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Volume 24, Issue 102, Jim Carnegie, Editor & Publisher

Thursday Morning May 24th, 2007

Radio News ®

Shareholders take final swipe at CCU
Clear Channel may be on the verge of becoming a private company, but shareholders got in a final swipe at management. They voted at their annual meeting to require greater independence of directors serving on the company's compensation committee, despite a unanimous recommendation by the board of directors that the proposal be voted down. Clear Channel already has a compensation committee, of course, and all of its members meet the New York Stock Exchange definition of an independent director. But the dissidents, led by a group of pension funds, said that wasn't good enough. They want the standard set by the Council of Institutional Investors. According to the resolution, "for the purpose of this proposal an independent director is someone whose only nontrivial professional, familial or financial connection to the corporation, its chairman or its executive officers is his/her directorship..." and neither they nor any of their relatives have been employed by the company within the past five years. The vote may prove to be a meaningless gesture, since the compensation committee is not likely to have any work to do before the vote on selling the entire company to a new entity headed by Thomas H. Lee Partners and Bain Capital. The San Antonio Express News quoted CCU CEO Mark Mays as saying the buyout is experiencing "nothing but momentum" following the latest revision to 39.20 per share, with current shareholders permitted to claim a stake in the new company.

RBR observation: The obvious target of this measure is B.J. "Red" McCombs, who co-founded Clear Channel with Lowry Mays and has been a company director for every minute of its existence over the past 35 years. According to the CCU proxy, the company leases some office space in San Antonio from a company owned by the adult offspring of Lowry Mays and Red McCombs for just under 17K per month. The adult children of McCombs also now control the family partnership which owns the string of auto dealerships by which Red made his original fortune. Those auto dealerships bought 873K of advertising last year from various Clear Channel radio, TV and outdoor entities. The McCombs family also owns five sites where Clear Channel Outdoor has billboard leases, for which 2006 payments totaled 156K. These deals have all been publicly disclosed and CCU says the rates are no different than what could be obtained with nonaffiliated parties. Indeed, these all seem like small change when compared to the total holdings of the two families, each of which have 10-figure fortunes. And given the size of the McCombs family stake in Clear Channel, it seems that Red McCombs would tend to hold the purse strings more tightly than someone with little or no personal stake in the company. The other members of the compensation committee are its chairman, construction company executive John Zachry, and former US Representative J.C. Watts.

Cox Radio signs for PPM in 8 markets
Cox Radio ended its holdout back in February and began encoding for Arbitron's Portable People Meter (PPM) in Houston (2/22/07 RBR #37) after PPM had gotten Media Rating Council accreditation there. Now, CEO Bob Neil has signed a five-year contract renewal for all 18 Cox markets, including PPM services scheduled to be rolled out in eight of them. Those markets include Houston, New York (Cox is in the embedded Nassau-Suffolk market), Atlanta, Miami, Tampa, San Antonio, Orlando and Jacksonville. Neil had long been resistant to PPM, questioning various aspects of the methodology and technology. Although he has now signed a contract, he is still going to be holding Arbitron's feet to the fire. He sent RBR these comments late yesterday: "We know no methodology is perfect, but we believe the best chance to improve it is from the inside rather than the outside. That includes the diary, which will still be 'currency' in most markets for the foreseeable future. That means making sure the sample sizes in demos and return rates in the diary markets are at levels that make the research reliable. We're paying for both methodologies and we deserve to get our money's worth in both. MRC accreditation in Houston was the key component in our decision to encode and subscribe, and we expect that process to continue to move forward in Philadelphia and the markets beyond. When Arbitron was 'selling' the PPM service to the radio industry, they were very confident the new technology would bring new advertisers and revenue to Radio, and that buyers would 'adjust' to the new technology by adjusting cost per point and not penalizing the industry from a rate perspective. They've been very aggressive in telling Radio that PPM would be a positive economic factor for Radio going forward. Arbitron now faces the law of 'be careful what you wish for' because now that people are paying real money, and the data is currency, it will face more scrutiny from broadcasters and advertisers. It's not 'pretend' anymore, we're playing for real with an entire industry, and it better be right. Just as advertisers want to hold us accountable, we intend to hold Arbitron accountable for the quality of the data and their assertions about its impact on our business."

