Georgia Association of Broadcasters GABBY Honors Night Highlight Reel

The Georgia Association of Broadcasters put together a great video from their GABBY Honors night, including the Annual GABBY Awards for Broadcast Excellence. Honors night took place June 7, 2013 at Georgia Public Broadcasting Headquarters in Atlanta. Click HERE for the video.

George
Media Services Group

When You’re Hot, You’re Hot!

The television station trading market is on fire. It is a great time to be a buyer…or a seller.  Supply and demand are at work and all the stars are aligning to make this the perfect opportunity to own a TV station. TV station consolidation is being driven by the need for scale, increasing retrans revenue, the looming spectrum auction, and low interest rates (or at least, easier borrowing).

If you listen carefully, you’ll hear whispering about the similarity of the current TV market to the radio business boom in the mid-90s. In TV, scale matters and it seems everyone has arrived at that conclusion at the same time. No one is sitting still.  Being big is a big deal.

From an M&A perspective, buyers will pay for scale.  And it is an impressive list of buyers: Tribune, Gannett, Sinclair, and Gannett to name a few.  Peter Liguori (chief executive of Tribune) was quoted as saying, “Our investment thesis is simple:  Scale matters.”

Scale is more relevant than either the network affiliation or geography.  The “scale argument” is very valid with the bigger revenue and expense numbers in the larger markets. When operators have sufficient scale, they have leverage with their vendors across the spectrum.  Plus the scale brings with it more resources to develop top line revenue, more expense savings through consolidation, and generally, a lower cost of capital.

Most of the action happening in the TV business right now is in the top 50 DMAs, with the spectrum auction players focused on the top 35 (and primarily on second tier properties).  The Spectrum Auction has created an artificial floor to TV station values. On September 28, 2012, the FCC adopted the Broadcast Television Spectrum Incentive Auction NPRM. In order for wireless networks to keep pace with the demand for spectrum, the FCC proposed to free up the some of the TV spectrum via an auction.

They will be clearing and reallocating parts of the television spectrum. Owners of TV stations will have the option to voluntarily auction off their spectrum to the wireless industry.  A number of well-heeled spectators are betting on buying “today” and playing the auction “tomorrow.”  The rising tide from the auction is lifting all of the boats.  It, in effect, gives owners a “put” (and therefore downside protection) on prices.

TV may be following the radio consolidation path of the ‘90s, but likely with a better outcome.  TV is more easily scalable than radio.  It is a more transactional type of business model.  Radio has to be very concerned 24/7 with local programming (versus the network TV model).  There are far fewer TV stations than radio, so governance is easier.  TV may wind up looking more like the cable business, in terms of ownership/scale, than radio.

Multiples have moved higher for TV.  Banks are growing more comfortable with leverage on broadcasters’ balance sheets.  I believe that the currently trading multiple is in the range of 8x to 10x.

The icing on the cake may come from badly needed regulatory relief:

• More favorable cross-ownership rules
• Possible relaxation on foreign investment requirements

On the negative side, there is some discussion within the Beltway about eliminating the UHF discount and about tightening the rules on JSAs and SSAs.

There have been nearly $7 billion in TV station M&A so far this year and there’s approximately another $2 billion more projected to come before the end of the year.*  This market is hotter than it ever has been. Now is a great time to buy. Or sell.

*Source: UBS Investment Research

George
Media Services Group

Interested in the tower business?

A number of our readers own towers or are otherwise involved in the tower industry.  If you fit that description, you might enjoy our sister publication, Inside Towers.  Please click to check it out:

Inside Towers

Link to Inside Towers LinkedIn group

Link to Inside Towers on Twitter

George
Media Services Group

Join us at the Radio Show in Orlando!

The Radio Show is just around the corner, September 18 - 20, to be exact.  Media Services Group will have a suite at the Rosen Shingle Creek Hotel and will co-sponsor the Leadership Breakfast on Thursday morning (presented by Lew Paper of Pillsbury).  It should be a great convention.

