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Cumulus and iHeart on the ropes
- Thread starter bossbill
- Start date
Not necessarily. This is a stock price problem, not a radio station problem. Stock price has crashed because of debt issues, not ratings. They need to solve the debt, create new value in the stock, and perhaps even reimagine their overall business.
That's the hard part about this. Investment decisions are not made because of programming. This is an accounting problem. This is a business problem. It needs to be fixed by people who know business, not programming. Fixing programming isn't cost neutral because it might involve replacing some talent, re-launching a station, and advertising those programming changes in other media.
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More than half of the stock is owned by Crestview and the Dickey family. If they vote to go private, the company goes private.
mrradioguy
New Participating Member
Probably saved Clear Channel back in '07 & '08 along with selling off TV & smaller markets plus spinning off LiveNation, etc.
Cumulus has been doing the exact opposite since then.
I agree. Their stock was in big trouble before they went private. They were better off taking it off the market.
Their big market stations are well run, get great ratings, and are among the most profitable. They launched iHeart, and it's created another revenue stream. They've gotten into the concert business, and it's also been profitable. Still, the company as a whole is losing money. All of that doesn't give Cumulus much chance for a quick or easy turnaround. They can spend five years, create two new revenue streams, make their stations profitable, and their stock could stay in the toilet.
The other thing I was reading is the investment strategy of Crestview Partners. At their website, they talk about something called "distressed for control transactions." What does that mean? I did a search, and found this explanation:
"Simply put, their line of work is to make a profit from companies that have failed to do so and are on the brink of bankruptcy. Unlike traditional hedge funds, however, their investment doesn’t stop at buying significant portions of these companies’ debt for pennies on the dollar, tidying up the balance sheet and then selling at a higher price. Instead, they get in and stay in — bringing in new managers, installing a new strategy, renegotiating labor and supplier contracts, and so on. (That’s the ‘control’ part.) It’s not an easy task, especially given the state of these companies when they step in."
How does this apply to Cumulus? I guess we'll see. My other thought is: Are there companies they work with that they can combine with Cumulus in order to improve the efficiency and value of them.
"Simply put, their line of work is to make a profit from companies that have failed to do so and are on the brink of bankruptcy. Unlike traditional hedge funds, however, their investment doesn’t stop at buying significant portions of these companies’ debt for pennies on the dollar, tidying up the balance sheet and then selling at a higher price. Instead, they get in and stay in — bringing in new managers, installing a new strategy, renegotiating labor and supplier contracts, and so on. (That’s the ‘control’ part.) It’s not an easy task, especially given the state of these companies when they step in."
How does this apply to Cumulus? I guess we'll see. My other thought is: Are there companies they work with that they can combine with Cumulus in order to improve the efficiency and value of them.
K
K.M. Richards
Guest
More trouble for Cume-you-less ...
Pandora has agreed to purchase the assets of the streaming service Rdio (partially owned by Cumulus) as the service seeks bankruptcy court protection:
http://www.radioworld.com/article/pandora-to-acquire-“key-assets”-from-rdio/277528
Pandora has agreed to purchase the assets of the streaming service Rdio (partially owned by Cumulus) as the service seeks bankruptcy court protection:
http://www.radioworld.com/article/pandora-to-acquire-“key-assets”-from-rdio/277528
Yeah that is going to hurt a lot and surprisingly there has been little talk about how this will impact Cumulus. They supposedly invested ~$75 million into Rdio and Rdio was to be their version of "iHeartradio". Now they really have nothing to compete with digital audio services. They will have to build a new platform from the ground up or partner with someone else and the number of viable partners is dwindling. And Cumulus obviously doesn't have much to bring to the partnership. All those promotions for Rdio and Rdio had only ~300k subscribers globally. That's not a good sign.
The investment in Rdio was reported to be non-cash, consistent of advertising and promotion.
IIRC they're still on iHeart.
But the real question is: What is the value of owning a digital audio service? The biggest, Pandora, isn't profitable. So owning one is just a financial drain.
That is true. But giving $75+ million in air time is still a considerable investment. And Cumulus was supposed to drive Rdio's ad platform. This will be a big hit to Cumulus' digital ad revenue.
It can be. But can the gain be worth it? I'd argue Iheartmedia would be in a lot worse position today if they didn't have Iheartradio.
I agree. They've used it as a bargaining chip to get them other things. That's very different from what Cumulus did with Rdio.
How could iHeart be in "a lot worse position" than they are? iHeart market cap is $80 million, against a debt load of $22 BILLION
Having a debt load of $61 billion?
They're not a public company. And that's 3 times what Cumulus is at, which is a public company.
The whole market is down today, so don't read too much into that.
Yes, Cumulus is trading at 35 cents, but iHeart has 10 times the debt of Cumulus. Their plan to buy back some of their debt so that they'd have sufficient cash flow to minimize their negative cash flow has fallen flat, and key lenders are closing in. Both of these companies are reaping the "rewards" of overleveraging. Leverage works great except when it comes back to bite you.
Maybe...that's not been decided yet. This company has had more lives than most cats. Don't count them as dead yet.
The current management inherited this situation from people who've long since disappeared. Don't blame them for the cards they've been dealt. It takes creative management to run a business. Right?
joebtsflk1
Star Participant
I may be off with my station counts somewhat, but if iHeart has all of their stations listed on their website, there are about 350 stations in markets below 100. I didn't bother yet breaking out the number of AMs or FMs or FM HD2 translators. Assuming each one brings a generous $10 million each, that's $3.5 billion. Hmmm, maybe if they sell off everything below market 50?
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