Key legislator attacks satcaster deal
US Rep Mike Doyle (D-PA), a key member of the Subcommittee on Telecommunications and the Internet, has fired off a letter to AG Alberto Gonzales, FCC Chair Kevin Martin and FTC Chair Deborah Platt Majoras. His request: Put a stop to the proposed merger of XM Satellite Radio and Sirius Satellite Radio. Doyle is vice-chair of the committee, a wing of the Energy and Commerce Committee. In his letter, he pointed out that the two companies were awarded licenses in the first place with the understanding that they were to compete with one another. He also took them to task for seemingly ignoring another stipulation, that they provide customers with interoperable receivers. "I believe this disregard for the Commission's intentions and consumer interests should be a factor when assessing the promises these companies are making in pursuit of merger approval." He also expressed his belief that the merger would "lead to a lack of diversity of artists on satellite radio," adding, "Without this competitive force in the marketplace, the combined entity would no longer have to differentiate itself or improve its offerings." He noted that even if the merged entity holds the line on pricing, it could effectively arrive at the same result by "decreasing service options or quality." He concluded, "These are just a few of the many reasons I believe this merger should be denied. I urge you to keep these concerns, along with other many consumer concerns that will inevitably arise when a monopoly is present, at the forefront of your thought weighing the impact of this proposed merger."

Internet advertising shooting higher
You no doubt know already that Internet advertising was hot in 2006. Your own station's website ad sales likely grew double digits and your spot sales probably felt some new competition from various online enterprises. The Interactive Advertising Bureau (IAB) is out with its official tally by Pricewaterhouse Coopers, finding that US Internet advertising revenues increased by 35% last year to a record 16.9 billion. Q4 revenues were also up 35% to 4.8 billion. "We have every confidence that this growth trend will continue as marketers allocate more of their total marketing dollars to interactive and the industry delivers effective and innovative platforms for connecting with consumers," said Randall Rothenberg, President and CEO of the IAB.
| View the charts |

National party orgs pulling in the bucks
The latest Federal Election Commission numbers are in, and they show that Washington political committees continue to rake in cash. Not only is money begin gathered in bundles, a nice piece of change is already going back out the door. The trend arrows tell a story as well, with the Democrats' pointed up and the Republicans' headed down. According to the FEC, through the first third of 2007, Republicans have raised 61.2M and spent 46.5M, while Democrats have raised 59.4M and spent 36.5M. The comps on these nearly equal receipts are starkly divergent. For the Republicans, they represent a 25% decline over the same four months in 2005, and a 21% decrease compared to the first four months of 2003, the last presidential cycle. The Democratic numbers, by contrast, represent gains of 26% over 2005 and 126% over 2003. The charts below tell the tale for the six committees, including the Republican National Committee (RNC); the National Republican Congressional Committee (NRCC); the National Republican Senatorial Committee (NRSC); the Democratic National Committee (DNC); the Democratic Congressional Campaign Committee (DCCC); and the Democratic Senatorial Campaign Committee (DSCC).

RBR observation: These committees are already spending cash but can also be counted on to hold significant funds in reserve for last minute use in the hottest of the hotspots. And they may even go beyond what's in the warchest. You may recall that last October and November, the Democratic committees in particular pulled out their credit cards to take advantage of conditions moving their way in the waning days of the campaign. Expect more of the same at the end of the 2008 battle.
| Committee financials here |

Media Business Report TM

Brand name potential in wireless world
According to a recent study, a majority of US consumers are willing to purchase a Google or Yahoo!-branded mobile device if and when they become available. The survey was conducted in April by market research firm The EQUS Group Inc. 55% of respondents said they are willing to purchase a Google or Yahoo! mobile device, and only 21% said they are not. 23% of respondents were undecided. "In addition to these findings, we also found that 69% of consumers currently use mobile search tools on their mobile phones. Because search functionality is so highly utilized by mobile phone users, Google and Yahoo! are uniquely well-positioned to enter the mobile device market and may have an advantage over other consumer brands looking to enter the space," said Al Nazareli, CEO of The EQUS Group. This data is part of a forthcoming study, "Big Screen Plasma to iPod: Mobile Devices as the New Entertainment Platform," to be released this month by The EQUS Group.

NFL in the alphabet soup
with QVC, GSI
The National Football League likes to sell related merchandise, and has inked an agreement with cable direct-to-consumer sales channel QVC and with an internet etailing firm, GSI Commerce Inc. QVC has been named the NFL's "official television retailer" and will go so far as to add NFL-based shows to its programming lineup, which will start at the beginning of the season and run clear through to the Super Bowl. GSI, which has been associated with the NFL as operator of NFLShop.com, will provide the NFL-licensed merchandise sold on QVC and will basically handle fulfillment of QVC-generated sales. "We are pleased to team with two of the leaders in electronic retailing and multichannel commerce," said Lisa Baird, the NFL's senior vice president of marketing and consumer products. "This new alliance will further expand our marketing reach and better serve our fans who have an insatiable appetite for the NFL and our licensed merchandise."

