RBR's Daily Morning Epaper

Volume 23, Issue 48, Jim Carnegie, Editor & Publisher

Thursday Morning March 9th, 2006

Radio News ®

Entercom denies corporate payola
as Spitzer files suit
It's no surprise that Entercom has become the first radio company to be sued by New York Attorney General Eliot Spitzer for alleged corporate payola. The company had fired one Buffalo PD, Dave Universal, while Spitzer's probe was ongoing, saying he had violated Entercom's conflict-of-interest policies by accepting gifts and travel from independent record promoters (1/13/05 RBR #9). But Spitzer is accusing the company of much more, with the lawsuit filed yesterday in a New York state court alleging that Entercom traded air time for gifts and other payments, traded air time for promotional items and personal trips, solicited and accepted payments from record labels for air time, and operated corporate programs directed by senior management to sell air time to labels in order to manipulate music charts.

With litigation pending, Entercom executives aren't speaking publicly about the lawsuit, but the company issued this statement: "Entercom is a company that believes in playing by the rules and does so. We have firm policies prohibiting payola and requiring compliance with the federal sponsor identification rules and we enforce them. We have cooperated fully with the Attorney General's office in this investigation. Now that the Attorney General has filed this civil action we are confident that the issues will be fully and fairly resolved by the court." Spitzer, who'd previously announced multi-million bucks settlements with two record companies, continues to insist that payola is rife in the radio industry - - and endorsed at the top corporate levels. "By accepting secret payments in exchange for air time, Entercom compromised its radio programming and violated state and federal laws. What makes this case especially egregious is the extent to which senior management viewed control of the airways as an opportunity to garner illegal payments from record labels," Spitzer charged. And he again struck out at the FCC for failing to take action on the materials he has sent it from his probe. "Almost a year after payola was exposed in significant detail, the FCC has yet to respond in any meaningful way. The agency's inaction is especially disappointing given the pervasive nature of this problem and its corrosive impact on the entertainment industry," he insisted.
| Read the lawsuit here |

RBR observation: Perhaps, Attorney General Spitzer, the FCC hasn't acted because you haven't given them much to act on. By your interpretation of the federal payola statute, any transfer of money or other promotions consideration from a record label to a radio station is payola. That simply is not true. The "spin programs" which you point to as "illegal" are constructed deliberately to be in compliance with the payola statute and sponsor identification rules. The corporate-level agreements with independent promoters and/or record labels were drawn up by skilled lawyers specifically to make the relationships legal and above board and try to eliminate, as much as possible, the potential for individual employees to take payola. (Most radio companies, we would note, have since completely ended dealings with independent promoters.) The bottom line is this: Payola cases should be in federal court, not state court. The US government has a payola statute (which you don't seem to be capable of reading and comprehending), the State of New York does not - - and your claim that a general state business fraud statute applies is pretty far fetched. But then again we must remind our readers, this isn't really about payola at all - - it's about grabbing more headlines for Eliot Spitzer, candidate for Governor of New York.

Adelstein pushes again for FCC action
Mild-mannered Commissioner Jonathan Adelstein is nearly raging at the FCC's failure to act on the payola allegations by New York AG Eliot Spitzer. "The New York Attorney General investigation is piling evidence on top of evidence of the widespread abuse of the public trust. Given the voluminous documents pointing to major, systematic violations of FCC rules, the penalties should be commensurate with the crime. We can't let any violators get away with a slap on the wrist," Adelstein said in a statement after Spitzer filed suit against Entercom yesterday. The Democrat Commissioner has been outspoken on the payola issue, although the entire Commission last August approved an investigation into possible payola violations. To date, there has been no action.

RBR observation: See our observation to the previous story. If all Spitzer has sent the FCC is what he's disclosed publicly in his settlements with the two record companies and a pile of emails released yesterday in association with the Entercom case - - and we've seen no indication that he sent the Commission anything else - - then it's no wonder the FCC's enforcement folks haven't taken action. We've read everything that Adelstein has read (as far as we know) and it doesn't appear that there are any grounds to accuse anyone of corporate payola. Spitzer did find evidence of five possible cases of payola by four individuals. Three have been fired and the fourth had already left the station's employment before his activities were exposed. We expect the FCC will eventually take some sort of action on those, but that's hardly evidence of a widespread payola problem.

Show and telco: McDowell on display today
Robert McDowell goes before the Senate Commerce Committee today en route to the Senate floor for confirmation as the fifth FCC Commissioner and third Republican, giving Kevin Martin a third vote to work with for the first time in the relatively brief history of his chairmanship. While all businesses that do business with the FCC will have a vested interest in the proceeding, none will by quite so tuned in as AT&T. The FCC will have an up or down vote of its vote of its own on a project near and dear to AT&T's heart, its pending 67B acquisition of BellSouth. If confirmed (and we have seen no indications that there are any problems at all with this nomination), McDowell will be going to the Commission straight from a advocacy position at telco industry association Comptel, which both represents smaller telecom companies and is vociferously against this merger. According to Financial Times, other big telecom mergers have received thumbs up from the FCC without a great deal of difficulty, and this one may well be no exception. However, McDowell's recent history leaves room for the possibility of a 3-2 vote against the merger, or a 2-2 tie with McDowell recused. So nobody will be paying more attention to Capitol Hill doings this afternoon than AT&T. Stay tuned...

