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Welcome to RBR's Daily Epaper
Volume 23, Issue 205, Jim Carnegie, Editor & Publisher
Friday Morning October 20th, 2006

Radio News ®

Arbitron Q3 revenue
up 6%; income down 3.4%

Arbitron reported Q3 revenue of 90.7 million, an increase of 6% over 85.6 million in Q3 '05. Planned spending on the PPM and Project Apollo initiatives along with the required expensing of share-based compensation contributed to increased costs/expenses in Q3 of 7.8%--from 52.7 million in 2005 to 56.8 million in 2006. Net income for Q3 was down 3.4% from 20.9 million in 2005 to 20.2 million in 2006. Net income per share for Q3 was 0.68 (diluted) compared with 0.66 (diluted) for Q3 '05. They beat the street-on average, 6 analysts polled by First Call/Thomson Financial expected 0.61 per share for the quarter. The increase in net income per share relative to the decrease in net income is attributable to a reduction in shares outstanding due to the company's repurchase of its shares in the first half of this year. For the nine months ended 9/30, revenue was 250 million, an increase of 6.5% over the same period last year. EBIT was 73.1 million, compared to 84.4 million in 2005. Net income for the nine months was 45.7 million or 1.51 per share (diluted), compared with 56.1 million or 1.77 per share (diluted) during the comparable period last year.

Said Arbitron CEO Steve Morris: "Our marketplace is being forced to deal with rapid and wrenching change and all of us at Arbitron are working to the company out in front of that change so that we can help our customers succeed, and in so doing, succeed ourselves...On the PPM front, there has been steady progress. Radio One began encoding in Houston back in August. While they have not signed a contract, their cooperation does mean the Houston test results are much more complete and easier to interpret. We've completed PPM contracts with Univision for Houston, Border Media Partners for San Antonio and Austin and Buckley Broadcasting in NY." On the patent suit with Media Audit/Ipsos, Morris said they would have acted sooner, but Media Audit has said very little publicly about the manner in which their electronic audience measurement actually works, and it has made it difficult to get a fix on potential areas of infringement until recently. On the Project Apollo front, Morris said the timing looks now to be a continuation of the pilot, another six months to finish installing encoders in the "highly complex environment" of the major broadcasters. "We are getting these installations done, but it has not been easy. The good news is the clients seem pleased with the information they're receiving and the continuation of the pilot into 2007 allows us to bring other advertisers onboard."

RBR observation: PPM is key to Arbitron's future success. It seems the company is making steady progress toward its goal of having the top 10 markets PPM-ready in 2008. Now, if Arbitron wins its patent suit against Media Audit/Ipsos, the company will likely have the electronic ratings market cornered for radio. Nielsen doesn't seem all that interested at this point in joining that fray. RFP Committee or not, Clear Channel will basically have to jump on the PPM bandwagon if Arbitron wins the suit. At this point, does Clear Channel want to wait for the outcome before it signs for PPM? It could take a while. Agencies want PPM and more and more radio companies are signing on with them. Needless to say, MRC accreditation is also pretty important to PPM's success. The next MRC meeting on PPM is imminent. In fact, it was only recently postponed.


CBS has settled with Spitzer
CBS Radio has come to a settlement with New York AG and governor-hopeful Eliot Spitzer under terms of which it will cease all activities which give the appearance of payola. It will also pay 2M, which will be distributed to non-profit music education and music appreciation organizations in the state. FCC payola pointman Jonathan Adelstein hailed the agreement, saying, "I commend Attorney General Eliot Spitzer for once again achieving a breakthrough with this settlement. CBS Radio is leading the radio broadcasting industry by finally admitting wrongdoing and agreeing to change its practices. This should provide new fuel to drive the FCC payola investigation to completion. Since payola saps the vitality out of radio, this is a win not only for listeners everywhere, but also for the radio industry itself." Meanwhile, the New York Supreme Court decided earlier this week that a similar case involving Entercom will proceed.

