Radio station owners fall into two camps: Pick one!

The last two years in the radio business have not exactly been a walk in the park. Defaults, bankruptcies and receiverships have been rampant. A ton of equity vaporized in a sea of debt. It has not been a good time for station owners, especially those "faint of heart" or with highly leveraged balance sheets.

All of this has precipitated a lot of gloom and doom talk on Wall Street, in the industry trade publications, and in the convention hallways, suites, and bars.

From my perch, it seems that station owners fall into one of two broad categories:

1) Those who believe that radio's best days are behind it and that the end is near, or

2) Those who believe that the current low station prices present the buying opportunity of a lifetime. The business will recover and even thrive in the new environment.

Let's look a little more closely at each assumption:

1) Radio is dead. Long live Radio!

• Old media is over. New media wins.
• Radio has lost the kids.
• We're too little, too late to the digital party.
• Who needs a transmitter when you can stream?
• There are too many "cooler" new media options.
• Who buys radios when you can buy a smartphone or iPad for your information and entertainment?
• The Internet will soon occupy the dashboard.

2) Shopping at the bargain rack!

• Radio is still a high cash flow business.
• We can and will compete in the digital world.
• Fortunes were made in the last major downturn (think Lowry Mays).
• Regulatory relief may be the catalyst for reigniting the business (think elimination of the subcaps).
• Newspapers have lost their strangle-hold on retail business.
• There is no better megaphone for generating web traffic than radio.
• Radio still drives customers on Main Street.
• HD holds long-term promise.
• In the face of competition, radio has maintained its ubiquitous reach.

Conclusion

Pick a camp. Now.

Yeah, this sounds self-serving (after all, I am a broker). But, it is now time to place your bet. Here's my logic:

If you're in the "Radio is Dead" camp, the best thing you can do is cut your losses. With station values headed south, your station(s) will never be worth more than today's valuation. If you're under water with your bank, hand 'em the keys. Get out now while you can.

If you believe that you can buy good radio businesses from the bargain rack, then step up. You will buy solid businesses at historic lows. The seller's pain will be your gain. Get on board before prices take off. Build great clusters and hire from the incredible talent pool stranded on the beach. There is no better time than now.


It is time to select the scenario you believe will pan out in radio's future. To do otherwise is to leave your personal future to fate. Hold 'em or fold 'em. One school will be right. The other . . .

Those are my thoughts. What are yours?

George
Media Services Group

Inside Radio (http://www.insideradio.com/) published a story called "Digital radio advocates spread the gospel to the wider internet world" this morning. They included a link to a report prepared by the Interactive Advertising Bureau (IAB). If you're in the streaming audio business, it is an important piece (and may be useful to your sales departments).

Click HERE to get the report.

George
Media Services Group

Thoughts from the 2010 Radio Show

I'd like to share a few thoughts from last week's Radio Show. Though I have heard that overall attendance was up, there were fewer station owners on hand than usual. However, the FCC lawyers turned out in force, playing with a home court advantage.

The meeting was decidedly more upbeat than the last two years' shows (though that is not saying much considering the gloom and doom we've been through). Station revenues are up year-over-year and it has been a long time since we could make that claim.

On the station trading front, our suite activity was robust. There still aren't a lot of deals getting done, but at least the talking has resumed (after eighteen months of virtual silence). The missing ingredient continues to be bank financing. Despite renewed optimism about the prospects for the radio industry, there was little optimism that the bankers were returning any time soon. Trading will remain lackluster until the banks embrace the industry again.

Let's hope that next year's Radio Show in Chicago is a time for celebration.

George
Media Services Group

FM Auction 91 List

Click HERE for the FCC Auction 91 list.

George
Media Services Group

A climb up the tallest tower

This video doesn't really have much to do with the theme of this blog, but anyone who has been involved with broadcast towers will find it interesting. In my case, with a fear of heights, it was downright terrifying. Thanks to Eddie Esserman for sending it to me.

A guy climbs a 1,768' tower (video): http://video.yahoo.com/watch/8244494?fr=yvmtf

George
Media Services Group

When to Hire a CFO

Good article from Anne Field (Business Insider) on "When to Hire a CFO":

https://www247.americanexpress.com/MoblOpenWeb/articles.do?TargetID=when-to-hire-a-cfo-anne-field&showOnOne=true

George
Media Services Group

Robert Prather of Gray Television talks with B&C

B&C interview with Robert Prather: http://www.broadcastingcable.com/article/457293-Prather_Calls_for_Unity_on_Mobile_DTV.php

George
Media Services Group

Who says radio isn't fun any more?

Who says radio isn't fun an more? Here is WDHA (Morristown, NJ) market manager Nancy McKinley.