VNU's big shareholders
cool to 8.9B buyout
Will Billboard get a new owner or not? It looks like VNU CEO Rob van den Bergh won't be able to leave the company without enduring a second shareholder revolt. After months of speculation about the company's future, since big shareholders derailed a seven billion bucks acquisition of IMS Health in November and cost the CEO his job (11/18/05 RBR #227), VNU announced yesterday that its supervisory and Executive Boards had accepted a 7.5 billion euros (USD 8.9 billion) from an equity consortium made up of AlpInvest Partners, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co. and Thomas H. Lee Partners. The buyout offer is for 28.75 euros per share, up from the group's initial indication that it would offer 28-28.50. But VNU also announced that it was foregoing its dividend, which was 0.55 euros a year ago, effectively negating the bid increase. Some of the big shareholders who'd nixed the IMS Health deal aren't satisfied with the price, despite assertions by van den Bergh that it fully values future growth and that alternative approaches will require significant investment by VNU to build up its businesses. Fidelity International, which owns over 15% of VNU, and Knight Vinke Asset Management, which owns 2%, both issued statements saying they are likely to oppose the deal. That would appear to make it impossible for the private equity buyout to achieve the required 95% shareholder approval. van den Bergh, however, noted that Fidelity said it was "unlikely to support the offer," which he said "means there is room for discussion." Knight Vinke, which led the previous shareholder revolt, is calling for VNU to sell off its Media Measurement unit, which includes the Nielsen Media Research TV ratings company, and its Business Information unit, which includes such US magazine titles as Billboard, AdWeek, Editor & Publisher and MediaWeek - - then focus on building up its Marketing Information unit, which includes ACNielsen. Knight Vinke also wants Eric Knight, its Chief Investment Officer, appointed to VNU's supervisory Board.

RBR observation: If you think being a big CEO is all golf, private airplanes and high society parties, just ask Rob van den Bergh how much fun he's been having over the past few months. VNU appears to have suspended its search for a successor, since he's now planning on staying on until closing of the buyout deal. But that assumes there will be a closing. He clearly faces an uphill climb to convince dissatisfied shareholders that the consortium's bid - - worth a bit over 10 billion bucks once you include debt assumption - - is the best deal that can be had. There was, after all, only one bidder for all of VNU. In one of yesterday's conference calls, VNU management said the most likely buyer for Nielsen Media Research alone would be WPP Group, but that CEO Martin Sorrel had already said that the expected price was too high for him to be interested. We wait to see if van den Bergh can turn this around and win approval of the buyout bid - - and if not, what's next for VNU?

Wall Street Media Business Report TM

Q4 Conference Calls
Salem posts modest gains in Q4
Same station revenue growth wasn't much, 1%, for Salem Communications in Q4, but CEO Ed Atsinger noted that it still beat the radio industry, which was down 3%. Including acquisitions, net broadcasting revenues were up 5.1% to 51.5 million. The quarter also saw the lack of one million in political advertising from a year before. Station operating income rose 5.1% in Q4 to 19.8 million. "The challenging environment for radio at the end of 2005 has continued into the first quarter of 2006 and is reflected in our first quarter guidance; looking further into 2006 and longer term, we are optimistic," said Atsinger. Salem is predicting that Q1 revenues will be up in the low single digits to 49-49.5 million. Salem also announced that it had concluded its annual renewal negotiations for national block programming which airs on its Christian Teaching and Talk stations. The company says in excess of 90% of the business was renewed, with price increases averaging approximately 5%.

VNU tops guidance
Even as it announced a deal to be sold to an equity consortium, VNU reported that its 2005 organic revenues were up 5% to 3.46 billion euros, at the low range of previous guidance. However, EBITDA rose 11% to 587 million euros, excluding one-time items, exceeding the company's guidance. Both figures are adjusted to reflect constant currencies. Outgoing CEO Rob van den Bergh expressed pleasure with the 2005 showing. The Media Measurement & Information unit was, as usual, the star performer, with double digit growth led by Nielsen Media Research in the US. Organic revenues rose 11% to 986 million euros and EBITDA rose 19% to 271 million euros. Marketing Information revenue was up 4% to 1.87 million euros, with EBITDA up 4% to 287 euros, led by gains in its Latin America and emerging markets operations. Business Information (publishing & trade shows) revenues rose 2% to 618 million euros and EBITDA gained 8% to 109 million euros, with US trade show revenues up 10% but little growth on the publishing side. However, ad revenues for the US trade magazines were up slightly in 2005 after four consecutive years of decline.

