Should I buy a station ?

[NO DAG]

The answer is yes, if the price is right, and the opportunity is real. Better know sales, and how to scrounge. Is there any real estate going involved in your purchase ?

 

[jackandcoke]

Does anyone have an idea of what the multiples should be for buying a station in Northern new England. Do you think that radio is a good investment. I'm concerned that satelite monthly pay is going to destroy the business of free radio which is so pure and needed. Thoughts...

Multiple depends on size of the market, size of the station(s) relative to the market, health of the local economy, and--of course--what the demand for the property might be. Terrestrial radio as an industry has lost its cache with Wall Street, having levelled its growth curve in major markets, so multiples have softened--from say 10-12X to more in the 8-9 range. Radio revenue is still growing in smaller markets, nationally, but beware "poverty pockets"--no matter how pretty they may be. If retail ain't booming, radio ain't booming. XM/Sirius are up to 4 percent penetration now--cutting terrestrial radio's lead down to a mere 90 points...

 

[Goat Rodeo Cowboy]

When it comes to really small markets and some down-at-the-bottom stations in metro areas: Judging value or purchase price on multiples of cash flow is do-able when the station is operated by a corporate owner who uses the big-time reputable accounting firms, and the cost of operation include a salary for the manager that is part of cost, not part of the cash flow.

When you are dealing with a small market guy who operates the station out of his shirt pocket with funny accounting, he typically wants his entire income to be considered "owners profit" and thus part of the cash flow. That inflates the cash flow and if you try to pay 8x, 12x even 16x for what should be management expense, and would be if a national accounting firm did your books, you could end up paying through the nose.

 

[bernzee]

Back when I first got into radio, buying a station was almost a sure thing. We tried to form an employee group to buy our station that was tied up in probate but at the time ('77), we couldn't come up with a credit line among us that would total the $800,000 asking price for the AM/FM combo (!!!!!!!!). Which was in the black, by the way, with a positive cash flow. 30 years ago, radio was almost a guaranteed good investment.
Since then, however, the industry has indulged itself in self fulfilling a prophecy of doom. First, it was newspapers, our arch enemy. Then technology reared it's ugly head with local cable and its accompanying adverising availabilty. How on earth would we survive this? Many radio minds worked on and worried about the problem and eventually decided to co-exist with the enemy and, lo and behold, there was indeed room in the marketplace for both (all 3, counting the paper). But the seeds of fear had been sewn.
Radio, especially local radio, has been living in fear of being conquered ever since. Station clusters have sold themselves to corporations whose predominant issue is the bottom line. Individuals have tried to form themselves more like corporations. The result; no gamble/no risk programming. Announcers are encouraged to NOT be creative-just read you liners and give the title and artist of all the 10 songs you just played plus the next 10 coming up. Music is so highly researched that most stations playlists crossover and the selection of tunes gets smaller and smaller. And then there's Arbitron...the purveyor of "fake science" whose extrapolated ratings system rules all.
Given that as an outline, radio has gone from true broadcasting to extreme "narrow" casting. Along with that, much the same as in network TV, the numbers of listeners has continued to decrease at an alarming rate for years. Time spent listening has diminished, trend wise. Advertising rates have had to swell which puts radio out of reach for a majority of small, local businesses.
Let me summarize while the coffee still rules. If you are looking at radio stations as an "investment", your chances of turning a profit within the first couple of years are dim at best. If you choose radio because you love it, have loved it and will continue to love it with all its frailties and strengths, then I say jump in. If you really really love it and take active participation in operations, sales, producing, taking out the trash, etc., and don't want to fall into the trap of running vapid satellite programming day and night, or even worse, bland voice tracking, then you will find an experience that is second to none. If you just want to play around with your money, the stock market will give you a hell of a ride.

 

[radiotony]

Great points.

I would add that it really depends on what kind of radio you want to do and what kind of time you want to put into it, not unlike any other business. It is an interesting time to be in media because so many things are changing with technology.