If you would like to schedule a confidential meeting during the show, please get in touch.

Hoping to see you in Orlando,

George
Media Services Group

New York Times article on WBAI

Good article on the plight of WBAI, New York.  Thanks for the "ink!"

http://www.nytimes.com/2013/08/21/business/media/democracy-may-prove-the-doom-of-wbai.html?smid=tw-share

George

Sinclair Buying Allbritton Stations For $985M

Sinclair Buying Allbritton Stations For $985M

Another FAQ: What is “stick” value?

Q:  "What is “stick” value?"

A:  “Stick” value refers to the value of the station absent any revenue or cash flow. Think “franchise value” of the facility.

It is often calculated by the population covered by the station’s signal. We typically use the 60 dBu contour for FM stations, and the 2.0 mVm daytime contour for the AM facilities.

George
Media Services Group

Tribune Grabs Local TV Group for $2.7 B

Tribune Grabs Local TV Group for $2.7 B: Gannett's acquisition of Belo didn't last long as deal of the year, as ...

Another FAQ: How long does the sale process take?

Q:  "How long does the station sale process take?"

A:  Often, preparing the due diligence information prior to the marketing of the station(s) is one of the most time-consuming steps of a sale.
Most station marketing agreements with media brokers call for a duration of six to eighteen months, with twelve months being typical.
Time on the market varies. Like real estate, stations that are priced more closely to their Fair Market Value tend to sell the quickest.

The FCC approval process generally takes 60-90 days, with the Staff approval becoming “final” in an additional 40 days.  Any objections can delay the process.

George
Media Services Group

Another FAQ: What is MSG’s online due diligence room?

Q:  "What is MSG’s online due diligence room?"

A:  MSG uses a password-protected, online, due diligence room. You will be provided with a username and password after signing the appropriate NDA.  ALL OF OUR TRANSACTIONS ARE CONFIDENTIAL unless notified to the contrary. No one at the client or station level is to be contacted without permission. Each site typically contains a Descriptive Memorandum as well as more detailed information on real estate, financial information, employees, etc.

George
Media Services Group

Preparing your radio or TV station for sale

"New carpet and fresh paint" may work in real estate transactions, but more is required to effectively sell radio and television stations.

We have prepared a white paper entitled, "Preparing Your Broadcast Property For Sale."  It is available (free of charge) for download by clicking HERE (email registration required).

I hope that you find it useful.

George
Media Services Group

Another FAQ: Has the spectrum auction impacted the value of my television station?

Q:  "Has the spectrum auction impacted the value of my television station?"

A:  If your TV station is located in the top 35 DMA’s, there is a good chance that the “stick” value of your property has increased. New risk capital has been invested in TV stations with the expected payoff to come from spectrum auction proceeds.

George
Media Services Group

Large group on hand for the North Carolina Association of Broadcasters convention

Almost 300 people are on hand at the Grandover resort in Greensboro for the NCAB annual convention.  Here is a shot from tonight's award presentation dinner.

George

Another FAQ: Why are so many broadcasters selling their tower assets?

Q:  "Why are so many broadcasters selling their tower assets?"

A:  There are several valid reasons. The trading multiples on tower cash flow are significantly higher than the BCF multiples for radio and TV stations. Selling your tower allows you to monetize a valuable asset without hindering your station operation. Many owners use the funds to retire debt. It also shifts to tower upkeep, expense and burden from the broadcaster to a tower company.

Since a tower sale does not require FCC approval, cash can be raised quickly.

George
Media Services Group

NAB's Gordon Smith addresses Virginia broadcasters

NAB President and CEO Gordon Smith addressed a packed meeting room this morning at the Virginia Association of Broadcasters summer convention.  He delivered a well received message entitled, "Working in Unity to Lead Broadcasting to a Strong and Vibrant Future."

George
Media Services Group

Another FAQ: How do I get my station(s) ready for a sale?

