The Coming Cumulus Massacre of Citadel

[SirRoxalot]

The "ifs" are getting bigger on this deal. Cumulus stock is headed downward, reducing the value of the shares that current Citadel stockholders will get as part of this deal. If we go into a double-dip recession, the lenders could say no, fork over the penalties that Cumulus would have to pay Citadel, and walk away with a couple of billion still in their pocket instead of invested in a Cumulus-run morass.

The Citadel stakeholders would be left with a company to run. That means either re-upping with Farid & Co., or looking for another buyer for some or all of their properties. They would tuck another chunk of change in their pockets, lightening their debt load even more, and making them even stronger as a stand-alone group.

Another scenario could see Cumulus getting into a 3-way deal with another group - like Town Square - to sell off a bunch of the former Citadel properties in smaller markets. That would have to happen PDQ.

Meanwhile, the fat lady is in the back trying to figure out if she should start warming up or not.

 

[TheBigA]

Meanwhile, the fat lady is in the back trying to figure out if she should start warming up or not.

If Cumulus goes away, I don't see anyone else bidding for Citadel. It's too big and is filled with too many money-losing properties for anyone to buy. They need to shut down a few dozen money-losing AMs, and cut costs even more to attract a buyer. I think Townsquare is done buying. They just bought Double O and Millenium. So the options are pretty slim. On the other side, I think that puts Dickey in a position to pull a Farid and demand a price cut. It worked when Farid bought ABC.

 

[carolinaradio]

Meanwhile, the fat lady is in the back trying to figure out if she should start warming up or not.

If Cumulus goes away, I don't see anyone else bidding for Citadel. It's too big and is filled with too many money-losing properties for anyone to buy. They need to shut down a few dozen money-losing AMs, and cut costs even more to attract a buyer. I think Townsquare is done buying. They just bought Double O and Millenium. So the options are pretty slim. On the other side, I think that puts Dickey in a position to pull a Farid and demand a price cut. It worked when Farid bought ABC.

I know nothing about Buffalo radio, but happened upon this thread from the headline at the top and have been following it.

If this didn't wind up happening, could Entercom come back for Citadel? I think the biggest drag on Citadel, financially, are a lot of the old ABC stations in small, inefficent clusters. As talk slowly migrates to FM, they are going to be left with a lot of heritage talkers on AM that have nowhere to go unless they want to blow up heritage stations like WPLJ, KLOS, etc., which seems doubtful.

 

[TheBigA]

If this didn't wind up happening, could Entercom come back for Citadel?

What has Entercom bought lately? I see them as the kind of company that dangles money around and doesn't spend it. They would want a handful of stations that work for them, and they MIGHT want the network under certain circumstances. But every time they enter into negotiations for stations, they walk away.

 

[carolinaradio]

If this didn't wind up happening, could Entercom come back for Citadel?

What has Entercom bought lately? I see them as the kind of company that dangles money around and doesn't spend it. They would want a handful of stations that work for them, and they MIGHT want the network under certain circumstances. But every time they enter into negotiations for stations, they walk away.

They haven't bought anything (except for that little purchase out in San Fransisco) - I agree, they seem to save their money, and it has greatly benefited them. I just threw it out there because I know they were interested in Citadel earlier in the year.

 

[JustPastBuffalo]

If this didn't wind up happening, could Entercom come back for Citadel?

What has Entercom bought lately? I see them as the kind of company that dangles money around and doesn't spend it. They would want a handful of stations that work for them, and they MIGHT want the network under certain circumstances. But every time they enter into negotiations for stations, they walk away.

Entercom has been paying down debt and buying back shares. The company's Q2 indicates the challenges faced, with the word "decreased" frequently appearing in the report. A number of operators report that June was a challenging (also described by some as "dismal" and "sh*tty") month for many radio companies. The 11% decrease in Entercom station operating income is troubling and EBITDA being down 15% is a cautionary signal, especially if it continues to hold through Q3. That said, Entercom appears to be better off than many companies its size. Senior debt is manageable at $625M and the Field family, which holds a majority of the stock, is known to be prudent about operating and expansion. The company knows when to walk away from the table. It has been reported that Entercom looked at buying ABC before Citadel made a bid. David Field is on record as saying Entercom was interested, but walked. He also added, in retrospect, doing so with some regret. I think Cumulus will eventually close on Citadel. There are some mammoth egos involved this poker game. But if the deal goes south, Farid Suleman holds a pretty good hand, Citadel having emerged from bankruptcy in good shape. I'm not defending the either company's tactics, simply trying to offer an objective assessment of the reality of the situation from this side of the speakers.
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BTW, carolinaradio, welcome to the Buffalo-Niagara Falls-Rochester board.

