Thanks to allaccess.com for this post. Doesn't sound like radio's fortunes are improving a whole lot:
The NAB RADIO SHOW in PHILADELPHIA opened WEDNESDAY with the annual DICKSTEIN SHAPIRO conference on broadcast financing, this year subtitled "Surviving the Meltdown."
Marcus: Industry Rallying
SUGARLOAF ROCK CAPITAL Managing Partner and former DEUTSCHE BANK analyst DREW MARCUS opened the conference by noting that 2009 will be the worst year in the advertising market since 1975 and down to a new low in share of the ad pie, but that the industry is seeing an "incredible rally" in media equities and debt and is the second most profitable medium despite shrinking margins. He noted that radio, projected by GOLDMAN SACHS to be off 23% in ad revenue this year, will be off 5% next year.
MARCUS said that the industry, presently leveraged at a multiple of 7.6 times, needs to get that number down to 4 times, but even so has seen equities rebound, up over 158% year-to-date, and debt bonds have risen 68%. Nevertheless, MARCUS said that radio "is out of favor" with capital markets despite its multiples recovering. He credited a belief in a cyclical recovery, signs of improvement in the second derivative, and increased likelihood of refinancing in recent weeks for the rally in radio, although he noted the "jury is still out on the secular recovery."
He said radio's private market values are likely to decline, with bid prices well below asking prices, and that radio stocks are likely to be "orphaned and volatile" in 2010, with next year's growth dependent on a recovery in the auto industry and on the performance royalties fight. He suggested that companies will look to recapitalize before capitulating, and said that the industry remains a "great free cash flow business."
Financial Panel Looks At Coping With Debt
On a panel of financial industry leaders and analysts, JIM KUSTER of RBS SECURITIES blamed some of radio's decline in ad share not only on shifts to new media but CLEAR CHANNEL's "Less is More" campaign. He said that most analysts see radio has having "stabilized" in EBITDA although margins have been "crushed." On the other hand, KUSTER noted, radio remains the highest free cash flow medium and is likely to remain ahead of other media in that category. And he noted that radio's market capitalization has dropped 95.3% since 2003. Looking ahead, KUSTER said that the key is that radio stocks are still covering interest expense on average despite the decline of the market value of their debt.
ATALYA CAPITAL MANAGEMENT's MICHAEL BOGDAN noted that most companies in the industry are either in default or close to it, but "the good news is that we're all in this together." He suggested that companies either try to work with lenders to rework debt or "kick the can forward" and just keep going and hope lenders let the company operate as usual while in technical default without any amendments or extensions on paper.
GOLDMAN SACHS' JEFF FERRY said that continuity in management is important to drive revenues and rates to increase the value of stations in local markets, while GE CAPITAL's RAYMOND SHU said that the decline in revenue has hindered the availability of capital in radio and all other industries, calling the last 24 months a "perfect storm" of problems that have plagued the media sector. SHU said that top-line and cash flow "have to stabilize" for the radio industry to recover.
WACHOVIA's BISHOP CHEEN, in the audience, asked if the "incredible shrinking market cap" means that someone would emerge to consolidate and take over the industry; KUSTER said it is "still a bit early" to tell whether that might happen; BOGDAN said that radio's status as a regulated market and a "long, hard fight with equity players" would mitigate against the ability of a single party coming in to take over. Asked by moderator LEW PAPER whether the takeover by lenders like GOLDMAN SACHS of NASSAU BROADCASTING is the start of a trend, FERRY said that lenders don't really want to be in that position and that in "a lot of situations" management is remaining in place. KEVIN SHEA of LAUGHLIN MEGHJI said that lenders are "not terribly shy about stepping up and taking an equity position in these companies in exchange for debt," waiting for a recovery.
Group Heads: Time To Grow Revenue
NRG MEDIA's Pres./CEO MARY QUASS opened the panel of radio group heads at the DICKSTEIN SHAPIRO conference by saying that the recession has hit some of her smaller and medium Midwest markets later than larger markets ("we sucked less"), but all markets are feeling the effects of the downturn. She said that her company is "hopeful that it'll balance itself out."
CHERRY CREEK RADIO CEO JOE SCHWARTZ, another operator in smaller markets, said that "what we've done ... is diversify away from big categories like auto and have gone for much smaller categories," helping the company through the downturn. Nevertheless, he said that his auto revenue is considerably off and that it has been "difficult" to make up the difference. "This is and always has been an operator's business," he said, noting that everyone at the table had to painfully cut good employees this year, and with expenses now at the bottom, the industry needs to focus on driving revenue. He said that "we just can't keep" cutting expenses to show growth. QUASS agreed that revenue growth should be the focus, saying that "we've done everything else," adding that "radio is unquely positioned to be able to offer the best of both worlds," delivering mass audiences as well as Internet-like one-on-one relationships ("radio was the first social network ... we lost our way").
DAVID FIELD, President/CEO of ENTERCOM, asserted that the industry's problems are a "cyclical issue," comparing radio's ad revenue drop to similar or greater drops in other media. With signs of a recovery being observed, FIELD said, the question remains whether radio will participate in the recovery of advertising; "My fear is that we're shell-shocked and myopic ... and not thinking forward" to a recovery, which he predicted will show double-digit growth in revenues for next year ("I know I'm an outlier on that").
CBS RADIO Pres./CEO DAN MASON agreed with FIELD and noted that through the worst recession in memory, the industry is still performing well. "This is still a great business," MASON said. "We have stations and clusters now pacing positive." He said that his largest markets took the brunt of the downturn in FEBRUARY, but he is optimistic for 2010 despite the problems in the automotive category, on which MASON said CBS concentrated with some success last week.
