Friday, January 25, 2008

Radio: Wall Street Shuffle

What’s the big deal?

Radio stocks were plummeting long before fears of a recession. At last the radio industry is first in something again – first to be worst.

A couple of weeks back I listed devalued radio stocks. It’s only gotten worse.

That 90 percent-plus club keeps growing: Spanish Broadcasting, Radio One, Emmis, Citadel, Regent. 90-percent. That’s the value they’ve lost.

Let’s take a quick trip to Los Angeles – the number one radio market in America. Even in the worst of times there were always buyers awaiting an opportunity to pick up an FM or two or three in that market. But that was yesterday.

Supply and demand? It’s not even a buyer’s market. No one’s buying.

You have two major chains – Radio One and Emmis – and neither one’s getting as much as a nibble for the troubled FM properties they’re trying to unload.
So do you take them off the market and try to make another go of ‘em with new formats, which you can't really afford to change or market – or do you hang a sign on ‘em reading, “New! Lower Price?” That’s the one you put up before “Priced to sell” and “Fire sale.”

This is the first time I’ve heard excuses being made for the Los Angeles radio market. My favorite? There are too many stations in that city. That used to be the last-ditch line you’d use to define Rust Belt markets.

Could it be that there are no greater fools remaining - as in there are always greater fools willing to pay even more than you did for a property you paid too much for?

How about those leveraged buyouts? Will BainCapital and Thomas H. Lee determine that they’re better off paying the $500 million break-up fee to back out of the Clear Channel LBO deal? Breaking up may not be that hard to do.

Remember, they’re doing it for the children. Lowry’s children.

Here’s the choice. Stay the course while Clear Channel continues to plummet? The deal, which was supposed to close last year, is now targeted for February or March. What’ll their value be by then? Will Bain and Lee’s backing banks risk it or cut their losses. I’d say flip a coin except that it’s a heads I win, tales you lose deal. There are few things worse than to have a vested interest in a dysfunctional corporation.

Bain/Lee offered $39.30. As I write this Clear Channel’s down to $32.14. Ask yourself - what would (BainCapital founder) Mitt Romney do?

It’s a shame when facts keep getting in the way.

I got an advance on what the number one song will be on Clear Channel’s corporate playlist. It’s a remake of Prince’s "1999." They changed the lyrics to “…we’re gonna party like its 1929.”

And did you hear the one about the Cumulus and its go-private deal? The gelded bulls at Merril-Lynch lost $8.6 billion and have problems far more pressing than a radio deal gone sour – especially when those that set up the deal are no longer with the company. We’re talking – what - a five dollar drop since the deal was set? The deal's clouding up.

There’s buyer’s remorse and there’s buyer’s morose. With Cumulus it’s one and the same.
I understand the bad blood started when everyone in the room claimed to have the superior intellect.

And if you need proof that there’s a glut of too many radio stations – drop by the FCC offices where they held an auction for 14 AM radio stations in various markets and no one showed.

We already know of a few deals where clusters in smaller markets sold for less than their original purchase price. There’ll be more.

We also know that there are creative, resourceful managers and talent waiting to get back in when the proper pragmatic deals are done. Other smart managers and talent that still have jobs are laying low and pretending to being good soldiers as they await the inevitable.

When radio is restored it’ll be different and will require the skills of linking old media with new – and that means far more than just a stream encircled by lowest common denominator features.
Years ago Bob Sillerman told me that thriving businesses have fun, make money, and having fun making money. He’s right.

You know the problem is the crisis stage when pro-radio trades begin expressing commiseration for all involved and offer optimism that a judicious resolution to the calamity will be found.

Just and rational. Those words haven’t been uttered in radio since the Telecom Bill was passed in 1996.

The math is simple. The values have to be realistic for radio to be profitable again.

Going down?


A Former Broadcast Professional said...

Good, I hope they all DIE!!!! The way they committed genocide on the industry-all of them, they deserve to lose their shirts. Broadcast properties are ridiculously overvalued. Maybe if they sell for a reasonable price someone will be able to do real radio again-they’ll be able to afford it!

yeschester said...

the sooner they cut their losses the better chance they will have of recovery. the longer they wait, the worse it gets and the more devalued radio will become. they are in dangerous territory now. their arrogance and stubboness will kill them.

Anonymous said...

I'll give iBiquity credit for one thing - they must have seen this coming, and are trying to take advantage of a desperate situation. Too bad, the industry doen't even believe in HD Radio:

"Where is the Cool, the Content, the Charge?"

"Here is another bad sign: almost every time I speak with a GM or PD about HD Radio, they say,'s a non-starter, isn't it? If we don’t believe in HD Radio, who will?"

Kingfish Stevens said...

So, Mitt Romney is willing to pay $39/per share for shares worth $32 and he wants to be our president? That's not fuzzy math, that is just bad math. Couple that with the Big Dig overrun's and John Dean's next book will be "Worse Than Bain Capital". Aw Me.

the same broadcast professional as before said...

