Tuesday, March 31, 2009

Handy list of links to radio station groups

We have added links to many of the country's radio station group operators onto our Media Services Group website. Click here and scroll to "Radio Broadcasters":



Cox Radio tender a hint of private market values

Cox Enterprises recently proposed to buy all of the outstanding shares (which they don't already own) in Cox Radio (CXR). The tender offer represented a 15% premium over the prior day's closing price. However, it also represented an opportunity for the prominent Atlanta family to take the company private at a historically low trading multiple. Estimates of the EBITDA trading multiple are in the low-5s. Remember that Emmis (EMMS) failed to go private at 10.9x just a few years ago. Multiples on other broadcast stocks are in the 4x range if you consider the fair market value of their deeply discounted debt.

So what does this say about private market multiples? One easy conclusion is that we're at the lowest multiples seen in decades. Private market multiples tend to be higher than public multiples, and I suggest that is the case today. Sellers are justifiably reluctant to sell into the current marketplace. But for those who have to, the Cox tender suggests that pricing will be on the lower end of my predicted 5x to 8x range in 2009.


Monday, March 30, 2009

Copps to reconsider cross-ownership ban

News headline: "Copps: It May Be Time to Reconsider Cross-Ownership Ban"

Acting FCC Chairman Michael Copps makes headlines as he opines that it may be time to take a fresh look at lifting the FCC ban on newspaper/broadcast cross-ownership. Unfortunately, he's ten years too late. Newspapers are beyond saving, and there is no capital to finance cross-ownership. This antiquated rule should have been deleted once the Internet came onto the scene.

Another case of the regulators being years behind the curve. Great idea, Mr. Copps; it might have worked had someone come up with it during the Clinton years.


Tuesday, March 17, 2009

Did we already hit the bottom?

Surprise jump in housing starts. Big stock market rally. Is this the first good news that we've heard in months?

Interest rates are fabulous. The Fed has flooded the market with liquidity. How long before the banks start making loans again?


2009 Radio Station Trading Multiples

In January of 2008, we drew a lot of comment (most of it negative) in the radio trade press when we released our expectations for radio station trading multiples for the year. We predicted that stations would trade in a range of 7x to 9x Broadcast Cash Flow (“BCF”), which at the time, sounded very low. Those multiples represented the lowest levels in well over a decade.

Our crystal ball worked. In fact, much of 2008’s station trading occurred in a 7x to 9x range, though deteriorated toward the lower end of the range as the year wore on.

However we were wrong on our second point: we predicted a turnaround by mid-year. What we (and apparently everyone else) missed was the impact on the credit markets of the sub-prime debt debacle.

OK, so what happens this year? The following is my opinion, and not necessarily Media Services Group’s (it is my blog, isn’t it?). I think that we are in a 5x to 8x environment, likely for the rest of the year, and perhaps longer. Until the credit markets thaw, I do not see marked improvement. Trading will be sluggish at best. At lot of balance sheets have to be re-jiggered to show more equity and much less debt.

Radio is going to have to reinvent itself in order to flourish in the digital world. And unlike newspapers, I predict that it will. Once the capital structures have been repaired and the business embraces new media, then, and only then, are you likely to see revenue growth. That top line growth, if coupled with low interest rates, will result in multiples expansion. I look for a return to an 8x to 10x world. While that is nothing like we saw in the “go-go” years, it beats the heck out of what we’re seeing now. And it will create a lot of value for smart entrepreneurs who held their noses and invested in the medium when it looked like the buggy-whip industry.

At least, that’s my opinion. What's yours?


Monday, March 9, 2009

Radio deal of the decade (for the buyer)

Jeff Wilks closed on his purchase of the CBS/Denver stations. $19.5 million for three, big signal FMs. This may be the "buy" of the decade.

Sunday, March 8, 2009

Newspapers and Magazines = Dead Men Walking

The time we used to spend reading newspapers and magazines now will be spent reading and writing blogs.

We've Seen This Movie Before

Credit is frozen. Bankruptcies are increasing. Everyone's in workout. Business is horrible. There's genuine fear that the broadcasting business, particularly radio, is over.

1991 - 1992