Friday, April 16, 2010

Observations from this year's NAB Show

Following a day of recovery time, I would like to share some observations from this year's NAB in Las Vegas. Many of us switched venues this year. Brokers and bankers were torn between the familiar Bellagio and the new (and NAB endorsed) Encore. Most (including Media Services Group) opted for the Encore. It turned out to be a great spot . . . good restaurants, pleasant surroundings, and generally good service. Our suite was in the Tower Suites and it proved to be a comfortable meeting locale. I heard several comments that the "bump factor" (running into colleagues in the lobby, bar, and hallways) was not as good as previously at the Bellagio.

On a side note, the Encore is hosting Garth Brooks in its showroom. Loree and I saw his show Sunday night and it was fabulous. He does over two hours just with an acoustic guitar. No band. No fire, smoke or flashing lights. If you get a chance, see the show.

The official NAB attendance numbers were up over last year and our experience bore that out. Unlike last year when there were few bankers, buyers or sellers in our suite, this year consisted of wall to wall meetings. I think that is a good leading indicator of the health of the station trading business. The difference between this year and last was striking.

The same can be said about attitudes. A year ago, most of us had the feeling of staring into the abyss. Fast forward twelve months and you get the sense of a new optimism about the broadcasting industry (though fear abounds about the economy). There is a strong sense that the "bottom" is in the rear view mirror. I concur. In fact, I think that the New York Times sale of WQXR last year was the bottom. Things have steadily improved since.

As for station pricing, my partners and I went into the convention with the sense that buyers were offering up 6x BCF and sellers were asking 8x (with some deals likely to get done in the sevens). Our meetings with prospective buyers and sellers supported our thesis. I believe that 6x to 8x range to be an accurate assessment of today's trading market.

Inventory is still tight. I know that ours is and conversations with other brokers and buyers suggest that we are not alone. We expect a far greater supply of inventory by the fall Radio Show.

I also found it noteworthy that we had some bankers in our suite (and they were not all there to talk about workouts). Some lenders appear to actually be gearing up to make media loans again. That too is significant.

There was a lot of chatter (and a few conspiracy theories) about the $500 million equity investment with Lew Dickey. As I mentioned before, we view it as a sea-change event for the industry.

As always, regulatory matters were front and center in Las Vegas. One conversation raised an interesting point regarding the FCC's attempted TV spectrum grab. If the current FCC commissioners think that broadcasting is no longer relevant (as seems to be the case), how can they then take the position that multiple ownership rules make any sense? We're either relevant or we're not. They can't have it both ways.

The NAB Show proved that the deal market is back, at least compared to last year. There is much healing still required. And things won't materially improve until the lenders re-enter the marketplace. But finally, we appear to be moving in the right direction.

That's how I saw the convention. What about you?

George
Media Services Group