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Volume 22, Issue 128, Jim Carnegie, Editor & Publisher

Thursday Morning June 30th, 2005

Radio News®

Coen backs down on ad spending forecast
Universal McCann Sr. VP and Director of Forecasting Bob Coen is no longer as bullish about 2005 ad spending as he was back in December (12/7/04 RBR #237). Instead of 6.4% overall growth, he now expects US ad spending to grow 5.7% this year. Why so slow? Coen points to tough comps as one reason - - it's hard for media who got a windfall from last year's election and Olympics spending to post significant gains against those numbers. He also says the new Sarbanes-Oxley law may be a factor, making national marketers more cautious about how they do business. On the local level, he says consolidation by retailers has reduced local advertising prospects in many communities. "Many of the new giant retailers like Wal-Mart and CVS are concentrating heavily on building store traffic by offering the lowest possible prices to their local consumers, foregoing any form of joint cooperative advertising efforts and focusing just on the lowest possible price for the products of national manufacturers," he noted. "Eventually the pendulum should swing back to the use of a broader range of inducements other than price alone," he said, but for now the big discounters pose a problem for local media. In his mid-year update, Coen reduced his 2005 growth estimates for radio and television, but boosted his estimate for cable. He even cut back his growth estimate for Internet advertising, although it's still a double digit number. Our chart compares Coen's original forecast to yesterday's update.

| View the Chart |

RBR observation: Coen's original forecast of 5% growth for local radio was pretty bullish, so the new 3.5% estimate looks a lot more realistic. Even that is pretty ambitious, since the RAB reported growth of only 1% through April. On the TV side, the quarterly reports from group owners indicate that business is a slower than expected, so it's reasonable for Coen to back down some on local and quite a bit on national business expectations. The national cable networks really have their act together this year - - thus, Coen is now predicting 12% growth rather than 7%. If he's right, which appears likely, this will be the first year that the cable nets (all of them combined) have more ad billings than the Big 4 broadcast networks.

KXOL heading for a new tower
It looks like the landlord-tenant dispute between Emmis and Spanish Broadcasting System is about to be rendered moot by SBS' KXOL-FM Los Angeles finding a new landlord. In its latest filing in the lawsuit brought by Emmis to evict KXOL from its tower for launching a format that competes with Emmis' KPWR-FM, SBS says it has nearly completed construction at a different tower site, Verdugo Hills, owned by Infinity. According to SBS, the new site should be ready to go by this Friday (7/1) and, once the FCC gives its OK, KXOL should be broadcasting from the new site a few days later - - and exiting the Emmis site. SBS still denies that it violated the lease with Emmis, since KXOL is still in a Spanish-language format, but it does claim that the new "Latino 96.3" format of hip-hop and Reggaeton has taken listeners away from KPWR and several other stations. It says the court should dismiss the case because KXOL will no longer be a tenant on the Emmis site and the lease terms specifically forbade any financial claim for lost business - - in SBS' view negating Emmis' claim for tens of millions in damages.

Watchdogs see possible
3.5B dollar consumer DTV hit
A survey by the Consumers Union and the Consumer Federation of America reports findings that 39% of all analog TVs currently in use rely solely on over-the-air reception - - some 80M sets - - which would require down-converters to continue being useful once analog signals are turned off. CFA/CU contrasts this to the number 33M typically quoted by the consumers electronics industry. CFA/CU also notes other estimates, from GAO, NAB, and consumer groups, which always seem to have a floor of 65M and can be higher. Figuring conservatively on the existence of 70M down converters at 50 bucks a pop results in the 3.5B dollar total. The National Association of Broadcasters was quick to endorse the report.

RBR observation: Mark this well. NAB and CFA/CU are generally anything but natural allies - - they have been on opposite sides, loudly, over the issue of broadcast ownership consolidation, among other things. When such frequently opposite viewpoints arrive at a mutual conclusion, it may well be a powerful force to try and resist. And many on the Hill have no intention of resisting. In the House Energy and Commerce Committee, many representatives noted that if constituents' TV signals go away, so likely will the politicians held responsible. Although Democrats want to go farther, both sides recognized this as an issue which needs to be addressed.

| Here's their comments |

Contempt brings Safire out of retirement
New York Times columnist William Safire, who now puts an ex- in front of NYT, has emerged from his hard-won anonymity to forward the cause of former NYT colleague Judith Miller and Time magazine reporter Matthew Cooper, in a case which the Supreme Court has refused to consider. Safire's defense, and his call for a national shield law, is made on behalf of all journalists. Safire had three recommendations specific to the case of the outing of Valerie Plame - - one of which calls for original leak publisher Robert Novak to provide more light on the subject. His fourth recommendation is the key, however. "The Congress should urgently hold hearings on shield bills to conform federal practice to the states' laws based on Congress's 1975 directive to the Supreme Court to apply 'reason and experience' to extending privilege..." he wrote.