Study says further dereg places diversity at risk
The Media and Democracy Coalition has released a series of market studies from Consumer Federation of America's Mark Cooper that place media diversity on the endangered species list in a number of markets. The study is keyed to the dissemination of news, and is based on newspaper and weekly circulation, television news ratings and ratings for New/Info radio stations. A relative importance was assigned (as opposed to an FCC pre-6/2/03 study which granted equal weight to a wide variety of media). Television led at .33, followed closely by newspaper at .32, then radio at .11 and weeklies at .10. It then applies formulae used by the DOJ and FTC to measure market concentration, used for all sorts of different competitive business endeavors. The report studied markets in Arkansas, California, Florida, Maine, Michigan, Montana, Ohio, Oregon, Pennsylvania, Texas, Virginia and Washington. We looked quickly at Virginia, where RBR HQ is located. The study notes that in each of three markets, by far the dominant entities are newspapers and network-affiliated television stations. In Northern Virginia (better known as Washington DC), the study notes that a merger involving the Washington Post of one of four top television stations would likely exceed DOJ or FTC monopoly levels, and in two other markets, Richmond and Norfolk, such a merger would almost certainly exceed monopoly levels. The study can be accessed at media-democracy.com if you want to take a look. NAB's Dennis Wharton responded to the study's release, noting, "We're hopeful that public policymakers recognize the seismic changes in the media landscape in the three decades since many of the media ownership rules were adopted. Broadcasters are not seeking elimination of all ownership rules. However, measured relaxation of regulations will preserve localism and ensure that free, high quality programming enjoyed daily by millions of Americans does not migrate to pay platforms."

RBR observation: The FCC study made assumptions in trying to find a way to assess market diversity, and so does this study. Opponents of consolidation had a field day with some of the FCC's decisions, such as counting a small multiethnic radio station the same as a major network-affiliated television station, or counting a small suburban weekly the same as a market's premier daily newspaper. Whether this will have an effect on the FCC's next attempt at a media ownership rulemaking is debatable, but it will certainly become part of the public record.


Democrats respond
to big Republican buys

After national Republican campaign organizations were reported making huge one-day cash bombings in multiple congressional districts from coast to coast, reports have surfaced that the Democratic Congressional Campaign Committee has spend almost 12M in one day, spreading it out amongst 32 candidates in 17 states. According to website TPM Cafe, a little less than half of the cash, over 5M, was dropped into three Pennsylvania races, with another 107K plunged into a fourth PA race. 778.5K went to three Ohio contests, and almost 650K went to three more in Indiana. TPM Cafe reports that the scope of the buys is expanding as more seats appear to be coming into play. On top of that, reports say that the Democratic National Committee is actually taking out loans in order to feed the Democratic Senatorial Campaign Committee, which is trying to tip enough close races to get the net seven-seat gain it needs to add chairman to the name of its committee leaders. Finally, operatives are said to be putting the squeeze on likely 2008 presidential candidates who are sitting on cash reserves they don't need yet. Republican committees and administration officials are also actively bringing in more cash for the final push. Meanwhile, reports note that the Republican National Senatorial Committee exit from Ohio hasn't left Ohio Republican Mike DeWine high and dry. The Republican National Committee is said to have pumped 700K into the race. Reports still placed that amount as "scaled back," but noted that it showed the Republicans have not given up on the campaign there.

RBR observation: The Democrats smell blood. The problem is that even though they've done a better than usual job of accumulating cash, they've also been spending it, and have been widely reported to be at a disadvantage going into the last three weeks of the campaign. The bottom line for broadcasters is that the more success they have scrounging for cash to match that the Republicans are already planning to spend, the more cash will flow to stations and the tighter air inventory levels will get. Another important point is that the strategy being pursued will spread the battlefield, bringing campaign cash to places that were completely off the national radar a few short weeks ago.

Looking ahead at Tribune
In looking ahead, Tribune executives directed analyst attention to the recent past, reminding them that, "On Sept. 21, 2006, the company announced that its board of directors had established an independent special committee to oversee management's exploration of strategic alternatives for creating additional value for shareholders. As part of its performance improvement plan, the company announced the sales of its Atlanta and Albany television stations in June 2006 and its Boston television station in September." The Atlanta sale is closed, the other two are expected to follow upon FCC approval. It also sold Time Warner stock and its corporate jet, among other things. The non-news today is that this is about as up-to-date as the company plans to get as it continues to weigh its options. Good news included better pacing for its television stat Q4, based on strong political spending and improvement at CW affiliates compared to lackluster 2005 performance when they were mostly WB affiliates. The company's TV Food Network is also a strong point.