 

[SirRoxalot]

The Dickeys will do everything possible to close the Citadel deal. It may be the only way to hold Cumuless together. There's so little equity in their company these days, and the stock prices are heading so sharply downward that the bankers have to decide to either buy or sell. Holding is not really an option.

 

[JustPastBuffalo]

...although some investment professionals see Entercom from a different perspective.

 

[SirRoxalot]

I expect everyone to hedge their bets on growth for any stock under the current economic conditions. The market is, shall we say, "unsettled"? Advertising budgets get cut by many companies during uncertain times. The ones with enough cash on hand can take advantage - just like investors who get out near the top, and have cash to invest when the market drops. Of course, there are many folks who have tried to time the market with disastrous results. Remember, Mr. Potter was buying when the bottom fell out.

Overall, Entercom looks like one of the more stable companies. They're profitable for the owners. It isn't what investors looking for growth in stock prices want to see, though. And there are no dividends for people looking to park their money and still earn a little something.

 

[Element9]

Yet, in spite of the downtrend in the market and the challenges and uncertainty facing sales professionals on the street, programmers and on air personnel, some Citadel people are living large. From RBR/TVBR dot com:

http://www.rbr.com/radio/citadel-golden-parachutes-keep-growing.html

"Suleman is now in line to receive $10,751,000 in cash compensation from Citadel, $13,491,154 in cash and stock for his stock and options, $12,954,947 in “pension and non-qualified deferred compensation,” and $39,043 in perquisites and benefits (P&B) for a total of $37,236,144. Ellis is set to receive $1,525,000 in cash, $1,560,668 for her stock and options, and $27,211 in P&B for a total of $3,112,879."

Compensation for a job well-done, no doubt.

 

[carolinaradio]

Thanks for the welcome.

Maybe I'm thinking wishfully, but I wonder if we could see any improvement in the current Cumulus stations whenever this goes through (assuming it does)? I mean, they're taking on heritage stations like KLOS, WPLJ, WBAP, etc....can they really run those with the "one size fits all" playlist mentality like they do with some of their stations currently (such as their CHRs)? I don't know if they can run all of these larger market stations the bare-bones way they run some of their smaller ones. I'm no expert, but by looking at their stations, they seem to be one of the cheapest companies there is, more than Clear Channel. They love to syndicate nights on their country and CHR stations. Citadel seems to put a lot more in to their properties. They have more professional websites, less syndication/more airstaff, mobile listening apps, etc. Until Cumulus bought Susquehanna, they were mainly a small market company. I wonder if they know what they're doing entering in to/expanding their presence in these larger markets?

On a side note, Cumulus is actually hiring in the programming field:
http://money.msn.com/business-news/article.aspx?feed=BW&date=20110803&id=14042008

Cumulus is in some awfully small markets. I wonder if we'll eventually see them exit some of those like Clear Channel did a while back?

 

[TheBigA]

Thanks for the welcome.

Maybe I'm thinking wishfully, but I wonder if we could see any improvement in the current Cumulus stations whenever this goes through (assuming it does)? I mean, they're taking on heritage stations like KLOS, WPLJ, WBAP, etc....can they really run those with the "one size fits all" playlist mentality like they do with some of their stations currently (such as their CHRs)?

It's been my experience that the buyer gets to make the rules.

 

[Kent]

Maybe I'm thinking wishfully, but I wonder if we could see any improvement in the current Cumulus stations whenever this goes through (assuming it does)?

I suppose anything's possible, but I wouldn't call it likely. Cumulus is heavy on corporate control and hasn't shown any indication they're going to change.

I mean, they're taking on heritage stations like KLOS, WPLJ, WBAP, etc....can they really run those with the "one size fits all" playlist mentality like they do with some of their stations currently (such as their CHRs)?

Well, they took on some large and major market stations when they got Susquehanna, and they didn't change.

I don't know if they can run all of these larger market stations the bare-bones way they run some of their smaller ones. I'm no expert, but by looking at their stations, they seem to be one of the cheapest companies there is, more than Clear Channel. They love to syndicate nights on their country and CHR stations. Citadel seems to put a lot more in to their properties. They have more professional websites, less syndication/more airstaff, mobile listening apps, etc. Until Cumulus bought Susquehanna, they were mainly a small market company. I wonder if they know what they're doing entering in to/expanding their presence in these larger markets?

I've been told Cumulus specifically prohibits live talent after 7 PM. I don't know if that's true, but it would be in character. You might see a few two person morning shows and live middays in some of the larger Citadel markets, like Cumulus has in a few of its larger markets, but I expect massive cuts in programming staff with little regard to those people's contributions to the company.

On a side note, Cumulus is actually hiring in the programming field:
http://money.msn.com/business-news/article.aspx?feed=BW&date=20110803&id=14042008

I doubt it's going to trickle down to the local markets. They're probably going after people like McVay because they want to make as much use as possible out of voicetracking with out of market talent and syndication as possible.