RBR observation: Such legislation is at least in the pipeline, and it is significant that it is very much on a bipartisan basis. Senators Dick Lugar (R-IN) and Chris Dodd (D-CT) and Reps Mike Pence (R-IN) and Rich Boucher (D-VA) are taking point.

Penny Lane nuthin': FEC hits Lane Evans for 185K
The Friends of Lane Evans (D-IL) formed an organization called the Victory Fund, which the Federal Elections Commission contends was little more than an extension of the Friends of Lane Evans. The upshot is that money spent by the Victory Fund needed to be gathered, spent and reported just as that gathered, spent and reported by the congressman's main campaign organization. It wasn't. At issue are activities in the 1998 and 2000 election cycles. The money in the VF account was raised by FoLE, and a lot of it - - 200K out of 500K - - came directly from union treasuries, a federal election no-no. Voter ID and get-out-the-vote activities of VF were seemingly directed by and seamless with those of FoLE, and 18K was spent on radio and print advertising. The Evans organization agreed to a consent judgment under terms of which it will pay 185K. The Rock Island Democratic Central Committee also got rocked for 30K in the agreement, bringing total Dem damages to 215K.

Quote us on SCOTUS, Part 2
We continue with more commentary from interested parties regarding the Supreme Court's Monday triple play involving Brand X, Grokster and confidential source shielding. Today: Ted Stevens (R-AK) and Daniel Inouyu (D-HI) of the Senate Commerce Committee on Brand X and Grokster, NCTA's Kyle McSlarrow in Brand X, Newspaper Guild's Linda Foley on shield, and ASCAP's Marilyn Bergman on Grokster.

| Here's their comments |

Adbiz©

CIBC: Cable upfront dollars
likely to come in down
CIBC World Markets is officially cutting its 2005 and 2006 U.S. ad spend forecasts for TV ahead of what it believes will be a flat-to-down upfront for both broadcast (already completed) and cable network spend (not completed but tracking flat to down Yr/Yr)-owed mainly to 5% less inventory sold but also 2% lower CPMs than CIBC had been expecting. While CIBC still expects the dollars to show up in the scatter markets this Fall and for national TV advertising to grow next season, the company says the growth will be in the 1-2% range for broadcast and 5% range for cable, down from their original expectations of 2-3% for broadcast and 8% for cable. The cable upfront result is particularly disappointing given that the industry came in with 2% higher ratings to sell, whereas broadcast ratings were flat. "The implication is that the cable industry has failed this year to benefit from its greater target-ability in the form of higher price increases than Broadcast and perhaps should no longer (at least for now) be considered a secular growth area in media beyond the 1%-3% audience fragmentation we expect will continue," said CIBC in its report. "As a result, we are cutting our Upfront forecast to reflect 1%-2% lower spending for both Broadcast and Cable Networks, down from our prior expectation of +2% to +3% for Broadcast and +5% to +7% for Cable Networks. For Broadcast, the shortfall reflects 2% less inventory sold and 1% lower CPM increases (all at NBC) than we had expected, while for Cable, the shortfall reflects 5% less inventory sold and 2% lower CPM increases." CIBC added that this sets the stage for another tough summer in media stocks as investors worry more about Internet's pace of share gains. Ultimately though, the company believes the stocks will rally in Q4 as the TV dollars show up in scatter and ahead of the numerous Q1 '05 corporate split-ups in media.

