All the Emperors Had NO Clothes

After last week's NAB in Philadelphia, I left with a sense that we all were, at last, and alas NAKED.

For the first time since I've been going to the Fall Radio Show, no one was Showing Off. At least no one I saw. And that is way different from the go go days in the late 90's, and even last year.

Gone, for the most part were the limos, cigars and hookers. The men and women with jobs were hard to tell apart from the guys and ladies who took the NAB up on their generous offer to attend at a bargain to look for work. (And good on them for that gesture.)

After lots of meetings and looking at the faces at the Dickstein Shapiro breakfast Wednesday morning, everyone had the sober look of a new reality, and business as it (I can't lie to you any longer) really is back home on their faces. And the employed faces didn't look much different from those looking for work. Becasue, even for those with a paycheck coming in, they too could be "out." I think that applies, as we have recently learned, to banker, broker, attorney, manager owner or group head.

Having just written all of the above, I left town with a positive upbeat attitude thanks to Jerry Lee, Ed Christian, Dan Mason and dozens of others who, even in the Valley of Down Double Digits, believe we have a business that still has value to our customers. All of our customers: listeners, advertisers, employees, vendors and stakeholders.

I know we've been saying that for several years, starting about the time the revenue curve peaked nearly a decade ago. But now that we've all seen each other naked, we all know what we know. And, that it is what it is and we need to go about doing all those things we've been making rhyme with Kumbaya twice a year. It is time to get to work and fix our stations.

There's time, and I think there's a real will to do that this time. I hope so.

Current Trading Envirionment Observation

During 2007, the number closed deals began to decline. It was during this period (actually very late in 2006) that Clear Channel’s “Departing Markets” campaign was launched with approximately 90 small-market clusters, encompassing almost 450 stations, put on the block. The largest market in that group was Boise, ID (#108 at the time) and the markets went to the bottom of the ARB-ranked markets and many unrated markets as well.

More than 70 markets were sold, and those that were not were withdrawn from the market and folded back into the operations at the company in May 2008. Most remain there to this day. Those that did trade did so at multiples that look very attractive from a seller’s perspective in today’s environment. Virtually all markets that sold did so at low double-digit multiples.

By late 2007 and into mid-2008, trading volume was off dramatically as were multiples. Few deals were being done, with multiples having fallen to seven to nine times BCF.

By the third quarter of 2008 with the virtual freezing of the capital markets and publicly traded company’s prices headed toward free fall, trading was virtually halted and—with the exception of single-niche stations, the oddball standalone AM, and the out-of-the-blue “shocking” deals (Wicks’ acquisition in Denver, Ed Stolz’s Silver State Communications’ purchase of part of Beasley’s holdings in Las Vegas just this week, and Larry Wilson’s return to radio in Portland)—there are few meaningful data points from which to ascertain a market.

A review of comparable sales in markets similar to Montgomery reveals little. While several deals in the last 12 months have been contemplated, very few have closed and I don’t have much faith that those which have been granted for more than a few months are likely to do so.

The credit markets certainly get the bulk of the blame for the lack of trading, but there also appears to be an apathetic appetite at the moment for broadcast stations. In my opinion that’s brought about by the recession certainly, the declining radio revenues prior to that, and the uncertainty by many about the internet and all that entails with WIFI, streaming, Pandora and all those “boxes.”

The now-at-the-door royalty issue and the waning satellite radio noise level, to different degrees, also chill the market.

It is my opinion and that of most of my partners that “if a deal can get done, it would be in the five-to-seven-times range.” The bigger obstacle is not one of a multiple of cash flow, revenue, or even a per-person valuation, but rather one of a lack of available financing for acquisitions.

Clearly there has been an historic reset of values.

Bumper Stickers

When was the last time you saw a bumper sticker for a radio station? If it was recently, I'd wager it wasn't on model car later than 1987 and the station's no longer doing the same thing as the bumper sticker touted or even has the same slogan or call letters.

And that is more important than an observation, in my opinion.

People still use bumper stickers to speak with other drivers about things they're passionate about. I see stickers every day about how smart other folks kids are, what happens when guns are outlawed (and it won't be long according to other bumpers), saving everything from ta-tahs to baby seals, and how hot Sarah is. This past election sure was a bumper year for bumper printers!

But there aren't any bumper stickers for my favorite radio station or personality. Is that a budget matter, or doesn't it matter any more? I think I'll print some up and see.

Fear and Clothing in Las Vegas

The Spring pilgrimage to Vegas is over and this one was very different.

There were far fewer ties, even fewer customers in Hermes buying them.

Mark Ramsey indicated at the Radio Luncheon that Failure IS an option, and has a cathrtic effect. My take from Tom Taylor's column this morning was that delcaring failure, cleaning up the mess and starting over may be way through or out of this malaise. Colonic and perhaps correct.

I was surprised at the high levels of listening from all interested parties and sectors of our industry. There's usually a group that claims to have all the answers, whether that's us brokers, the bankers, buyers, lawyers or sellers. This time everyone was listening, asking questions, taking notes and considering the the possibilites. While there was certianly lots of talk of Failure (pronounced workout, bankruptcy, or some other method of deck chair arrangement), there was certainly hope and ideas for other outcomes as well. No one knows for sure how long our industry's or our economic malaise will last, and how tightly they are linked.