If it is a talk or news station you want to buy, there are a lot of things you can do. You can take on some of the programming and sales responsibilities to save money. If you are buying a music station, you can be a DJ as well as run the place. This allows you to be creative and also hold down costs. Instead of just putting on "the classic sh*ts," try a new music format. Try a hybrid format of all kinds of different music. Try a new talk format instead of just putting on Limboob and Innanity. Find interesting people in the community who have things to talk about and localize your content on the weekends. Get them to buy the time or help you get sponsors. Cover high school sports games, which not every parent can get to due to their busy skeds. There are a ton of guys - and women - out there who are itching to do radio play-by-play. You can get them for a song.

Even though I've gone back into the newspaper business, I'm still considering getting back into radio, especially if I can find a small mom and pop station somewhere where the housing is inexpensive and the climate is warmer than New England. After running WKXL, and doing basically everything but rebuild the transmitter and painting the tower, I could run my own place, under the ideal circumstances. I've also seen that that the interactivity which is going on in the newspaper business that can also be translated into radio. It isn't just streaming on the Web or Webcams of your hosts. You can put together video clips to drive traffic to your Web site and sell sponsorships to the videos. You can put together a weekly or bi-weekly newspaper shopper to offer print advertising to your radio clients, along with radio and Web. The key is figuring out a way to juggle it all and not sweating the small stuff. If you go into thinking you are going to succeed by micromanaging every little thing at your business just because it is yours and you can, you will lose a fortune and fail. Make sure you also get to know your staff and how much control they have over your revenue. Involve them in some of the changes you want to make - especially your sales department - and make sure they know that you are going to make some changes. Lying to them - telling them you will be hands off and then micromanaging everything - will alienate them and make them bitter enemies. They will most surely start pissing in the pond where you need to raise funds to pay off your station.

Buying a station is a long-term investment, depending on the current bottom line, so don't expect to make a fortune. But I sense that it could be very rewarding, too.

Back when I first got into radio, buying a station was almost a sure thing. We tried to form an employee group to buy our station that was tied up in probate but at the time ('77), we couldn't come up with a credit line among us that would total the $800,000 asking price for the AM/FM combo (!!!!!!!!). Which was in the black, by the way, with a positive cash flow. 30 years ago, radio was almost a guaranteed good investment.
Since then, however, the industry has indulged itself in self fulfilling a prophecy of doom. First, it was newspapers, our arch enemy. Then technology reared it's ugly head with local cable and its accompanying adverising availabilty. How on earth would we survive this? Many radio minds worked on and worried about the problem and eventually decided to co-exist with the enemy and, lo and behold, there was indeed room in the marketplace for both (all 3, counting the paper). But the seeds of fear had been sewn.
Radio, especially local radio, has been living in fear of being conquered ever since. Station clusters have sold themselves to corporations whose predominant issue is the bottom line. Individuals have tried to form themselves more like corporations. The result; no gamble/no risk programming. Announcers are encouraged to NOT be creative-just read you liners and give the title and artist of all the 10 songs you just played plus the next 10 coming up. Music is so highly researched that most stations playlists crossover and the selection of tunes gets smaller and smaller. And then there's Arbitron...the purveyor of "fake science" whose extrapolated ratings system rules all.
Given that as an outline, radio has gone from true broadcasting to extreme "narrow" casting. Along with that, much the same as in network TV, the numbers of listeners has continued to decrease at an alarming rate for years. Time spent listening has diminished, trend wise. Advertising rates have had to swell which puts radio out of reach for a majority of small, local businesses.
Let me summarize while the coffee still rules. If you are looking at radio stations as an "investment", your chances of turning a profit within the first couple of years are dim at best. If you choose radio because you love it, have loved it and will continue to love it with all its frailties and strengths, then I say jump in. If you really really love it and take active participation in operations, sales, producing, taking out the trash, etc., and don't want to fall into the trap of running vapid satellite programming day and night, or even worse, bland voice tracking, then you will find an experience that is second to none. If you just want to play around with your money, the stock market will give you a hell of a ride.

 

[Oldbones]

Instead of just putting on "the classic sh*ts," try a new music format. Try a hybrid format of all kinds of different music. Try a new talk format instead of just putting on Limboob and Innanity. Find interesting people in the community who have things to talk about and localize your content on the weekends. Get them to buy the time or help you get sponsors. Cover high school sports games, which not every parent can get to due to their busy skeds. There are a ton of guys - and women - out there who are itching to do radio play-by-play. You can get them for a song.

