RBR's Daily Morning Epaper

Volume 22, Issue 40, Jim Carnegie, Editor & Publisher

Friday Morning February 25th, 2005

Radio News®

Q4 profits at Viacom
obscured by radio writedown
Media stocks took a hit on Thursday because Viacom surprised investors with a Q4 net loss of 18.4 billion bucks. Virtually all of that was due to a non-cash writedown of 18 billion for "goodwill and intangibles" at its radio and outdoor properties. As CEO Sumner Redstone pointed out in the company's Wall Street conference call, if you look at the underlying numbers, you'll see a growth story. Cable revenues were up 15% to 1.9 billion. TV revenues were up 5% to 2.2 billion, with the CBS network leading the charge. Outdoor revenues grew 9% to 514 million. But one of the problem areas continued to be radio, with revenues down a million bucks to 550 million. Excluding the one-time charges, Redstone said Viacom hit its guidance to The Street and exceeded guidance for free cash flow, which was up 17% for the year to three billion.

RBR observation: What does the 18 billion writedown really mean to investors? Not a thing. Under the arcane rules of public accounting, Viacom's radio stations may be worth 11 billion less than they were a year ago, but if they were to actually be put up for auction, those big stations in big markets would bring prices well in excess of what they're carried at on the company's books. As our readers know, demand for top properties is still high and multiples haven't retreated. No doubt the seven billion decrease in value for the outdoor division is only on paper as well, since billboards are also in high demand.

Viacom wants to buy TV stations, sell radio
CEO Sumner Redstone says 2005 is going to be a year for the "reinvention" of Viacom. Part of that is going to be a restructuring of assets, although nothing quite on the scale of last year's spin-off of Blockbuster. There's been talk at Viacom for many months about shedding some of its Infinity radio stations outside the top 20 markets. To date, all that's actually happened is the sale of a couple of small AMs in Baltimore and a much larger deal (but in the top 20) to swap an FM for an equity position in Spanish Broadcasting System. But Co-President/COO

Les Moonves insists that the company is serious about reworking its radio portfolio and divesting "a lot" of its stations outside the top 20 markets. Meanwhile, Moonves says Viacom wants to buy more TV stations, particularly duopolies, such as its recent acquisition in Sacramento. The other Co-President/COO, Tom Freston, says in his part of the company, Viacom is in the early stages of an auction to sell off its Famous Players theater chain. He said the company has also been approached by potential buyers for its theme parks, which are also viewed as non-core assets.

RBR observation: If Viacom is serious about cashing out of its medium-market radio stations, it's sure doing a piss-poor job of going about it. In virtually every radio company conference call for the past couple of cycles, analysts have asked the CEO whether they're interested in buying what Viacom has for sale - - and they all say that nothing is being shopped. Are they just waiting for other people to come to them with deals? Infinity CEO Joel Hollander has said before that he wants to add stations in such markets as Atlanta, Houston, Dallas and San Diego. That's fine, but we don't think he's likely to find anyone in those markets willing to swap for Memphis, Fresno and West Palm Beach.

Citadel says ad demand is improving
No doubt about it, the marketplace for radio advertising is improving and Citadel Broadcasting CEO

Farid Suleman is singing the praises of a competitor, Clear Channel, for its "Less is More" (LIM) initiative. Adding her comments on LIM, Citadel COO Judy Ellis said "there is definitely is a demand on inventory that has been created by this," but added that she's seen very few advertiser requests for 30- or 15-second spots, which is an element of LIM, along with reducing the number of minutes of advertising per hour. While not giving guidance for Q1 alone, Suleman is projecting that Citadel's revenues should be up 3-5% for all of 2005. For now, though, he noted that growth rates are inconsistent across the nation. Providence, Albuquerque, Oklahoma City and Little Rock had record revenues in Q4, while Birmingham, Knoxville, Saginaw and Lansing were down. Suleman insisted, though, that once normal business conditions return, radio should be able to sustain annual growth of 5-6% in the future.

