Saga Head To Industry: Look At Pricing Models

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While Saga Communications President/CEO Ed Christian said Local dollars are “still the backbone” of his company, National dollars — and the struggle to get the shares it used to — have put Saga under “a tremendous amount of pressure.”


The key reason, Christian noted, is continued rate erosion.

“The industry needs to understand the paradigm of pricing,” he said, speaking to investors during Saga’s Q3 earnings call on Tuesday. If not, a few years from now stations may resort to using a $100 coupon to win business, he warns.

In a call to his industry brethren, Christian implored other broadcast companies to look at pricing models, and to address reasons why Saga is holding at 11%-12% for National, in terms of percentage of total dollars. In comparison, Saga saw rates of close to 20% before a downturn in National hit all radio broadcasters several years ago.

The complaint about the lack of growth in National dollars came as Christian recited several newspaper headlines in which companies were shutting down stores and moving out of markets.

His point? Radio companies haven’t shut down 30 radio stations to focus on other markets.

Christian neglected to note of merger acquisitions, however, as dozens of radio companies — most recent Greater Media — have faded into radio industry history. Other companies, notably Emmis Communications, has pared down assets in order to refocus on its biggest profit-generating properties.

Christian took no analyst questions on a light-hearted call that focused on Saga’s positives in Q3 — and there were many.

First, the company enjoyed a $1.6 million revenue gain from the July closing of a broadcast tower sale in Norfolk to SBA Communications. The tower houses the transmitter for Classic Rocker WAFX-FM 106.9, and Saga is in a lease-back arrangement with SBA.

Second, political dollars surpassed $1 million for Saga’s TV stations, and radio taking in a little more than half of that amount.

Overall, Saga saw net income climb from $3.1 million (53 cents per diluted share) to $5.4 million (92 cents). Net revenue jumped from $33.8 million to $36.1 million, as Station Operating Income (SOI) increased from $24.3 million to $25.5 million.

RADIO, TV EACH SEE GAINS

Thank political dollars for the improvement in net operating revenue seen for Saga’s radio and TV properties.

For Q3, radio net operating revenue inched ahead from $28.5 million to $29.9 million. However, Q3 segment operating income soared from $7.3 million to $9.5 million.

On the TV side, net operating revenue jumped from $5.3 million to $6.2 million. Operating income increased from $1.8 million to $2.6 million.

However, operating expenses increased at both divisions for Saga, and the company forecasts further increases in Q4, Christian said on the conference call.

Saga owns or operates broadcast properties in 26 markets, including 67 FM and 32 AM radio stations, 4 television stations and 5 low-power television stations.

RBR + TVBR RELATED READ: Small-Market Success, Next To Nashville


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Adam R Jacobson is a veteran radio industry journalist and advertising industry analyst with general, multicultural and Hispanic market expertise. From 1996 to 2006 he served as an editor at Radio & Records.