Rumor has it that an NTR Revenu line item has been added to her 2011 budget: Crop Dusting

George
Media Services Group

More news-talkers moving to FM

Last week's announcement that heritage, big signal, Atlanta News-Talker WSB-AM (750 kHz) was adding an FM simulcast is yet another benchmark in the growing trend of talkers migrating to the FM band. It follows similar moves by KSL in Salt Lake City and KCBS in San Francisco. While these appear to be smart moves, I believe that they sound a large warning signal for AM station values in the future.

A strong case could be made that the big AM News-Talkers like WSB have kept the AM band alive. News-Talk listeners have been content to seek out their programming on the AM band. If all of the major AMs throw in the towel for the FM band, who will be listening to AM? My guess is that AM will be dominated by niche players in the future: foreign language, religious, and other specialty programming.

Station prices are based on supply and demand. It looks like AM supply will be increasing at the same time that demand is decreasing.

Those are my thoughts. What are yours?

George
Media Services Group

Inc. magazine's business plan presentation

If you are working on a business plan (hopefully for station acquisitions!), Inc. magazine has a good resource: Business Plan Presentation. It is a basic PowerPoint template which may serve you well as a starting point for your presentation. At worst, it would serve as an antidote for writer's block.

George
Media Services Group

Have your tried mind mapping? (Article from Inc. magazine)

Here is a good article from Inc. magazine on mind mapping. I have found the concept to be very useful for project management; there are a lot of ways for entrepreneurs to put it to effective use.

I use software from Mindjet (MindManager) and can recommend it highly. For project management, ResultsManager is a great add-in.

George
Media Services Group

MSG transactions for the first six months of 2010

The bad news is that is was a very slow first half of station trading. The good news is 1) it was a lot more active than a year ago, and 2) things are shaping up nicely for the second half. Here are the transactions announced by Media Services Group for the first six months (Note: we used BIA estimates of revenue):

Sale Announced: 01/10
Calls: WMNE-AM (now WHTY-AM)
Buyer: Travis Media
Seller: Radio Disney
Market: West Palm Beach-Boca Raton
Market Rank: 47
Price: $500,000
Gross Revenue (BIA): $150,000

Sale Announced: 3/10
Calls: FM CP
Buyer: Chadrad Communications Inc.
Seller: Big Cat Broadcasting, LLC
Market Rank: Unrated
Price: $85,000
Gross Revenue (BIA): N/A

Sale Announced: 2/10
Calls: KCUV-FM, KJAC-FM
Buyer: Moreland Properties, LLC
Seller: NCR Broadcasting Inc.
Market: Denver-Boulder
Market Rank: 20
Price: $5,000,000
Gross Revenue(BIA) : $800,000

Sale Announced: 3/10
Calls: KDJQ-AM
Buyer: Iglesia Misionera Pentecotes, Inc.
Seller: KDJQ, LLC
Market: Boise, ID
Market Rank: 100
Price: $325,000
Gross Revenue (BIA): N/A

Sale Announced: 4/10
Calls: WCKZ-FM, FMW204BF
Buyer: Star Educational Media Network
Seller: Northeast Indiana Public Radio
Market: Orland, IN
Market Rank: Unrated
Price: $225,000
Gross Revenue (BIA) : N/A

Sale Announced: 5/10
Calls: AM CP
Buyer: Acme Broadcasting III
Seller: Pamplin Broadcasting Inc.
Market: Reno, NV
Market Rank: 121
Price: $20,000
Gross Revenue: N/A


Sale Announced: 7/10
Calls: WHPI-FM, WPIA-FM, WZPN-FM, WWCT-FM
Buyer: Big Toe Communications, LLC
Seller: Independence Media Holding, LLC
Market: Peoria
Market Rank: 150
Price: TBA
Gross Revenue: $1,350,000

George
Media Services Group

A number of broadcasters support the AM/FM Subcaps

A number of broadcasters teamed up to file reply comments with the FCC seeking repeal of the AM/FM subcaps on July 26. The coalition represents some 668 stations in markets of all sizes. My two broadcasting companies (Monticello Media and MSG Radio) as well as our brokerage firm signed onto the comments.

If the subcaps are repealed, it will result in new capital coming into our capital starved industry. I predict that a number of broadcasting companies may be saved from bankruptcy if the subcaps are removed on a timely basis.

The subcaps are no longer (if ever) justified. You can read the details in the Reply Comments. Essentially, if you operate in a market where ownership of four FMs and two AMs is allowed (or four AMs and two FMs), the removal of the subcaps would allow you to own six stations, regardless of flavor. If they are repealed, unprofitable clusters can swap/trade/buy/sell and improve their strategic and financial positions.

Repealing the subcaps will awaken a stagnant industry, introduce fresh capital, and open doors for new minority ownership. Let's hope that the FCC sees the wisdom of eliminating an antiquated burden on broadcasters.

Click here for the filing: Reply Comments

That is my opinion. What is yours?

