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Volume 24, Issue 35, Jim Carnegie, Editor & Publisher
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Tuesday Morning February 20th, 2007
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Radio News ®
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 XM and Sirius
announce merger plans
Will it ever happen? That is the big question, since combining the only two satellite radio companies in the United States will have to clear huge regulatory hurdles. Following months of rumors and speculation, XM Satellite Radio and Sirius Satellite Radio yesterday afternoon announced plans for a stock-swap "merger of equals" valued at 13 billion bucks, including net debt of 1.6 billion. Under the planned merger, Sirius CEO Mel Karmazin would become CEO of the combined company and XM Chairman Gary Parsons would be Chairman. XM CEO Hugh Panero would exit, although he will remain in his job through what promises to be a very long process of trying to win necessary approvals from the FCC and the Antitrust Division of the Department of Justice. Just how will the companies clear those regulatory hurdles? That is likely to be a hot topic in a joint Wall Street conference call this morning, but was all but ignored in the announcement distributed yesterday.
"The combination of an enhanced programming lineup with improved technology, distribution and financials will better position satellite radio to compete for consumers' attention and entertainment dollars against a host of products and services in the highly competitive and rapidly evolving audio entertainment marketplace. In addition to existing competition from free 'over-the-air' AM and FM radio as well as iPods and mobile phone streaming, satellite radio will face new challenges from the rapid growth of HD Radio, Internet radio and next generation wireless technologies," the announcement said on the issue of how the merger will be positioned as not being anti-competitive. Incredibly, the announcement said that regulatory approvals were expected in time for closing by the end of 2007. Even Wall Street analysts who believed that winning approval for such a merger was even possible have been talking of a timeline stretching to the latter part of 2008. Under the proposed merger, Sirius would be the surviving entity, with shareholders of each current company owning approximately 50% of the merged company. XM shareholders would receive 4.6 shares of Sirius stock for each share of XM stock that they own, increasing the number of Sirius shares outstanding to over 2.6 billion.
RBR observation: Despite the report issued last Friday by Bear Stearns analyst Robert Peck that an XM-Sirius merger would "likely pass" FCC and antitrust approval, we beg to differ. The companies would need three yes votes on the FCC and we can't imagine how they would find one. And should any Commissioner dare to indicate their support, they would likely rethink that position after being called to Capitol Hill for a very public bi-partisan flogging. To be sure, Wall Street investors love the merger idea. Both companies are burning through cash at an astounding rate and are far off the financial projections of their original business plans. Merging is expected to save 3-7 billion by cutting overhead and being able to raise subscription rates. But just how are XM and Sirius going to make the case for any public benefit from merging the only two competitors in a field? We can only think of one - as a single company they would likely finally comply with the FCC rule which requires their receivers to be compatible with each other's satellite system.
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NAB to fight satellite merger
The National Association of Broadcasters was quick to declare its opposition to any merger of the two satellite radio companies. "Given the government's history of opposing monopolies in all forms, NAB would be shocked if federal regulators permitted a merger of XM and Sirius. It bears mentioning that regulators summarily rejected a similar monopoly merger of the nation's only two satellite television companies - DirecTV and Dish Network - just a few years back," said NAB Executive VP Dennis Wharton. "When the FCC authorized satellite radio, it specifically found that the public would be served best by two competitive nationwide systems. Now, with their stock prices at rock bottom and their business model in disarray because of profligate spending practices, they seek a government bail-out to avoid competing in the marketplace. In coming weeks, policymakers will have to weigh whether an industry that makes Howard Stern its poster child should be rewarded with a monopoly platform for offensive programming. We're hopeful that this anti-consumer proposal will be rejected," Wharton added.
FCC Chairman says merger faces high hurdle
Although the Federal Communications Commission was closed Monday for Presidents Day, Chairman Kevin Martin issued a statement saying XM and Sirius will have to prove the benefits of the proposed merger if they are to win regulatory approval. "The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices," Martin said. "The hurdle here, however, would be high as the commission originally prohibited one company from holding the only two satellite radio licenses," the FCC Chairman added.
