KRTY-FM Los Gatos has been sold

[TheBigA]

But at that level and due to the decline in total market revenue going back two decades it is obvious that nobody else wanted the station. That is the only possible explanation for the low price... less than the 2020 gross revenue.

You don't know that. This was an estate sale, not a traditional sale by a company.

But if they could not come up with that low amount in nearly three years, it is unlikely they ever would.

The pandemic and local covid rules prevented them for two of those years from doing the kind of fundraising they wanted to do. They weren't going to some big investment company. They were going to actual listeners in the community. In keeping with the wishes of the deceased owner.

 

[davideduardo]

Another point here is that the station made money debt free... what if it had $4 to $6 million in debt service and regular principle payments? I don't think that the market could produce the necessary free cash flow.

 

[TheBigA]

Another point here is that the station made money debt free... what if it had $4 to $6 million in debt service and regular principle payments? I don't think that the market could produce the necessary free cash flow.

That's why they weren't looking to do that. They were looking to raise the money from listeners, not take out a loan.

On the other side apparently the employees are all taken care of. They get generous severance and buy outs.

The people who got screwed were the listeners. Oh well. But whatever happened to public interest, convenience, and necessity?

 

[MarkW]

$1 million in pro forma broadcast cash flow per annum should be able to service, say, $4 million in debt on terms lenders would normally deem commercially acceptable. Add $1 million in equity, and it seems to me KRTY should've been able to maybe fetch $5 million from a properly run marketing process / marketing period. Now, if my $1 million BCF figure is too generous, then obviously the calculus changes.

I read that Houlihan Lokey was involved in the brokering of the sale. That is a rather well known investment banking and advisory firm. Were they representing the estate or EMF? A $3 million sale would normally be very small potatoes to them (i.e. not worth their time) if they were on the sell side of the deal.

 

[davideduardo]

$1 million in pro forma broadcast cash flow per annum should be able to service, say, $4 million in debt on terms lenders would normally deem commercially acceptable. Add $1 million in equity, and it seems to me KRTY should've been able to maybe fetch $5 million from a properly run marketing process / marketing period. Now, if my $1 million BCF figure is too generous, then obviously the calculus changes.

In 2003 San Jose had market billing of $63 million. That is roughly $95 million in today's dollars. Now, the billing of the market is $15 million and not predicted to grow.

The station is likely to be breaking even or making a little based on pre-pandemic billing. With no projected increase in market revenue, I doubt they can even do $250 k in free cash flow.

I read that Houlihan Lokey was involved in the brokering of the sale. That is a rather well known investment banking and advisory firm. Were they representing the estate or EMF? A $3 million sale would normally be very small potatoes to them (i.e. not worth their time) if they were on the sell side of the deal.

H-L is not known for brokering broadcast stations... they are more in the enterprise level total business sales area.

 

[davideduardo]

That's why they weren't looking to do that. They were looking to raise the money from listeners, not take out a loan.

I'm at a loss to think of a "popular appeal" class format that has ever gotten full listener purchase support.

On the other side apparently the employees are all taken care of. They get generous severance and buy outs.

That is fortunate.

The people who got screwed were the listeners. Oh well. But whatever happened to public interest, convenience, and necessity?

There were not all that many listeners left. The station was 13th in the market in cume. And it was 26th in cume in the total SF market.

 

[TheBigA]

There were not all that many listeners left. The station was 13th in the market in cume. And it was 26th in cume in the total SF market.

I promise you that there are far more country listeners than K-Love listeners in San Jose. That was not a factor here. This sale was not about serving the community. It was about closing out the estate and paying off the beneficiaries.

 

[semoochie]

You're exactly right. I guess the estate had a time limit, and EMF had the ready cash, so they win. That's a lousy way to do business.

As the articles I've linked state, the staff was trying to raise the money, but the pandemic hit. They needed an extra year.

I get the sense that Nate Deacon is doing all this press so someone else with ready cash can try to get the station away from EMF.



Those are good questions, and I don't think either are going to happen. I'd like to require non-coms to stay in their space. I think that's fair since the opposite isn't allowed by law. So commercial stations can't operate in the lower half, but they can flip stations in the upper half. Seems like something's wrong there, but the precedent has been set, so it's not changing.

We're just screwed. EMF has an unlimited amount of cash and they'll keep buying until they've reached their quota.

What quota is that? There is no legal limit!

 

[TheBigA]

What quota is that? There is no legal limit!

Correct, but they only have two formats, so they only need two stations per market.

 

[Theater of My Mind]

We're just screwed. EMF has an unlimited amount of cash and they'll keep buying until they've reached their quota.

The psychological end of FM radio for me occurred when EMF killed WPLJ in New York. It was never my favorite station, but it was an important preset and it helped create a vibrant radio scene in the NYC market where I live. When K-Love took it away I felt a huge sense of loss and deflation about radio that never recovered.

EMF had already killed WBRU in Rhode Island, my go-to favorite station during my summer vacations. It was around that time I started posting here that EMF is ruining FM radio.

Shortwave and AM radio were consumed by bible thumper stations on the way to their ultimate demise too. Religious broadcasters have always been opportunistic vultures preying on distressed media channels. That's what's happening to FM right now. It's sad, but most people will move to the next, better platform like always -- in this case streaming -- leaving the old platform to serve up scraps to the nostalgic diehards left behind.

 

[davideduardo]

The psychological end of FM radio for me occurred when EMF killed WPLJ in New York.

The station was not profitable, despite may attempts. At the time of consolidation, more than half of all stations in the US were not profitable.

Shortwave and AM radio were consumed by bible thumper stations on the way to their ultimate demise too.

Shortwave died because, around the word, even small communities got their own stations. Shortwave signals are erratic and represent another era when listeners would tolerate fading and static and interference.

