Storm Clouds on the Horizon

[TheBigA]

It's really difficult to compare Townsquare and Cumulus considering vast differences in market size and debt load. iHeart is a closer match, and they're crashing and burning.

Huh? Townsquare's debt is about $840 million. Cumulus is $2 billion. How is $2 billion closer to $20 billion? The difference is that Townsquare just attracted a 14% investment from Madison Square Garden. Meanwhile Cumulus just had a judge reject a major refinance plan. That's the immediate reason why the stock has dropped.

The Cumulus attempts at diversification - like the Nash branding complete with magazine, Westwood One, the dance with Rdio, and plenty of other forays did not exactly enhance the revenue of the company.

Once again, that's ancient history, and has nothing to do with the current situation. The magazine went belly up last year and so did Rdio. Making bad investments is part of why Lew is gone. No amount of talent or money was going to save either of those turkeys. Two years later, they still have no digital strategy. That's a major problem. They have lots of digital staff, but no strategy. That's not a talent or sales problem.

 

[Rusty Bridges]

As I read this thread and other threads regarding the prosperity of radio it looks like Mr. E is talking out of both sides of his keyboard. In the other WECK thread, he speculates that WECK's current owner paid of his debts and the station made a profit, billing a speculated $800 thousand per year. Not one of us knows the terms of the original $1.3 million purchase price. Was there a balloon payment due? What was the interest rate? And regarding the reported $550 thousand re-sale price, again, nobody but the prospective owner knows what the terms might be. Is there an assumption of debt? We. Do. Not. Know. And the seller and buyer are not obligated to tell us. So, Mr. A, like everybody here but the owner, you don't know shizzle. WECK's sale price is half the original purchase price. In what other business do such metrics exist?

 

[Buddy Shula]

As I read this thread and other threads regarding the prosperity of radio it looks like Mr. E is talking out of both sides of his keyboard. In the other WECK thread, he speculates that WECK's current owner paid of his debts and the station made a profit, billing a speculated $800 thousand per year. Not one of us knows the terms of the original $1.3 million purchase price. Was there a balloon payment due? What was the interest rate? And regarding the reported $550 thousand re-sale price, again, nobody but the prospective owner knows what the terms might be. Is there an assumption of debt? We. Do. Not. Know. And the seller and buyer are not obligated to tell us. So, Mr. A, like everybody here but the owner, you don't know shizzle. WECK's sale price is half the original purchase price. In what other business do such metrics exist?

I know the answer Rusty, and I do not mind saying. I think as broadcasters, we should share info and ideas. - 550K cash sales price. No other debt. Simple as that. It is a great price for two metro radio stations, real estate, building and tower. I am happy I worked very closely with Dick to make sure we had win-win situation. I did not want anyone to lose from this purchase. Dick has done a fantastic job, but wants to ease into retirement. He still owns a thriving WLVL. The way to get any transaction done is the talk about each persons goals, and find a way that they all can be achieved. After you agree to a price, then the real work begins, mainly in regards to financing and equity. There is a ton of money spent on attorneys and accountants. A good, conservative business plan is essential. Radio, like any other media, is a cash flow business. You can have very little expenses, and very high revenue. There is really nothing to buy but the assets of the company. In the case of radio, you have to go thru the FCC, which takes a little bit of time. You need to have an FCC attorney. I am truly blessed by the team I have. I will also have a superior team at WECK. I have great things that any fan of radio will love. I bought the station to add personality, fun, and relevance. Advertisers will love it, and they will get great results. Listeners will love it, as there will be nothing like it in Buffalo radio. The process was tough, but it is already worth it. I would never leave a great company like Entercom, to do something I was not sure about. It's gonna be fun! Thanks again for your kind words on this board. It is nice to hear optimism.

 

[TheBigA]

So, Mr. A, like everybody here but the owner, you don't know shizzle.

Perhaps you're confusing this thread with another? This thread is about Cumulus, not WECK. Maybe you can be specific about what I said in this thread.

I have no criticism of WECK. I wish the new owner great success.