 Harrisburg here we come
The third public forum on Media Ownership is booked for Friday in the Pennsylvania capital of Harrisburg. It'll kick off at 9:00 AM at the Whitaker Center for Science and Arts' Sunoco Performance Theater as 222 Market Street. It should come as know surprise that a coalition of watchdog organizations is reviving their Paul Revere act to warn those in the surrounding countryside that the FCC is coming. According to the FCC's schedule, this forum will be relatively compact. An as-yet-unnamed panel will have the floor from 9:30-11:00 AM, followed by an hour and a half of public comment, a half-hour break, and another hour and a half of public comment, winding up at 2:30 PM. The group of groups trying to fill the venue with anti-consolidation citizens includes Communications Workers of America, Common Cause, Consumers Union, Free Press, Media Tank, Mid-Atlantic Community Papers Association, The Newspaper Guild, PennPIRG Education Fund, Pennsylvania NOW, Prometheus Radio Project, the Rainbow/PUSH Coalition, United Church of Christ Office of Communication, Inc., and U.S. PIRG. In addition to that, four Democrat US Representatives sent the FCC a letter complaining that the FCC hadn't allowed adequate time for local citizens to make plans to attend, especially those who need to make arrangements to get time off from their jobs. The foursome includes Mike Doyle (D-PA), Tim Holden (D-PA), Robert Brady (D-PA) and Allyson Schwartz (D-PA). They also objected to the early quitting time, saying the session should have been scheduled to begin at 6:00 PM to allow greater attendance.
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The light at the top of the tower
Sometimes you just can't win for losing. A broadcaster in the Fresno market agreed to move a tower at the behest of the suburban Clovis municipal government. That meant it was time to meet the regulators, the neighbors and the birds. According to the Fresno Bee, KFIG-AM owner Chris Pacheco spent 1.2M on the new tower (on a 500K budget). Although Pacheco said after 20 years in the business he has yet to see a dead bird near a tower, he installed pricy white strobe lights on the towers to warn off migrating birds, eschewing less expensive and less obtrusive red lights. That apparently pleased the US Fish and Wildlife Service, but some of the people in the new neighborhood compared the new lighting system to a fireworks show. Having already gone through the regulatory wringer to get to this juncture, Pacheco is unwilling to apply to modify the lighting scheme yet again, although according to the report it isn't as intense as it was during its early operation. At least one local resident doesn't blame him, saying that local residents failed to consider all the angles in advance and have only themselves to blame for the current situation.
 Disney handed another
Pooh setback
The Walt Disney Company has once again lost a courtroom battle in its effort to keep from having to pay billions of damages to Stephen Slesinger Inc. related to marketing of Winnie the Pooh characters. In the latest court round, a federal judge in LA ruled that the granddaughters of A.A. Milne, who wrote the Pooh books, and Ernest Shepard, who illustrated them, cannot challenge the 1983 licensing agreement that revised who got what from Disney related to Pooh marketing. Although the latest court suit was brought by the heirs, Disney paid their legal fees. Disney and the heirs have been fighting for decades to wrest the Pooh rights from Slesinger, who acquired them from Milne in 1930. Lawyers for Slesinger say the latest ruling means that the federal courts can now return to the main event - determining whether Disney owes Slesinger over two billion in damages for underreporting sales of Pooh-related merchandise.
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Ad Business Report TM
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Initiative scores planning for Bayer
Initiative North America has been awarded the consolidated planning and buying account for Bayer HealthCare's Consumer Care Division, agency CEO Richard Beaven announced. Initiative previously handled buying for Bayer, and will now add planning as well. Initiative CEO Beaven said the win blended the accomplishments of the past with a progressive vision of the future. "This is both a testimony to the great work Initiative has done for Bayer over the years and an acknowledgement of our capability to deliver end-to-end solutions," Beaven said. The win is the latest in a series of combined planning and buying assignments for the media company over the past year. Previous new business wins include CBS, Showtime, Lionsgate Films and Gateway.
The movie business and radio advertising
MediaMonitors analyzed the relationship between the movies and ticket purchases last week. Radio has always been one of the best vehicles for a studio to break home a great new movie. The Paramount/Dreamworks Eddie Murphy movie Norbit was the most advertised movie last week with a total of 3042 spots. Interestingly enough, Norbit, according to Imdbpro.com scored at the box office pulling in more than 58 Million as of February 16th with 16.8 Million last weekend alone. Breach, came in #2 in the Spot Ten with 2478 spots and scored more than 10.4 Million over the weekend, while the #3 Spot Ten movie, Daddy's Little Girls, did 12.1 Million bringing its total to 17.8 Million. With Academy Award nominations hanging in the balance, The Departed, Babel, Letters From Iwo Jima and The Queen appear on the top ten list, but the number of units aired was far below the top three. The Departed ran more than 600 spots on American radio. However, to put things into perspective, even with Norbit being the #1 on the Movie Spot Ten, it only comes in at 73rd on the national Spot Ten.