RealNetworks launches effort
on SCOTUS Grokster ruling
RealNetworks is reportedly launching a newspaper campaign via Publicis Seattle that uses the Supreme Court case to highlight its own legitimate music sharing service, Rhapsody 25, launched a few months ago. The unanimous decision this week ruled that file-sharing networks such as Grokster and Morpheus can be held liable when users trade copyrighted material without permission, drew worldwide attention. RealNetworks' effort featured full-page ads running in Tuesday's LA Times, The NY Times and USA Today emphasizing that Rhapsody offers 25 free music files each month without the danger of copyright infringement. The company also plans to deploy a search-term campaign that capitalizes on the ruling. Creative for the print ad shows the names of bands forming a judge's gavel. The ad reads, "The decision is in. The best choice for free, legal digital music is Rhapsody. www.rhapsody.com. On Monday, the Supreme Court made its decision. Now you can make yours by going to www.rhapsody.com. It's the only place where you can get free and legal access to over 1,000,000 songs, and share music with your friends. Great music whenever you want it. No hassles."

Pamela Anderson does AIDS PSAs
Pamela Anderson has done a package of M·A·C AIDS Fund radio PSAs written, produced and directed by McHale Barone. Emphasizing that 3 million people worldwide die of AIDS every year, Anderson's frank delivery personalizes this statistic with a message: "Sooner or later someone you know can become one." Joe Barone guided the actress towards a powerful vocal approach to the copy. "Pamela is very savvy," he says. "She has first-hand experience with Hepatitis C, and a deep appreciation for the M·A·C AIDS Fund 'Get Tested' call-to-action. Though she's primarily recognized for her striking physical presence, she totally met the challenge of a radio performance. These spots are sure to get people thinking seriously about getting tested." The :60, :30 and :15 spots were co-written by Barone, Chris McHale and McHale Barone partner Jill Cheris who also produced the session on location in L.A. The campaign broke nationally this week in conjunction with "National HIV Testing Day," and will also air in Singapore, Australia, The UK, Canada and New Zealand. Since it was founded in 1994, the M·A·C AIDS Fund has raised over 47M through the sales of the VIVA GLAM lipstick collection.

Media Business Report

Kagan forecasts cable industry to reach 47 billion by 2009
The results are in from Kagan Research's annual survey of cable network execs. The survey finds cable has made a vigorous recovery since the ad market meltdown in 2001 and continues to attract attention from investors. The industry posted an estimated 9.0 billion in cash flow in 2004, with a margin of 34.1%. In a market dominated by major media companies, new nets continue to have a difficult time getting off the ground. Limited bandwidth has also changed the competitive parameters for incumbent networks. Nevertheless, Kagan reports the industry is "the picture of health." According to SVP Derek Baine, "We forecast over the next five years total revenue will grow at a CAGR of 12% per year, reaching 47 billion by 2009. Cash flow is expected to rise at a 16.4% rate, giving the networks an average cash flow margin of 41% in 2009, up from a projected 35% in 2005." Some statistics and projections based on Kagan's 10-year forecasting model: · The top 10 most widely carried networks averaged 88.7 million subs in 2004, compared to 88.0 million in 2003, growing 0.8% YoY, with a 3.3% CAGR from 1995-2004. · Ad revenue is expected to grow at a CAGR of 13% per year, with license fees up 11.6% per year and other revenue growing 9.1% annually. · Aggregate sector cash flow is estimated to rise at an annual growth rate of 16.4%, bringing total cash flow from 10.4 billion in 2005 to 19.1 billion by 2009.

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Media Markets & MoneyTM

Bakers buy a bundle from CSN
The Baker family (Vernon, Virginia and Edward), which operates one of the most unique radio groups in the US, is picking up a quartet of Virginia FMs and twice as many translators from noncommercial Religious outfit CSN International. The 8M buy will feed the noncommercial Positive Alternative Radio (PAR) side of the family's portfolio. The group is unique in that it also has commercial radio interests. The full-power stations coming from CSN include WYJY-FM Fredericksburg, WJYA-FM Emporia, WPVA-FM Waynesboro and WJCN-FM Nassawadox. They join seven other full power Virginia FMs in the PAR packet, which also includes stations in West Virginia, North Carolina, Tennessee and Indiana. The commercial side of the operation, which utilized multiple licensee names and ownership share arrangements, brings parts of Kentucky and Maryland into the territorial mix.

Washington Beat

Abernathy meets the press
Republican FCC Commissioner Kathleen Abernathy is holding a morning session with reporters today to discuss upcoming initiatives at the FCC. There is much upon which a little light-shedding would be of great interest, particularly since the Supreme Court has in effect ordered the FCC to get to work - - again - - on its media ownership rules. Abernathy will be entertaining on the FCC's 8th Floor. However, Abernathy's colleague, Chairman Kevin Martin, will have to choose his issues carefully until such time as President Bush and Republicans in Congress get around to filling the empty Republican seat left on that very same floor by Michael Powell. Brought up today, many of the key issues before the Commission would be sure to result in a 2-2 vote. Stay tuned...

