More Consolidation is Not the Answer to Poor Business Decisions

[TheBigA]

This is a terrible example. The radio station would sell if it were priced right. If I put my used phone on eBay at price of $2,000 no one will buy it. If I drop the price to $1,500 it still won't sell. You can't always get what you want, just ask Mick. Check the market value and price it accordingly. Duh.

What's the right price? $30 million? Would you pay $30 million knowing you will have to pay another $10 million to staff and operate it? Good Karma wasn't making enough with it for them to pay $12 million a year. So they walked away.

I'll say this again because you don't understand: Buying radio is a poor business decision. Buying one station is a poor business decision. At ANY price. Price is not the issue. It's owning and operating a declining asset that is guaranteed to be worth less every year. It's not your money, so you don't care.

 

[Theater of My Mind]

What's the right price? $30 million?

Ask the brokers, I'm sure they can tell you the realistic market value.

I'll say this again because you don't understand: Buying radio is a poor business decision. Buying one station is a poor business decision. At ANY price. Price is not the issue.

I understand perfectly. Yes, price is the issue. It may be a poor business decision in your opinion and even in mine, but someone will see value in it and buy it if it's priced correctly. Why are you talking like you don't know how the free market works?

It's not your money, so you don't care.

That's a ridiculous statement. I don't have to be the buyer in order to care about what happens to the station any more than you do. Stop being so narcissistic. We're all members here because we care about radio.

 

[davideduardo]

What's the right price? $30 million? Would you pay $30 million knowing you will have to pay another $10 million to staff and operate it?

That is not necessarily what it costs to operate a station in NYC. In fact, one can easily move studios now to a lower cost business park in NJ, and if group owned, use shared programs or talents. All you really need locally are sellers.

Good Karma wasn't making enough with it for them to pay $12 million a year. So they walked away.

Good Karma moved into a new model... one that does not even require buying Nielsen. They had no reason to have that additional station in New York. It's a very different business model.

I'll say this again because you don't understand: Buying radio is a poor business decision. Buying one station is a poor business decision. At ANY price. Price is not the issue. It's owning and operating a declining asset that is guaranteed to be worth less every year. It's not your money, so you don't care.

The decline in revenue is not as extreme as you paint it. With operating economies and a firm new media extension of a station, such as what TownSquare does, there are opportunities at the right price.

 

[TheBigA]

Yes, price is the issue. It may be a poor business decision in your opinion and even in mine, but someone will see value in it and buy it if it's priced correctly. Why are you talking like you don't know how the free market works?

I know how the market works: Willing buyer, willing seller. We have a willing seller. No willing buyers. He's explained his situation. The clock is ticking. He HAS to sell this station by 2026. That's next year. Every year he waits, the price to buy out his stockholders goes up. Every year, the value of the station goes down:

Under its amended articles of incorporation, Emmis has a three-year window to buy back its shares. In year one, Emmis would pay $6 per share, with that offer rising to $6.50 in year two, with the offer of $7.25 per share coming in year three. Each would be a premium over the roughly $4.60 per share that Emmis currently trades at. The stock is listed on the Nasdaq OTC exchange as “EMMS.”

Do you understand this??? Why would anyone in their right mind pay $6.50 a share for stock that's selling now at $3.16? Why?

 

[TheBigA]

That is not necessarily what it costs to operate a station in NYC.

Sure, you can run a station just like EMF for $1 million a year in tower rent and other local expenses.

If you have to operate a station on the cheap, you shouldn't be doing business in NYC. People want some company to come in, buy a radio station, and play music on it. They want the station to hire knowledgeable and entertaining local talent. Then they'll complain that there are too many commercials, and the ads they run are annoying. That's why owning a radio station is a poor business decision. Not to mention they have to deal with crazy regulators. Why would anyone want to do this?

The decline in revenue is not as extreme as you paint it. With operating economies and a firm new media extension of a station, such as what TownSquare does, there are opportunities at the right price.

TownSquare doesn't want to own a station in NYC. They're happy staying in NJ, where they're cutting local staff because of declining revenues. They know owning radio stations is a poor business decision. That's why they're transferring their business online.

 

[Theater of My Mind]

I know how the market works: Willing buyer, willing seller. We have a willing seller. No willing buyers.

No, we don't have a willing seller. It's not priced to sell.

He's explained his situation. The clock is ticking. He HAS to sell this station by 2026. That's next year. Every year he waits, the price to buy out his stockholders goes up. Every year, the value of the station goes down:

Every year the value of my car goes down too. So I can advertise it for sale at a new-car price and let it sit in my driveway, or I can price it at its current market value and easily sell it.

Do you understand this???

Please see above. I'm not the one who doesn't seem to not understand.

