Monday, November 28, 2011

What does CBS’s Washington deal mean for station pricing. . . Outlier or Reset?

The recent announcement of CBS Radio’s purchase of WFSI-FM (Annapolis, MD) has caused quite a stir in the station trading community. Much of the talk centers on price: not how MUCH they paid, but how LITTLE!

On face value, it at first appeared that CBS has acquired a class B, 50,000 watt, Washington, DC FM station from Family Radio for $8.5 million, or $1.69 a pop (using the 60 dBu contour). Have station prices been radically reset to the downside with this deal?

The previous low-water mark was the WQXR-FM sale in New York a couple of years ago; it came in around $3 a head.

Our very own Stephan Sloan (MSG, Providence, RI) took a closer look and brought to light some factors which suggest that this deal might be an outlier.

WFSI, despite its huge pop count (around 5,000,000 people) is something of a “tween-er" to both the Baltimore and the DC markets. It is particularly a “rim shot” station in DC, where it reaches only 54% of the Arbitron metro population. It does somewhat better in Baltimore (82.5%) but is still not a full-market signal.

We think it appropriate to value the station on its DC-only coverage. Doing so yields a value of $3.08 per pop. Still, Dan Mason and his gang at CBS made an extraordinary “buy” with this station.

Media Services Group