The Radio Equalizer: Brian Maloney

08 January 2008

Radio Broadcasting Stocks Crushed By Wall Street


Investors Beat Up Radio Stocks, Talk Is The Future


Feeling a bit light in the pocketbook these days? Try being a radio industry investor, now the fastest route to losing your shirt this side of Las Vegas.

So far in 2008, Wall Street has continued to slaughter broadcast industry stocks, sending several into official penny- stock territory (under $5/ share). And while talk radio remains as popular as ever with listeners, it is caught in the crossfire as music formats lose out to iPods, satellite radio and the Internet.

In addition, gross mismanagement at the highest levels has greatly contributed to the problem, with programming quality downgraded in an attempt to reach unrealistic cost- cutting targets.

Meanwhile, other firms have taken on too much debt in order to finance station mega- deals. With potential ad revenues quickly migrating from radio to the Internet, these outlets are worth far less than just a few years ago.

Making matters worse, a number of key players have attempted to unload large numbers of stations all at once, leading to a huge marketplace glut.

As a result, shares of station owners are now going for a song, with few takers. In recent months, investors have unloaded positions after even the slightest increases in price, happy to salvage what they can. And on days when the overall markets are dropping, broadcast stocks are the first to be smashed.

Take Citadel Communications, new owners of ABC Radio's mega- talk stations (KGO and KSFO / San Francisco, WBAP / Dallas, WJR / Detroit, WABC / New York, KABC / Los Angeles, WLS/ Chicago and more): its shares now trade at a mere $1.60, down from over $20 as recently as 2003.

Or Entercom, which owns WRKO / Boston, WWL / New Orleans and KMBZ / Kansas City: it has experienced a merciless decline, now trading at $11.30, down from $70 early in the decade.

Emmis, which includes WIBC / Indy, KFTK / St Louis and KLBJ / Austin in its talk radio stable, has seen its shares fall to $2.58, down from close to $30 in 2003. Cumulus, corporate parent to KLIF / Dallas-Fort Worth and KCMO / Kansas City, now trades at $6.53, down from over $20 per share five years ago.

Until today, the only bright spot was Clear Channel Communications, which holds some of the nation's biggest talk stations in its stable (KFI / Los Angeles, among others). Due to an expected corporate buyout, its shares have remained stable.

But today's Financial Times of London has poured cold water on that, reporting that the deal is likely off. That has sent the stock price down more than a dollar today.

For talk radio, this perfect storm has led to format- damaging cost- cutting at a time when the audience could easily be pulled away by emerging Internet- based media, cable television talk, or other diversions. So far, however, the audience has continued to grow against radio's ugly overall backdrop.

From Arbitron, this chart shows evidence of that increasing talk radio listenership.

In recent months, syndicated talk host Sean Hannity has been sounding the alarm about music radio's questionable future and pointing to his own medium's strength. Here's what he had to say during a recent industry gathering, according to Hear 2.0:

"Music radio is going to be in trouble."

So said radio talker and Fox News host Sean Hannity this week at Arbitron's consultant fly-in.

"In five years when every car has an iPod connection and you can listen to anything you want, what is music radio going to do?"

But Hannity's message may be falling on deaf ears, as the industry is still in denial over the widespread rejection of FM music by iPod- touting young people and continues to punish talk radio with short- sighted cost- cutting. Local talk programming is still being replaced by substandard, third- tier syndicated programs, even at some major- market outlets.

If only radio executives (most of whom come from music or sales backgrounds, not talk programming) would recognize exactly where broadcasting's future lies, perhaps our industry's seemingly impending collapse could be averted. Don't hold your breath.

UPDATE: cutbacks seem to have hit some of the Northeast's biggest talk stations and that has industry insiders buzzing tonight. Both WABC / New York and WRKO / Boston offered no special election night primary coverage after 7pm. WABC actually ran a basketball game, while WRKO stuck with its regular programming! This is not the way to save radio.

UPDATE: Emmis reported earnings Wednesday morning, profits have fallen a staggering 96%, according to the Indy Star. Weak ad sales in New York City and Los Angeles are cited.

FOR New England regional talk radio updates, see our other site.

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  • I see two things happening. One is that DJ's do not break music or genre's any more. There is a glut of new music available, but the stations program less and less variety which has done almost has much harm to CD sales as piracy.

    I also see that if wireless internet gets as prevelant as cell phones so you can tune in to internet radio in your car, that means you can hear your favorite station anywhere you are with no broadcast issues, and you can micro program. These things are going to kill off much of what we now know.

    By Blogger One for the Vine, at 08 January, 2008 17:44  

  • Very good analysis, Brian. As much as I usually enjoy disagreeing with you, on this point, we find agreement.

    As painful as the process may be, this near death of radio may actually be its salvation. Radio has always been slow to innovate. Over the last decade, it has ground to a dead halt as corporate owners have focused their energies appeasing the short term aspirations of shareholders rather than serving the communities they shake down for ad dollars. The company I worked for debuted with a very sophisticated IT model that would have maximized income from music sales, data base mining, and harnassing the power of emerging media instead of competing with it as it is today. Radio could have owned the internet and, with it, the billions to be gleaned for filling Ipods with desired content. But it didn't and internet companies that were pipe dreams ten years ago are multi-billion dollar enterprises today.

    What would have saved radio is putting the emphasis on localization be it talk programming or committing to being a proactive community partner. Unfortunately, air staff and promotions people are always the first to got and, with them, that inextricable link to the community.

    But, there is room for optimism. It's not the medium that is likely to crash and burn but the overleveraged corporations that are slowly consolidating themselves out of existence. And, from the ashes, smart local broadcasters who are still in love with radio will have a chance to reinvent the high tech phoenixes that arise in hundreds of communities throughout the country.

    So, while it will render my stock certificates to the status of toilet paper, all I can say is... burn, baby, burn.

    By Blogger Dave Carroll, at 08 January, 2008 17:55  

  • Brian, I agree with your appraisal of Music's "head in the sand" view of technology. this applies to the studios and their refusal to explore new alternatives to the CD as well.
    But have you overlooked the talk side of things. Could buyers be running scared from the continuing threat of the free speach killing "fairness in broadcasting act" and the chance that a dimmicrat takeover of both congress and the whitehouse would bring an end to talk radio?

    By Anonymous Anonymous, at 08 January, 2008 20:31  

  • Sorry to change the subject but Libs need to learn more about Obama before they vote for him. This is not a good man for America. Look at the “pastor” of the church he attends. Obama has had a long relationship with this idiot.

    Why would you want this man to be president? I think any republican nominee will beat him, but I would rather the republican’s lose this election then take a chance on him becoming president.

    Obama does state they he does not agree with all that his “pastor” says. My question is which parts do you agree with.

    By Blogger pf1, at 09 January, 2008 02:12  

  • What is really killing music radio is the fact most new cars now have car stereos with the 3.5 mm RCA stereo jack auxiliary input, and you can retrofit most older cars with new car stereos that have this input also. With that auxiliary input, you can plug almost any brand of portable music player, playing music you chose to put into that player. As a result, users get to make their own choices on what to hear, an extension of the de-massification of the media Alvin Toffler talked about as far back as 1979.

    Talk radio will continue to thrive, especially conservative talk radio and sports talk radio.

    By Anonymous Anonymous, at 09 January, 2008 10:32  

  • Brian,

    How does John Zieglar's dumping by KFI figure into radio's turmoil?

    By Blogger PCD, at 11 January, 2008 10:48  

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