FEC ducks LUC question
The Missouri Broadcasters Association had a question: If a candidate failed to meet statutory content requirements in a prior ad, would a broadcaster be barred from offering lowest unit charge (LUC) on a subsequent ad? The Federal Elections Commission used examples provided by MBA to issue a narrow, non-illuminating opinion.

RBR observation: Hey FEC, c'mon. We're not trying to trip you up with a trick question. This stuff comes up in real life and involves elected officials and lawyers. Let's get rid of the guesswork. We really want to know. We need to know. And thanks, Mr. Toner and Mr. Smith, for going the extra mile to help us out. | More... |

NH pol going after pharma ads
New Hampshire State Rep. John Dejoie is trying to ban drug ads in the state, saying that their cost is passed on to consumers at a time when prices are skyrocketing, according to Foster's Online. Dejoie is saying the state government needs to act in the absence of any meaningful action at the federal level. The drug companies are calling it an attempt to infringe their right of free speech. According to Foster's, Dejoie has several obstacles to overcome. For starters, he has to prove that the ads are false or misleading - - this would seem to be a difficult hurdle to clear, since neither claim forms the basis of Dejoie's objections to the ads. Another is the fact that much of the advertising comes into the state over national networks over which local broadcasters have no control. Finally, pharma companies argue that even if Dejoie is successful, it won't drug change pricing.

Conference Calls Q4 2004

Citadel same station revenues up 3%
With local ad sales leading the way, Citadel Broadcasting saw net revenues rise 7.4% in Q4 to 109.8 million dollars. Excluding the impact of changes to its station portfolio, the company said same station revenues were up 3%, which beat the industry average. That gain was all due to local sales, since national was down 4% for the quarter. Even so, Citadel CEO Farid Suleman applauded his company's new national rep, Katz, for improving Citadel's share of national business in its markets. Suleman said Citadel is working closely with Katz in 2005 to bring in new business and expand sports marketing, which is important in many Citadel markets. "Unlike other companies, we're really happy with our transition to Katz and really the entire Katz team has done a great job for us," Suleman said, then joked, "If Stu Olds and Steve Shaw are listening, that's only for today - - not tomorrow." Running down Citadel's Q4 numbers, station operating income was up 5.9% (5% same station) to 48.2 million and free cash flow gained 25.4% to 39 million. That growing pile of free cash flow creates a bit of a dilemma for Suleman. While the company is continuing its stock buyback program, the CEO said he's also mindful of the need to keep enough shares out in the market to maintain liquidity for shareholders. As for using that cash to make acquisitions, Suleman said buyers are still wanting 18 times cash flow, but that it's hard to make money if you pay more than 15 times.

Saga posts a record quarter
Saga Communications posted record results for Q4 and 2004, and quite a few of its peers did the same, so CEO Ed Christian says he's sick of seeing articles bashing the broadcasting business as being in dire straits. For Q4, Saga's net revenues were up 9.6% to 36.1 million, with same station revenues up 4.8%. Radio revenues were up 9.2% to 32.2 million - - a 3.8% gain on a same station basis. Radio operating income rose 8.7% to 10.5 million, or 3.8% same station. TV net revenues gained 13.1% to 3.9 million and operating income rose 28.4% to 552,000. Same stations results were the same. Although Saga doesn't give forward guidance, Christian said he didn't think the 5% projection for the radio industry by Universal McCann's Bob Coen was unreasonable, although he then backed off to a range of 3.5-5% - - with the first part of 2005 slower than the finish.

Viacom projects growth in 2005
How's 2005 looking? Viacom says it expects to deliver mid single-digit growth in revenues and operating income and high single digit growth in earnings per share this year.Co-President/COO Les Moonves sees TV growing gangbusters, with CBS on a ratings upswing and its O&O stations getting a boost from the network's strong performance. But after reporting a flat Q4 for radio, he's keeping expectations low. Moonves said most radio groups are expecting only modest growth in Q1 - - and that's all he's expecting for Infinity. Moonves confirmed that the company's investment in promotion - - after a long dry spell - - has paid off at eight large market stations. He said that six or seven more stations are being targeted for more spending on promotion, while maintaining the initial eight.