And more often than not, get what you pay for.

While what you were trying to do at WKXL was admirable, I don't think it can be denied that it failed to connect with much of anyone in the community. The station probably had more employees than listeners. Granted, the station has a clueless owner and a lousy signal, but the fact remains that very few people want to listen to so-called "community" radio, and if no one listens you're gonna have a tough sell to advertisers. Fine if you have deep pockets and just want to play radio station, not so good if you actually want to run it as a business.

 

[argytunes]

OLDBONES...

There are some people who are content to eat the same stale pasta every single day. They just reheat the sauce and pour it over cold spaghetti that was prepped 2 or 3 nights earlier?

This seems to be your viewpoint when it comes to radio? You're certainly entitled to listen to any radio station that sounds identical to 50 others...from music and bad commercials...to bumper liner liner cards that most listeners IGNORE!

But I'd rather try to listen a format that most of the other radio stations AREN'T doing? I'm not suggesting that programming COUNTRY RAP PUNK MUSIC is gonna take off anytime soon....but wouldn't it be terrific if it did?

The effort alone might silence you once and for all?

argytunes

 

[Goat Rodeo Cowboy]

In response to your post, Oldbones, I don't think you can prove you are right, and I don't think I can prove you are wrong.

I see a lot of postings in Radio-Info about "make it local" and sometimes they list stations we should listen to as examples. I come away from some of those experiences asking myself: What do THEY think LOCAL is? There is something spiritual about the days when we sat on this ratty throne between two turntables and we opened our mouth to speak words, live, that seemed to fit the occasion, but our reality was that we were focused on the music and other program elements being offered and in our mind we knew we were doing something creative and worthy. We want to re-live that experience and you can't really do it when the programming elements are coming on via satellite and we in the station are focused on a lot of distracting duties, which has always been true of our listeners. For the most part, the radio experience was not as "spiritual" for them as it was for the guy (or gal) seeing the on-the-air bulb light up, actually talking to the microphone as though it were a tiny person. Most of us who were 'live and local' were never as good as it felt like we must be. HOWEVER- - -

If playing music recordings is 98 per cent of our program content, why would anyone ever listen to their local station when 30, 50 or 70 miles away there was a flamethrower pumping out a narrow choice of music that fits their ears. In local radio we always feel the need to alloy together a blend of two or three formats lest we lose our local audience because our music choice was too narrow. Then we lose the serios music fan.

To do Live and Local radio in a small market, you have to fly into the face of common wisdom. Common wisdom says that all people want from their radio is music. What about the people who are not music fans, the people who have no ear for tone, the people who can't carry a tune in a bucket. The "big boys" know that image ads are more effective that transaction ads. Research has supposedly proved than. (We used to say institutional ads and price-and-item ads.) The big city merchants who buy the advertising sold by the "big boys" of the radio business have sophisticated tracking mechanisms with their on-line computerized cash registers and they know what their ad campaigns do for them.... or they think they do.

In the small market where you sell to family owned businesses, you better have customers walking through the door now and then asking: Where is the lettuce you advertised for 95-cents a head? Where are the back-to-school lunch boxes for $2.47 cents? When they go to Lions Club at noon they are impressed with radio when someone with poor attendance habits is sitting at their table and says "I came today because I heard on the radio who the speaker is."

Home town merchants don't have access to sophisticated anyalysis of their sales. None of those sales-building conversations take place in the presence of the ad buyers if all you are doing at your station is, as we used to say, "Grinding Records" and there are none of those community based elements you seem to find deadly to successful radio.

Curiosity question: Do you have experience selling advertising in small market radio? Depending on your answer, I may have to eat my words.

 

[radiotony]

Like I have said previously on this posting board, I didn't agree with everything we did at WKXL, and if I had to do it all over again, I would have done things differently. But I did think it was an important experiment.

