WFLA format in FWB??

[jmtillery]

You make excellent points, and I agree with your assessment of small-town radio. However, another problem with a "would be" broadcaster becoming a first-time buyer, it's virtually impossible considering most, if not all, radio stations that may be available for sale are priced way out of the market from sellers who think their 250 watt daytimer in McCook, Nebraska is worth $2.5 million dollars when it is ony billing $80,000 annually. That leaves applying for an available frequency and building from scratch which again is next to impossible because the FCC decided to sell sprectrum to the person or entity with the deepest pockets, making a class A construction permit in Grey Bull, Wyoming selling for $800,000 on a station that, once built, is only worth maybe $400,000. I.E., everyone appears to have one thing on their mind and that is old fashioned greed.

Mark Tillery,
Former General Manager WTMC-AM 1290 Ocala, Florida
(1993-1999)
Ocala, Florida
[email protected]

 

[Poledo]

Well, most businesses sell at a multiple of the yearly revenue. I know that I could sell my business on Monday at 1:1 with just a couple of phone calls. Right now someone would have to offer me 5:1 to get me to talk to them and it might take a 10:1 offer to get me to sell, but i wouldn't consider buying another business at more than 2:1. Since the number of radio stations is limited I would assume the multiple would be slightly higher, perhaps 5x the yearly billing is a fair price for a radio station? I would assume anything less would be a bargain for an average station in an average community.
Of course other factors come to mind, like the condition of the equipment that comes with the station and the cost to get it into good working order. There's also the public perception of the existing station. If it's been playing brokered religion for 10 years and pulling a 0.1 share, it'll be very hard for a new owner to bring listeners back to that frequency, even if he has the best damn format in the country. It seems like it's easier to pull listeners to a new station on a new frequency than a new station on a cursed frequency.
I base this on a quiet real estate theory that a building becomes cursed when the occupying business goes under. A similar business would be attracted to the building because it would already be finished for their needs, but once it opens up in the same building they will usually fail. The trend frequently lasts until the building is completely remodeled and a different type of business moves in. This theory doesn't apply to chains and strip malls as much as it does to local businesses and stand alone buildings.

 

[redneckriviera]

Mark, I think we'll start to see a retreat on station prices over the next few years, similar to what's been happening with home re-sales. New home sales have plunged much faster than existing home re-sales, because the homeowners just stay put. If an existing radio station is making money and there is no other compelling reason to sell, the owner will just keep operating. But in those situations where a station isn't making money or there is an external reason requiring a sale, the prices aren't going to be what they once were. You know--the difference between a buyer's market and a seller's market. As time goes on, station prices will continue to adjust to the "buyer's market."

Poledo, radio stations have historically been traded at multiples of operating profit ("broadcast cashflow") rather than revenue. In recent years the multiple has been around 10, give or take. Clear Channel made waves in the mid-nineties by paying multiples rumored to be up to 15 or 20 for some glamor properties where they thought they could realize immediate and enormous upside through consolidation, but 10 X BCF remained the industry standard for a long time. There seems to be a general consensus that those pricing formulas are now in the crapper, but station trading has slowed to a crawl. As mentioned above, it's becoming a buyers market now, and the buyer will have a lot more to say about station pricing from now on.

 

[Tibbs4]

RNR --- all valid stuff there. Sorry, I've been a bit "snowed under" (not really, it did flurry for five minutes this morning, though)
and wish I could post more thoughts on why I love/loved the PC-FWB area. You seemed to hit the points pretty well spot on!