Adbiz©

RBR exclusive: Details from Interep's roundtable with radio and agency execs
Interep held an industry roundtable discussion 2/16 in New York City to proactively solicit the input of the agency community on the major challenges/ opportunities facing radio today. The roundtable discussion included both representatives from our client broadcasting groups (group heads, sales management and programmers) and ad agency execs (account management and media executives). Interep has granted us exclusive details of the event beyond the press release. This discussion is the first in series of planned events by Interep to increase the communication and interaction between their client radio stations and media decision-makers. We present the discussion in a series.

RBR observation: If radio doesn't brand itself as a local medium - - community involvement - - as teenagers grow up, they are going to find other avenues to depend on when something local happens in their community. What the roundtable basically addressed was when radio got all excited when voice tracking technology came about in 1999, that was nice, but now they have to revert back to being local. Local means creative content with quality PDs. That means investing in local talent. The radio stations and groups need to market their products better to let people know what they're doing, besides TV spots that promise "seven songs in a row." The problem is radio has a poor identity right now vs. other technologies. Sure, we hope HD Radio might solve the problem with an added audio channel for each station and even more after all stations move to digital, but we're in the crisis now and all of that may not come to true fruition for years. Again, the answer for now is to get local. More local ad reads from the air staff. Local DJs. Local flavor. Local bands. Local content. Local interest. Local partnerships. Local identity. Local events. Locally programmed. Back to basics.
| More... |

Hanes launches aggressive branding effort
The No.1 apparel brand in the US announced a new campaign that will feature Hanes vet Michael Jordan (from the successful "Just wait'll" theme in the 1990's) as well as three new headline celebrities - - Matthew Perry, Marisa Tomei and Damon Wayans - - beginning 2/28. At the core of its new marketing effort, Hanes will bring to life its new tag (no pun intended), "Look Who We've Got Our Hanes On Now," with new TV spots featuring funnyman Damon Wayans, actress Marisa Tomei and everyone's "Friends" star Matthew Perry, who partners with Jordan in the new series. Set to the beat of fun, energetic music, the spots feature Damon Wayans in the midst of his daily shaving ritual, a playful and flirtatious Marisa Tomei having fun around the home and showing her strong sense of style in colorful Hanes casualwear, and a competitive Michael Jordan and Matthew Perry dueling it out in a game of pool. Created by The Martin Agency, each spot captures each celeb's personality - comfortable with themselves and their Hanes. Magazine ads launch in July. To complement the new advertising, Hanes is launching new packaging, which premiers this spring for its women's line. The entire campaign will run throughout 2005.

Correction: it was Active Int'l, not ICON
We incorrectly named Poof-Slinky's AOR as ICON in our Slinky-does-radio story yesterday (2/24 RBR #39). Poof-Slinky's AOR is actually Active International.

April Radio & Television Business Report

Be sure to catch our blockbuster April NAB issue:

One on One: We interview outgoing NAB CEO Eddie Fritts.

Feature: What kind of individual would industry leaders like to see head the NAB?

AdBiz: But will they buy it?
We ask agencies and the industry about support for new, unproven formats.

Media, Markets and Money: We check the financing climate: Is financing still readily available for radio and TV deals?

Advertisers: Don't miss this opportunity to appear in Eddie Fritts' farewell interview!
Call Today, space is limited.

June Barnes at 803-731-5951 or
Jim Carnegie at 813-909-2916

Don't miss your copy!