And AM has suffered the same fate: bad quality when compared with FM, and subject to all kinds of man-made noise.

With a few exceptions, the religious operators came later when there were disposable stations available for little money.

Of course, a case can be made for Short Wave operators like those that ran HCJB who provided educational and health services and even did, locally, Quechua news and entertainment when no commercial station would serve the indigenous population. They even provided health and hospital services to those populations.

Religious broadcasters have always been opportunistic vultures preying on distressed media channels.

Which, in other circumstances, would not even be on the air.

That's what's happening to FM right now. It's sad, but most people will move to the next, better platform like always -- in this case streaming -- leaving the old platform to serve up scraps to the nostalgic diehards left behind.

Yeah, the 89% of all adults who use radio, today, every week. Your hatred for those who think we did not get here by accident does nothing to bring peoples of different beliefs together and is symptomatic of the "my way is the only way" thinking which is more and more prevalent in recent years.

 

[Negin]

The psychological end of FM radio for me occurred when EMF killed WPLJ in New York. It was never my favorite station, but it was an important preset and it helped create a vibrant radio scene in the NYC market where I live. When K-Love took it away I felt a huge sense of loss and deflation about radio that never recovered.

EMF had already killed WBRU in Rhode Island, my go-to favorite station during my summer vacations. It was around that time I started posting here that EMF is ruining FM radio.

Shortwave and AM radio were consumed by bible thumper stations on the way to their ultimate demise too. Religious broadcasters have always been opportunistic vultures preying on distressed media channels. That's what's happening to FM right now. It's sad, but most people will move to the next, better platform like always -- in this case streaming -- leaving the old platform to serve up scraps to the nostalgic diehards left behind.

One station I used to listen to fell to the EMF spew Too bad they can't be reigned in before the whole band belongs to them.

 

[Michael Rivers Kramer]

In 2003 San Jose had market billing of $63 million. That is roughly $95 million in today's dollars. Now, the billing of the market is $15 million and not predicted to grow.

The station is likely to be breaking even or making a little based on pre-pandemic billing. With no projected increase in market revenue, I doubt they can even do $250 k in free cash flow.

H-L is not known for brokering broadcast stations... they are more in the enterprise level total business sales area.

That is a serious revenue drop. Is that drop percentage comparable in other markets? I remember a time when LA was a billion dollar market, Sacramento was about 130m to 150m and SF was just under 500 m.

 

[davideduardo]

One station I used to listen to fell to the EMF spew Too bad they can't be reigned in before the whole band belongs to them.

EMF only wants one good signal (or a collection of partial ones) per market for each of its formats. Nearly all US markets have way too many stations, so by some going to EMF the available ad revenue in each market is split in fewer ways and helps the surviving stations do better.

 

[davideduardo]

That is a serious revenue drop. Is that drop percentage comparable in other markets? I remember a time when LA was a billion dollar market, Sacramento was about 130m to 150m and SF was just under 500 m.

No, it is nearly double the percentage drop of nearly any other market I have looked at. The Walmartization of retail and the consequent loss of local merchants has eliminated local revenue for radio in suburban markets, with San Jose being the most obvious case.

LA is now about a $550 million market, and is off by over 60% in inflation adjusted dollars over the year 2000. San Jose is off by over 80% and that is due to the market simply not having enough unique local advertisers to subsist.

 

[Negin]

EMF only wants one good signal (or a collection of partial ones) per market for each of its formats. Nearly all US markets have way too many stations, so by some going to EMF the available ad revenue in each market is split in fewer ways and helps the surviving stations do better.

In many areas they have more then one signal in a market. Where I'm at I can pick up 5 stations from them of both their formats.

 

[MarkW]

Am I correct that revenue from brokering of long form air time is not counted in arriving at total market billings?

 

[davideduardo]

In many areas they have more then one signal in a market. Where I'm at I can pick up 5 stations from them of both their formats.

In Nielsen, 95% of the at home and at work listening is in the 65 dbu coverage area. EMF knows that, and when they can't get a great signal, they cover a market with bad ones, knowing each one will only "work" in its primary coverage area.

 

[Theater of My Mind]

The station was not profitable...

Shortwave died because...

Yeah, the 89% of all adults who use radio, today, every week...

David, I always know the types of rebuttals you'll write to my critical posts and I do respect your knowledge about the business of radio, but sometimes I feel like you're like Baghdad Bob, the Iraqi information minister telling everyone it's all an illusion and there's nothing to see here.

Maybe you can tell us what the overall radio audience is today compared to, say, 5, 10, 15 years ago. You know as well as I do that it's a constant downward slope, in fact you've mentioned the actual numbers in other threads, and it's pretty dramatic.

It's declining for a combination of reasons but you can't dismiss how people feel when EMF kills their favorite stations, and the effect things like that have on people's perception of what radio offers them any more when entertainment is replaced by dogma. The decline is real, and the role these religious hijackers play in it is real too.

Your hatred for those who think we did not get here by accident does nothing to bring peoples of different beliefs together and is symptomatic of the "my way is the only way" thinking which is more and more prevalent in recent years.

Hatred is a strong word. I resent what EMF is doing, and the fact that they, like all religious broadcasters, exploit rules that give them an unfair advantage. In my view policy failures allow an organization like that to remove mass-appeal entertainment channels from a very limited broadcast spectrum and replace them with a type of evangelism most people don't want to be subjected to, where something fun existed before. In fact, if there's anyone pushing one-sided, "my way is the only way" beliefs here, it's EMF.

 

[davideduardo]

Am I correct that revenue from brokering of long form air time is not counted in arriving at total market billings?

The revenue from advertisers and sponsors is what is counted. If a station sells all its time to one operator, the revenue to the owner is generally what is counted.