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Salem Communications
pushing hard
Known as a religious broadcaster and posted top increases in its Q2 results, see below, you think that someone got religion but in reality it is called programming. President/CEO Edward Atsinger has Salem focused on two major programming content areas: The Fish format and News/Talk with a big push on Bill Bennett's 'Morning in America' which has 83 affiliates and expected to hit the 100 market by years end. The positioning of Salem in News/Talk is more in the Talk level with 21 hours of syndicated content which puts Salem in a good position in the M&A department where it can turn a key in a heart beat and go talk with low overhead. The key to this success is patience in developing content that produces results. Astinger pleased with breaking the 1 share 12+ in Los Angeles and should be because that means people in the second largest market are listening and it only grows. No question was asked of Salem on the resent spot load diet but was asked how did they beat the industry with July by performing so well? Astinger had to have had that you know what smile on his face as the formula is content and building up from the niche.

RBR observation: To hit the level of broadcaster success Salem wishes to achieve and break out of the pure Christian image but maintain their values is in the syndicated Talk business with its talent of Bennett, Mike Gallagher, Michael Medved, and Dennis Prager. Salem will have to market a touch better than the non-Christian broadcaster. Stigmas are a touch to shake but it can be done. First observation is drop the word News and go just with Talk with your talent. News in the biz is either top of hour drop in or a 24/7 operation, which is very expensive. The Fish format is solid. These conference calls all aren't about the numbers. It's sometimes more about the body language. Astinger and his crew toss off good radio broadcaster vibes.

Veronis Suhler takes stock of communications
Veronis Suhler has dusted off its crystal ball, and sees a turnaround in communications and advertising businesses which should carry forth into 2008. Overall advertising is expected to jump 7.2% by the end of 2004. Here are sector-by-sector predictions, including a 2003 temperature-taking and a sighting on the expected 2008 position.
RBR observation: Does this mean we can all just sit back, try not to screw up and watch the money roll in?

Broadcast TV
2003 results: 2.3% gain in advertising revenue to $42.1B
2008 prediction: 5.6% compound growth to $55.4B
Cable & satellite TV
2003 results: 8.4% gain in total spending to $83.5B
2008 prediction: 7.9% compound growth to $122.2B
Broadcast & satellite radio
2003 results: 1.3% gain in advertising revenue to $19.7B
2008 prediction: 7.9% compound growth to $28.8B
Newspaper
2003 results: 2.1% gain in total spending to $63.6B
2008 prediction: 4.7% compound growth to $79.8B
Consumer Internet
2003 results: 16.1% gain in total spending to $30.7B
2008 prediction: 11.4% compound growth to $52.7B

Cox cable wants its privacy
Cox Communications is the name used by the multimedia conglomerate's cable television operating unit. Not only does it want its privacy, it's willing to pay top dollar get it. It's offering $4.42 above and beyond the stock's 7/30/04 closing price. The issue trades as NYSE:COX. Cox Radio (N:CXR) is not part of the offering. But reports say that price is rising fact. The offer is $32/share, representing a 16% premium over the 7/30 price, and a 14% premium over the stock's ten-day average. The entire value of the buyback, which accounts for about 38% of the company's total number of shares, is $7.9B. Cox Enterprises Chairman/CEO James C. Kennedy said the offer gives shareholders a meaningful spike over recent trading patterns. He explained that the plan "...is a chance to make a substantial additional investment in an asset we know well. An increasingly competitive environment convinces us that future investments in the cable industry are best made through a private company structure." According to a Reuters report, the price of the stock is rising in Monday trading, with shares going as high as 23% above the Friday closing price, thereby topping the offer. There was no word as to whether the company would restructure the terms of the buyback.

Buy the way...
Harris Nesbitt Research (HNR) has been tuning in to the latest round of radio dog and pony shows, and no doubt looking at other factors as well. In particular, it likes five radio stocks: Clear Channel, Entercom, Cumulus, Saga and Regent. "In out scenario-test of hypothetical returns from share buyback, each would provide stock price gains above 15% annually to 2006" says a HNR releases. HNR calls Clear Channel more than just a pure-play radio stock (which we're not sure we agree with - - what about all those TV stations, billboards and concert venues?) - - it calls it the best value among pure-play radio stocks. On the pure-play television side, it selects Belo Corp.