I think it failed for a number of reasons - mostly bad signal, lack of promotion, and the fact that AM radio is going the way of the dodo in small markets, unfortunately. You can throw in some stuff about the owner, but it's his station so ... Someone I know at Arbitron told me that we probably had between 600 and 700 listeners, which is way, way down from the syndication years and way down from the glory years of the station - when people in the community really did care about community radio.

Despite what you or others may think about the "community programming," most of the prime time hours on WKXL were not community programs but news - 3.5 in the morning, 1 at noon, and 3 in the afternoon - not unlike WBZ, only local. A ton of local sports, which was the big money maker, filled in the gaps, along with the specialized shows.

The news and local talk format is a winner, especially if you know what you're doing and you have a good signal.

And more often than not, get what you pay for.

While what you were trying to do at WKXL was admirable, I don't think it can be denied that it failed to connect with much of anyone in the community. The station probably had more employees than listeners. Granted, the station has a clueless owner and a lousy signal, but the fact remains that very few people want to listen to so-called "community" radio, and if no one listens you're gonna have a tough sell to advertisers. Fine if you have deep pockets and just want to play radio station, not so good if you actually want to run it as a business.
[/quote]

 

[JIBGUY]

Unless the station is the one AM flame-thrower in the market, deep-local involvement is a recipe for disaster. The salaries needed for decent people to do local radio will always outweigh the income from advertising... and by a wide margin. - Wanna do local? There's always the wide variety of church suppers and community entertainment events on the village greens, etc, in the form of PSA's easily inserted in the station's computer. - My Maine station, WJTO in Bath, does this a lot. But its the music that makes people listen. For a lowly AM station, the music must be a different mix than what is heard on the other 25 stations audible in a station's town. - For WJTO, those many many timely PSA's are aired, and I also have about 50 local "mission statement" PSA's from local non-profit groups, where in 25 secords or so, the station describes what the group does and how they can be reached.... 'evergreen' PSA's which can last 2 or more years before updating. But the big question is: "Can it make money?" I believe so... if I were to even try to sell it. (WJTO airs no commercials). The PSA's are easy and inexpensive to do, however the local news is not. And usually, WJTO shows up nicely in the Portland book; good for a station 35 miles away; and always in the Lewiston book (30 miles away). Numbers like that, this local daytimer may or may not be sold. But at least it would not hemorrage money with that formula of different music and local stuff being almost limited to lots of PSA's. - WJTO, under my ownership, USED to do a LOT of local news, a real lot. -even a total news hour at 12 noon; and half hours at 8 AM and 4 PM. Ratings were zero. Newsman & wife moved to a warmer climate (she said after two winters: "I can't do this again") ; News ended abruptly and no one noticed. With news gone, WJTO started showing up in the ratings. - So if you want to buy a station, you'll have to run it inexpensively at the beginning. Stations are NO LONGER money machines. The 1960's was 45-or-so years ago. Times have changed. There ARE a few exceptions, but so very few... and those exceptions have been doing "live and local" for decade or more. - So air different music mix and include local non-profit groups as PSA's and you'll make a lot of people happy, and maybe even your bank account happy. Anything more than that will make you familiar with the U.S.Bankruptcy Court processes.

 

[RadioStationDudeUSA]

Does anyone have an idea of what the multiples should be for buying a station in Northern new England. Do you think that radio is a good investment. I'm concerned that satelite monthly pay is going to destroy the business of free radio which is so pure and needed. Thoughts...

If you have to ask questions like this on a public message board, you probably shouldn't own a station and don't have the wherewithall to own one anyways.

 

[radiotony]

With all due respect to my good friend Bob, who I admire, for all that he is done in this industry and his fine radio stations, I must disagree. News and community involvement can be profitable and is the way to go in my book. It may not sell well in Maine or in other smaller markets, but it does sell and is profitable. Here are some local examples:

* WASR in Wolfeboro: Award-winning morning news with Joe Collie, which is pretty booked up with ads, and along with the Red Sox, are the station's best billing hours. Collie is deep in the community. Everyone knows him and he is a good asset to the station. In fact, most advertisers don't want to book ads during the station's music hours, only the news and Sox, from what I'm told. This may have changed in the last six months since they hired Monique Coppola to get out there and hustle it, selling ads and doing some programming for the station. But, the morning news is still the money maker there. News, local involvement, profitable.

