Monday, April 27, 2009

Restructuring An Entire Industry (Radio)

If predictions from the NAB Show are correct (and I believe they might be), the radio industry will undergo a complete financial restructuring in the next 12 to 24 months. A massive amount of debt will be converted to equity and/or written off. Yet there will be winners and losers.

Broadcast companies will be divided into two distinct camps by their lenders:

1) Good operators with bad balance sheets

2) Bad operators with bad balance sheets

Fortunately, there are a few operators with good balance sheets, but very few.

Good Operators with Bad Balance Sheets

  • Excess debt will be converted to equity; remaining debt will be restructured with payment terms matching the companies' ability to pay.
  • Owners will keep a stake and management will keep their jobs and be incentivized to perform under the new arrangement.

Bad Operators with Bad Balance Sheets

  • Lenders will adopt a "throw out the bums" mentality.
  • Assets will be liquidated, or in some cases, sold to entrepreneurs (and financed by the lender) who know how to make the business work.

So who are the winners and losers?


  • Lenders who stay calm, carefully analyze their problems and possible solutions.
  • Existing broadcasters without a leverage problem, particularly if they want to grow their business.
  • Existing broadcasters who become pro-active in dealing with their problems.
  • Entrepreneurs who know how to operate (and have been patiently waiting for a window to get in).
  • Attorneys and smart, experienced broadcast restructuring consultants.
  • Smart distressed debt buyers who pair up with entrepreneurial operators.


  • Over-leveraged and under-operated broadcasting companies.
  • Lenders who panic.
  • Investors who bought into the over-leveraged and under-operated broadcasting companies.

Those are my thoughts . . . what are yours?

Media Services Group


  1. "Over-leveraged and under-operated broadcasting companies". Doesn't that describe almost every radio company in America?

    "Existing broadcasters without a leverage problem...". You can count those on one hand - there certainly aren't enough of those to be significant to an industry-wide financial restructuring.

    "Existing broadcasters who become pro-active in dealing with their problems." How can an enlightened operator or two thrive in the face of a business that's been stripped mined by greedy incompetents?

    Radio revenue was sinking when the economy was growing and as Bill Steding pointed out, radio's product is hackneyed and overworked.

    Reversing radio's problem will require that the radio industry understand the death knell that the music industry is leveling on it - particularly embracing the fact that the webcast royalties are a bigger threat than the terrestrial ones.

    Sadly, it could well be that a financial reset at 4x cash flow might only send a radio company - even one with better operators, back 5 years but leave it on the same path.

  2. as i once learned from a business master...
    "if you have the cash the luck will come"

  3. Gregg,

    If there EVER was a time when cash was King, it is now.