The Coming Cumulus Massacre of Citadel

[JustPastBuffalo]

According to Lew Dickey, Q2 was soft. http://www.rbr.com/radio/blah-quarter-for-cumulus-ahead-of-citadel-closing.html Note that "a September 15th closing" is again mentioned. It had previously been "by September 1st." Then for a few days it was "after the first of the year." Now it's either "September 15th" or "shortly after September 15th." The Citadel shareholders are scheduled to vote on September 15th. Plenty of drama associated with this deal.

 

[SirRoxalot]

Russ Burton, long-time producer of Larry Norton's show and Buffalo Bills football broadcasts is leaving Citadel to go into sales at Town Square. Makes you wonder if he knows something that we don't know - other than there's more money in sales than there is as a producer.

 

[Radio_bored-Op]

I have skimmed over most of this thread,
soo please direct me to the info, if this
inquiry has already been answered:

Would Cumulus "dump" ( sell)
one/any of the FM stations here in
Buffalo ? ( as a stand alone) purchase
for some one w/deep pockets..

and/or sell the Buffalo cluster, just
to cut their losses and move on/out of buffalo.

and if so, what would be an estimated asking price?
(not that have the money........)
at the moment

 

[JustPastBuffalo]

I have skimmed over most of this thread, soo please direct me to the info, if this inquiry has already been answered: Would Cumulus "dump" ( sell) one/any of the FM stations here in Buffalo ? ( as a stand alone) purchase for some one w/deep pockets.. and/or sell the Buffalo cluster, just to cut their losses and move on/out of buffalo. and if so, what would be an estimated asking price? (not that have the money........) at the moment

First the disclaimer1: Hard to predict what Cumulus will do in any of its medium markets, but based on what's being reported, the answer to the question about "dumping" is no. Perhaps an emphatic "No!"

Cumulus is boldly positioning its forthcoming purchase of Citadel as being the largest pure-play radio company in America, projecting margins of 40% EBITDA, greater than Clear Channel's baseline of 35%. Broadly speaking, Cumulus will retain 40 cents of every dollar it makes. Perhaps of most concern, Cumulus projects "synergies" (a fancy way of saying "savings") of $51.9 million, which is over and above previously published reports of "$50 million" in synergies. One of the ways Cumulus intends to "synergize" is through "centralized operations."

Some bullet points from the presentation that Cumulus CEO Lew Dickey and his folks are using in their roadshow, getting the financing together for the $2.4 billion acquisition of Citadel - They say the combination of the public Cumulus Media Inc., the just-folded-in Cumulus Media Partners (formerly 25% owned and managed by CMI) and Citadel will be “the largest pure-play radio company.” (Clear Channel is both radio and outdoor.) Cumulus pitches “Industry-leading adjusted EBITDA margin of 40%...low capital expenditures [extraordinarily low, as TRI noted in its coverage of Cumulus’ latest Q2 results]…optimized capital structure.” Not much about programming assets or content. But there are “$51.9 million of identified synergies” – that’s costs to be cut, by eliminating duplication between Cumulus and Citadel. Cumulus does mention its “Sweetjack” daily-deal product, which it’s been testing in Atlanta. It also says the “underperforming Citadel Network [syndicator Citadel Media] is expected to benefit greatly from a larger platform and Cumulus content assets.” (There are already worries at the station level of more out-of-market programming pushed to local stations.) Cumulus says its management has “a history of exceeding estimated cost synergies.”

Additionally, Cumulus and Lew Dickey in particular, appear eager to prove that it can out-perform Citadel and Farid Suleman, who reported a soft Q2 (second quarter), attributing that to problems in certain major markets, particularly San Francisco, Atlanta and New York, coupled with a decrease in revenue from Citadel's networks. Some of Suleman's comments and corresponding figures can be read here: http://www.rbr.com/radio/another-down-quarter-for-citadel-broadcasting-audio.html

The medium markets (like Buffalo and Providence) might provide Cumulus with a degree of much needed revenue stability. As such there's no incentive for Cumulus to spin these stations to some local white knight with deep pockets (again, the disclaimer1), at least in the near term. Dickey appears to be promoting an attitude of "we can't wait 'til we get our hands on those stations, we're going to print money."

 

[GeorgeKramer]

Shredd & Ragan are losing Josh Potter, one of their key contributors. He's leaving 103.3 FM for a gig in Cleveland.

I believe Andy Roth is his new boss. The Buffalo connection strikes again!

On a related note, Potter also does the 7 pm to midnight shift on WEDG so they will need to fill that slot. I think he also does remote work and an occasional Saturday morning/afternoon shift.