Media Markets & MoneyTM

Styles wiles: And then there were three
Styles Media is building on its surprise move into southern California with a new deal that will bring in both a new FM and a new partner. The acquisition of KWIE-FM and its owner, Donald G. McCoy, builds on the earlier deal with Spanish Broadcasting System for what are now KDAI-FM Ontario CA (ex-KZBA-FM) and KDAY-FM Redondo Beach CA (ex-KZAB-FM). Styles acquired the two 93.5 mHz SBS stations last fall for 120M dollars (8/18/04 RBR #190). The deal for KWIE is worth a tenth of that, valued at 12M dollars, and will result in McCoy having a major presence in Styles Media, joining Thomas A. DiBacco, Kim Styles DiBacco and Stephen Bodzin as principals. KWIE will form a duopoly with the Ontario facility in the Riverside-San Bernardino market. The Redondo Beach FM is considered part of Los Angeles.

Withers dons a bigger Cape
Russell Withers is expanding his Cape Girardeau MO superduopoly with a 150K deal to acquire KUGT-AM Jackson MO. The seller is Larry Dunger's The Light and Power Company Inc. The station will cluster up with KAPE-AM, KGMO-FM, KBXB-FM, WKIB-FM and the LMA'd KREZ-FM. The "W" station is located across the Mississippi River in Anna IL. The LMA'd station is owned by Dana Withers, who we believe to be Russell's daughter. The cluster was justified using the old-fashioned signal contour radio market definitions. Although Cape Girardeau is measured by Nielsen and is famously the home of radio icon Rush Limbaugh, it is not on the list of markets handled by Arbitron. Nor by Eastlan, for that matter.

Washington Beat

Infinity fails to wriggle
out of phone fine
WBLK-FM, one of Infinity Radio's Buffalo stations, was hit with a 4K fine for failure to provide prior notification to a phone call recipient that the call was headed for the airwaves. The NAL was issued on 8/5/03. Infinity's latest argument has fallen on deaf ears. In assessing the NAL, FCC noted that Infinity was involved in a similar case dating back to 1998, assessed to licensee EZ Sacramento. Infinity says this was a violation of statute - - the FCC, it argues, is precluded from allowing another unrelated case from prejudicing its actions in the current case which is still pending, as is the case with EZ Sacramento. In fact, Infinity says it would have difficulty addressing the EZ case at all at this point. (The purpose of the statute is to prevent an invalidated accusation against a company from being used against it in an unrelated case.) Nonsense, says the FCC. It says, "We explained that our reference was to the underlying facts of similar conduct, rather than to the existence of the contested notice of apparent liability as such, a practice that the Commission specifically held permissible in a rulemaking proceeding on this very issue."

RBR observation: In other words, if we understand this correctly, the FCC would have been out of bounds had it upped the fine as a repeated violation. However, as applied here, merely mentioning the case is fair.

Transactions

KNND-AM Eugene-Springfield OR (Cottage Grove OR) from Thornton Pfleger Inc. to Paul Henry Schwartzberg.

WKMC-AM Altoona PA (Roaring Spring PA) from Allegheny Mountain Network to Handsome Brothers Inc.

| More... |

Stock Talk

Market up, broadcasters down
A market backlash to Viacom's unexpected non-cash writedown of 18 million bucks in Q4 sent media stocks lower, even as the broader market had a good day. The Dow Industrials moved up 75 points, or 0.7%, to 10,749, with traders encouraged by a government report on gasoline and heating oil supplies.

The Radio Index fell 1.202, or 0.6%, to 216.679. Viacom's Class A stock fell 2.5% and its Class B 2.1%. But it wasn't the worst performer. That was cumulus, Down 3.6%.

