Wednesday, November 4, 2009

CC’s Mays Demotion Has Implications

The financial troubles of Citadel, Clear Channel and Cumulus have been well chronicled. The companies all have mountains of debt that they probably will not be able to service by 2010. You might have been dreaming about station clusters being dismantled and sold to smaller operators who are broadcasters, and not conglomerates just using radio as their money-making vehicle. I certainly have. Unfortunately, from what I've been reading in the past few weeks, that will not happen in the short term.

The three C’s—and CBS Radio is not included—are apparently negotiating with their lenders behind the scenes. What most likely will happen are debt-for-equity deals through which banks and holding companies will own large shares of the station groups. Initially at least, current management will probably stay in place. But, the lenders will by and large be calling the shots.

The banks of course do not want to be in the radio business, but the problem is the huge multiples at which the three C’s purchased stations, multiples as high as 12 times net cash flow. Truthfully, stations were never worth anywhere near that, but the urge to rule the radio world overshadowed rationale thinking. Although radio stations are not their cup of tea, the lenders do not want to sell at the current going rate, as low as 4 or 5 times cash flow. So you can expect banks and holding companies to own broadcast properties for the foreseeable future.

There will be some exceptions. In Portland, OR, Alpha Broadcasting, whose CEO is Citadel founder Larry Wilson, cobbled together a super cluster by purchasing the stations owned by Rose City and then CBS Radio. Bonneville, which reportedly has wads of cash, is rumored to be swooping over a number of the former ABC stations now owned by Citadel.

Last week’s demotion of Clear Channel CFO Randall Mays was not a tremendously publicized event. But, it was noteworthy because it suggests the investment banks are already pulling the strings. Clear Channel CEO John Hogan will likely be a highly-paid puppet of the lenders. And that does not auger well for the affected radio conglomerates.

The banks and holding companies are going to be all about keeping costs down. That increases the likelihood of more rounds of layoffs, and greater use of voice tracking and syndication. I don’t expect much in the way of investing in air talent and content.

The groups that have been fiscally responsible, such as Cox, Bonneville and others, might have the option of going for the kill by out-programming voice-tracked operations. Will they spend the necessary dollars to do that as the economy improves, or will they stand pat or cut back, taking advantage of their dramatically pared-down competitors to improve profits?

Best of Atlanta Part-Timers
Last week’s Atlanta Radio’s Best & Brightest column generated some email regarding the glaring omission of several personalities. Only full-time people were considered for selection, and I certainly was remiss in not mentioning that. If I had included part-time air talent, the choices would have been Mark Arum for his Saturday talk show on WSB-AM, Matt Jones for Organic X on 99X and JoJo Morales for his weekend work at Q100.

Mouse Out of Intensive Care
Russell Smith, Radio Disney (WDWD-AM) Chief Engineer, checked in to report the station is back to 12,000 watts during the day. As you probably know, the adjacent creek’s rise to at least 25 feet above its stream bed brought 12 feet of rain inside the transmitter building. Ironically, the flood hit immediately after the station had boosted wattage from 5,000 and was waiting for FCC approval to use the new antenna system fulltime. Planning for the new signal commenced in 2003.

WDWD made a wise decision on September 21, when access to the site was cut off, to cease operation and kill the power. By 4 that afternoon, everything inside the building was submerged.

On September 24, crews from Belfor Property Restoration began cleaning, and on September 28, Belfor technicians began dismantling all the equipment and processing it through chemical baths, autoclaves and convection ovens.

Belfor was able to restore three transmitters and almost all other gear to working order. Because the power had been turned off, equipment was dirty but undamaged by electrical shorting in nasty water. One piece of gear was not salvageable since it was connected to a phone line. Many of the small porcelain insulators in the antenna system were broken and took several days to replace as did rewiring and reinstalling the restored equipment.

Radio Disney was silent for a week, coming back on from an emergency 1,000-watt transmitter on September 28.

Russell was previously the Chief Engineer for the ABC/Citadel cluster of WKHX-FM, WYAY-FM and WDWD, which was retained by Disney after Citadel purchased the other two stations. Russell left Citadel to manage the estate of Country singer Travis Tritt and handles Radio Disney on a contract basis. I usually reject pleas for plugs in this blog, but Russell is a friend and a great guy. So I’ll mention that he is looking for AM stations that need site rehabilitation, mowing, clearing, have a drainage or wildlife problem, or require ground and antenna system repairs. You can get in touch with him at

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