NAB Show 2013 - From a media broker's perspective

With the bags finally unpacked and the body back on Eastern time, I would like to share some thoughts from the 2013 NAB Show in Las Vegas.  My observations are from the perspective of a media broker specializing in the purchase and sale of radio/TV stations and communications towers.  No doubt that this view of the convention differs from those of  a broadcaster.  For one thing, we spent most of the time sequestered in meetings in our suite at the Encore and very little of it at the Convention Center.

This year, I attended the Rain Internet radio conference on Sunday, at least the first half of it (our Media Services Group meeting filled the afternoon).  Kurt Hanson does a good job with the conference.  In particular, I enjoyed the dashboard discussion.  Paul Jacobs was on that panel; you can check out his report HERE.  While the dollars are still relatively small, the growth rate is not.  I will plan to attend Rain again in the coming years.

My partners and I convened on Sunday afternoon to discuss the state of the broadcasting industry, what is happening in the media brokerage business, and where pricing multiples are for broadcast properties.  For radio, broadcast cash flow multiples are mostly in the 6x to 7x range, with "outliers" in the 5s on the low side and as high as 8x for the upper limit.  TV deals are bringing higher multiples than radio.  Higher retrans fees, a blow-out political year in 2012, and spectrum auction speculation appear to be fueling the TV appetites.  Throughout the convention, there was a good deal of discussion about the TV spectrum auction, and the NAB featured a panel on the subject.

We expected robust activity in our suite and we were not disappointed (most of our meetings are set up in advance).  The suite was busy all day on Monday and Tuesday and we even had a few meetings on Wednesday morning.  History has shown that such activity is a good predictor of trading action in the coming months.

There is no shortage of station buyers and sellers; all we are missing are the lenders.  Though slowly but surely, they too are returning.  It is worth noting that GE threw a party at the Show this year after being absent for the last three or four years.  The broadcast lending that is going on appears to be in the 3x to 4x range.

Several of us attended Erwin Krasnow's (Garvey Schubert Barer) annual breakfast Monday morning at the Las Vegas Country Club.  Thanks, as always, to Erwin, John Pelkey and Melodie Virtue for their hospitality.  Matthew Berry, Chief of Staff for FCC Commissioner Ajit Pai, made an interesting presentation.  Among other things, he addressed Commissioner Pai's interest in saving AM radio.  That too received a lot of "buzz" throughout the week, particularly following the Commissioner's panel on the subject.

In addition to GE's party mentioned above, Wiley Rein also threw a nice reception.  As always, it was well attended by the broadcasters, brokers and bankers.

No NAB Show is complete without attending the Broadcasters Foundation breakfast on Wednesday morning.  It is a great organization doing wonderful work:

"The mission of the Broadcasters Foundation of America is to improve the quality of life and maintain the personal dignity of men and women in the radio and television broadcast profession who find themselves in acute need."

Phil Lombardo and Jim Thompson hosted the event, awarding the Ward L. Quaal Leadership Awards to:

• Skip Finley
• David Kennedy
• Bob Schmidt
• Alan Frank
• Charles Osgood
• Mike McKinnon

The Lowry Mays Excellence in Broadcasting Award went to Stanley S. Hubbard.

That's my story from Las Vegas.  See you at the Radio Show this fall in Orlando!

George
Media Services Group

Erwin Krasnow: The First Amendment and the Fallacy of the Public's Airwaves

Erwin G. Krasnow recently penned a piece entitled The First Amendment and the Fallacy of the Public's Airwaves. It is worth reading. It also stirred up some great feedback, both pro and con:

Kudos

Frank Kalil, Kalil & Co – “Every owner of TV and Radio should send $1000 to the Erwin Krasnow Thank You Fund.”

Mark Fowler, former FCC Chairman – “It’s heartening to see your solid advocacy in defense of our beloved First Amendment.”