As for Cash Flows, I agree 1000%. 10X was crazy in the day. I think we've hashed that out before on here. You/we/they (well, any smart
operator-in ownership consideration) should look at all the various market variables (new stations, format potentials, ad rev +/-, dynamics
of the market, etc.) It's the head strong owners that still stick to the old rules of this times x. That is where the lock down for the
non-big C's (Citadumb, Crumy, CC) is hitting the wall. Those guys who did not sell during the frenzy or bought then still think they have a
toy worth more. Look at what Double 00 or Tragic (never mentioned on RI anymore) or Quantum would "demand." It still is
outrageous and crazy. Looking at the "bright" side --- since Spring Bleak 2009 will probably be substantially down, along
with tourism in general, the PC market has to be in trouble worse than just six months ago. Yet, I am sure the clowns and
clones are still in denial of the upcoming doom. There are right at ten stations that should be picked up in the PC market for
$400-$500k and still be over priced, yet these companies will sit on losses (year after year) or thin profits before they cut
their losses. That is just crazy logic to me. The worst part is they don't try to compete, they cut costs, gut the sound and
have no enthusiastic sales people left. It's such a flawed mindset, and yet it is the COMMON WAY. I wouldn't rule out a few
good opportunities coming down the path in January.

BTW, Poledo, rob, etc. You guys listen to these stations (I assume) --- notice any fewer ads?

 

[redneckriviera]

To get a sense of how it works, try this on for size.

Let's say you own 4 FM sticks down there at Spring Break Beach. One is a well-established classic rocker that averages about $60K in monthly billing. One is a CHR that has to split the Top 40 pie with another CHR, so it averages around $40K a month. Another is "the other" Country station and it scrapes up $30K in monthly ad sales, and the 4th one is a Flava Of Da Month (say, Adult Hits) and chips in $20K per month. That's $150,000 a month--or $1.8 million yearly. Let's say you paid $6 million for the bunch and financed $5 million, and your monthly nut is around $70,000. So you run it for $60,000 to $65,000 a month--3 or 4 jocks + lots of net & VT + a couple of office people & a GM/SM--and you're paying the mortgage and still have $10+ to send up to corporate each month.

At the end of 7 years the nut disappears and you're spinning off a million in profit off $1.8 in billing. Now, what's it worth?

You're right, in the old paradigm, where each of those 4 stations would have each been averaging $450,000 a year ($1.8 mil, collectively), the numbers wouldn't have worked. But in Clusterworld, they do.

 

[redneckriviera]

What I was getting around to (this thing cuts you off if you type too slow) was that each individual station in a cluster like that doesn't have to do shitloads of ad revenue for it to work, because the basic operational structure is pretty much like the old fashioned one-station model.

In my "fictional" example, the top dog in the whole litter isn't even generating a half-million a year in ad sales, and the rear-ender is just picking up table scraps. But put 'em all together and it adds up to enough to retire the debt and eventually make the batch worth something.

At least it's worked up until this point, because there were lenders out there willing to make multi-million dollar loans. Whether it still works now, when nobody can even get a loan to buy a car...

But if credit stays tight, perhaps the only way current owners will ever be able to get out is to break up the clusters and sell the stations individually.

And if the current owners aren't making that nut, then it will be the banks selling off the pieces. And banks don't want to be in the radio business, so there may be some bargains to be had.

 

[Tibbs4]

Boy what a creative cluster you created for yourself. I wouldn't mind owning one of those myself...how about you, rnr?
Those sales figures sure look positive compared to what I expected you to "create." I assume such a cluster could be
finessed to be that successful if done properly. Of course "the deer hunter" might know of a good engineer that could
maximize the signals, check the equipment, etc. to improve coverage and a few technical problems. Of all of those
stations, what would be flagship station have to be? Maybe someone does owe the banks and would be better served
focusing on stations closer to their HQ or something. Maybe they could be assumed or something. I dunno. It's an
intriguing thought. Or a nightmare in the making, er, continuing.

 

[Poledo]

I'd be really surprised to hear that banks are still lending to radio stations. I know there's a credit crunch, and I didn't think it would wind up effecting me, but it did. To the banks, I'm golden... always have been. I never asked for anything that I couldn't get. Two months ago I had to take out a 5 year loan for 100k to purchase a $160k property. The bank made me sign away $750k in collateral to get the money, and that was the best I could get after shopping the loan to 3 different banks. The other two banks wouldn't loan me money unless I was buying a home (primary residence) or a new car.

