Tuesday, July 14, 2009

Radio stations are worth 3x BCF. Today.

I have a theory. It is based on over 20 years of carefully observing radio station sale prices. Anecdotal, yes. But I believe it to be valid (and given the time and data, am certain that it would be validated using correlation analysis).

Radio station "stick" cost-per-pop multiples track Broadcast Cash Flow multiples.

For many years, Media Services Group has tracked stick prices (the price of a facility with little to no Broadcast Cash Flow). The measure which we have found to be accurate over time is the value of the cost-per-pop. This value of the multiple is determined by dividing the purchase price of a stick by the population covered by the station's (FM) 60 dBu coverage contour (We use a similar method for AM facilities using the 2.0 mVm contour).

Here's the interesting thing. The cost-per-pop at any given time is almost always equivalent to the cash flow multiple in use at the same time. In other words, if stations are selling at 10x BCF, sticks trade at $10 per pop. In the heady days following deregulation, BCF multiples moved into the high teens to 20x; cost-per-pops for FM sticks were running high teens to 20x, a perfect correlation.

I recently analyzed FM stick sales for the first few months of 2009. They averaged just under $6 per pop. Cash flow deals, few that there were, were running around 6x. This pattern has been consistent for at least two decades.

Today, The New York Times sold WQXR-FM in New York for $45 million. WQXR reaches 15 million people in its 60 dBu contour. Do the math: $3 per pop.

So if my theory holds, radio stations are now worth 3x BCF. All markets are dynamic; they move up and down. And the station trading market (whether based on cash flow multiples or cost-per-pop multiples) has always, and will continue, to move up and down. But I believe that at this moment, we in the radio business live in a 3x BCF world. Time will tell if I am correct.

Those are my thoughts. What are yours?



  1. So, on the surface it would seem to make sense that at 3x BCF now would be an incredible time to swoop in and buy. Or, in your opinion, is this just further indication that not only is the value of radio continuing to fall at alarming rates, but that there aren't yet any signs that the bottom has yet been reached?

  2. If you do buy the real estate, you should have a clear picture as to what to do with it in these changing times. I bought a cell phone last week. When I told the clerk that I needed one with a radio, he looked at me like I was 90+ years old (that's soooo
    1970's!). Radio is becoming a small part of a larger media picture. I am beginning to think it is not the focal point any more.

  3. @radio45: You don't need a cell phone with a radio. You need a cell phone APP to get radio, i.e. the Clear Channel "iHeartradio" app and many, many more. And if you can't find an APP for your favorite radio station, just bookmark their stream on your browser faves.

  4. When you have a cell phone with an app to get radio, you then have to add on an unlimited data plan. A FM radio is a much cheaper solution.

    We're an internet only broadcaster. We have a an iPhone all. We have a web app on other devices. We even stream to many Nokia, Sony, Sanyo and other phones that support 3GPP.

    But you're still going to have to pay extra for that data plan, and depending on where you are, you might not have any data coverage, or reliable enough data coverage.

    Unfortunately, while glamourous, streaming to mobile devices is still unreliable and not mass market enough in most places.

    I want to see streaming overtake FM. It's in my interest. But I'm not going to delude myself into thinking that the technology is as robust and cost efficient as just listening to FM radio is.

    (The tradeoff of course is there are so much better content choices with streaming radio than there are over the air. But over the air is free; and streamed to your phone is going to cost you for the data plan).

  5. Thank you George for a very interesting analysis. I was wondering though, since Univision is gave up WCAA-FM in order to receive WQXR-FM, then isn't the $45 million "purchase price" really just the difference in the value of WQXR and WCAA, and not just the total value of WQXR? Hopefully as fundamentals improve, so too will multiples

  6. The complex deal totaled $45 million. Univision paid $33.5 million to swap its FCC 105.9 FM broadcast license and transmitting equipment for WQXR’s license, equipment and stronger signal at 96.3 FM. WNYC paid $11.5 million for the 105.9 FM license, transmitting equipment and the WQXR call letters and website.

  7. 2/20/10

    can anyone give me a ballpark estimate of what it would cost to buy a 50,000 watt reasonably clear channel radio station in each of the following cities, if one were for sale: New York, Washington, Chicago, Atlanta, Denver, Dallas, Los Angeles, San Francisco. A range of prices from highest to lowest and the two cities involved would be fine. Thanks.

  8. I'll take a stab at this, but with several caveats:

    1) I am assuming FM facilities with 100% metro market coverage.

    2) I am assuming that could could find a willing seller and that you are a no-contingencies cash buyer.

    3) I used Arbitron metro population numbers and 60 dBu contour estimates provided by BIA.

    4) My opinion is based on a multiple times the number of people in the 60 dBu contour ("pop count").

    5) The range is wide as there are few "comps" in this marketplace.

    6) Atlanta, Dallas, and Los Angeles received a "sunbelt" premium on their value per pop.

    7) Denver received an over-radioed market discount on its value per pop (as supported by a recent transaction).

    8) This is not an "official" opinion of stick values from Media Services Group.

    New York
    Population - 18,393,100
    Cost per pop - $3 - $6
    Valuation - $55 million to $110 million
    Note: WQXR-FM sold at or close to the bottom at around $3 per pop.

    Population - 5,118,700
    Cost per pop - $3 - $6
    Valuation - $15 million to $31 million

    Population - 9,490,800
    Cost per pop - $3 - $6
    Valuation - $28 million to $57 million

    Population - 5,272,100
    Cost per pop - $8 - $8
    Valuation - $26 million to $42 million

    Population - 2,714,600
    Cost per pop - $2 - $4
    Valuation - $5 million to $11 million
    KCUV (class A) and KJAC (class C1) recently sold for $5 million; I calculate their cost per pop at $1.75

    Population - 6,227,500
    Cost per pop - $5 - $8
    Valuation - $31 million to $50 million

    Los Angeles
    Population - 13,109,300
    Cost per pop - $5 - $8
    Valuation - $66 million to $105 million

    San Francisco
    Population - 6,957,000
    Cost per pop - $3 - $6
    Valuation - $21 million to $42 million

  9. George, would you still calculate a 3$ per pop in 2012? What would you estimate a class A in a 167 ranked market? What about one just outside that same metro?

  10. The value per pop is still running in the $3 to $6 range at this time. For rated markets, I would use the pop count in the 60 dBu contour for just the counties included in the Metro area, and would ballpark a $4 per pop value. This assumes that there is no cash flow and only limited revenue.

  11. George, are AM stations valued differently than FM stations, and if so how? Would it just be a different cost per pop, and if so what do you think that is these days for a stand alone AM station (with no translator) in a rural unrated market for a station that is breaking even? Thanks.