* Clear Channel southern New Hampshire cluster: Again, award-winning morning news, most surely making money or else they would probably get rid of their crack news team, including Angela Andersen and Bernice Corpuz, who I hired at WKXL in 2005 when she was in the unemployment ranks. We all know some of the great stories they've done over the years and how connected they are to Manch and southern New Hampshire. While I don't know the financial specifics, I'm almost sure they are making money with their news hours or they wouldn't have news hours. We also know that CC has been dumping its least profitable stations as it aims to go private. They are keeping these stations though so ... And, we know the history of the company getting rid of talk "talent" because the sales numbers weren't there pay the local talkers. However, the news remains. News, local involvement, profitable.

* WEZS in Laconia: WEMJ alum Allan Harrison gets canned in a round of Nassau cost-cutting and he takes his morning news hours and advertisers over to Gary Hammond's great smooth jazz station. I don't know the specifics of the arrangement but I would guess that Allan is brokering time and selling the ads himself. As well, I would bet that he is making a profit or why would he be getting up very early in the a.m. to do it each day, and then selling it out in the streets for revenue? Again, news, local involvement, profitable.

* WKXL in Concord: Well, OK, this is another story and I'm not going to go into specifics but it could work, I know, I've seen the numbers. The owner, however, has decided to spend his money putting things on the air which he cares about like a daily local health show and kid's concerts, and policy speeches on the stump, for example - all noble endeavors - but something which the community doesn't want to pay for. So be it. However, with changes, it could be profitable without losing the local involvement or the news.

* WTPL, WKBK, WNTK all have local morning news and talk, are connected to the community, and most surely profitable. This is just New Hampshire. I'm sure there are many other examples. And I haven't even gotten into all the cool things which can be done - and are being done - in the business.

Local is the way to go.

Unless the station is the one AM flame-thrower in the market, deep-local involvement is a recipe for disaster. The salaries needed for decent people to do local radio will always outweigh the income from advertising... and by a wide margin. - Wanna do local? There's always the wide variety of church suppers and community entertainment events on the village greens, etc, in the form of PSA's easily inserted in the station's computer. - My Maine station, WJTO in Bath, does this a lot. But its the music that makes people listen. For a lowly AM station, the music must be a different mix than what is heard on the other 25 stations audible in a station's town. - For WJTO, those many many timely PSA's are aired, and I also have about 50 local "mission statement" PSA's from local non-profit groups, where in 25 secords or so, the station describes what the group does and how they can be reached.... 'evergreen' PSA's which can last 2 or more years before updating. But the big question is: "Can it make money?" I believe so... if I were to even try to sell it. (WJTO airs no commercials). The PSA's are easy and inexpensive to do, however the local news is not. And usually, WJTO shows up nicely in the Portland book; good for a station 35 miles away; and always in the Lewiston book (30 miles away). Numbers like that, this local daytimer may or may not be sold. But at least it would not hemorrage money with that formula of different music and local stuff being almost limited to lots of PSA's. - WJTO, under my ownership, USED to do a LOT of local news, a real lot. -even a total news hour at 12 noon; and half hours at 8 AM and 4 PM. Ratings were zero. Newsman & wife moved to a warmer climate (she said after two winters: "I can't do this again") ; News ended abruptly and no one noticed. With news gone, WJTO started showing up in the ratings. - So if you want to buy a station, you'll have to run it inexpensively at the beginning. Stations are NO LONGER money machines. The 1960's was 45-or-so years ago. Times have changed. There ARE a few exceptions, but so very few... and those exceptions have been doing "live and local" for decade or more. - So air different music mix and include local non-profit groups as PSA's and you'll make a lot of people happy, and maybe even your bank account happy. Anything more than that will make you familiar with the U.S.Bankruptcy Court processes.

 

[Oldbones]

Curiosity question: Do you have experience selling advertising in small market radio? Depending on your answer, I may have to eat my words.

Most of my background is programming. Tried Sales (lured by the prospect of making better $), and sucked at it. My hat is off to a good sales rep, one who knows the audience and the market & doesn't try to sell a client on a promotion, special show, etc. that doesn't fit.