Since the topic took a seg to values an money, does anyone know anything about that newer station in Ebro? Like how much have they invested in that thing and is it making enough money to pay the bills? I rarely get/got to listen to the station, but I believe they had waterfront studios on PC Beach and their signal was so bad there that they were relying on one or two translators to cover Panama City. Sounds like it was the biggest money pit in the market to me.

 

[redneckriviera]

Yeah, banks like real estate. They don't "get" radio. It is one of the reasons venture capital & investment groups became so involved in radio--more adventuresome. But, such groups also won't fool with "small stuff," so consolidation allowed radio to "bulk up" and tap the big money. One of the real problems for entrepreneurs at this time is that radio has become a Big Money game. It's real hard to play unless you've got a truckload of cash behind you. A return to the pre-consolidation ownership caps would actually help quite a bit, in that regard.

The Ebro FM--WBPC--originally covered swamp & trees & not many humans, but it looks like they got a CP to move the thing closer to town. The radio-locator.com map shows the 60 mV contour covering Panama City--good enough for car reception, but marginal inside. Yeah, that was a critical error that cost them hundreds of thousands to correct. And it is still a rimshot, at best.

Tibbs, that creative cluster of mine ain't all that creative. Look a little closer at PC and Uh-Oh. The numbers are a guess, but they're an educated guess. It may look like a mess from afar, but the closer one gets to the checkbook it most likely looks a lot better.

 

[Tibbs4]

RNR --- I got where you were coming from on that. It does make total sense. What makes me wonder about the billings
is that the area is a LCD market and that keeps rates so whored out that I couldn't see $20 a spot still there when you get
into the three way fight between Double nothing, Tragic and Quantrum. The one exception to the big bucks rule is Mark
Carter at Seabreeze. He's still the brightest one of them all, Jimmy excluded.

 

[redneckriviera]

RNR --- I got where you were coming from on that. It does make total sense. What makes me wonder about the billings
is that the area is a LCD market and that keeps rates so whored out that I couldn't see $20 a spot still there when you get
into the three way fight between Double nothing, Tragic and Quantrum. The one exception to the big bucks rule is Mark
Carter at Seabreeze. He's still the brightest one of them all, Jimmy excluded.

Well, remember that CC--specifically 'PAP--sets the rates in PC. Everyone else falls in line behind them. And I'd guess (wild guess) that they're getting $55-$60 for AMD and averaging maybe $40 on a 24/7 basis. Then Sunny slips in there just a few bucks back... then there's a second tier of stations at around $20-to-$30... and everyone else scrapes & scrambles for ten bucks a throw--or whatever they can package up with a contest/promotion.

But it's really all about the sun & fun & white sand beaches in PCB. Who needs radio?

Mark & Jimmy are indeed the exceptions, making it work the old fashioned way. It's not impossible. But it does require different operating strategies--and these two guys could probably write the book.

 

[Tibbs4]

<<<<<But it's really all about the sun & fun & white sand beaches in PCB. Who needs radio?>>>


That ought to be the title of a book. It would just be easier to sit on the beach and laugh (or cry)
at the state of PC radio. And we'd make more $$$, despite the healthy beer consumption costs!!!
Man, now I am depressed. Tower of Pizza, bikini's (or less), youth (size 30 waist vs. today's version)

I am headin to the gym to get ready, rnr. Anybody got a phone number for a legit Double 00000
exec that'll let us play radio on the beach again??? Someone will allow it.


P.S. Mark Carter is my un-official hero. If you have not met him, it's worth the trip to 98 near
Seaside. He is the toughest cookie there is, yet the most humble and honest I have met.

 

[Poledo]

My, how many twists and turns has this thread made. Now here's a new one.

What's the story behind Mark Carter at Seabreeze selling off the stronger 102.1 signal? And why don't 102.1 and 106.3 share a common tower?