George
Media Services Group

Syd Small of Acccess.1 passed away last weekend

Our condolences go out to the family, friends, and colleagues of Syd Small, who passed away last weekend. Syd was President and CEO at Access.1, where he ran radio stations and networks. He may be best known for operating WWRL in New York, which he ran for almost 30 years.

Here is the story from NYDailyNews.com.

Syd was a good guy. He will be missed.

George

Radio industry second quarter revenue results

Here is a look at second quarter revenue from around the radio industry:

FMQB

George
Media Services Group

Dave Martin's post on "Eating your own dog food" (station website)

David Martin has a good post about station websites on his N=1 blog. Click on:

"Eating your own dog food"

George
Media Services Group

Time to set appointments for the Radio Show in Washington

The Radio Show comes to Washington, DC, September 29 through October 1. This year's show is a joint undertaking between the NAB and RAB. Media Services Group will be located at the headquarters hotel, the Grand Hyatt Washington.

If you would like to set up an appointment to meet, please drop me a line at:

mailto:george@mediaservicesgroup.com

I hope to see you in DC!

George
Media Services Group

Radio stations for sale with seller financing

Station trading activity continued to be slow in the first half of 2010, though vastly ahead of last year’s anemic pace. The lack of bank debt continues to stifle transactions, though there are some seller financed opportunities popping up.

We have three such opportunities, any one of which might fit a first time buyer profile. Cash down payment requirements vary, beginning around $250,000 for a qualified buyer. The stations are located in NC, VA, and WV. Two of the opportunities are in rated markets. Contact me if you would like to look more closely.

We also have a two-FM cluster with some cash flow in a rated Midwest market.

If you belong to LinkedIn and haven’t already joined our group “Radio/TV Station Buyers,” you can click here to do so: Radio/TV Station Buyers

George
Media Servces Group

RAB and NAB Looking to Cancel Dickstein Shapiro Conference at Radio Show: BIG MISTAKE!

The Dickstein Shapiro conference has been a fixture for those of us in the business of buying, selling, and financing radio stations for something like twenty years, most of that time as the lead-off event at the Radio Show. It is the only event of the year where all 400 industry participants are in the same room at the same time.

The NAB wants to cancel it this year and fold the sessions into the regular show format. I am told that the RAB's Jeff Haley is leading the charge. Big mistake.

For many, the conference is the one NAB event that is relevant. A number of the participants fly in specifically for the event in the morning, take a few meetings in the afternoon, then fly home. The NAB will lose them as Radio Show attendees if the current plans hold.

A number of brokers are so incensed about the NAB's actions that they are considering running their own conference down the street from the NAB's (and would probably invite Dickstein's Lew Paper to run it as he has for the last two decades). At a time when the NAB and RAB are working hard to maintain the Radio Show's relevance, how can they get this one so wrong? If you agree, make your thoughts known to Jeff Haley and your NAB contact.

Those are my thoughts. What are yours?

George
Media Services Group

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

The bottom is in

The Crestview Partners $500 million investment in Lew Dickey announced today marks the turnaround for the radio industry. With leverage, it represents new liquidity for the radio business in excess of $1 Billion. I believe that we saw the real pricing bottom mid-year 2009 with the purchase and sale of WQXR in New York.

This deal brings renewed life to station trading. We have weathered the storm. Congratulations Lew!

George
Media Services Group

iPad sales in 2010 are predicted to top 7.1 million units. 2011, 14.4 million. 2012, 20.1 million. Article

Fellow radio broadcasters: don't you wish the iPad included an FM tuner, especially one capable of receiving HD? How did we miss this?

George
Media Services Group

Stations for sale: new opportunities

Media Services Group is exclusively marketing some new radio and TV station opportunities:

• 4 station cluster (2 AM / 2 FM) in a Mid-Atlantic college market. $700k revenue
• 4 FM station cluster in rated Southeastern market. Turnaround priced to sell. Seller financing.
• Small market ABC affiliate TV station
• 4 FM station cluster in rated North Carolina market. Seller financing.
• AM/FM in North Carolina resort market. Seller financing.
• 2 FMs in Southwest rated market.
• 2 FMs in Midwest rated market. Positive cash flow.

If you are interested, please contact me for an NDA (George@MediaServicesGroup.com).

George
Media Services Group

Let's get together at the NAB

The NAB is just around the corner. The Media Services Group suite will be at the Encore this year. If you would like to discuss the station and tower trading marketplace, please get in touch for an appointment. We are available Sunday night through Tuesday.

I hope to see you there!

George
Media Services Group

Good FCC information website for broadcasters

Here is a website from Cavell Mertz & Associates which makes researching FCC station information a breeze (for AM/FM/TV). You can also search Antenna Structure Registration and nearby airports. Very handy. And thanks to Don Curtis for the tip. Click here: FCCInfo.com

George
Media Services Group