Radio: How much?

How does one determine the actual worth of a radio station today?

There is one certainty. Most are worth less – and far less in some cases and markets – than they were a year ago.

If nothing else, the radio industry proved to be an accurate barometer of where the economy was headed.

Does that P.T. Barnum quote immediately come to mind when you think of those who invested heavily in radio?

Let’s travel back twelve years and six months ago when Bill Clinton got this party started by signing the Telecommunications Act of 1996.

Remember the rallying cries of getting more than ten cents of every ad dollar?

Or the one about “owning” a “captive audience” that has to listen to radio in their car?

How about all that non-traditional revenue that would add so much added value to radio?

In one month – close to $2 billion in radio deals were announced. In just one week, five of the largest radio chains bought eighty-two stations.

To paraphrase Paul Harvey, you already know the rest of the story.

All radio had to do was resist some of the greed when the blue skies began clouding up at the turn of the century.

When it didn’t – and radio entered its Dark Ages – it became an industry of schemes and scams.

Instead of hiring qualified account executives, managers were ordered to hire sales people right off the street. Instead of respected radio station a.e.'s, accounts were getting called on by glorified Tin Men that received no training and knew nothing about selling time.

We’re how many shopping days from July 30 – the day Bain Capital and Thomas H. Lee are scheduled to absorb Clear Channel?

This deal was announced several hundred-thousand Chivases ago – or in a time frame we’re more accustomed to – twenty months ago.
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Come on, you had to laugh when a couple of the banks that weren’t caught in the web of Bain-Lee’s Black Widow Clear Channel deal – used that very reason to illustrate their solvency – unlike, let’s say, Wachovia, which can't.

Think about it. Those banks were sagging into their cream-cheese based foundations even before they blindly entered into this Clear Channel deal with Bain and Lee. Why didn’t someone tell them the party was over a long, long time ago?

So, let me see if I get this straight. These banks are now trying to find suckers…er…investors to help finance the $17.9 billion leveraged debt buyout. Deutsche Bank AG and Citigroup have been offering $3 bil of that debt to potential investors for low-to-mid 80 cents on the dollar – and that’s down from the 90 cents on the dollar they were peddling back in late March.

Don’t feel bad for the smarmy brothers, Masters Mark and Randall Mays. They’re not headed for the poor house anytime soon.

Sure, they’ve wrecked the old man’s company – but give ‘em a break. According to an SEC filing, CEO Mark and President/CFO Randall will each roll over $10 million – and will each receive - oh, just $20 million of restricted stock when the deal’s wrapped – plus stock options equal to 2.5 percent of the fully diluted shares of the new company.

Even after I read Alec Foege’s Right of the Dial Clear Channel book, I still get the Mays brothers confused. Is Mark bad and Randall evil – or is it the other way around?
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That’s like the slogan, “Together we can,” which is used by the Institute for Educational Leadership. It’s not to be confused with the Mays family slogan, “Together we con.”

Whatever the case, the obits will be posted and requiems will be sung for the next round of layoffs to be announced from the San Antonio Kremlin headquarters of Clear Channel in another month. You need not shed a tear for the Mays family and their obedient servant John Hogan. They will continue to live long and prosper.

But back to the question at hand: How does one determine the worth of a radio station license?

Cash flow? Projections? Physical plant? Management? Staff – if you have any? Does it have a pulse?

The days of clustering-up a market and putting a price tag on the whole shebang are over.

The original definition of a successful merger is when one and one equals three. Can you name a single radio merger that produced those results?

Don’t you hate it when you’re talking to a group of radio people about Citadel – and one says, “How much life is left in that company?” True story. Worth every penny of its eighty five cents.

We have to get a twenty-first century radio pricing guide readied.

Radio lives in a world where nothing is for sale and everything is for sale. That is, if no one’s buying – is there really anything to sell?

If no one is listening to radio – is anyone really hearing it? For those of us who still believe the radio industry can be salvaged, let’s hope that’s not the case – but we’ll know for certain fairly soon.

New York, L.A., and Chicago – the top three radio markets are switching from Arbitron diaries to go exclusively with the people meter, which reports real-time radio listening. That means whatever radio station you happen to hear – whether it be at home, at work, in the car, at a store, in a waiting room – will be recorded.

Will it show that having a favorite radio station is now just a nostalgic memory?

Will it show that morning drive is losing both the TSL it once did to command premium rate?

And how does one equate the worth of radio when major league radio accounts like A-B, GM, and Coke are pulling their dollars out of radio. Some, like GM, are doing cuts across-the-board. Others, like A-B are redistributing the wealth to other media - including Internet.

What does one do when a radio station’s worth less than what is owed on it?

We already know what that means in the housing and automotive market.
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Buzzard Jeans & J.P. Snodgrass 1975