RBR observation: Radio stations which carry football teams, host NFL-themed shows and/or cover the NFL on their local newscasts will be helping indirectly to generate a market for the items QVC and GSI are trying to sell. While we can't think how the project will harm local broadcasters, it's too bad there doesn't seem to be a way to get a cut of the proceeds in exchange for all the free coverage.

Ad Business Report TM

Grey to market reds and whites
Terlato Wines International has signed on with Grey Worldwide to market its wares, which include luxury wines sold under about 40 different labels in the 14-dollars and up range. In fact, Terlato says it sells one out of every eight bottles in that class in the US. Grey may well be looking at a diverse approach to marketing the products, which include Terlato's signature Rutherford Hill Napa Merlot, Chardonnay and Cabernet Sauvignon offerings. Jim Heekin, Chairman and CEO of Grey Global Group, said, "We are tremendously excited to be working with Terlato. Their portfolio of luxury wines spans the world's great vineyards. We share their passion for excellence and are committed to leveraging the power of their premier brands and launching new products with inventive ideas that resonate in every medium."

RBR observation: This would be a great product to advertise on a commercial Classical station.

Washington Media Business Report TM

Solis wants a full buffet menu
Yet another Democratic legislator has been working the keyboard. This time it is US Rep Hilda Solis (D-CA), a member of the Energy & Commerce Committee's Subcommittee on Telecommunications and the Internet. She recently wrote an article for the San Francisco Chronicle on the topic of a la carte cable menus. She said, right in the title, "I'll take the buffet." She noted proponents of a la carte, including Kevin Martin, and mentioned PTC's founder, saying, "Self-described media critic Brent Bozell has said that per-channel-charges would help sift out what he sees as objectionable programming - like MTV." However, she thinks the arguments in favor of a la carte are specious. "But a close look at the idea of a la carte pricing shows that it would be a disaster for consumers. Most consumers would pay more for less, as the sweeping rules would decimate small and niche cable channels while raising prices." She said studies show that it would be even more disastrous for a lot of channels that rely on bundling and casual channel surfers for survival. "Indeed, virtually every study by private firms and government agencies - including an earlier, more comprehensive study by the FCC - have concluded that a la carte will raise prices for consumers who watch more than 11 channels, and kill small, minority, women and niche programmers." She notes that like the media consolidation issue, a la carte has brought left and right together in opposition, and called it "...a bad deal for consumers and a poison pill for the cause of media diversity."

RBR observation: We agree. Push the parental control technology and leave the business model alone.

Media Markets & Money TM

Close encounter in Georgia
Media Services Group's Eddie Esserman tells us that the 2.3M acquisition of a number of small-town Georgia radio stations by Georgia Eagle Broadcasting is a done deal. Included in the group are WWNS-AM/WPTB-AM Statesboro, WSYL-AM/WZBX-FM Sylvania, WDXQ AM & FM Cochran and WMCD-FM Claxton. The buyer is headed by Cecil Staton. The seller was Communications Capital Company.

Internet Media Business Report TM

SoundExchange offers deal
to small webcasters
With momentum growing in Congress to throw out the web streaming royalty rates adopted by the Copyright Royalty Board and impose more reasonable fees, SoundExchange - the organization set up to collect royalties for record companies and performers - has proposed what it is calling a "subsidy" for small webcasters. Instead of the CRB rates, which most webcasters large and small say would take well over 100% of their revenues, SoundExchange is offering a temporary reduction through 2010. Under the offer, small webcasters would pay a royalty fee of 10% of gross revenues up to 250K and 12% for all gross revenue above that amount.

RBR observation: Divide and conquer. It's the oldest trick in the book. Note, though, that the "subsidy" proposed by SoundExchange is only temporary. After just a few years the small webcasters would be subjected to royalty rates that are certain to force them out of business. Frankly, we can't understand why SoundExchange is pressing so hard for royalty rates which will produce zero in payments for it to disperse. No one, large or small, can come up with a viable business model for web streaming under which you pay someone else more than 100% of your revenues.