Mancow drops suit against FCC tattler
Chicago shock jock Mancow Muller's attempt to wrap himself up in the First Amendment, as well as to collect a cool $3M from David Smith has been called off. Smith logged many frequent complainer miles with the FCC charging Muller with going over the over-the-air decency line. Smith monitors Muller's show, and files complaints with the FCC when he feels Muller has gone over the line. A federal judge said that Muller's contention that his First Amendment rights were being violated was without merit. Muller thereafter withdrew his lawsuit. Smith, who claims Muller has toned down the show thanks to his efforts, plans to continue monitoring it.

Viacom to acquire SportsLine
Viacom is acquiring Internet-based sports news provider SportsLine.com for $1.75/share in cash. Viacom, which already owns 38% of SportsLine's outstanding stock, previously offered 7/1 to buy the remainder of the site for $1.50/share. SportsLine has been on the block since mid-May. The acquisition, valued at $46M, is expected to close by year-end. Public stockholders of SportsLine.com will be entitled to receive $1.75/share in cash on closing of the transaction. Viacom will merge SportsLine.com with CBS Sports: "This is a great opportunity for Viacom and CBS," said Les Moonves, Viacom Co-President and Co-COO. "We've enjoyed a collaborative relationship with SportsLine dating back to 1997, and this acquisition complements our strategy of expanding Viacom's presence in what has become the fastest growing advertising sector." Added Sean McManus, President, CBS Sports: "The ability to integrate SportsLine's rich content with CBS Sports' stable of industry-leading franchises like the NFL, the Final Four, US Open Tennis and the PGA Tour presents tremendous possibilities for our advertisers and consumers now and into the future."

Conference Calls, Q2 2004

Salem soars in Q2
Religious radio specialist Salem Communications performed well in Q2 2004, posting a 10.1% increase in net broadcast revenue over its Q2 2003 results. The company says it is benefiting from overall growth in its Religious niche, a trend expected to carry forth in the foreseeable future. The growth was fueled by positive results in its Christian music stations, which enjoyed combined for a 9.4% increase in revenue and a 23.4% leap ini station operating income. Looking ahead, Salem is expecting to continue its positive trend into Q3 with net broadcasting revenue gains in the 7.9%-9.2% range.

Adbiz ©

Consumer spending bigger than ad spend
More evidence of the shift in consumer habits and why advertisers are seeking new forms of media such as video gaming and product placement. The Consumer spending last year in the US overtook advertising as the primary source of revenue for the media industry, reflecting the growth of pay-TV, DVDs and the Internet. According to a study published yesterday by Veronis Suhler Stevenson, consumer spending on media last year rose 6.5% to $178.4B, surpassing advertising, which grew by 3.2% to $175.8B. The report signals a willingness by American consumers to pay for information and entertainment that matches their interests rather than relying on advertising-supported media designed to appeal to a broader audience. James Rutherfurd, VSS EVP, told the London Financial Times: "Consumers are voting with their pocketbooks. One of the things they seem to want to do is avoid or minimize advertising."

The report also says consumer spending on media accounted for 27.5% of media revenues last year, ahead of advertising, specialty marketing and spending by businesses. Consumer spending has grown at a compound rate of 7.9% a year since 1998, reflecting the rising cost of cable and satellite TV and the growth of premium services. It also reflects the growth of the video game industry, the rise of DVDs and the Internet. According to VSS, US consumers spent 2.25% of their disposable income on communications last year, almost double what they were spending 25 years ago.