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| Media Business Report TM |
 Stick to the knitting
When people buy a newspaper, it's not because of the way it was marketed, because of its state-of-the-art circulation practice, nor is it because of the efficiency of back room functions. According to the University of Missouri-Columbia School of Journalism, they are buying just what you'd think - quality news. UM-C further says it has the numbers to back up the idea that investing in the newsroom actually improves a newspaper's bottom line, a finding which it says flies in the face of the current belt-tightening trend which is leading to staff reductions. According to UM-C associate dean Esther Thorson, "If you lower the amount of money spent in the newsroom, then pretty soon the news product becomes so bad that you begin to lose money." At least one peer professor hailed the finding that "quality precedes profit."
RBR observation: You would not be standing on shaky ground to extrapolate this finding to other media, and indeed, other business ventures. If you cut the percentage of chocolate in your candy bar, it isn't going to take your loyal customers long to figure it out and give you the heave-ho. It was speculated that a lot of the job-cutting mania is being done not because management thinks it's the best thing for the business, but because they think it's what Wall Street wants to see. Sound familiar? As Cherry Creek Radio exec Joe Schwartz pointed out recently, you can't save your way to prosperity. Luckily for him, his small market group only has to worry about Main Street, so he gets to focus on running a broadcasting company rather than a portfolio enhancement company.
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| Media Markets & Money TM |
Close encounter in Kilgore
Educational Media Foundation is in the saddle of yet another FM station. This time, it's KTPB-FM Kilgore TX, part of the Tyler-Longview market. According to Greg Guy and Summer Foust of Patrick Communications, the pricetag is 2M. EMF is the noncommercial purveyor of the K-LOVE Network, featuring Contemporary Christian programming. The seller on the noncommercial 88.7 MHz facility is Kilgore Junior College.
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| Washington Media Business Report TM |
Dole kicks off return effort
 Senate Republicans are facing a challenging 2008 environment in which they have to defend just about twice as many seats as do their Democratic counterparts. And they've already lost one incumbent, with Wayne Allard (R-CO) opting out of a re-election bid already in a state that is becoming increasingly competitive. Another senator around whom retirement rumors have swirled is Elizabeth Dole (R-NC). That rumor has now been officially put to rest, as Dole kicked off her campaign for a second term. Although her warchest at the moment hasn't quite reached the quarter-million mark, she expects that she will be able to raise the necessary funding without any major difficulty, and further expects the Democrats in North Carolina may have a difficult time coming up with a viable candidate to take her on.
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| Internet Media Business Report TM |
Rope a DOPA?
Computer World is taking aim at Senate Commerce Committee's Ted Stevens (R-AK) known variably as Ranking Member or co-chairman thanks to his collegial relationship with Chairman Dan Inouye (D-HI). The computer magazine is concerned about the bill, which would protect children in schools using federal money for Internet access. The Deleting Online Predators Act (DOPA) would force such jurisdictions to block all interactive websites. The list includes virtual social spots like MySpace, and possibly blogs. And also, apparently, Wikipedia, because of its interactive editing feature. While Computer World expressed the possibility that some students may lean a little to heavily on the informational resource, and expressed the skepticism one must retain when using it, given the fact that it may be edited, it concluded that such a nevertheless valuable educational tool should at the very least remain available, and any bill which catches it in its prohibition net is not well crafted at all.
RBR observation: This is, of course, Stevens' second go-around as a source of Internet ridicule (the magazine was less than complementary) after last Fall's Committee lesson delivering Internets went viral. For the most part, this isn't anything for broadcasters to worry about too much, although it's the type of thing that may at some point be attached to - and drag down - a more general communications legislative package.