 

[SirRoxalot]

When you look at market size and national reach, Cumulus is a lot closer to iHeart than Town Square. Town Square was born out of bankruptcy, and is dealing with small market people. They're still working with their original management team, which had a much more realistic plan that the Dickeys. They also have a lot of markets with much less competition than Cumulus or iHeart. They were making profit, which allow them to expand into other areas that can add to their revenue.

Cumulus - as you stated - dithered away with some bad ideas, spending a lot of money on them. A lot of that money came from cut, cut, cutting. Maybe you need to spend time in a radio station so you can see what happens when talented people are let go, and they can't find experienced sales people to service clients. Or when experienced sales people see customers that they've developed relationships with over a long period of time become "house accounts" because "all we need to do is renew them anyway." BTW, stuff like that is following the iHeart model. Ideally, those sales people will go develop new clients. Realistically, they get pissed off and look for another opportunity - like cable TV, which can target super-locally, and sells spots for more than radio. I'm sure that there's a study out there on Cable TV sales and how it's impacted both Radio and TV sales.

Cumulus changed management, and has been fighting an uphill battle since day one. Revenue movement has generally been positive, but the stock market is unbelieving and impatient. I guess it's a good thing that we don't have iHeart on the stock market because radio would look like a travesty if they had share prices to add to the overall composite.

Big A, I get it. You don't like talent of any kind. You've stated that over and over. You think it's unimportant, despite a mound of evidence otherwise. I don't think that you even like radio. You're preference appears to be for everything on-line. So, are you shilling for Pandora, or satellite? You sure don't think much of radio as a media. Oh, you might want to try out on-line outside of major markets. Either buy an unlimited plan for cellular - with its spotty coverage - or prepare for some disappointment with on-line access over dial-up, or low-end DSL. There are major swaths of territory in this country where radio does just fine.

 

[TheBigA]

When you look at market size and national reach, Cumulus is a lot closer to iHeart than Town Square.

But that's not what this discussion is about, and not what you were comparing in your previous post. You were comparing debt, and in that case, you're wrong to say Cumulus is closer to iHeart. They aren't, and their situation isn't anywhere near as dire, nor is it as complicated. So don't try to change the subject.

Big A, I get it. You don't like talent of any kind. You've stated that over and over. You think it's unimportant, despite a mound of evidence otherwise. I don't think that you even like radio. You're preference appears to be for everything on-line. So, are you shilling for Pandora, or satellite?

What are you talking about? None of this has anything to do with this discussion at all. Talent is important when it's used well. I've said that numerous times. I've said that current Cumulus management has returned programming decisions to local markets, and continues to support local talent and branding. I have no problem with any of that, except that it hasn't helped the stock price, and really hasn't resulted in improved revenues. But I'm sure the new CEO will say that this Thursday.

My view about radio is that it benefits from diversified platforms. When the Buffalo Evening News also owned radio stations, those radio stations benefited. But federal law prohibits that now. You have examples in Buffalo where radio companies also have a strong online presence. It hasn't hurt their radio stations. They are among the most listened-to stations in town. But it diversifies their revenue. I don't see why you have a problem with this. It's common financial advice for investors, and as a result, it's hurting Cumulus with its stock price. If we're going to talk about stock price, which is what this thread is about, we need to focus on those things that will affect that price, and I believe diversifying their revenue streams will help. That's all I'm saying. Don't twist it into anything else.

 

[davideduardo]

As I read this thread and other threads regarding the prosperity of radio it looks like Mr. E is talking out of both sides of his keyboard. In the other WECK thread, he speculates that WECK's current owner paid of his debts and the station made a profit, billing a speculated $800 thousand per year.

Billings = Gross income before expenses
Profit= Net income after expenses.

It's amazing how many people don't know the difference between "gross" and "net". It's "revenue" vs. "profit".

The $800 thousand estimate was for the billings of both of the owner's properties, not just WECK, and came from the established industry source for this sort of data. That source shows WLVL to be the greater biller, in fact. That, if true, might explain the sale of WECK.