I was impressed by the number of "company" people who paid their own way, burned their families' frequent flier miles and free hotel nights to come to the show. Good on all who showed up on their own to work, learn and share.

And Joe Schwartz from Cherry Creek had the best advice, "Don't let this make you sick." He's right. This isn't fun, and we're all trying to make the changes to adapt to this "new world pricing" of our assets and inventory. Dealing with a load of debt isn't comfortable, but there's a huge difference between a meeting with a banker and doctor.

As Mark Ramsey said Failure may be an option; it is not a disease. It is good to have gone and felt the pulse and the mood, and good to be home.

Eddie

The Infinite Dial

What we thought we knew has been quantified in the just-released "Infinite Dial" study conducted by Edison Research and Arbitron.  The study, the 17th, in an ongoing project to measure to impact of online, satellite, mobile, and all other forms of content acceptance shares with us the quantifiable results of the amount of listening to "regular" terrestrial and HD radio, online, outer space, iphone, ipod and every other way to be entertained.

I wasn't surprised by any of the results, save the exponential acceptance of Facebook and other communities by older adults, but the actual "numbers" are worthy of your review and contemplation.  And then action.  Probably sooner rather than later.

As my airplane mechanic keeps me updated on conditions needing monitoring or attention, his most comforting response is "not yet."  And then we get "yet."  Well, we're at yet if you're not already there.

The entire study is available for download at both arbitron and edisonmedia, both dot com.  It's worth the paper to download it and worth your time to read it.  What else are you going to do on that long ride to Vegas over the weekend from a coach seat?

Speaking of Vegas, I plan on this not being one of more upbeat gatherings, but I'm bright eyed and looking forward to seeing everyone and planning for what lies ahead.  After all, it is what it is.

Travel safely and read carefully.

Eddie

Broad Listening

I've been noodling this for a few days and Mark Ramsey's (www.mercurymediaresearch.com) blog this morning and the weather in south Georgia this evening, forced me to take a look.

Since Marconi we've been Broad Casting and it's worked out pretty nicely for us. The world was round before Thomas Friedman declared it flat. We talked, they listened and we used to answer the request line when listeners called.

The TV, 8 track, cassette, Walkman and iPod all came along and we deflected those doomsday devices with out effort. Audiences, revenues and multiples all grew. And fortunes were made along the way.

The Internet came along we all dialed it up and surfed the net.  It was cool and back in 1995 we didn't consider it could possibly affect our radio stations.  Broadband and broadminds and smart geeks converged and broke the mass into a mass that could be divided and divided into smaller fractals.

And we kept Broad Casting. And Stoppped answering the phone. And stopped playing "requests." And then emptied our control rooms.

But the mass demanded attention as it became unamassed and found  a very individual and personal way for communities from millions to 2 to form via the internet. Just consider how many millions of people became literally communities of two on the dating sites. Many happy marriages were made and others broken with this new technology. Want to talk "intimate relationship with an audience?"

And we Broadcasting withdrew from this social experiment and kept on playing what we believed to be the hits, selling some advertising to cover our costs and trucking right along.

We understood something was afoot about 2000, but we couldn't understand how it was affecting us, so we cut costs to numb the pain.  And now almost a decade later, we are trying to race after that hip train.

We now know that we'd better get hip to the situation before we're part of the next verse of American Pie.

Catch on and catch up are hard when you understand the game.  For many broadcasters, we just don't understand it.  And we've turned away from our stations many a kid who did, both on the air and in our workplace.  They were getting the music they wanted, when they wanted it from shoplifter.com and we didn't weren't hiring.  Or if we did give them a job as a board (bored) ops, we didn't engage them in a dialogue.  All too often they were in our shops alone.

So now we chasing after every silver tipped bullet on the net trying to figure out how to be a part of the conversation and community while becoming a commune ourselves.  And it's making us crazy.  It shouldn't.

Nobody can do local better than we do.  When shit hits the fan, and the power's off,  and there's a tornado wandering around the county like there is tonight, it's the radio that gets turned on.  And I'm betting that we're going to figure out how to Broad Listen to our very local communities and local broadcasting however it's "tuned" will continue to entertain, comfort and inform as we have for 80 years.

It's going to take a stretch and as one of my favorite stand alone broadcasters says "this all gives me a headache, but I've got to do it."

The tornado warning's been lifted.  I just heard it on the radio in the dark.

Eddie

Radio Revenues to Rise

That headline and the warnings in most of the industry trades late last week about our "being careful" are, of course, related to today. April 1.

Radio Revenues according to BIA aren't likely to rise for some years. And the Internet I'm told just passed radio's revenues for third place in advertising. That's not an April Fool's Day joke.

But what got my attention is that our trades were CAUTIONING us not to do stupid things today. Here we are a (if we're lucky) "mature" industry surrounded by all these new technologies and opportunites for "acting out" and we as licensees of the public trust and pledged to serve in the public interest are having to be admonished not to #$^ up.

This is not our first rodeo or April Fool's Day, but I wonder how hard it must be for us to learn. I guess I'll get to read about it tomorrow when some April Fool's Day stunt one of us did will qualify for a Broadcaster's Darwin Award nomination.

You'd think by now. Especially by now.

Eddie