Wall Street Media Business Report TM
Arbitron expects Q4 revenue to be up 5%
For Q4, Arbitron expects revenue to increase approximately 5% compared Q4 '05. Arbitron's FY 2006 revenue guidance is unchanged and is expected to increase between 6% and 8% compared to 2005. EPS (diluted) for Q4 is expected to be between 0.12 and 0.17 versus 0.36 in the Q4 '05. Arbitron's Q4 EPS guidance takes into account several factors: In October 2006, Arbitron repaid its 50 million note, which had an above market interest rate and a number of terms that potentially limited the company's financial flexibility. The pre-payment required the company to pay a "make-whole" interest payment to the note holders and also necessitated a write-off of the remaining balance of unamortized deferred financing costs. These two expenses will amount to approximately 2.9 million (pre-tax) or 0.06 per share (diluted) in Q4. The impact of share-based compensation expense in Q4 is estimated to be approximately 1.3 million, or 0.03 per share (diluted). The balance of the year-over-year reduction for the quarter is attributable to planned incremental spending on the PPM rollout in Philadelphia, New York and LA, as well as on some information technology spending that was previously planned to be spent in Q3.

Tribulations of Tribune
The Tribune Corporation, operator of newspapers, television stations and WGN-AM Chicago, reported Q3 2006 results that were strongly affected by one-time occurrences regarding its acquisition of Times Mirror, resulting from a pair of restructurings and a tax hit it inherited from a subsidiary of that company. Total results amounted to 162.2M/65 cents per share, compared to 21.9M/seven cents per share in Q3 2005. Taking that out of the equation, results amounted to 45 cents/share, two cents below analysts' consolidated expectations. "Our third quarter financial results reflect the continued soft advertising environment," said honcho Dennis FitzSimons. "However, growth in our interactive business is solid and the newly-launched CW Network will drive improved prime time ratings and revenues at our television stations. We continue to make progress with our overall performance improvement plan as we focus on maximizing value for Tribune shareholders." Broadcast/entertainment revenues were down 3% to 393M, and operating cash flow was down 13% to 139M. Looking at TV alone, revenues were down 3% to 288M and operating cash flow was down 15% to 86M.

Tough times at the NY Times
This e-space will not have the New York Times to kick around much longer, as it forwards plans to concentrate on its publishing assets by selling off its broadcast group, which includes nine full-power television stations and an AM-FM combo in New York. Even though it has not announced the first nibble for the stations, it has already labeled them under discontinued operations, and spoke barely a word about them during yesterday's earnings conference. The company's earings of 14M/10 cents per share did not compare favorably to Q3 2005's 23.1M/16 cents, and was two cents lower than analysts were expecting.


Executive Comment
RBR continues our series hearing from radio executives on the status of our radio medium today and for tomorrow. If you have a comment feel free to send them along with total word count 250 and your photo to [email protected]

What are three things that radio must do
to be competitive in this new media environment?

Bruce Maduri, President & CEO, Genesis Communications:
Great question. 1. Radio needs to be sure that the analog signals it provides are technically the best they can be. That means to hold off on HD Digital conversion until all the interference issues are eliminated. There are issues for both AM and FM bands. Let's not jump on that bandwagon to find out that it was a mistake and end up with embarrassing technology that is not ready for primetime. 2. Radio needs to be sure to hire the most entertaining talent in the world. That means developing great local talent that succeeds in conjunction with great network talent. Consumers have more options than ever for entertainment, Radio needs to program compelling content to remain relevant. 3. Radio must be sure that it expands the playlist in both the music and talk formats. The same tired songs will not cut it anymore and the same political topics will get old. It may take risk, but that is what needs to be done now.