Q:  "How do I get my station(s) ready for a sale?"

A:  It pays to get your house in order.  All buyers will need to review certain key documents at some point in the sale process. They tend to fall in these general categories:

• Contracts and leases
• Financial
• Real Estate
• Employees

Compile a list of all station contracts and leases (including tower leases, programming and talent agreements, maintenance, ratings, software, etc.).  Include start and end dates, monthly costs, and cancelation terms

Financial statements play a key role in the sale process; they are the foundation supporting the value of the business. They must be accurate and comprehensive.  Prepare a three year history of Income Statements. If non-operating expenses are contained in the expense line items, they should be identified for each year.

Summarize your real estate holdings in a spreadsheet (use, acreage, location, and property tax). Locate your most recent property tax bill and surveys.

Prepare an update employee list, including job title and compensation.

Review your Public File to ensure full FCC compliance.

George
Media Services Group

Off to the VAB and the NCAB

Hoping to see you in Virginia Beach at the Virginia Association of Broadcasters tomorrow. And then on to the North Carolina Association of Broadcasters this weekend in Greensboro.

Safe travels,

George
Media Services Group 

Another FAQ: How do I select an FCC attorney?

Q:  "How do I select an FCC attorney?"

A:  Get referrals. And look for an attorney with extensive experience with station transactions. Media Services Group is happy to provide you a list of FCC attorneys with a track record of completing deals.

The Federal Communications Bar Association (FCBA) is a volunteer organization of FCC attorneys.   A directory of members is available from the FCBA.

George
Media Services Group

Another FAQ: How do I hire a media broker?

Q:  "How do I hire a media broker?"

A:  Look for integrity, honesty, discretion, and experience.  Choose a professional who has completed a lot of deals. Refer to “Hiring a Media Broker” for an in-depth discussion.

Avoid brokers who promise a purchase price which defies logic. Many potential sale processes have gone awry when the seller hires a broker who promises a “sky high” price after ignoring broker prospects who presented honest expectations.

Whether or not you choose Media Services Group, it is a good idea to work with a firm belonging to the National Association of Media Brokers (NAMB).

George
Media Services Group

Puerto Rico Radio Show a success

The Puerto Rico Radio Show is taking place this weekend in San Juan, and the broadcasters are out in force.  Many stations are even doing remotes from the event.  Kudos to Association President (and President of UNO Radio) Luis Soto (seen here warming up the Friday luncheon crowd),

and Executive Director Jose Ribas.

George

Media Services Group

Another FAQ: Does Media Services Group represent buyers?

Q:  "Does Media Services Group represent buyers?"

A:  Only occasionally. Like real estate brokers, media brokers tend to work for the sellers. Media Services Group represents sellers on an “exclusive right to sell” basis in most cases.

George
Media Services Group

Gannett Acquires Belo In $2.2 Billion Deal

Gannett Acquires Belo In $2.2 Billion Deal

Another FAQ: What are appropriate “add-backs” to Broadcast Cash Flow?

Q:  "What are appropriate “add-backs” to BCF?"

A:  Interest, depreciation, amortization, and taxes should be added back to operating profit to determine BCF.

Buyers and sellers often differ on what additional expenses may be added back to BCF. Usually they are:
1) one-time-only expenses not normally seen in the ordinary course, and

2) owner-related charges which a new buyer would not expect to incur.

George
Media Services Group

Another FAQ: What exactly is BCF?

Q:  "What exactly is BCF?"

A:  Broadcast Cash Flow (“BCF”) is operating income, excluding interest, depreciation, amortization, taxes, and extraordinary items. Essentially it is the cash “left over” to service debt, pay for capital expenditures, pay taxes, or return to the owner(s).

George
Media Services Group

More FAQ's: Does Media Services Group sell other types of businesses?

Q:  "Does Media Services Group sell other types of businesses?"

A:  We only sell radio stations, television stations, wireless towers, and “new media” businesses.

George
Media Services Group