Cumulus CEO: Recovery could take 10 years


Radio revenues fell fast from their 2006 peak, but Cumulus Media CEO Lew Dickey told Wall Street analysts Tuesday that retracing that lost ground may take a while.

“Our industry revenues peaked in 2006 at $21.5 billion. So, in 2006 radio was a $21.5 billion industry – and this year revenues are forecast to finish around $15.5 billion, s a decline of $6 billion. We believe it could be – from peak to trough back to peak again – it could be 10 years, or maybe 2016 before we reach $21.5 billion again,” Dickey said in his quarterly conference call.

“We definitely believe the industry is going to come out of this cycle and continue to grow, but it’s going to be quite some time before we reach the 2006 level. So, more than ever before we believe efficiency is becoming the greatest source of competitive advantage in our business today. By employing state-of-the-art technology to run the enterprise and drive productivity – we believe [that] is critical to having a sustainable business model. It’s not about cutting bodies, but rather it’s about resource allocation, systems and customer-focused solutions,” Dickey said of the changes the company has made in recent years to cut costs. But he also noted that in just the past six weeks Cumulus Media has hired 50 new sellers, with plans to hire 50 more by the end of this year.

While Cumulus is not providing specific dollar targets for its Q4 guidance, Dickey told analysts that the company does expect to improve on the revenue and EBITDA performance it posted for Q3, reported a few hours before his conference call. That’s despite comping against $3.6 million in political revenues from Q4 2008. He noted that September was the best month for Cumulus Media in Q3, with revenues down 16%. October is a different story, due to the heavy political ad sales booked a year ago.

Looking further ahead, Dickey said Cumulus is budgeting for positive revenue growth n 2010. Again, no specific numbers.

Dickey provided a little bit of information about privately owned Cumulus Media Partners (CMP), which is managed by Cumulus Media. Its EBITDA was down only 8.2%, vs. 20% for Cumulus Media. CMP operates in large markets and Dickey noted that the advertising recovery appears to be taking hold in larger markets, with smaller markets trailing.

He’s also optimistic in the long term, particularly for local advertising. In his view, newspapers and Yellow Pages directories will never recover from the declines they’ve experienced in recent years, so radio should grow share as local businesses return to advertising. Dickey directed analysts to the analysis that The Nielsen Company released this week, showing that people of all ages, including the young demos, are still heavy radio users.

RBR-TVBR observation: Entercom CEO David Field sees the opportunity for a quick recovery. Lew Dickey thinks it will take many years. Who’s right? There’s really no way to know. Certainly no one saw this advertising recession coming until it was upon us, so it is unlikely that anyone’s crystal ball is going to be any better going forward. Heck, these same guys have been complaining for the past couple of years that visibility is so bad they can’t really see where ad revenues are going to be a month from today!