Consolidation gave the industry a great way to turn a profit by cutting costs and offering advertisers bulk in listener reach. But it also gave us a mindset to cut costs where we should not and that is in talented interesting entertainers on a local level. Radio needs to get back to making the listening experience an EVENT, not a music jukebox or the same old story in political talk. Adapting to the new media will take improving the old media. We are all developing the new digital media devices as ancillary programming and sales opportunities. This is to insure the future of broadcasting, but right now the backbone of the industry is the analog stations. Drive listeners to the web and to the portable devices, but let's not ignore the millions of listeners who hear us on the analog AM/FM radio receivers already in the marketplace. AM Talk Radio has recently been referred to as the "new" media. Interesting, since it is the senior division of broadcasting. That is a content success story for AM. There are a great deal of very smart and talented people in this business. I am sure that when unleashed we will see significant gains and growth to an industry that really isn't old and ready for retirement.


Ad Business Report TM

Lopez Negrete Comm.
signs for PPM

Arbitron announced Lopez Negrete Communications, the second largest independently owned and operated Hispanic advertising agency in the United States, has signed a multi-year agreement for Arbitron Portable People Meter radio ratings services in Houston. Lopez Negrete Communications, with billings of 150 million, is an independent, Hispanic owned and operated agency specializing in Hispanic marketing and serving advertisers that include Wal-Mart Stores, Tyson Foods, Bank of America, Visa USA, Azteca Milling, Microsoft Corporation, Domino's Pizza, Reliant Energy and others. Said Alex López Negrete, co-founder and president of Lopez Negrete: "Our agency philosophy has always centered on our commitment to the Hispanic community, part of that commitment is participating in progressive and forward thinking media measurement initiatives like the PPM System that show the unique differences and the power in Hispanic radio consumption. We're going to help our clients continue to grow their business by efficiently and effectively reaching their Hispanic customers who are loyal listeners to radio." To date, Arbitron has signed contracts with leading agencies that place more than 90% of the national radio ad dollars. One of the reasons Arbitron went to Houston was to further demonstrate they can recruit a PPM panel that reflects the diversity of the markets surveyed, particularly in terms of Hispanics. Both in terms of language preference and ethnicity, Hispanics are now well represented in the Houston PPM sample.


Media Markets & Money TM
Melchert raises a Mercury AM
Randall Melchert's Quad Cities Media will actually have to raise 150K cash to acquire WKBF-AM Rock Island, part of the Quad Cities Arbitron market. The seller is Van Archer's Mercury Broadcasting Company. Sitting on the sidelines in this transaction is none other than Clear Channel. The sale will bring to an end a lease held by Archer under which the radio giant provided studio space for the station.


Washington Media Business Report TM
Tough year for live debates
The highest form of broadcast public service in the political arena, in our humble opinion, is the public debate between candidates. We see their families only in passing, usually not until the end of the program, unlike seeing them as a main element of an information-free ad. If mud is to be slung, the recipient is there to either defend himself or at least sling some right back. Almost always, there are reputable journalists asking questions, and ideally the candidates have no idea beforehand what questions are coming (although if they are worthy of office they should have a good idea what's coming). 2006 has brought a confluence of two events which make the live debate format at the very least unusually interesting. One is the new 325K fine for an egregious incident of broadcast indecency. Second is the page scandal swirling around ex-Rep. Mark Foley (R-FL). The debate surrounding who knew what when has guaranteed that the topic's geographical footprint goes far beyond the Florida border. And it has led some candidates to look for embarrassing sexual content in their opponent's public or not-so-public records. And debates offer the kind of forum where these findings may be brought to light, and potentially threaten a broadcasters wallet and clean record with a hefty indecency fine. For example, a recent Associated Press headline read, "Sex talk dominates N.C. election debate."

RBR observation: We would hope that the FCC would let a station providing such a valuable public service off the hook if a politician who is bringing it on hot and heavy steps over the line. But who knows?


Entertainment Media Business Report TM
Tom Athans launches talk USA Radio
Tom Athans, one of the original pioneers of the progressive talk radio format and founder of the Ed Schultz and Stephanie Miller shows, announced Talk USA Radio - a new radio program supplier that will develop progressive talk shows. Athans says Talk USA Radio has new programs in development and its first shows will be announced soon: "We're working on some exciting new shows and hope to have them launched by the first of the year." Athans departed now-bankrupt Air America as its EVP in September. Prior to that, he was founder and CEO of Democracy Radio which pioneered the progressive talk format. In January 2004, Athans developed and launched The Ed Schultz Show, currently held by Randy Micheals' company Product First. Athans also developed and produced the very popular Stephanie Miller Show, in partnership with Ron Hartenbaum and WYD Media until Hartenbaum fully acquired the show 12/05.