Transactions

22.45M WCHA-AM/WIKZ-FM, WQCM-FM & WHAG-AM/WDLD-FM Hagerstown MD-Chambersburg-Waynesboro PA (Chambersburg PA, Greencastle PA, Halfway MD) from Dame Broadcasting LLC (J. Albert Dame) to MLB-Hagerstown-Chambersburg IV LLC, a subsidiary of Main Line Broadcasting LLC (Daniel Savadove). 1.125M escrow, balance in cash at closing. Includes non-compete. [File date 5/26/05.]

1 KCAC-FM Camden AR from Camden Career Center, a subsidiary of Camden Fairview School District (Eddie R. Moore) to Southern Arkansas University Tech (Rogers Worsley et al). Cash. Noncommercial station. [File date 5/26/05.]

NA WIPC-AM Lakeland-Winter Haven (Lake Wales FL) from Siber Media Group Inc. (David Spada) to Super W Media Group Inc. (Robert Cubero, Carl Czuchaj, Bonnie Karp). Unspecified debt assumption. [File date 5/25/05.]

Stock Talk

Stock markets await the Fed
Stock prices were soft on Wednesday as traders waited for rate news from the Federal Reserve. The Dow Industrials dropped 31 points, or 0.3%, to 10,374.

Radio stocks followed the market. The Radio Index was down 0.447, or 0.2%, to 205.792. Saga dropped 2.9% and Disney was off 1.7% as the worst performers of the day.

Radio Stocks

**Here's how stocks fared on Wednesday**
Company	Symbol	Close		Change	Company	Symbol	Close		Change
Arbitron	ARB		42.95	+0.37	Jeff-Pilot	JP		50.91	-0.31
Beasley	BBGI		14.49	-0.09	Journal Comm.	JRN		16.89	+0.09
Citadel	CDL		12.17	+0.07	Radio One, Cl. A	ROIA		13.14	-0.18
Clear Channel	CCU		30.95	+0.04	Radio One, Cl. D	ROIAK		13.16	-0.17
Cox Radio	CXR		15.68	-0.08	Regent	RGCI		6.05	unch
Cumulus	CMLS		12.16	-0.11	Saga Commun.	SGA		14.17	-0.42
Disney	DIS		25.43	-0.43	Salem Comm.	SALM		20.39	+0.19
Emmis	EMMS		17.86	+0.07	Sirius Sat. Radio	SIRI		6.58	+0.15
Entercom	ETM		32.97	-0.03	Spanish Bcg.	SBSA		10.05	-0.05
Entravision	EVC		7.96	+0.03	Univision	UVN		28.19	-0.01
Fisher	FSCI		47.92	-0.20	Viacom, Cl. A	VIA		32.85	-0.05
Gaylord	GET		46.55	+0.85	Viacom, Cl. B	VIAb		32.65	+0.01
Hearst-Argyle	HTV		24.66	-0.04	Westwood One	WON		20.49	+0.06
Interep	IREP		0.44	-0.02	XM Sat. Radio	XMSR		33.92	-0.28
International Bcg.	IBCS		0.01	unch	-	-	-	-	-

Bounceback

Send Us Your Opinions We want to
hear from you.
This is your column, so send your comments to [email protected]

A Sirius acquisition of ABC Radio (6/28/04 RBR #126) would work if Disney would be willing to accept an all stock deal. Plus, it seems to me a deal structured in this way would also be acceptable to Sirius stockholder as any stock dilution would be offset by the asset value of the ABC Radio stations. In addition, Sirius would gain substantial ground on XM overnight with a deal of this magnitude. Plus, there would be no tax implications for Disney. Also, Disney would be provided with a hedge with an additional distribution mechanism that may, at some point in the future, be extremely competitive with conventional radio. Incidentally, Sirius market cap is currently 8.55 billion making an all stock transaction be extremely doable, provided the estimated two billion Disney is supposedly seeking for the radio assets is accurate.

Joseph Jones
J. D. Jones & Co.
Los Angeles, CA

Arbitrends

Upped & Tapped

Harris back to ABCRN
Steve Harris is leaving XM Satellite Radio as VP/Music Programming on 7/1 and going to ABC Radio Networks in Dallas effective 7/15. He's former VP for Urban Programming at ABCRN, and will be overseeing four Urban formats and four Hispanic formats for ABC.