TVBR TV News

TV revenues dropped in Q1
No surprise, since there were no Winter Olympics this year, nor federal elections. The Television Bureau of Advertising (TVB) reports that station revenues were down 3%, syndicated TV 5.9% and network TV 6.5%. All in all, the industry was down 5.3% to 11.75 billion for the quarter, according to data gathered for TVB by TNS Media Intelligence/CMR. Among local broadcast television's top 10 advertising categories, the picture was mixed. The biggest category of all, Automotive, was down 8.9%. Restaurants, Telecommunications, Financial and Schools/Colleges/Camps were up. Car & Truck Dealers, Furniture Stores, Insurance/Real Estate, Leisure Time Activities/Events and Government & Organizations (which includes political) were down.

**1st QUARTER 2007 SUMMARY -- LOCAL BROADCAST: Top 100 Markets**
	1st Qtr 2007	1st Qtr 2006	% Change
Local Broadcast TV	4,040,470,400	4,163,608,200	-3.0
Syndicated TV	986,757,900	1,048,620,800	-5.9
Network TV	6,724,034,700	7,192,658,200	-6.5
Total Broadcast TV	11,751,262,900	12,404,887,200	-5.3

Source: TVB; TNS Media Intelligence

Transactions

1.1M KGVY-AM Tucson AZ (Green Valley AZ) from Green Valley Broadcasters Inc. (Larry Nelson) to KGVY LLC (George W. Kimble). 225K escrow, balance in cash at closing. Includes non-compete. [File date 5/4/07.]

22.5K WDUF-AM Duffield VA from George Maddux, Special Commissioner, Estate of Arlene M. Smith to Deanna D. Smith. Court settlement of inheritance case. Buyer loaned 22.5K to station in 2001 and received one dollar purchase option which is now being exercised. [File date 5/4/07.]

Stock Talk

Greenspan talks, stocks fall
No, that's not a recycled headline from a few years back. The former Fed chief still has the ear of Wall Street traders and when Alan Greenspan expressed worries about whether the skyrocketing Chinese stock market will come plunging back to earth, traders sold stocks, erasing gains from earlier in the session. The Dow Industrials were down 14 points for the day, or 0.1%, at 13,526.

Radio stocks were a bit lower. The Radio Index declined 0.265, or 0.2%, to 162.025. Saga had the worst day, down 2.1%. Westwood One had the best, up 2.4%.

Radio Stocks

**Here's how stocks fared on Wednesday**
Company	Symbol	Close		Change	Company	Symbol	Close		Change
Arbitron	ARB		50.11	-0.10	Hearst-Argyle	HTV		26.02	-0.26
Beasley	BBGI		8.84	-0.09	Journal Comm.	JRN		13.72	-0.20
CBS CI. B	CBS		33.24	+0.42	Lincoln Natl.	LNC		73.10	-0.65
CBS CI. A	CBSa		33.19	+0.41	Radio One, Cl. A	ROIA		7.53	+0.01
Citadel	CDL		8.48	+0.01	Radio One, Cl. D	ROIAK		7.57	+0.05
Clear Channel	CCU		38.20	+0.09	Regent	RGCI		3.30	unch
Cox Radio	CXR		14.91	-0.18	Saga Commun.	SGA		9.49	-0.20
Cumulus	CMLS		9.36	-0.12	Salem Comm.	SALM		12.65	+0.18
Disney	DIS		36.48	+0.21	Sirius Sat. Radio	SIRI		2.86	+0.06
Emmis	EMMS		10.61	-0.01	Spanish Bcg.	SBSA		4.69	+0.06
Entercom	ETM		27.63	+0.02	SWMX	SMWX		0.24	-0.01
Entravision	EVC		9.38	-0.07	Westwood One	WON		7.97	+0.19
Fisher	FSCI		50.05	-0.18	XM Sat. Radio	XMSR		11.62	+0.46
Google	GOOG		473.97	-1.89	-	-	-	-	-

Bounceback

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Below the Fold

Ad Business Report
Grey to market reds and whites
Terlato Wines International has signed on with Grey Worldwide...

Media Business Report
Brand name potential
In wireless world US consumers are willing to purchase a Google or Yahoo!-branded mobile device if...

Washington Media Business Report
Solis wants a full buffet menu
Yet another Democratic legislator has been working the keyboard...

Internet Media Business Report
SoundExchange
Offers deal to small webcasters a "subsidy" for small webcasters...

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More News Headlines

Just a little
family gathering
The Bancroft family was holding a get together yesterday, apparently to discuss the 60 bucks per share offer that News Corporation CEO Rupert Murdoch has made for the company that they control, Dow Jones & Co. Word of the meeting comes from the Wall Street Journal, owned by Dow Jones, which said there was no formal agenda and family members would be able to openly debate their ownership strategy. Family members holding over 52% of the voting power of Dow Jones have already rejected the Murdoch offer, but some of the Bancrofts reportedly want to discuss the offer further, as well as other alternatives. According to the WSJ, those might include seeking other potential buyers, exploring a merger with another media company, or buying out public shareholders to take Dow Jones private.