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| Engineering Business Report TM |
 Daylight Savings switchover
may cause glitches
TDGA (Traffic Directors Guild of America) advised its 5,000 members to take special care twice this spring. This is the first year that the Congressionally mandated change from Standard to Daylight Time in the vast majority of states occurs in March, rather than "The first Sunday in April." Mastering the ability to eliminate an hour from the 3/11 log isn't that difficult and Traffic software vendors are always helpful in talking new personnel through the process of eliminating the 2AM-3AM hour. However, the concern this year is that many of the clock-controlled automation systems have been pre-programmed for years to perform that same task in April, not the new "2nd Sunday of March." Depending on the upgrades from software programmers, it's possible your traffic and automation will simply perform the changeovers in a seamless maneuver, requiring little or no input from Traffic or Operations. Or-if not addressed-you might find the systems completely ignore the move-clocks-forward-one-hour command on March 11th and instead-perform that task on 4/1, providing a legitimate April Fool's Day joke completely unexpected. If you use Microsoft Windows Operating Systems, you might find this site helpful. "It's not exactly the magnitude of the Y2K fears of seven years ago," said Larry Keene, CEO of TDGA, "but it's a highly predictable concern for Stations with earlier models of Traffic software and/or Digital playback automation systems designed before Congress legislated the date changes." TDGA is advising Traffic, Continuity and Operations staffers to check out this concern in advance of 3/11, and more importantly, again prior to the first Sunday in April, to avoid dropping the hour of programming on the wrong date.
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| Transactions |
40M WQEW-AM New York NY from The New York Times Radio Company (Thomas J. Bartunek) to Radio Disney New York LLC, a subsidiary of Walt Disney Co. (John Hare). Cash. Duopoly with WEPN-AM. Cross-ownership with WABC-TV. Disney is selling WABC-AM/WPLJ-FM to Citadel. [File date 1/29/07.]
270K KIKS-FM/KALN-AM Iola KS. 90% of Iola Broadcasting Inc. from Michael P. Russell, Lovetta Russell (each 45% to 0%) to Thomas E. Norris (0% to 90%). Note. Sellers will remain employed at the stations at minimum salary of 500/month. [File date 1/26/07.]
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| Stock Talk |
A day off
US stock markets were closed Monday in observance of Presidents Day. Here are the closing prices from Friday.
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| Radio Stocks |
Here's how stocks fared on Friday
| Company |
Symbol |
Close |
Change |
Company |
Symbol |
Close |
Change |
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Arbitron
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ARB
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45.76
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-0.44
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Journal Comm.
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JRN
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13.31
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+0.12
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Beasley
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BBGI
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9.13
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-0.01
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Lincoln Natl.
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LNC
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70.79
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+0.44
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| CBS CI. B |
CBS |
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31.81
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-0.07
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Radio One, Cl. A
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ROIA
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7.40
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-0.01
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| CBS CI. A |
CBSa |
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31.78
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-0.10
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Radio One, Cl. D
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ROIAK
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7.42
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-0.01
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| Citadel |
CDL |
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10.44 |
-0.02 |
Regent
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RGCI
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2.98
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-0.01
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Clear Channel
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CCU
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36.45
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-0.12
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Saga Commun.
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SGA
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9.64
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-0.01
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Cox Radio
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CXR
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15.65
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+0.08
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Salem Comm.
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SALM
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12.32
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-0.01
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Cumulus
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CMLS
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10.31
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+0.05
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Sirius Sat. Radio
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SIRI
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3.70
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+0.10
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Disney
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DIS
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34.89
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+0.22
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Spanish Bcg.
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SBSA
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4.20
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+0.03
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Emmis
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EMMS
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8.67
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-0.05
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SWMX
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SMWX
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0.80
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-0.10
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| Entercom |
ETM
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30.61
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unch
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Univision
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UVN
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35.95
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+0.02
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Entravision
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EVC
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8.49
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+0.18
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Westwood One
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WON
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7.10
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+0.01
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Fisher
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FSCI
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44.85
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-0.16
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XM Sat. Radio
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XMSR
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13.98
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+1.00
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Hearst-Argyle
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HTV
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26.25
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-0.13
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Bounceback
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 We want to
hear from you.
This is your column, so send your comments and
a photo to [email protected]
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Below the Fold
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Media Business Report
Stick to the knitting
Where your customers are. People buy a newspaper, it's not because of...
Media Markets & Money
Close encounter in Kilgore
Educational Media Foundation is in the saddle of yet another FM...
Internet Media Business Report
Rope a DOPA?
Computer World is taking aim at Ted Stevens (R-AK)...
Engineering Business Report
Daylight Savings switchover
May cause glitches in traffic systems...
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Stations for Sale
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Central CA Coast FM: $1.5M
Pacific Northwest FM: $750K
Terms Available
MCH Enterprises: 805.543.3466
www.mchentinc.com
 Market your Stations For Sale
in our daily epapers.
Contact
June Barnes
[email protected]
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Radio Media Moves
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Harper & co.
 to Paragon
Bob Harper has sold his company, Keystone Focus Research, to Paragon Media Strategies. Harper joins Paragon as Sr. VP and will be a lead researcher and consultant.