 

[SirRoxalot]

Congrats to Mr. Potter. Good move on his part. He'll be missed by S&R, and he'll miss the coming Cumuless purge.

 

[JustPastBuffalo]

Josh Potter is a funny, talented guy who also produces some great bits for S&R. He's going to be missed, off and on the air. But, AFAIK, Jim Jacka, another talented guy, is still part of the S&R/Citadel team. The 97 Rock morning show loses the very talented Russ Burton to Town Square sales, and now Potter is off to Cleveland. Tough few weeks at 50 James E. Casey, but people have to go where the opportunities present themselves, especially with the imminent sale to Cumulus. These behind-the-secenes-guys contributed greatly to their respective shows. It's particularly unsettling because they're are the "young turks" who are the future of the business. Best wishes to Russ and Josh.

 

[Element9]

According to Taylor On Radio, Cumulus expects to close this Friday:

More signs Cumulus plans to close on Citadel this week – One staffer tells TRI “Cumulus wants all Citadel employees’ emails to be ‘@Cumulus.com’, effective immediately upon closing. Looks like all local Citadel IT departments are preparing for an apparent closing this Friday, September 16.” That lines up with the dual shareholder meetings for the two companies on Thursday, September 15. So right around the time many radio executives pack up to leave the RAB/NAB Radio Show in Chicago that ends Friday, there could be a whole lot of news out of Cumulus. The folks here in Chicago are already buzzing about it.

 

[yugoidar]

9, you beat me to it! So what's new, right?

Well now that it's imminent, the question becomes how quickly will those of our friends that remain at the Citadel cluster start feeling the impact of the change in ownership? While I wish them the best, I'm afraid that that is probably not what's in the cards! Stay strong, friends!

 

[Radio_bored-Op]

I tuned in and was HAPPY to
see Eddie Woo on the night side
of the EDGE_guy done his time on
the night flight and getting his
well deserved bump up to a "real" shift.
-
OK, there are 7+pages to this
Cumulus/Citadel thread but I need
to (well want to) KNOW::: is this
a good thing, or bad thing??

sure post-ers will reply, define good or bad
-or depends if you are making $, or if
you are being fired, etc.
look people come and go, and talented people return;
OVERALL: maybe just from the listeners side of things,
good or bad ?
just reply, good or bad.... lol.
Im not one of the 51%owners, not
on an advisory board, not a suit, I'm a
37-old guy, who likes radio, but doesnt always
see the big picture, good or bad ?

 

[Bob1370]

You know, a lot of the predictions of higher ROI through "synergies" turn out to be wishful thinking for one main reason--when the cuts result in noticeably inferior programming, audiences drop faster than costs, leading to unsold inventory, and/or availabilities sold at what had been fire-sale prices just to keep the CPM competitive in the face of sliding ratings.

Folks at various Clear Channel and Citadel clusters have been through this and know the story well.

It doesn't happen very often at the Entercom clusters and hardly ever at CBS clusters because they've been smart enough not to take all the quality out of the presentation of programs in key dayparts.

 

[SirRoxalot]

They're calling the company "Cumu-LESS". That should tell you all you need to know, Op. I don't think that this will be pretty. The big question is timing. Do they send people packing on Friday, and start training who's left in a new corporate way of life on Monday? Or do they wait through the Fall book to see who adapts to the new "system", and make changes just in time for Christmas?

Fasten your seatbelts. It's going to be a bumpy ride.

 

[TheBigA]

You know, a lot of the predictions of higher ROI through "synergies" turn out to be wishful thinking for one main reason--when the cuts result in noticeably inferior programming, audiences drop faster than costs, leading to unsold inventory, and/or availabilities sold at what had been fire-sale prices just to keep the CPM competitive in the face of sliding ratings.

Sometimes. Then again, if you look at the top revenue producing stations at BIA, you'll see a lot of CC stations there. "Inferior" is subjective. What's inferior to someone in radio maybe wonderful to others.

I thought it was interesting that when CBS sold its Buffalo cluster, the new owners kept the previous level of on-air staffing, but the revenue wasn't enough to keep the company from bankruptcy. So quality programming isn't always enough to keep the company in business.

 

[SirRoxalot]

I thought it was interesting that when CBS sold its Buffalo cluster, the new owners kept the previous level of on-air staffing, but the revenue wasn't enough to keep the company from bankruptcy. So quality programming isn't always enough to keep the company in business.

Not when you seriously overpay. That would seem to be a sign of bad management on the part of the purchaser. You can't cut your way to prosperity when you've been stupid enough to take on overwhelming debt. Let's face it - CBS snookered Regent, the same way ABC snookered Citadel.