Another bidder
for EMI?
The auction is over and Terra Firma declared the winner of EMI Group (5/22/07 RBR #100). But that may not be the last word. The New York Post reports that former EMI CEO Jim Fifield and the Corvus Capital private equity firm were preparing a new bid to top the 4.7 billion offered by Terra Firma - and top it substantially, to around five billion bucks. Just why Corvus waited until now to enter the bidding is not clear, since it could easily have joined the months-long auction process that produced five serious bids. Nevertheless, the EMI board will have to take a serious look at the new bid. Meanwhile, there are rumors that Warner Music Group may yet come back with a higher bid after losing to Terra Firma.

JamTraxx renewed
United Stations Radio Networks (USRN) announced it has signed a multi-year extension of its agreement to sell network commercial time for Chicago-based JamTraxx Media (JTM). JTM will continue to provide affiliate relations efforts as well as act as producer for all JamTraxx and RadioMixes programming. JamTraxx produces customized "Mix Shows" for hundreds of affiliates around the globe for formats including Urban, CHR and AC. USRN has been providing representation for JTM to the national advertising community since early 2004, and this renewal extends that partnership beyond the end of the decade.

RBR Radar 2007

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

Google pushes
spectrum subleasing
Google auctions its own online advertising, under terms of which companies control where their ads will appear on Google's search engine by how much they're willing to pay per click. The online giant thinks this model could lead to much more efficient use of the radio spectrum, and suggests that the FCC allow its auction winners to offer wholesale whatever spectrum it has but is not using. Also, a large chunk of prime spectrum is coming on the market as television broadcasters get set to turn in their analog licenses and begin digital-only transmission beginning 2/17/09. The spectrum auction will take place well before that date, and FCC Chairman Kevin Martin (R) has been talking about getting the auction under way as early as this Fall.

RBR observation: This appears to come in under the heading of an idea worth looking at, but not one to rush into headlong. One watchdog mentioned the ugly possibility of a small company investing heavily in a spectrum device only to find itself shut out of the spectrum once a private auction is completed. The big positive for broadcasters in all this is that they will be long gone from this portion of the spectrum while such issues are hammered out. There will no doubt be plenty of digital conversion issues, and it will be nice to let someone else worry about this one.
05/23/07 RBR #101

Newspapers fighting back
to regain ad share
Relationals, which bills itself as "the leader in customer relationship management (CRM) and sales force automation (SFA) for the newspaper industry,"

RBR observation: Radio, television, Internet sites and everyone else have been targeting daily newspapers as the place to shave off ad spending. And why not? The lumbering old dailies were an easy target - high-priced, inefficient and poorly targeted. Most put little effort into ad sales because they didn't have to - the business just kept coming to them out of habit. No more. The auto sector led the exodus from daily newspapers (and other "old media" properties as well) and other savvy advertisers have begun questioning the efficiency of using a medium that mostly misses the prime younger demos. But don't count out the newspapers. They are fighting back - and fighting for their survival. They will become better marketers, hire more sales people and train them better. The dailies aren't going away.
05/23/07 RBR #101

Florida's leap forward
is problematical
As expected, the state of Florida has moved its primary ahead of most of the pack, scheduling events for both Democrats and Republicans on 1/29/08. That would put it a week ahead of the rapidly growing Super Duper Tuesday mega-event on 2/5/08.

RBR observation: In short, at the moment this situation is a mess. If the national parties hold their ground, Florida's attempt to increase its relevance may actually have the opposite effect. And if votes for a candidate are not counted as punishment for campaigning in a non-sanctioned event, they'd be crazy to spend any money in the state. Stay tuned and Florida Broadcasters get involved it is your business.
05/22/07 RBR #100

CCU board endorses boosted bid;
Vote delayed
If you've booked airfare to San Antonio to vote on the Clear Channel buyout, you'll have plenty of time to stroll the River Walk and enjoy some quality Tex-Mex cuisine. There will still be CCU's annual shareholders meeting, to reelect board members, certify the outside auditors and such, but the buyout vote is on hold. For the second time, an increase in the offer from Thomas H. Lee Partners, Bain Capital and the Mays family has been endorsed by the CCU board of directors. The latest increase was only 20 cents, to 39.20 per share.
05/21/07 RBR #99

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