What is not publicly known, either from Miller Kaplan data or from sources like BIA, is how much of that billing was profit. Nor do we know how much of the original sale price was in the form of loans, and how much is has been paid down. We know that the buyer back in 2008 (March was the closing date) was well advised... for example, Fletcher, Heald & Hildreth was the communications law firm they used for the sale and that one is among the very best.

 

[Rusty Bridges]

WLVL Lockport out-billed WECK Buffalo-Cheektowaga. That speaks volumes. There's nowhere to go but up. As to format speculation, it doesn't matter. Buddy is a fantastic relationship seller. He could sell sand to sheiks.

 

[PTBoardOp94]

Cumulus reported earnings today. Losses of $18.57 per share, or $543 million. That was on revenue of $299.5 million.

Earnings before interest, taxes, depreciation amortization and items were $206 million for the year. Cumulus took a non-cash write-down of $603 million to the value of its station portfolio.

Stock was down 19% after Wall Street's close.

 

[TheBigA]

Stock was down 19% after Wall Street's close.

19% sounds like a lot, but when the stock is trading under a dollar, it's just pennies.

Fourth quarter is usually supposed to be strong in radio, with holiday sales. But with retail in the toilet, there's no holiday bounce any more. And from what I can see, sales is not where the problem is.

They're blaming the write down on overpaying for Citadel. That happened five years ago.

 

[Rusty Bridges]

Watching the trends on broadcasting stocks, Beasley, Saga, Journal, Scripps, Townsquare, Sinclair, Entercom... and Cumulus at around 33 cents a share and foundering. A friend who works at Cumulus' Cincinnati cluster says she and her co-workers are feeling more uneasy with the passing of each month, despite focusing on the everyday business at hand, selling, producing, promoting and performing on the air. They check the stock daily, hoping for an uptick. At one time some felt Cumulus would parcel off the stations to better owners like CBS and Entercom, Saga or Townsquare, but those hopes have been dashed. The golden era was when the stock price was around 1.40 a share, before the 8 for 1 maneuver. "As long as the check clears, keep putting one foot in front of the other." She joined Cumulus from a small midwest group after Citadel failed, hoping the Dickey brothers would lead to brighter days. The manager who "sold her" on the job left within a year. Then Lew Dickey was ousted, but was all in with Mary Berner. Many of her co-workers who survived the Citadel cuts are not optimistic, but their sense of humor remains intact, "At least we're not iHeart." They see the subtle signs. More empty desks on the sales floor, positions consolidated. They know there are very few places to go if Cumulus fails, especially as they age. They lived through one bankruptcy and are dreading another. They hope to survive, but it's become like the lottery. No matter how hard they work and how good the ratings may be, there are no guarantees. It's very stressful.

 

[Rob Piotrowski]

No matter how hard they work and how good the ratings may be, there are no guarantees. It's very stressful.

That comment applies to any of the owners you named above.

 

[TheBigA]

That comment applies to any of the owners you named above.

And really applies to any line of work. Imagine working at Sears.

 

[flybynight]

And really applies to any line of work. Imagine working at Sears.

At every turn you try and diminish the concerns and stresses of people in radio. Why is that?

Many who post here dedicated their professional lives to a specific line of work that requires a more unique skill-set than is required to work at Sears. Broadcasting has been a career for many and takes lots of years of self-improvement and sacrifice to really get ahead, including plenty of moving. Comparing that line of work to people in retail is asinine.

Sorry, most people I know in radio have far more invested in their career than someone at Sears or Macy's or JC Penney or Target etc etc etc.

 

[TheBigA]

Many who post here dedicated their professional lives to a specific line of work that requires a more unique skill-set than is required to work at Sears.

No one said they don't. The one skill set you obviously lack is an understanding of context.

We were talking about being employed at companies facing difficult financial circumstances. I could have said AIG too. Try to consider the context before you go off on attack mode. That's what Sears has in common with the topic of this thread.

 

[davideduardo]

At every turn you try and diminish the concerns and stresses of people in radio. Why is that?

