Business will get better by the spring


But Cumulus Media CEO Lew Dickey was speaking of the spring of 2010 as he appeared Tuesday at the UBS 36th Annual Global Media and Communications Conference in New York. Dickey also told the gathering that more consolidation will help the radio industry get its house in order. And, of course, he was asked about the new radio ratings service that Nielsen will launch next year in 50 Cumulus markets.

Dickey told the investor gathering that business turned down in November and he thinks Q1 of 2009 is going to be “awfully difficult” as well. “I do believe first quarter [for the industry] is going to be anywhere from 400-600 bps [one basis point is one-one hundredth of a percentage point] worse than 4th quarter in terms of ultimate performance and then I think that things will start to level out,” Dickey said. “The comps will be a little bit easier in the back half of next year. So, I think that if you take a look at ’09 – I’m speaking now in terms of the industry – I think the back half is gonna outperform the first half, which is going to get out of the gates pretty slowly. Things are still very, very sluggish,” he noted.

The CEO is expecting government efforts to stimulate the economy at some point. So, when will the radio business get back on a growth trajectory? “We think that’s gonna be sometime in 2010, maybe spring of ’10,” Dickey suggested.

“I’m an advocate for more consolidation,” the Cumulus Media CEO told the UBS gathering. “More consolidation in the business will weed out back actors,” he said. And while some people have complained about radio consolidation, Dickey noted that compared to the outdoor advertising business, where the top three players control 80-85% of the revenue, the top 25 players in radio control 50% of the business. “It is still, contrary to popular belief, a very fragmented, unconsolidated industry,” he insisted. Under existing laws and regulations, Dickey says radio can “consolidate dramatically from where it is today” – so that won’t require any further deregulation from Washington. By weeding out those “bad actors” he referred to, radio will be able to establish some pricing discipline. That lack of pricing discipline is what he blames for the industry being unable to gain any traction for revenue growth.

Dickey sought to correct what he said are some Wall Street misconceptions about the new ratings service being fired up by The Nielsen Company in 2009 for Cumulus Media’s 50 smaller markets. Dickey complained that Cumulus executives got nowhere with their complaints to Arbitron about the quality of their diary-based ratings data. “We felt that they were distracted trying to get their PPM off the ground,” Dickey said, leading to the company’s RFP for a new ratings service.

But he emphasized that the new ratings service is not owned by Cumulus. “Clearly Nielsen is the leader in the industry. It’s the global leader, it’s 20 times the size of Arbitron, roughly,” Dickey said, noting that it is already measuring radio in other countries. “They see this as a market they can take and this is a great way for them to enter the market,” he added.

“Cumulus just initiated the RFP. This is a legitimate third-party vendor. The global leader in audience measurement that is coming in,” Dickey said, noting that Clear Channel has already signed up for the service it the initial markets where it also has stations. “This industry needed competition,” according to Dickey, who said this will force Arbitron to raise its game. “And I think that Nielsen is going to be a formidable competitor in this venue.”

RBR/TVBR observation:
Some folks don’t want to hear about more consolidation, but the economic reality doesn’t leave much choice. What Lew is talking about won’t require any loosening of ownership limits. Rather, he sees existing companies merging or selling out to competitors to improve their balance sheets.