CUMULUS Chairman/CEO LEW DICKEY joked that "there has been no pressure from lenders" on companies like his, then got serious about the "Maalox moments" faced by his and other companies, discussing the problems of restructuring that could be too early and end up with "Chapter 22, which is Chapter 11 twice." He said that lenders have to "equitize" -- convert debt to equity -- once it has been determined that the business has hit bottom, thus betting on the industry's recovery.
The panel discussed an audience question on "price wars," with DICKEY blaming the industry's reaction to buyers low-balling them on spot prices and asserting that radio needs to take the lead on keeping rates from falling further. He noted that despite perceptions, the medium continues to reach audiences, including 18-34 year olds ("my hat's off to our programmers" for reaching listeners); "we have to realize the true value of what we have ... and teach the buyers how to buy us," he insisted. SCHWARTZ added that he believes "the new normal" will be that all advertising money is up for grabs, noting that the ad revenue lost by newspapers, radio, and TV "didn't go anywhere," and "the opportunity is there" to grab more of the overall ad pie.
On a question about how radio has reduced itself to irrelevance by firing people and damaging the product, FIELD said that radio "is not bare-bone" and that there remains "more innovation than ever," with the industry "winnowing back" less compelling content. He disagreed that the radio product has been diminished and said that more people are listening than ever before while other media like newspapers have lost audience. "The pundits are wrong," FIELD insisted. Noting that other businesses like PANDORA have promoted themselves as "the new radio," MASON asked, "If radio's such a darn bad business, why does everybody else want to be radio?"
From the audience, AC WBEB (B101)/PHILADELPHIA owner JERRY LEE touted a PHILADELPHIA market campaign starting MONDAY touting a study showing radio commercials as eight times more effective than other forms of ads in return on investment. The campaign will be available at engagingcommercials.com.
Talent Gets A Forum
A panel of on-air personalities included GREATER MEDIA Rock WMMR/PHILADELPHIA morning co-hosts PRESTON ELLIOT and STEVE MORRISON, CITADEL MEDIA syndicated talker CURTIS SLIWA, CLEAR CHANNEL Top 40 WHTZ (Z100)/NEW YORK and PREMIERE RADIO NETWORKS morning host ELVIS DURAN, and GREATER MEDIA Talk WLNK (107.9 THE LINK)/CHARLOTTE and syndicated morning "BOB AND SHERI" co-host SHERI LYNCH.
The hosts, prompted by moderator and WMMR PD BILL WESTON, discussed show prep (SLIWA and LYNCH called it a "24/7" process, all credited their production staff and "living your life"), their "100% slam-dunk" regular material (MORRISON, joking that the "scatological stuff" works, said that the "little" things from real life connect best; DURAN's go-tos are the prank phone call "phone tap" bit and topics on cheating, a topic LYNCH also uses with the specific angle of "cheating with your blood relatives"), politics (LYNCH eschews voicing her personal views, DURAN lets staffers talk politics but seeks balance, MORRISON (echoed by LYNCH) said his audience isn't coming to the show for politics), vacations (SLIWA joked that he never takes off because he knows too many radio people who have "gotten the call" while on vacation; DURAN said that "best of" shows perform well, and LYNCH, ELLIOT, and MORRISON said that their show staffs try to coordinate vacations and air "best of" segments), and the importance of cooperating and participating in sales.
DURAN discussed how syndication has changed his show, saying that "I hate" having to change the show for new markets. "That was a tough decision to make," he said of the changes. "Do I miss being local? Absolutely." MORRISON said that he and ELLIOT like their local content and that the Internet has changed the nature of syndication, allowing people to listen to the local version of the show anywhere.
Anti-Performance-Fee Spot Winner Announced
The winner of the "Don't Tax That Dial!" contest soliciting anti-performance-fee PSAs was ANDY BEROKOWITZ of FOREVER COMMUNICATIONS WWOT (HOT 92 AND 100)/ALTOONA-STATE COLLEGE, PA for a spot depicting a station that can't play music due to the "performance tax."
This Morning :
8-9a Operating Under Emergency Conditions
8-11a Dickstein Shapiro LLP Presents Broadcast Financing 2009: Surviving the Meltdown
9-10a Tower Failures - How to Prevent Them
9-10:15a So You Think You Can Rate
9-10:15a Modern Management: Old School Principles Meet New School Techniques
9-10:15a Getting a Symphony Out of a One-Man Band
9-10:15a How Radio Can Do Video Economically and Profitably
9-2p Career Day
10-12p Planning, Building and Maintaining an IP-based Radio Facility
10:30a-11:45a Learning and Earning: From the Final Edition to Online Juggernaut(s)
10:30-11:45a Great Client Marketing Strategies with Small Budgets
10:30-11:45a How to Use Twitter to Increase Your Station’s Ratings and Revenue
11a-12p Michael Harrison’s Annual Report on the State of Talk Radio
11a-12p Combining Text Messaging & Social Networking To Drive Revenue & Listenership
12-2p NRSC Meetings
1-2p Tools to Help Sell Radio to "Main Street" Advertisers
1-2:15p I Saw It on the Radio: Our New Multimedia Reality
1-2:15p Radio’s Entrepreneurs: Starting Your Own Business and Networking Opportunities in 2009
1-2:15p Make Yourself Fireproof
1-2:15p Integrated Media Marketing: Leading Your Radio Sellers through the Transition
1-2:15p East Coast Super Talent
2-2:30p Electronic Program Guide Update
2:30-3:45p Opening Address & Digital Think Tank Super Session
4-6p Opening Reception (Exhibit Floor)
4-7p Exhibit Floor Open