Dentsu expansion targets US shops
AdAge reports Japan's Dentsu Holdings USA is merging two small New York shops, DCA Advertising and Oasis Advertising, today as one of the first steps in a strategy to more aggressively in the U.S. through acquisitions and new-business wins. The new $150M DCA agency will handle Canon U.S.A. and Toyota Motor North America. To avoid a conflict between DCA's $100M Canon business and a $40M Sharp account at Oasis, Dentsu's Colby & Partners, based in Santa Monica, recently opened a NY office to take over Sharp. Dentsu is by far Japan's biggest ad agency, controls almost half of all media buying there and even owns the only ad trade publication and the main advertising awards show. Ranked by its 2003 worldwide revenue of $1.86B, Dentsu is the world's largest agency network, 50% bigger than the No. 2 network, Omnicom Group's BBDO Worldwide. But 90% of Dentsu's revenues come from Japan, and the remaining 10% make Dentsu barely a player outside Japan. "We'd like to do at least 15%," Nick Kobuse, Chairman of Dentsu Holdings USA, told AdAge.

Media, Markets & Money tm

Washington Beat

Engineering

BE to introduce 50kW AM transmitter
Broadcast Electronics announced it will debut a high-powered AM transmitter at the October NAB Radio Show in San Diego. The transmitter is based on a patent-pending high-efficiency modulation design developed by BE engineers. Said Richard Hinkle, BE's Director of RF Engineering: "This design lets us pack a lot of power and features into a very small chassis." The new transmitter is about half the size of comparable models and offers full transmitter control and diagnostic capability locally via a 15-inch, XGA front-panel display, as well as remotely from virtually any location via IP.

Features include:
* PA modules accessed from the front of the transmitter, while lift-off rear panels provide access to power supplies and all AC connections.
* Nighttime power capability as low as 250 watts.
* 15" XGA graphical user interface for operation and diagnostics, also available via IP.
* Power factor greater than 0.98.
* All in a footprint that is about half the size of comparable models.

The new transmitter will ship in the first half of 2005.

Programming

ABCRN launches "Saturday Night At The 80s"
ABC Radio Networks announced the debut of "Saturday Night At The 80s," a new weekly program featuring hits from the decade that gave the world Flashdance, Men At Work and MTV. Hosted by WPLJ's Todd Pettengill and originating from New York, "Saturday Night at the 80s" will be carried on stations from coast to coast including ABC O&Os WPLJ-FM NY, WRQX-FM DC and WDVD-FM Detroit beginning 9/25. The five-hour, high-energy show blends the music, memories, and comic personality to create a show that journey's back in time while remaining relevant to today's listening audience.

Al Franken to get TV simulcast
Air America radio's "The Al Franken Show" will be aired as a one-hour TV show nightly at 11:30p and 2:30a (ET) on the Sundance Channel beginning 9/7. The show is slated to air on TV through the election and may continue beyond that.

RBR Closer Look

Winds of Naples, FL--Bending the Palm Trees
Hurricane season doesn't officially end until Nov. 30th. but they are coming; just wait. We are only 9 weeks into what forecasters predict a busy season as a few storms are scooting around us you are having your morning coffee. We have been lucky with just tropical depressions that have not had any affect to up root a Naples palm tree. Key forecaster Bob Coen from Universal-McCann media revenue forecast sees these storms for the balance of 2004. This is just the short term picture. As the medium begins our count down to years end remember there are only five (5) months remaining in 2004. We have heard many new buzz words and phrases hanging around: Spot Load Diet, Forward Guidance ending, Weekly Pacing dropped, Second Ratings Company, Accountability still not understood, EDI, DTV, HD Radio, Ipod's and Technology. The list can go on but the media's Reality Show is this chart to pace your individual station(s) buy to hit your budget compliance. Coen's full report is in the August issue of Solutions Magazine now sitting on your desk. How do you stack up? Click the chart and print out.

Transactions

$13.125M KADN-TV Lafayette LA from KADN-15 Inc. (Charles Chatelain) to Comcorp of Tyler License Corp. (Thomas R. Galloway Sr., D. Wayne Elmore et al). From amended purchase option of 7/21/99. KADN-TV is Fox affiliate on Channel 15. LMA since 11/12/97. [File date 7/7/04.]

$2M WGSP-AM Charlotte NC from Charlotte Christian Radio Inc., a subsidiary of Willis Broadcasting Corporation (Levi E. Willis Sr.) to Norsan Consulting and Management Inc. (Norberto Sanchez). $100K escrow, balance in cash at closing less LMA payments. LMA 6/1/04. [File date 7/7/04.]

Stock Talk

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