Radio Stocks

**Here's how stocks fared on Thursday**
Company	Symbol	Close		Change	Company	Symbol	Close		Change
Arbitron	ARB		41.18	+0.13	Jeff-Pilot	JP		48.25	+0.06
Beasley	BBGI		16.70	-0.04	Journal Comm.	JRN		16.29	+0.13
Citadel	CDL		13.64	-0.18	Radio One, Cl. A	ROIA		13.77	-0.11
Clear Channel	CCU		33.91	+0.01	Radio One, Cl. D	ROIAK		13.77	-0.11
Cox Radio	CXR		15.72	-0.35	Regent	RGCI		5.19	+0.17
Cumulus	CMLS		14.04	-0.53	Saga Commun.	SGA		16.13	-0.02
Disney	DIS		28.15	-0.50	Salem Comm.	SALM		22.39	-0.04
Emmis	EMMS		18.54	-0.16	Sirius Sat. Radio	SIRI		5.58	-0.04
Entercom	ETM		33.88	-0.57	Spanish Bcg.	SBSA		10.07	-0.03
Entravision	EVC		7.84	+0.02	Univision	UVN		26.69	-0.28
Fisher	FSCI		50.28	-0.47	Viacom, Cl. A	VIA		35.28	-0.89
Gaylord	GET		42.36	-0.08	Viacom, Cl. B	VIAb		35.00	-0.74
Hearst-Argyle	HTV		24.67	-0.78	Westwood One	WON		23.73	-0.24
Interep	IREP		0.61	-0.02	XM Sat. Radio	XMSR		30.15	-0.73
International Bcg.	IBCS		0.01	unch	-	-	-	-	-

__UNSUB__ to this email service.

Bounceback

Send Us Your Opinions We want to
hear from you.
This is your column, so send your comments to [email protected]

This reader has his own story to tell about vodka and pickles
(2/24/05 RBR #39).

I run WNOR FM...a heritage and very progressive active rock station in Norfolk, Virginia. I read with interest today and yesterday your story about the Ivanabitch ad's. Let me help clear the record. My market a few months ago had an avail come up through the rep for this account. I listened to the spots, and while I found them mildly entertaining...it was my feeling that they were way over the edge of good taste and sexual innuendoes. We told the agency specifically what we'd like to change in spot 2 only, and truthfully it was one line that we wanted to edit. The agency, with their high moral and creative standards told us "Screw it, we'll just find another station that will take it as is." Of course they did...as my competitors' moral beliefs and standards melted in the face of a "big buy". (Hey, a guy gotta make budget, right?") We turned down the spot because it was in bad taste and had an obvious and ridiculous "phallic" meaning throughout the spot(s). The goal of the entire campaign was to make the pickle a substitute for a penis. Cute to say that they wanted people to drink like the Russians do, but the truth is the truth. We told them the truth, and told them what we'd like to do to adjust that feel, to make it work for everyone and they told us we were stepping on their creative freedom. So, as they say...."that's the rest of the story."

Dave Paulus
President/General Manager
WNOR-FM

Upped & Tapped

Two jump to Sirius
Mel Karmazin is certainly putting his mark on Sirius Satellite Radio. Two former Infinity/Westwood One colleagues are now heading the company's sales efforts. Sam Benrubi is Senior Vice President of Advertising Sales and Stephen Smith is Vice President of Advertising Sales.

Goldberg to become
Air America CEO
We told 'ya (2/18 RBR #35): Former Artemis Records Founder/Chairman /CEO Danny Goldberg will join Air America Radio as CEO. Goldberg replaces Doug Kreeger, who stepped down as acting CEO in December.

Promotion in Cleveland
Joann Riordan has been named General Sales Manager of Infinity's WQAL-FM Cleveland. She had been the station's Local Sales Manager.

Reach Media taps Bond
Reach Media announced Gary Bond has been tapped as VP/Business Affairs. He had previously worked for Belo and CBS.

Sporkin to NPR
Former CBS, Fox, Disney and Sony spokesperson Andi Sporkin has moved to the non-commercial side as Vice President of Communications for National Public Radio.