Why would anyone in their right mind pay $6.50 a share for stock that's selling now at $3.16? Why?

*Investment involves risk. Investors should note that past performance is not a guarantee of future returns. The investment value may be affected by market fluctuations.

 

[TheBigA]

No, we don't have a willing seller. It's not priced to sell.

HOW DO YOU KNOW? You're basing your opinion on an interview he did two years ago. He hasn't talked to anyone since.

My other example was Salem. They just sold a group of popular FM stations for $80 million. Who bought them? EMF.

Who else is buying major market radio stations now?

 

[Theater of My Mind]

HOW DO YOU KNOW?

Because if it was priced to sell, it would have sold. That's how the market works, especially in New York.

 

[TheBigA]

Because if it was priced to sell, it would have sold. That's how the market works, especially in New York.

Who would buy it? Nobody has money. There are a bunch of AMs also on the market in NYC now and no one has bought them.

The only companies that MIGHT have an interest in 98.7 can't buy it because of ownership rules. That's what this thread is about.

 

[davideduardo]

Sure, you can run a station just like EMF for $1 million a year in tower rent and other local expenses.

The biggest expense for any full FM is the ESB antenna rental. Beyond that, you can run a station for nearly the same as one in Cleveland or Atlanta costs.

If you have to operate a station on the cheap, you shouldn't be doing business in NYC. People want some company to come in, buy a radio station, and play music on it. They want the station to hire knowledgeable and entertaining local talent.

I have never seen in any open ended research anywhere in the world where I have worked where "people" talk about "local talent" or "local shows". They don't even talk about "live" versus delayed or recorded. They care if it is entertaining, fun, informative. Period.

Then they'll complain that there are too many commercials, and the ads they run are annoying. That's why owning a radio station is a poor business decision. Not to mention they have to deal with crazy regulators. Why would anyone want to do this?

At this time, nobody wants to buy stations as there is no growth opportunity, while the same money can be put in, let's say, AI or chips or other developing areas with much greater prospects of return.

Lots of people bought cheap Xerox stock in the 60's and some became millionaires. But if they did not sell the stock at the right time later, they would be paupers now.

TownSquare doesn't want to own a station in NYC. They're happy staying in NJ, where they're cutting local staff because of declining revenues. They know owning radio stations is a poor business decision. That's why they're transferring their business online.

TownSquare does not want to be in PPM markets. The reasoning is really not about ratings methodology but the fact that those markets are so big geographically that singe-outlet stores and services can't use mass market media.

TownSquare uses radio as part of a package that is principally based on providing a marketing service that includes radio and multiple online/"on your phone" aspects all bundled. That works in small to medium markets, but not in the biggest ones.

 

[TheBigA]

The biggest expense for any full FM is the ESB antenna rental. Beyond that, you can run a station for nearly the same as one in Cleveland or Atlanta costs.

Insurance is higher in NYC. Taxes are higher in NYC. Labor costs tend to be higher. See my next comment.

I have never seen in any open ended research anywhere in the world where I have worked where "people" talk about "local talent" or "local shows". They don't even talk about "live" versus delayed or recorded. They care if it is entertaining, fun, informative. Period.

Who's talking about research??? NYC is a union town. The union keeps salaries and staffing as high as they can. Regardless if its entertaining.

TownSquare uses radio as part of a package that is principally based on providing a marketing service that includes radio and multiple online/"on your phone" aspects all bundled. That works in small to medium markets, but not in the biggest ones.

Confirming what I said that owning radio is a poor business decision.

 

[Theater of My Mind]

Who would buy it? Nobody has money. There are a bunch of AMs also on the market in NYC now and no one has bought them.

We're talking about a top FM signal which is not yet obsolete like AM radio is.

The only companies that MIGHT have an interest in 98.7 can't buy it because of ownership rules. That's what this thread is about.

So these are the factors that affect the market value. Does it mean we're supposed to accept even more media concentration in a landscape where a very small number of big broadcasters already control most of the stations, so the owner can make more money on the sale? Emmis could have sold this station years ago when the market values and demand were higher but they didn't. So why should the FCC change the ownership rules now to help Emmis sell to someone like iHeart when doing so would further reduce the already small number of diverse broadcasters in the market? I know this may sound quaint considering our current political landscape, but the FCC is supposed to be looking out for the public interest, not acting as a dealmaker for big business.

 

[davideduardo]

Insurance is higher in NYC. Taxes are higher in NYC. Labor costs tend to be higher. See my next comment.

Do what Univision did: relocate to Jersey.

Who's talking about research??? NYC is a union town. The union keeps salaries and staffing as high as they can. Regardless if its entertaining.

I was talking about "local content" in programming.