It's a bad sign when you have broadcasters doing what they want, not what the listening public wants, governments and politicians doing the same thing, and now presidential candidates who claim to know business displaying bad business-this country is headed for a big shake up-60's style. The silent majority is very soon going to speak up-

Dr. Nick said...

Clear Channel, CBS, Citadel, Cumulus, Radio One, Emmis and the rest misjudged the radio business. Businesses win, businesses lose. I think it is in their shareholders best interest to sell their properties for whatever they can get and provide opportunities for broadcasters incl. women and minorities to run radio. What are they waiting for? They haven't been able to make a go of it for over a decade. Cut your losses and run. It is not rocket science.

Anonymous said...

John - The people that should be reading you are the CEOs, CFOs and presidents of every major broadcasting chain. You write as someone with a true understanding and love of the radio profession. You understand planning for the future and mentoring. One of the many reasons radio has lost a tremendous share of audience and its TSL down with those that do is the decline in quality in both programming and sales. I pray you are right about a crash. I am not ready to give up on this medium yet.

Even Steven said...

I feel so bad for those big bad radio chains that treated their employees and listeners like crap. I hope we get to see sheriff sales for radio stations. They bought it, they ruined it and now they are going to eat it. I have no sympathy for these chains and the shareholders that get screwed. Too bad. You should have pulled out earlier or never invested in the first place. You deserve to lose.

Anonymous said...


Anonymous said...

Party like it was 1929. That was a great line. Unfortunately the Mays family wont feel a thing. It will be the employees getting the shaft as they continue to thin the herd.
We can only hope that Clear Channel sells to broadcasters. I'm not convinced they wont sell to one of their cronies and nothing will change. They may also want to wait until after the election.

Richard A Riley said...

"So, Mitt Romney is willing to pay $39/per share for shares worth $32 and he wants to be our president? That's not fuzzy math, that is just bad math. Couple that with the Big Dig overrun's and John Dean's next book will be "Worse Than Bain Capital". Aw Me."

Let's be clear, Mitt Romney founded Bain Capital. He is not in any way involved in the company, nor is his family. Period. Go to the Bain websites and review the employees AND the board of directors. NO ROMNEYS! Don't make this political.

And to the person who said radio is undervalued...I completely agree with you. With the kind of reach radio has had and continues to have the multiples are too low and the total revenue that the industry has taken in, even in the glory days was always too low.

Anonymous said...

John Right on again.

This AM's Radio Info has excerpts from a John Hogan memo. Even Tom Taylor called it draconian. They are doing everything they can to close the deal with Bain no matter how much they have to cut and who they have to let go. Wall Street should panic, real broadcasters as you call them should rejoice. Either way it devalues radio and brings its worth more line with reality.

Louis R said...

When the radio tv post-deregulation era is reviewed by business experts it will show that those in charge of change were way over their heads when it came to running more than a couple of dozen stations. Clear Channel deserves its fall. It was among the worst. You say you were in the cash flow business yet your execution was laughable.

Anonymous said...

i bought the hype and bought broadcast and satellite stock and sold it at its peak. i reinvested in new technolohy and continued my streak. should radio stocks collapse and values come back down to earth radio could very well become a good buy if the right people are in charge. but if i see any of the names currently associated with radio's fortunes today i will not reinvest. satellite radio is another deal i pulled out of early. i cannot see sirius xm or any combination around five years from now.

Anonymous said...

There's too much competition now from the internet, satellite radio (Sirius and XM) and from iPods. Instead of the monopoly they once enjoyed, old-style radio now has to contend with all these other options available to many more people.

Boom Gone Bust said...

Do I smell another BOOM gone BUST! If all the radio hype was real, revenues and listeners would be growing. But the truth is both are declining! Advertisers cancel radio when the economy slows, because they don’t believe radio advertising can actually help their business. Pd’s programming multiple stations, it’s possible and good for the bottom line,
but what are the real costs. Quality, creativity, unhappy listeners and advertisers! It’s a full circle right down the drain.

Today listeners have more entertainment choices than ever before. Even kids at the early ages of five, radio’s future embrace technology! A teen’s best friends are really the internet, their ipod, cell phones, and the next entertainment choices all driven by technology. Not radio, or HD what ever that is.. A store owner who sells car audio told me, her customers don’t want fm radio, not even HD. They want ipod connectivity. She sells USB enabled car audio and thinks a memory stick for $25.00 is the trend. I agree.

Stop drinking the Kool-Aid! Pull your head out of the bottle and see the train wreck called radio rushing down the track into a brick wall! If the housing-bust is anything like the radio-bust I’d expect more layoffs, cuts and stations being sold and bought at auction. It’s sounds scary and should alarm you! The current crop of radio leaders only see profit and will continue to live off their phony hype, just like many bankrupt home owners did during the recent boom.

The big three all snickered at made in Japan! It’s hard to make difficult decisions, it’s even more painful when the boat seems shipshape with minor leaks that can be patched. This boat has leaks! ignore them and you’ll go down with the ship too!