 

[Tibbs4]

I am going on fuzzy memory here. I believe that Mark's father sold WWAV 102 to Tom Birch.
That turned into a fiasco, financially, legally, etc. The towers over near Sandestin are
in a swampy area complete with snakes, etc. I am not sure if Mark's family owns that
land, but I know he's had to go cut grass, etc. over there. I am guessing that when they
sold Birch Wave that included the tower, but perhaps, not the land. That would make
sense on why Mark had to build another tower. It would seem logical that in a perfect
situation, they would have shared a tower. Mark's father (IIRC) just thought the deal with
Birch would work out. After all that, I think Mark applied for his own station to get back
in the business. I guess it's common knowledge that he ran the Seabreeze from his house
for quite some time until a fire screwed things up. He now operates WSBZ from the old
Wave studios/building. I am sure someone can tell us why/how Birch managed to not have
to pay for WWAV and still got to sell the station. I don't remember if Mark ever got any
payment when Quantum bought Wave from Birch after a long legal fight. I was not in the
market at that time. I talk to Mark a few times a year. One can only say he's about as
consistent and focused as they get, while the "big suits" run around the beach laughing
at him for being "crazy." Funny, same suits never last...he just pokes along at his own pace.
He's done better as a stand alone than most clusterf's down there have. The Holliday's
ran a good show. Crumy does reasonable despite themselves, but they have the sticks
and formats locked in to a great degree, so they can't loose more than 75% of what "was."
The other guys, well, someone can tell us about their success/failures. I can only guess
they just pick up the scraps to a great degree. It's sad that the Destin market has had
a flurry of interesting owners over the years that traded better success for the attempt
at the quick buck.

 

[Poledo]

Did you type that the Carter family sold 102.1 and never got paid? How is that possible? And 102.1 was later sold to Qantum and they did pay Birch for the station? Why didn't the Carter family have a lien filed on 102.1 the same day they transferred control to Birch if they were financing the sale? It's a very common business practice to file a lean on a piece of property for work done when you might not get paid for awhile. Did anyone break Birch's legs for screwing over an honest gentleman?

What type of relationship did Mark Carter have with his father? If Mark wanted into the business, why didn't his father hang on to 102.1 (which shouldn't have been worth much back then) and eventually sell or give 102.1 to Mark?

I knew something screwy happened with 102.1 way back when, but I didn't know it was this bad.

 

[Tibbs4]

Poledo --- next time you are at the Walton County Courthouse, ask for the public documents on this.
It has been so long and I have heard so many things on the situation that I don't want to give out false
information. What i posted above was my memories of things, subject to old age. I THINK basically
the way to look at it is simple...."all the legal documents and signatures and contacts don't
guarantee anything except lawyers get rich..." Trust and integrity are not generally very high
on people's Christmas list in radio (or most businesses...)


I seem to recall that the Carter's didn't get paid very much or very long on the deal. How long, I
cannot remember. It stayed "tied up" in typical legal manuevers for years. I can't remember
the outcome of the case. I am sure Mark told me, but I think I just left the issue alone.

Mark's dad just made a business decision that seemed pretty profitable for the time. I think he
thought he'd get control of 102.1.

 

[cceng1]

Tibbs you have it pretty well correct. The lawyers made all the money.....and don't let me get started on the way the Carter's were treated by Birch and his lawyers.....I could get a call from Birch's lawyers suing me Both of Mark's parents probably had several years taking away from their lives (the are both deceased) because of all of the stress from that fiasco.

cw

 

[Poledo]

Ok, seems like I should stop asking about the 102.1 deal. Just one more question... who is Tom Birch?

 

[Tibbs4]

Valid and honest question, Poledo...

http://www.linkedin.com/pub/4/b12/615

Now you know the other half of the story...

I never met Birch, but I did talk to him a few times. Seemed like a smooth talker, I don't
remember anything remotely unique, weird or arrogant from him. Just typical radio ga-ga.
Wife's name was/is/ Aurora.


--- what did happen from that lawsuit???

 

[cceng1]

I think they finally got it settled....if I remember correctly, Mark told me he got enough money out of it to pay for the swimming pool for their new house......what a hose job