Transactions
41.645M WAAY-TV Huntsville-Decatur-Florence AL (Huntsville AL) from Piedmont Television of Huntsville LLC, a subsidiary of Piedmont Television Communications LLC (Paul Brissette) to Huntsville Broadcast Corporation, a subsidiary of Calkins Media Inc. (Gary Shorts, J. Manuel Calvo et al). 2,082,250 escrow, balance in cash at closing. Buyer has received 105K credit toward upgrade costs. Station is ABC affiliate on Channel 31. [File date 9/29/06.]

675K WPGP-FM Wilkes Barre-Scranton PA (Tafton PA) from Sound of LIfe Inc. (Thomas Zahradnik) to Educational Media Foundation (Richard Jenkins). 33,750 escrow, 216,250 cash at closing, 425K note. Network affiliation agreement 10/1/06. [File date 9/28/06.]

450K WNOO-AM Chattanooga TN from East Tennessee Radio Group III LP (Paul G. Fink) to Clear Media LLC (Chester Lee Clear, Thomas Michael Ousley). 75K escrow, 150K cash at closing, 225K note. 25K discount to 425K if paid in full in cash by closing day. [File date 9/28/06.]


Stock Talk
Where are the gains?
We keep hearing about record-breaking gains on Wall Street. The only thing we see is that broadcasters are not really participating. It's another day of minus signs and red ink.


Radio Stocks

Here's how stocks fared on Thursday

Company Symbol Close Change Company Symbol Close Change

Arbitron

ARB

38.79

-0.14

Hearst-Argyle

HTV

23.54

-0.20

Beasley

BBGI

6.85

-0.04

Journal Comm.

JRN

11.73

+0.12

CBS CI. B CBS

28.19

unch

Lincoln Natl.

LNC

64.07

-0.37

CBS CI. A CBSa

28.19

unch

Radio One, Cl. A

ROIA

6.45

-0.08

Citadel CDL
9.67 -0.03

Radio One, Cl. D

ROIAK

6.48

-0.02

Clear Channel

CCU

31.37

-0.13

Regent

RGCI

3.71

unch

Cox Radio

CXR

15.72

-0.02

Saga Commun.

SGA

8.10

+0.13

Cumulus

CMLS

10.23

+0.08

Salem Comm.

SALM

13.70

-0.02

Disney

DIS

31.59

+0.01

Sirius Sat. Radio

SIRI

3.80

-0.10

Emmis

EMMS

11.58

-0.25

Spanish Bcg.

SBSA

4.93

-0.03

Entercom

ETM

25.66

-0.22

Univision

UVN

34.92

unch

Entravision

EVC

7.40

+0.02

Westwood One

WON

7.52

-0.04

Fisher

FSCI

42.95

-0.15

XM Sat. Radio

XMSR

11.36

-0.34

Gaylord

GET

48.00

+0.47

-

-

-

-

-


Bounceback

Send Us Your OpinionsWe want to
hear from you.

This is your column, so send your comments and
a photo to [email protected]




Below the Fold
Executive Comment
What are 3 things that radio must do

Bruce Maduri, Genesis Communications: Consolidation gave the industry a great way to turn a profit..But..

Ad Business Report
Lopez Negrete Comm. Signs
For PPM 2nd largest Independently Owned & operated Hispanic agency...

Media Markets & Money
Melchert raises a Mercury AM
Quad Cities Media will actually have to raise 150K cash...

Washington Media Business Report
Tough year for live debates
Highest form of broadcast public service...

Stations for Sale

Southern Small Markets
FMs and AM-FM Combos
Florida, Louisiana,
Mississippi, South Carolina
Call Gordon Rice @ 843 884-3590
[email protected]

Central Coast
FM Rated Market

Power Increase Approved.
Asking $1.5M
Call Brett Miller @ 805.237-0952
www.mchentinc.com




More News Headlines

No plans for NYT LBO
The New York Times is actively shopping its broadcast division with the aid of Goldman Sachs. The group consists of full-power television stations in Norfolk, Memphis, Oklahoma City (a pair), Wilkes Barre-Scranton, Des Moines IA, Huntsville AL, Davenport IA-Rock Island-Moline IL and Fort Smith AR, numerous LPTVs and a pair of New York radio stations (one of each). Executives said it was too early to speculate on deal structure, but that there was significant interest in purchasing the group in a package deal, as well as interest in cherry-picking stations. The other burning question involved rumors of a possible leverage buyout of the company. President/CEO Janet Robinson said the only current stockholders who have the power to approve such a deal are the Sulzberger family. She said they have given no indication whatsoever that such a plan is in the works.