Conclave fundraiser
Jeff Kleinbaum has joined the Conclave Learning Conference in the newly created position of sponsorship & fundraising coordinator. In other words, he is the guy charged with finding funds to support the non-profit radio programming conference. Kleinbaum is a former KQRS-FM Minneapolis Assistant Music Director most recently involved in music retailing.
 Schaller to Arbitron
Arbitron announced that it has named Jeanette Schaller as its first customer service representative (CSR) for its National Radio Services team, which provides listening information on radio networks, radio syndicators, public radio and satellite radio. Schaller previously served as a national sales coordinator for Interep/Chicago's Cumulus Major Market Sales division.
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RBR Radar 2006
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Radio News you won't read any where else. RBR--First, Accurate, and Independently Owned.
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Don't forget to vote!
RBR hears that the proxy solicitation firm hired by Clear Channel is beating the bushes to get out the vote. If you own a share or two, you may well have gotten a phone call urging you to return the proxy card and vote yes for the buyout by Bain Capital Partners LLC and Thomas H. Lee Partners LP, along with Mark and Randall Mays, for 37.60 per share. In fact, they are happy to take your vote right there and then over the phone. The votes will be tallied at a special shareholders meeting on March 21st. There is no indication any sweetener is in the offing, so this could end up resembling election night 2000 as we all waited for the votes to be counted in Florida.
02/19/07 RBR #34
Keeping its PPM options open
The Portable People Meter (PPM) as it looks today may not always look that way - either as far as the hardware is concerned, or in how it is used. In his quarterly conference call last week, Arbitron CEO Steve Morris kept all of his options open for the future. Arbitron officials have been critical in the past of challenger The Media Audit/Ipsos for basing its proposed radio ratings system on Smart Cell Phones. Morris repeated his concerns.
RBR note: For the concerns see
02/19/07 RBR #34
Arbitron downplays
challenger to PPM
Discussion of the test announcement by The Media Audit/Ipsos, with funding from five radio groups (2/12/07 RBR #29), dominated the Q&A portion of the quarterly conference call by Arbitron, as analysts sought to find out if the revived competitor poses a threat to the rollout of PPM. With Philadelphia, Houston and New York all scheduled to get PPM ratings this year, one analyst asked whether holdouts, including giant Clear Channel, might put off signing PPM contracts with Arbitron until they see the results of the TMA/Ipsos test early next year. "Always possible, but I really believe that the industry is at a moment of truth here, and they know it. The buyers are quite strident in their position that it is time to move forward. The rest of the competing media are moving forward in leaps and bounds in terms of innovation that they're bringing to the market, both in terms of product and in terms of measurement. And for radio to simply sit out and take a pass on the hope that something useful might come out of this three-month test and to delay making a decision that would drive the industry, I find that just very unlikely," said Arbitron CEO Steve Morris.
RBR observation: Real threat or merely an annoyance? Investors are trying to sort out whether PPM has clear sailing ahead or if Arbitron really faces the possibility of the radio industry adopting the TMA/Ipsos alternative and abandoning Arbitron in its bread and butter business, US radio ratings. There is more to RBR observation in this report.
02/16/07 RBR #33
Rising costs hit Arbitron
Arbitron managed to hit its guidance to Wall Street for Q4, but the costs of rolling out PPM and its ongoing Project Apollo pilot took their toll. While revenues rose 5.2% to 79.3 million, higher costs took earnings before interest and income tax down 35.7% to 10.9 million. Earnings per share fell to 17 cents, compared to 36 cents a year earlier. In their conference call with analysts, Arbitron execs said 2007 will be a trough year for the company, with double digit revenue gains in 2008 and beyond as PPM rolls out to the top 50 markets. Revenues are expected to rise 5.5-7.5% in 2007 with the first three PPM markets coming on line.
RBR observation: So you think getting into the ratings business is a windfall. HA. Do you think a new upstart service is going to accomplish what Radio needs today and for tomorrow to compete with the rest of the media world? Think again and get real.
02/16/07 RBR #33
Radio's use of video
Radio may be in a stagnant period. It certainly is in no danger of going away, but neither is it growing very much, not a happy situation for a business which used to crank out high-single digit black ink comps on a regular basis. The New York Times notes devoted a significant amount of ink to take a look at radio's use of one of the tools of the enemy: video. As with most other modern aspects of business, the key is the Internet.
02/15/07 RBR #32
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General Sales Manager
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