Ken Robinson, former Chief of Staff to FCC Chairman Al Sikes – “You don’t seriously think any of our Commissioners have (a) heard of Sen. Dill, (b) thought what the statute might say, or (c) let the First Amendment insinuate itself into their logic. Aw, c’mon!” “Always remember what a former FCC Chairman said of some of his colleagues - - “what they don’t know would fill the Anaheim Coliseum.”

Nortex – “Good advocacy by a former lawyer of the National Association of Broadcasters. If adopted, it would eliminate archaic regulations enforced by the FCC. The ‘public ownership’ of the airwaves has been used through the years to justify control of content.”

Musichead1029 – “This eminently rational mission statement is unlikely to be considered, as it would require the government to take actions that would threaten its power base. The FCC is interested in control, not ‘public interest.’ The only time you hear about the ‘public interest’ in the context of government is when a possibly well-meaning but ultimately condescending politician like Newton Minnow or Michael Copps claims to know what the ‘public interest’ is, and how they can implement it if they are just given the power to do so.”

Brick Bats

Marcus Aurelius – “Just sounds like another corporate backed jerk who wants to take all rights away from citizens and have everything controlled by corporations.”

Onthesidelines – “Typical libertarian drivel.”

Len Hart – “KRASNOW’S reasoning is fallacious, a right-wing inspired rationalization, an ex post facto excuse to let huge corporations reap huge profits by lying to us, brainwashing us, and otherwise kissing up to the right wing of which they are a part!”

Bird – “Using his “logic” then no one can own any land because that has been here long before man as well, but then that wouldn’t fit into his randist, capitalist wet dream. What a shithead.”

Josh – “This is absurd.”

Jackass – “Spoken like a true Conservative rat Republican. Smaller government, more control for government taking citizens rights away."


Erwin is a partner in the law firm of Garvey Schubert Barer in Washington, DC, and is a former general counsel of the National Association of Broadcasters and the co-author of The Politics of Braodcasting Regulation.

George
Media Services Group

Great article in RBR on the FCC assignment and transfer process

Today's RBR ran a great article on the FCC transaction approval process. Erwin Krasnow, preeminent FCC attorney, interviewed the FCC's Taft Snowdon, Supervisory Attorney, Audio Division, Media Bureau. Thanks to my partner Bob Heymann for calling it to my attention.

Click HERE for the link.

George
Media Services Group

Erwin's Medicine for the Holidays"

FCC attorney Erwin Krasnow has posted his "medicine for the holidays" collection of Holiday Humor.

Go to:

http://gsbholidayhumor.tumblr.com/

You can listen to three mp3s, namely, this year's edition (2009 Holiday Humor) and editions from 2008 and 2007.

George
Media Services Group

Broadcast Tower Market Looking Up

At the right selling multiple of Tower Cash Flow ("TCF"), selling your broadcast tower(s) can be a great way to raise cash. (Note: TCF is your revenue minus operating expenses such as ground lease, utilities, property taxes and monitoring).

For much of the last year, broadcast tower assets languished at low multiples of TCF with few, if any buyers. Tower companies in general were capital constrained like every other business, and if they did buy something, it was usually wireless towers. Many tower companies expressed concerns about the creditworthiness of broadcaster tenants. I saw some offers at 3x to 5x TCF, but no takers.

Fast forward to today. Many broadcasters and sitting on great FM tower assets and the market is beginning to heat up. While capital is still tight, "vertical real estate" is a scarce commodity. Multiples have been bid up into the 8x to 10x range. With tower consolidators getting back into an acquisition mode, station multiples in a lower range than towers, and with "cash being king," now might be a good time to consider selling your towers. I would be happy to confidentially discuss your options with you.

If you would like more information on maximizing the value of your broadcast towers, I strongly recommend that you pick up a copy of Erwin Krasnow's and Henry Solomon's book, "Broadcast Towers - A Step-by-Step Guide to Making Money on Vertical Real Estate." You can order it from the NAB Store (http://www.nabstore.com/books.html).

George

Media Services Group