Audacy Bonuses

[michael hagerty]

Selling the top performing stations in a viable cluster destroys the synergy of the cluster, meaning that the remaining stations will be worth less and the package sales strength is significantly devalued.

I get that. Here’s a question I’m honestly asking (and I know we’re not swimming in possible buyers at the moment):

Does a penny stock company belong in the big-clusters-in-major-markets business? Should they (if they can) sell their biggest market clusters and shrink themselves back to being Entercom?

 

[DavidEduardo]

Or what happens when a radio group is removed from a much larger media parent? CBS Radio was integrated with the other parts of CBS, and those synergies gave the radio group value that it lost when it removed from the parent company. I think we're seeing that now.

I see less of that than in the value of synergistic radio clusters in each market.

Radio and TV are not bought together, and the other divisions of the Redstone empire had not real connection other than being "entertainment related".

And I don't think buyers paid much attention to who owned stations. That may have been a "badge of honor" up through the 1950's, but not so much in the last five or six decades. For that, you have to look at how the buying process works at national and regional agencies and, today, it's all mostly about math.

But for investors, I agree that having players in every area made them look more complete. But at the same time, being heavily invested in a zero-growth sector held them back.

 

[TheBigA]

Radio and TV are not bought together, and the other divisions of the Redstone empire had not real connection other than being "entertainment related".

But quite often the radio stations occupied space in the TV buildings, or utilized TV resources, such as news coverage or weather. So the expenses were less. And the image of the stations was larger as part of a group, rather than split off. Radio was part of the combined "cbslocal" internet presence. Radio benefited from the larger technology part of CBS TV. Not any more. The deal required the stations to remove any connection to the former parent. Once you see the actual value, rather than the combined value, it's smaller and less impressive to potential investors, and that's the situation we have now. Entercom is strictly a local radio company, not a media empire, and the investors can see the weakness in the business model. Weakness is not a good look when asking for money.

 

[TheBigA]

Does a penny stock company belong in the big-clusters-in-major-markets business? Should they (if they can) sell their biggest market clusters and shrink themselves back to being Entercom?

You can't put toothpaste back into a tube. Trying to become what they once were won't bring back the value the investors once saw. It's all about image when we talk about investors. Entercom itself hasn't really changed. It's the same people running the same company in the same way. They didn't adapt to the changes in the business, and that's the real problem, no matter what markets they're in.

But then you ask a good question about CAN they sell their best assets? Who would buy them? iHeart would, but they've reached the fake FCC ownership limits in most of the markets. That's the problem. The radio industry is dealing with antiquated ownership rules, while Apple, Spotify, and everyone else doesn't. So who would but KRTH? We already know. Religious broadcasters. That's it.

 

[michael hagerty]

You can't put toothpaste back into a tube. Trying to become what they once were won't bring back the value the investors once saw. It's all about image when we talk about investors. Entercom itself hasn't really changed. It's the same people running the same company in the same way. They didn't adapt to the changes in the business, and that's the real problem, no matter what markets they're in.

But then you ask a good question about CAN they sell their best assets? Who would buy them? iHeart would, but they've reached the fake FCC ownership limits in most of the markets. That's the problem. The radio industry is dealing with antiquated ownership rules, while Apple, Spotify, and everyone else doesn't. So who would but KRTH? We already know. Religious broadcasters. That's it.

All excellent points. But on the current path, it starts to look like a fire sale is the only logical outcome---with religious broadcasters owning KRTH anyway.

Just from a personal perspective, I'd rather see a Bonneville or a Hubbard, well-run companies that aren't fully into the majors, running KNX and KCBS (and both companies have excellent heritage news properties) than Audacy. And both those companies are very good at other formats as well.

 

[exdjted]

I do love the irony of these bonuses being called "retention" bonuses.

Who besides Audacy would hire David Field right now to run a Radio company?

 

[TheBigA]

I'd rather see a Bonneville or a Hubbard, well-run companies that aren't fully into the majors, running KNX and KCBS

If you go back in time, those two were in the same pool with Entercom. All three were highly respected. One of them bought CBS Radio. If either of the other two buy those stations, they fall into the same black hole. The problem isn't the buying company, it's what they're buying. The radio system, built around a dated business model, regulated by dated FCC regulations, is the problem. Observers want to demonize David Field, and blame him for ruining what was once a crown jewel. But the problem is much bigger.