Next up? Anybody rather have shares of the "new" Cumu-less instead of $37 in their pocket? I'll take the cash, please.

 

[TheBigA]

Not when you seriously overpay.

Quality costs money. To you, quality is overpaying. How can you, on the one hand, expect quality content and full staffing when you don't want to pay for it? It's obvious that CBS staffing and payroll doesn't guarantee high revenues, as suggested by Dr. Smith's post. All it leads to is debt. So the conclusion is there's no value in quality.

 

[SirRoxalot]

Not when you seriously overpay.

Quality costs money. To you, quality is overpaying. How can you, on the one hand, expect quality content and full staffing when you don't want to pay for it? It's obvious that CBS staffing and payroll doesn't guarantee high revenues, as suggested by Dr. Smith's post. All it leads to is debt. So the conclusion is there's no value in quality.

Overpay for the property, "A". But you knew that. You're just being deliberately dense. Regent simply paid too much for the Buffalo group. It wasn't that they suddenly became dramatically less efficient. It's that there wasn't much upside for them to gain in a very competitive (but shrinking) market, or a whole lot of "synergies" for them to put in place without seriously hurting the product. That's just bad management.

Town Square essentially bought them at a bankruptcy sale. They've got a manageable amount of debt. They've made changes - including some that are rather agressive in both programming and sales. So far, they're winning. They're actually creating a more talent-friendly company than Regent was - which means this could get interesting if Cumuless does a slash-and-burn when they come into town.

 

[TheBigA]

Overpay for the property, "A". But you knew that. You're just being deliberately dense. Regent simply paid too much for the Buffalo group.

The price is based on anticipated revenues. They don't just take a number out of the air. That number was based on a certain level of quality, in terms of the property, the frequencies, the programming, the staffing, and the revenues. What changed between the purchase and the subsequent bankruptcy is the advertising depression of 2008. That also killed Citadel and most other media companies. "Overpaying" is an insulting word to use about a group has one of the highest rated stations in town under both ownerships. But the amount they paid was irrelevent when advertising revenues drop due to a bad economy.

 

[SirRoxalot]

Past history indicates that we have a "bad economy" about once a decade. Big time managers should be smart enough to understand that, and not live so close to the edge. The truth is that purchasers have sold lenders a bill of goods on "growth prospects" much too often since 1990.

If you're in it for the long term, you don't put your company in danger. Otherwise, you're just shuffling properties and trying to time the market. Of course, if you're getting big bonuses for doing the deal, and don't really take a hit if the deal doesn't work out...

 

[Element9]

Cumulus and the 'big swingin' dicks' (as Michael Lewis refers to the Wall street barons in his book, Liar's Poker) will show America how it gets done and where Farid and Judy went wrong. [/sarcasm] "$51 million in synergies, bay-bee!" If only there weren't human beings involved at the local level who will be adversely affected by Dickey's massive ego. All the pieces are in place. It's reported the closing is expected to take place Thursday after the boards of directors of both companies approve the deal. Friday may be an uneasy day for many Citadel employees locally and nationally. Even if things don't immediately change, it's very likely there'll be changes within the next 30 days. A buyer doesn't pluck down $2.6 billion and say, "Helluva job folks, nothing changes."

If you don't live here, but post from LA, New York or even Boise, what happens in Buffalo (or Rochester) is of little consequence to you. But if you're from these parts and the people you're used to hearing on the radio are no longer working, or maybe your favorite format gets changed, then you're immediately affected. Certainly not as much as the people who get pink slipped, but you feel it nonetheless.

 

[carolinaradio]

I suspect that we'll see more cuts on-air in the smaller and some of the medium-sized markets than the larger ones. I mean, we'll probably see some, but I doubt we'll see stations like WPLJ, WDVD, etc. running the voicetracked/canned Rick Dees afternoon or mid-day shows that Cumulus has been putting in their smaller markets (which literally have skeleton staffs), or just automated like they do in some markets. Night people should be the most concerned. They may fire long-time employees and hire new ones to replace them that require less $$$.
I worry more about the effects (on-air) in the smaller markets they are acquiring than the larger ones.

As I asked somewhere else, I wonder if Cumulus will start doing more voicetracking since they are going to get more big-market talent?

I wonder if Cumulus will divest any of its smaller markets and/or small AM's (including the current Citadel ones) that may be underperforming after the sale is completed, like we saw Clear Channel do several years ago.

Hopefully after all of this Cumulus will get a more impressive corporate website.