 

[chas108]

can they really run those with the "one size fits all" playlist mentality like they do with some of their stations currently (such as their CHRs)?

Jan Jeffries is keeping this Eric Church hit off WFMS and KPLX...
http://www.youtube.com/watch?v=wx-dUsh6OT8&ob=av2e

 

[JustPastBuffalo]

What does this song say? There are plenty of ways to interpret it. The comments following the video reveal how different people react to it. Polarizing. Maybe Jeffries feels the song has more negative than positive. Could be he thinks there are better things to do than have his stations embroiled in the middle of a tempest in a teapot that a song like this has the potential to create. Dunno. Just speculatin'. And I hope the mods don't send this to TIO if this thread turns into a sensible, rational discussion about a song and (corporate) format decisions rather than politics.

 

[chas108]

What does this song say? There are plenty of ways to interpret it. The comments following the video reveal how different people react to it. Polarizing. Maybe Jeffries feels the song has more negative than positive. Could be he thinks there are better things to do than have his stations embroiled in the middle of a tempest in a teapot that a song like this has the potential to create. Dunno. Just speculatin'. And I hope the mods don't send this to TIO if this thread turns into a sensible, rational discussion about a song and (corporate) format decisions rather than politics.

Jim, I don't see the lyrics as being a stumbling block for a Country audience. Jeffries may see the southern crunch rock-style arrangement as an issue...it pushes the sonic envelope a farther than recent hits by Jason Aldean and Brantley Gilbert. (I heard all three on 'YRK my last trip thru) The song has been Top 15 in Country Aircheck Monitor and Mediabase for close to a month, but that's not unusual for Eric Church or a lot of Country records nowadays.

Funny thing about some polarizing records...they come back big-time, often years down the road to become iconic oldies. Reba McEntire's "Fancy" and Martina McBride's "Independence Day" are two such examples.

My point was to "one-size-fits-all" programming decisions that based on anecdotal evidence will continue to be Cumulus' SOP. Hopefully the mechanism for local feedback still exists at those stations...callout, M-Score or at least the occasional auditorium test. But if not and everything continues to be handed down from Atlanta on a tarnished silver platter, it opens up opportunities for "live and local" competitors with the talent, budget and patience to see it through.

 

[Bob1370]

One size fits all often makes you a misfit in a key market--the bigger the market the riskier the strategy. If they care more about immediate savings than long term growth...well, that's the kind of thinking that put Citadel in Chapter XI, and gave Clear Channel a near-death experience that forced the Mays family to surrender control.

If Cumulus repeats the mistakes of its predecessors, it faces the same fate and will be left behind when the economy recovers fully. It's not like they don't have examples of the damage that low-rent programming strategy causes...they're buying some of the wreckage at a deep discount. Oh well, if you keep doing what you've always done, you're going to keep getting the same results, for better or for worse...

 

[carolinaradio]

Interesting responses.

If they continue the "one size fits all" approach with their CHR's and start it on the soon to be acquired Citadel CHR's, I hope they at least improve the programming. The music on their CHR's is awful. I'm shocked they keep PD's at these stations. I hope if they get some other people in the programming dept., it will improve, even if the orders are still handed down nationally.
People beat up on Clear Channel, but I think Cumulus is way cheaper.

Some of their stations, interestingly, have full airstaffs, like WGRR in Cincinnati, KFOG in San Fransisco, and KCFX in Kansas City. The main beef I have with them, like I said earlier, is no live night jock on most of their stations and no midday jock on some. Especially on a CHR - is it that hard to find somebody wanting to get their foot in the door, willing to work for almost nothing to do nights? Can they not at least voicetrack so there's somebody on? Same for the country stations. This deal is way bigger than the Susquehanna purchase, IMO.

 

[SirRoxalot]

Cumu-less is also acquiring Citadel Media, with its array of syndicated programming and 24/7 music formats. You can bet that Lou Dickey & Co. will be maximizing their profits by utilizing those resources.

Market 53 could very well see syndication everywhere but AM and PM drive. That'll make life easier for Town Square and Entercom. In fact, I could see a real game of musical chairs at Citadel, especially if they decide to take one of the stations Country, and if Larry Norton decides he's tire of getting up at 5 AM in Florida. Anybody want to bet that syndicated Country and a significantly smaller staff wouldn't appeal to Brother Lewie?

 

[carolinaradio]

That's really scary. I wonder if we could see automated 24/7 music formats?

Could this acquisiton come back to bite Cumulus? Economic conditions aren't great now, and remember the trouble Citadel ran in to after they acquired ABC. I think they were doing alright before then. They are taking on a ton of debt.