Correction
The Spanish Broadcasting System Q3 conference call is scheduled for 11/7/06. It'll be held at 2:00PM Eastern. Our earlier report putting the date as 11/6/06 was incorrect.




RBR Radar 2006
Radio News you won't read any where else. RBR--First, Accurate, and Independently Owned.

FTC aims to stop teen drinking
Is teaming up with non-profit The Century Council in an effort to reduce teen drinking, particularly when it is assisted by adults, including parents. Among its elements will be TV PSAs and a website with materials which can be used by broadcasters. Of interest to broadcasters is its affirmation of the alcohol industry's guideline banning ads on media outlets with a 21-and younger audience of greater than 30%. This is significant in the face of attempts to force the audience composition standard down.

RBR observation: We applaud any government solution that avoids First Amendment territory. And we heartily recommend that broadcasters and alcohol advertisers do a good job self-policing on this matter. Once again, it involves the word "children," and protecting them is a campaign asset that is prized by Democrats and Republicans alike. Legislators are often perfectly willing to lose in court if it will help get them through the next Election Day.
10/19/06 RBR #204

Radio You Need To Know
Nielsen unveils and announced number of proactive movements
As part of the company's commitment to bringing electronic measurement to all local markets it will bring Local People to additional markets....Also issued update on Average Commercial Minute MIT...and the ratings giant will continue to 'Follow The Video' is launching GamePlay Metrics, a new rating service for video games. Total and complete details on all three issues in
10/19/06 TVBR #204

Executive Comment
What are three things that Radio Must Do To be competitive in this new media environment?
Skip Finley, Vice Chairman, ICBC Broadcast Holdings, Inc.: Has 3 point to make and this is number 1of 3, To remain competitive in a new media environment, free-over-the-air Radio and television must Develop relevant, quality content for targeted audiences. Also in this RBR report is Rolland C. Johnson, Chairman and CEO, Three Eagles Companies.
10/19/06 RBR #204

They still want to give you a loan
Wall Street continues to beat up on radio and TV stocks, but the broadcasting sector is not out of favor with lenders. Those we checked with say they still want to make loans to the broadcasting sector. "Generally we see conditions remaining very favorable for borrowers. Over the past couple of months there has been a slight rationalization in the market as all the continuous deal activity of this year has begun to absorb some of the excess liquidity that was in the market. But that being said, it's still a very favorable market for borrowers to be issuing net capital," Robert Malone, Vice President at GE Commercial Finance Global Media and Communications.
10/18/06 RBR #203

Executive Comment
What are three things that Radio Must Do To be competitive in this new media environment?
Kerby Confer, Partner, Keymarket and Forever Companies:
Get back to basics. It was too easy for too long. It's always been about ideas. A wise man told me 30 years ago... "someday every station will have a two share and then the best idea wins." The order taking days are over. We need to give our advertisers and listeners a reason to buy.

RBR note: Confer has 3 more points to read see
10/18/06 RBR #203

Where's your National
Political cash going?
The answer is to watch the polls. Shifting fortunes on the political map are causing shifts in where the cash is flowing. If you have a toss-up on your hands, odds are your market is in for an influx of heavy advertising.

RBR observation: One observer noted that decisions on directing campaign cash flow are often very difficult and based on numerous factors. With an unusually wide battlefield and limited resources, tough calls are the order of the day. Bottom line: see
10/17/06 RBR #202

Executive Comment
What are three things that Radio Must Do To be competitive in this new media environment?
Peter Ferrara, President & CEO, HD Digital Radio Alliance: When you really think about it, the rules of engagement really haven't changed that much, only how we apply them. First, we have to understand exactly what is and is not our competition. (for complete details)
10/17/06 RBR #202

NBA Minute


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Local Sales Manager
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