CEO David Field told Wall Street analysts that Entercom has begun to feel the impact of Japanese auto companies having supply chain problems. That’s reduced radio pacings, and it’s happened quite recently.
“A few weeks ago we were pacing up strong mid-single digits for Q2 and anticipating a pretty strong quarter. Our local ad sales were accelerating meaningfully from flat in January to +3 in February and +6 in March. Again, I want to emphasize that’s our local ad sales. Unfortunately, over the past three weeks business conditions have slowed and we are now pacing up just one percent overall for second quarter,” said Field. “This is primarily being caused by the impact of the tsunami on automotive production. The shortage of cars in many dealerships across the country has caused a significant number of our automotive customers to cancel or postpone planed advertising during the second quarter. We would expect that our business re-accelerate as we get past the impact of this exogenous event.”
Yes, we had to look it up. An exogenous event is one that comes from outside an economic model.
Later, in answering questions submitted by Wall Street analysts, Field had more to say about automotive advertising.
“We have heard from most of our markets that they have received some degree of cancelations – almost exclusively from Japanese-based auto manufacturers,” Field said. And while there’s been less impact on domestic auto company advertising, “it has had some impact here over the last three weeks.”
Asked to comment on M&A, Field again confirmed that Entercom had bid for Citadel Broadcasting, adding that he had bid less cash and more equity than winning bidder Cumulus Media. But he said Entercom was mainly interested in the big market stations which had come to Citadel from ABC Radio and not the smaller market stations, which were a better fit with Cumulus. So, when the bidding got too high Field folded his hand. He now says the company is interested in growing, but doesn’t have to make any acquisitions.
RBR-TVBR observation: The obvious opportunity is for broadcasters to focus on car makers and dealers who aren’t impacted by the supply chain problem in Japan. As noted by Bob Prather at Gray Television, the Korean car makers may be advertising more in an attempt to gain market share. Dealers who have plenty of metal on their lots are still hot prospects, even as some of their competitors are facing inventory problems.