Many who post here dedicated their professional lives to a specific line of work that requires a more unique skill-set than is required to work at Sears. Broadcasting has been a career for many and takes lots of years of self-improvement and sacrifice to really get ahead, including plenty of moving. Comparing that line of work to people in retail is asinine.
.

True only if you are talking about retail clerks at Sears, and then only the ones with less experience and product knowledge. Retail is a lot more than being on the selling floor. If you are a buyer, accountant, display and window dresser, inventory manager, pricing specialist, marketing management person, etc., etc. at Sears, you have a finely honed skill set that is of less value the farther you get from the Sears market area.

Radio people at iHeart or Cumulus have to have the same worries that Sears professionals do: is there room at a comparable company for me if the place I am working goes under or if I get cut back.

It used to be that employees at a certain computer company said its initials meant "I've Been Moved". Changing markets is often part of any career path. In radio, it is greater because wages and opportunities increase the bigger the market. So we often start at a niche, suburban or small market station and move up in income and job importance... just like folks in other industries move to different branches to get experience.

Anyhow, it beats being a press operator at a daily newspaper.

 

[tbolt909]

Radio has never been a stable career path. Format changes,
Cost cutting, ownership changes and other calamities are trap
doors waiting to open. Those in programming have always known this.

Things are just worse now for everyone, not just air talent
and programmers. People who wanted a job for life worked at
the postal service or the DMV. Those days don't exist anymore
(If they ever did). Even McDonald's is circling the drain.!

Cookie cutter Radio formats are just as generic as
Sears stores. What unique "skill set" is required to schedule
the same 200 songs? Many talented Radio professionals left
long ago...

 

[Element9]

There are no guarantees in any business these days, but I get what Rusty's friend is thinking. She's fraught with anxiety. Maybe single white males don't get it. Whether it's publishing, sales or distribution, you can do your job well, handle three or four jobs within your office or station group and still get RIF'd. People can talk about the joy of moving to bigger markets, especially if you're a single white male, but that comes with a price, and there are plenty of people who don't want to pay it, mostly because they value a stable home life and appreciate having roots. Is there anything wrong with wanting to put down roots, raise a family and be rewarded for a job well and conscientiously done? Look at the people who've left Buffalo and have chosen to return. Take WBEN. Beach came back from a midwest market. Bauerle came back from St. Louis. Guys at 97 Rock have moss on their necks. The new ops manager at Townsquare came back from Atlanta. Channel 2 has seen the same with some of its anchors. Hauling three school aged kids and a wife and/or husband from town to town, up and down the dial isn't a day at the beach. Yes. Every business faces risks. Yes, risk is a part of life. Sears, IBM, HP... GM & Ford. The legacy contracts are done, the newbies get $16 an hour and pay for half their health insurance. Rusty's friend and her co-workers see the CEOs of failed companies walking with platinum parachutes, while the employees get the royal bone. They're doing the right thing, focusing on the present, but it's completely understandable that they're concerned.

 

[davideduardo]

They're doing the right thing, focusing on the present, but it's completely understandable that they're concerned.

Just look at the situation: radio advertising was one of the first things to go when companies retrenched in the first year of the recession. The industry lost about 40% of total billings. When the economy started to recover, there were many more options for advertising and the industry only recovered slightly.

Today, per last week's BIA report, radio bills about $14 billion a year. In 2006 it was nearly $21 billion. Inflation, albeit slow, means that stagnant revenue is actually decreasing revenue in terms of the value of money.

A "great" operating margin for a larger market station used to be in the 40% range, and few stations achieved that "gold standard". Take away 40% of the industry revenue, and you have stations either losing money or making very severe cutbacks.

Owners, managers and staffers at every level "are concerned". And they are faced with competition from a sector that they'd like to move into, but thus far, there is no profitable business model for streaming of any kind.

 

[davideduardo]

What unique "skill set" is required to schedule
the same 200 songs? Many talented Radio professionals left
long ago...

What unique skill set was required to schedule 14 songs and a coupla' extras in the Rick Sklar days of 77 WABC?

If things were as obvious and simple as you paint it, every McDonalds fry cook would be eligible to be the Chef de Cuisine at Le Bernardine in New York.