 

[Mediafrog+]

But then you ask a good question about CAN they sell their best assets? Who would buy them? iHeart would, but they've reached the fake FCC ownership limits in most of the markets.

In Houston I‘m sure iHeart would love to get back the two FMs it was forced to divest to what is now Audacy circa 2007. They’d have to ditch one of their AMs (likely either KPRC or KXYZ) but would once again have a full FM cluster.

Of course nowadays I would take back KKHH instead of KLOL for cluster synergy. Maybe KLOL goes to SBS to pair with soon-to-be-acquired KROI?

So iHeart would have KQBT, KTBZ, KKHH, KHMX, and KODA.

 

[TheBigA]

In Houston I‘m sure iHeart would love to get back the two FMs it was forced to divest to what is now Audacy circa 2007. They’d have to ditch one of their AMs (likely either KPRC or KXYZ) but would once again have a full FM cluster.

But there's the choice: Remove the fake FCC ownership limits, or sell to a religious company. The government has forced this situation, and investors know it. Investors hate government regulations.

How has selling WPLJ, WRQX, and KLOS made Cumulus a more attractive company to investors? That's the question you need to ask when looking at Audacy. Selling major stations won't help Audacy's problem with investors.

 

[Deleted User]

In Houston I‘m sure iHeart would love to get back the two FMs it was forced to divest to what is now Audacy circa 2007. They’d have to ditch one of their AMs (likely either KPRC or KXYZ) but would once again have a full FM cluster.

Of course nowadays I would take back KKHH instead of KLOL for cluster synergy. Maybe KLOL goes to SBS to pair with soon-to-be-acquired KROI?

but the reasons for the divestiture probably still exist, limits on the number of stations one company can own or control in a market AND the total % of advertising revenue they control (40%?)

With that in mind could they make that swap and still conform to FCC rules?

 

[Mediafrog+]

but the reasons for the divestiture probably still exist, limits on the number of stations one company can own or control in a market AND the total % of advertising revenue they control (40%?)

The divestitures had to do with Clear Channel investors also owning a couple of other stations in the market via Cumulus Media Partners. Those two stations have since been sold, so the situation no longer applies.

Can’t speak to the total revenue question. Anyone?

 

[Kelly A]

I do love the irony of these bonuses being called "retention" bonuses.

Who besides Audacy would hire David Field right now to run a Radio company?

None of us know what was/is happening behind the scenes. As BigA said; Entercom/Audacy has been run the same way since the 70's, when Joe Field was essentially a sole proprietor. David grew a traditional radio company and followed it's peers by going public. David, nor Joe could have predicted that the bottom would have started falling out of the radio business during the 2008 recession. Since then, the advertising headwinds have become even stronger. I'm somewhat familiar with Joe, and it wouldn't surprise me if he held David back from pursuing streaming as heavily as other media companies back when they should have jumped into the pool, mainly because it would have intentionally steered listeners away from OTA radio. I'm sure Joe still thinks of Audacy/Entercom as a radio company, and he still has quite a few voting shares.

 

[Kelly A]

With that in mind could they make that swap and still conform to FCC rules?

But again, swap what with whom? Other than EMF, nobody is doing radio deals these days. iHeart and Cumulus are emphasizing streaming. Neither of them would benefit financially to do a bunch of swaps with Audacy. Especially if it involves AM stations, because there's no near, let alone far future for AM.

 

[MarkW]

The better strategy is to got out of markets where there is no cluster strategy, such as not having "enough" good stations.

Remember that WDRQ in Detroit is already under contract to be sold to Family Life.

That will leave Cumulus with only two stations in Detroit - Hot AC WDVD and old demo news/talk WJR. Both reportedly have had a "for sale" sign on them for some time. I suspect Cumulus is trying to avoid a scenario where they are stuck holding WJR. No one apparently is willing to buy both WDVD and WJR together at a price Cumulus would find acceptable.

$10 million for WDRQ was evidently too good an offer for Cumulus to refuse. I think Cumulus made the right decision. The fact it went to a broadcaster that will never directly compete with 96.3 and 760 is even better.