 

[TheBigA]

We're talking about a top FM signal which is not yet obsolete like AM radio is.

I'm just looking for local examples where people are buying any radio stations now.

So why should the FCC change the ownership rules now to help Emmis sell to someone like iHeart when doing so would further reduce the already small number of diverse broadcasters in the market?

Fewer owners would lead to more format diversification. That's what you get with Sirius. No competition leads to a wider range of formats. Does NY really need another religious station just to preserve ownership diversification?

 

[ted chittenden]

I'm just looking for local examples where people are buying any radio stations now.



Fewer owners would lead to more format diversification. That's what you get with Sirius. No competition leads to a wider range of formats. Does NY really need another religious station just to preserve ownership diversification?

I'm guessing that for you format diversification is more important than ownership diversification. For me, it's the other way around, particularly with news/talk stations (which 98.7 in NYC currently isn't).

 

[TheBigA]

I'm guessing that for you format diversification is more important than ownership diversification. For me, it's the other way around, particularly with news/talk stations (which 98.7 in NYC currently isn't).

How many more religious stations do you want?

 

[RadioGuy1864]

How many more religious stations do you want?

At a certain point, even religious broadcasters will stop buying. The dynamics of the marketplace--the internet--will eventually effect even the religious broadcasters. Why deal with towers, the FCC, etc. when all you need is an internet stream?

 

[Delete My Account]

The problem facing radio right now is if the current owners can't buy more stations, those stations end up being sold to religious operators. There are no small local broadcasters who want to buy stations because they know it would be a bad business decision.

I just spoke to someone today who's buying two stations I used to work for. Small town. Radio isn't their main business, but it interests them. They aren't promising anything grandiose but do want to use the tools available to localize and connect with the community as best they can. No one's talking live jocks 24/7 or anything like that. But local community stuff that the larger communities on either side that are in "listening distance" don't cover, high school sports. And a bit of a unique flavor to the music formats. The competitor is a duo owned by a partnership of several local businessmen that all have at least one other job. They own the station because they view it as both a business and a community resource, for the schools and their sports programs, and entertainment as well.

No one's saying it's a great investment. But there's some people out there, who remember radio fondly, love it, and view it as a sustainable hobby business or a part of a broader set of things they do. Some of us are at a stage where it's effectively a managed decline while having fun with it, paying our bills. Some of us have it as part of a strategy that does include digital, podcasting, etc. And there's some opportunities where that makes sense. If you enjoy the work, it's not as much work. I'll probably do it in some form until the band shuts down. If I were independently wealthy, I'd do it for fun.

So there's not a ton of those buyers but they're out there and they're a demographic that still views radio positively, and in small towns, not everyone's over radio yet. There is a pricing point where it is feasible, if the sellers are willing to be reasonable as well. And technology has made it more feasible to bring those costs of operation down and still sound localized if you want to put in the effort. But these smaller owners are likely to have other jobs too. The owner of KMAS in Shelton is the morning host, does a lot of community interviews, was the former station manager and also works for the local school district. That's what the new small owner looks like. I think we'll see more of that where it fits and I'm glad a few people still care to do it, even when it isn't the license to print money it used to be in some markets. They're embracing the public service aspect.

And if you can do that and also be cross platform, you just might make a go of it. Assuming you understand how to monetize each aspect of the operation rather than just straight spot sales. Be a podcast studio, a local news portal, an app, do events. There's ways.

 

[ted chittenden]

How many more religious stations do you want?

Have the following not occurred to you:

1) Salem preferred KLove Inc. to purchase its contemporary Christian outlets in order to keep those stations broadcasting contemporary Christian music.

2) Large commercial broadcasters might be more open to selling their stations to religious broadcasters precisely because they know these broadcasters are not going to attract much, if any, of their current audiences.

3) The same rules concerning how many radio stations a single company can operate in one market apply to religious broadcasters, including KLove, Inc.

 

[TheBigA]

Have the following not occurred to you:

I'm aware of all three things. The point is the business model of non-commercial religion seems to work better for radio than ad-supported music. There are many more religious radio companies than K-Love. K-Love doesn't care about ownership rules because it doesn't have more formats. The ones they have fit comfortably under the limits. So none of your points matter to them or VCY or Relevant Radio or Family Radio or any of the others.

None of your points address what I'm saying, which is that there are no new commercial radio companies looking to buy radio stations. So retaining the 30 year old ownership limits for no other reason than to attract new radio companies only results in more religion on the radio dial. It doesn't help format diversity, it doesn't improve the quality of radio programming, and it doesn't mean more jobs for radio people. If the intent is to promote more religion on the radio, then by all means, hold on to those ownership limits. I fully expect this FCC to do just that. In fact I expect them to find ways to make it harder for existing stations to stay in business.