More News Headlines

CC Radio-Indie 103.1 JSA to end

KCRW-FM LA to begin podcast

RBR Radar 2005

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

Agency comments on Vodka campaign ad refusals
Billboard and radio ads for Ivanabitch Russian vodka, being banned by Viacom Outdoor, Clear Channel Outdoor and a number of radio stations, we asked Empire Communications Group managing partner, Pete Helow, a bit about what went on-and why radio can afford to turn down ad dollars: "On the radio side, we did find channels that would run it, but we weren't able to reach our full demographic. The problem with the radio spots is I can't figure out if the use of the word 'bitch' in the ads was refused because they thought it would offend an older audience or maybe because some of the stations didn't want liquor ads targeting younger demos. They didn't give us specifics, they ju! st said 'we decline to run your spot.'
| Spot 1 | Spot 2 |
RBR observation: The spots are funny. This may be a good example of FCC indecency fine fears getting so far out of hand, there's no standard corporate formula to follow that could apply to everything. The FCC's reckless finger-fine pointing is so vague, managers are left to guess what they should or shouldn't run on the fly. Nevertheless, if there was a reason they turned down the client, they should have made it more specific. Radio you hade good creative and importantly - You shouldn't be turning down ad dollars these days without a good reason. Wonder why some in the dumper. 02/24/05 RBR #39

Cox subpoenaed in payola probe
You can add Cox Radio to the list of radio companies who've acknowledged receiving subpoenas from New York Attorney General Eliot Spitzer in his grand jury probe of independent record promoters. Cox said in an SEC filing that the subpoena requested certain documents and records pertaining to the investigation of "certain promotional practices in the radio industry." The company said it is cooperating with the AG.
RBR observation: For the most part it is politics 2005 not the payola of 1985. 02/24/05 RBR #39

FCC Going, going.... Gone, Bye Bye
There has been no official word on Republican Commissioner Kathleen Abernathy's departure from the FCC, but for the second time in a week, a key staffer has announced their own departure. These are jobs generally filled at the discretion of the individual commissioner... Top staff are exiting... What could it mean? (Chin stroke, chin stroke, chin stroke) Hmmmm. RBR observation: People change jobs all the time, and this may mean simply that people are changing jobs. However, it also fits right in with all of the speculation, supporting rather than debunking it. 02/24/05 RBR #39

Cumulus CEO sees
ad demand improving
But has Frustrations with Reps
After beating expectations in Q4, Cumulus Media CEO Lew Dickey is promising Wall Street more of the same in Q1 - - revenues gaining 3-4% on a same station basis. Demand is improving month-over-month - - and that's before seeing any real impact from Clear Channel's "Less is More" initiative. But with local sales powering growth at Cumulus, the CEO expressed some frustration that the national rep firms aren't as aggressive in going after new business as his own local sales teams and describes the rep business that has been structured over time to be very reactive and to really take advantage of avails.
RBR observation: Add this to what Radio One boss Al Liggins stated: 'concedes that trying to make the two big rep companies compete for his business by having Radio One's stations split roughly 50/50 between Katz and Interep hasn't worked out as he'd hoped, and may actually be costing Radio One some national business.' - Lew is 100% correct that the rep business has not changed or improved its pulling engine of their train of groups and stations in many moons. Sales people at the reps do as any sales person does, try and sell but on a much larger scale with more fragmentation. Radio and in many cases TV also have not got into the 21st century as it is called redeploying of assets with technology. But it is not up to us to fix their problems. 02/23/05 RBR #38

Indecency challenges in the works?
NAB Joint Board Chairman Phil Lombardo recently issued a ringing call to arms, asking broadcasters to stand up to the ill-defined indecency rules, not to mention the inconsistent enforcement of them. And although nobody's talking on the record, the Los Angeles Times says efforts may be afoot to take the FCC to court over the matter. Lombardo already has hinted that the National Association of Broadcasters is putting together a defense fund. 02/23/05 RBR #38

Deal Maker
W.B. Grimes & Company is seeking a "deal maker" to head up its Broadcast Brokerage Division. You must have passion for sales, solid broadcast background, and an active rolodex. Commission-based position with exceptional earnings potential. Relocation not required.

News Director
WLPO/WAJK/WKOT, LaSalle, IL - Established stations in the Midwest looking for the journalist of integrity and understands what local means to a news department with experience to encourage others on staff. LaSalle is a great market and excellent company benefits. EOE.

See Radio Careers for more info.

Other Links

State Associations
Contact Us