Stations for Sale

Rocky Mountain
Rated Market
New market FM on the air and ready to go! One of the Rocky Mountain Region's most upscale markets priced to sell! A great opportunity for an aggressive, innovative operator!
Cliff at Clifton Gardiner & Co
(303)758-6900
[email protected]

More News Headlines

WBBM-FM Chicago first to employ
"Visual Radio"?
Chicago's WBBM-FM looks to be among the first beneficiaries of Infinity's deal with Visual Radio, a service from Nokia and Hewlett-Packard that enables listeners to receive local FM stations on their mobile phones synchronized with interactive text and graphics (4/19 RBR #77). There are details to be worked out, such as which carriers will offer the service. Infinity CEO Joel Hollander tells The Chicago Tribune, "All this content is going to be on cell phones and we're trying to partner up with some of those companies. We're hoping that 'BBM-FM will be a station that's up and running within six months."

Myron Cope
named winner of
2005 Pro Football
Hall of Fame award
Myron Cope, the legendary broadcaster who retired last week after a 35-year stint as an analyst on the Pittsburgh Steelers' radio network (6/22 RBR #22), has been named winner of the 2005 Pro Football Hall of Fame's Pete Rozelle Radio-Television Award. Previous winners of the Rozelle Radio-Television Award include Lindsey Nelson (1990), Chris Schenkel ('92), Curt Gowdy ('93), Pat Summerall ('94), Frank Gifford ('95), Jack Buck ('96), Charlie Jones ('97); Dick Enberg ('99); Ray Scott (2000); John Madden ('02) and Don Criqui ('03). Cope, 76, will be presented with his award at the Enshrinees Dinner on 8/6, during the annual Hall of Fame Enshrinement Weekend celebration in Canton, OH.

RBR Radar 2005

Radio News you won't read any where else. RBR--First, Accurate, and Independently Owned.

How about an Emmis-ABC swap?
Broadcasting is still a tough business says CEO Jeff Smulyan but was proud to report that radio and TV groups both outperformed their markets and peers in the company's fiscal Q1, which ended May 31st. "We're not as bearish on some signs in the radio business as I've seen from the analysts out there. Our June has been very good." If you expected to find out a lot about how the effort to sell Television is going Smulyan played it close to the vest. Emmis could end up swapping its TV group for some of Disney's ABC Radio stations. Smulyan noted speculation about what an ideal match-up that would be and praised John Hare and the management team at ABC Radio, but also insisted that he doesn't yet know if incoming Disney CEO Bob Iger has decided to get out of radio. RBR observation: Smulyan couldn't do a deal for all of ABC Radio because Emmis would end up way over-leveraged. ABC Radio is worth 2-3 times the value of the Emmis TV group. But a workable and intriguing scenario would be to swap Emmis TV for some of ABC's larger market FM's, particularly those which would add to Emmis' clusters in New York, LA and Chicago. For RBR in depth observation see 06/29/05 RBR #127

Apple releases iTunes update
Rolled out an update to its iTunes music software to handle podcasting. The software, designed for both Windows-based PCs and Apple's Macs. MBR observation: Remember, so far no licensing deals have yet been struck with radio stations to podcast their music shows. Negotiations continue with ASCAP, BMI and SESAC. When that gets done someday, it should be interesting the effect it may have on the industry. Note: Be sure to see our Podcasting story in Radio and Television Business Report's August print edition, not reading us see www.rbr.com 06/29/05 RBR #127

TNS: 2005 ad spend
to increase 3.4%
Advertising spend will reach 145.3 billion this year, according to a TNS Media Intelligence forecast. TNS predicts a 4.1% rise for the first half of 2005 and 2.7% for the second half. The majority of media would see growth, with cable TV and Hispanic media more at 11.6% and 10.5%, respectively. RBR observation: Close up look at the stats in our chart is worth a print out for your pacing. 06/29/05 RBR #127

The "i" has it at Paxson
Re-brand its TV network as "i" - - reflecting its new programming strategy of providing "an independent broadcast platform for producers and syndicators who desire to reach a national audience." This should come as no surprise to TVBR readers. Since April we've been writing that this was what was coming. 06/29/05 TVBR #127

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