Ad Business Report TM

CC wins arbitration against XM: Channels to have ads
An arbitration panel has ruled that XM Satellite Radio will have to add advertising on four of its "commercial-free" music channels. This, after a legal embroglio with Clear Channel over its 1998 investment in XM which gives it control over four XM channels: Kiss, Sunny, Mix and Nashville. The 1998 deal was made before XM made its music channels completely commercial-free. XM will add four new commercial-free channels to assure subscribers will see no reduction in the total number of channels without ads.

We asked Rich Russo, JL Media's SVP/Director of Broadcast Services, if he would be interested in the new inventory option. "Well, they can't tell me who's listening to what channel yet, so it does me no good. The problem with these guys on both satellite companies is they're going to get people who are going to do Direct Response and see if they get a response. But the problem with that is if you're running all DR advertising, it f's up the content. Because DR advertising sucks. If you listen to Howard...I mean I don't know if I want to be hearing about Golden Palace dot com. That's the problem-they're going to take anything." Russo says Sirius is going to have the same problem with Stern. They can't tell buyers who is listening. "Or, are you going to be content with being a conceptual or DR entity? I'm not sure you want to do that." What may be next from the satcasters is block programming. "Are you going to let me buy an hour and let me do whatever I want with it?," speculates Russo. "Then you will start hearing infomercials on satellite? I have a feeling that's going to happen. Call it a client service channel. We're going to give you X amount of web blasts, we're going to give you promo spots. Channel 110-115 we're going to call 'client service.' We're going to run half hour to an hour of block programming. At 1PM on Channel 110 is Oreck Vacuum Cleaners. At 2:00 is Dr. Penis pills." Then they're going to generate value by, yes, charging the client for the infomercial, but also cross-channel it. Says Russo: "So the DJ on Channel Fred comes on and says, 'Hey, that was The Cure with Just Like Heaven. If you're looking for a cure for male pattern baldness, why don't you go to channel 115 at 2:00 because we're going to have the Bosley guys on. They're theoretically not running commercials on their commercial-free stations."

RBR observation: This may be what satellite will have to do to increase revenues. We believe Russo may have nailed it. Listeners may be able to put up with a mention an hour to tune to another channel to get more information about a product or service. It's a fine line though. To get mainstream advertisers on board, the satellite companies are going to have to pay for a ratings service.

Boyle analyses LIM one year later
In 2005, the radio industry largely participated in the inventory reduction effort, "Less Is More" (LIM) by Clear Channel. Media Monitors retained Wall Street analyst Jim Boyle to explore its database from the Industry's major markets to ascertain LIM's impact and other Industry trends in 2005.
| Three trends that were notable in 2005: |

BB&T branding campaign begins today
BB&T Corporation is launching a new campaign today to introduce its new brand positioning and "There's opportunity here" tag. The initiative will begin with new TV commercials airing during the Atlantic Coast Conference basketball tournament through Sunday and continuing throughout the BB&T footprint for the rest of the year. New radio spots and print will be included. Raleigh, N.C.-based Rockett Burkhead & Winslow is the AOR. The RBW team talked with employees from across BB&T to gauge attitudes, opinions, beliefs and the general culture of the company. Prior to the external launch, RBW created an internal branding awareness campaign for BB&T's 28,000 employees. Employees visited an internal online portal called "Opportunity Central" to learn about the BB&T brand and what "opportunity" means for them and for their clients. Training modules allowed employees to become "brand certified."

Media Business Report TM

Knight Ridder bids due today
The biggest newspaper sale in history is about to take place. Bids are due today for Knight Ridder, the nation's second-largest newspaper chain. Bids are expected to be in a range of 6-8 billion bucks, showing there's still plenty of interest in "old media" properties. The rumor mill has been focusing on three likely bidders: A combined bid by Gannett and MediaNews Group; the McClatchy Company; and an equity consortium headed by Thomas H. Lee Partners.

Media Markets & Money TM

Ohio noncom clears out of Michigan
When Cincinnati Public Radio acquired WVXU-FM Cincinnati from Xavier University, it also picked up a network of small-town affiliates scattered in towns in Ohio, Indiana and Michigan. It has succeeded in striking deals which will liquidate the Michigan portion of the net. WVXA-FM Rogers City went for 411K, WVXM-FM Manistee for 380K, and now we know WVXH-FM Harrison MI is fetching 200K. It'll go into a duopoly with Coltrace Communication's WUPS-FM Houghton Lake MI. Both are in the center of the main part of the state, far removed from Arbitron territory. The station, which occupies the 92.1 mHz portion of the dial is just on the proper side of the noncom/commercial divide to start selling advertising once the deal closes and the license is converted to that end.

Sun sets on Sunbury deal
Patrick Communications brokers Greg Guy and Larry Patrick tell us that the 3M agreement sending WMLP-AM & WVLY-FM from Milton-Lewisburg Broadcasters to Roger S. Haddon Jr.'s Sunbury Broadcasting Corp. has been brought to closing. The Talk/Soft AC stations are both licensed to Milton PA in the Sunbury-Selinsgrove-Lewisburg PA Arbitron market.

Washington Media Business Report TM

Stations get off with warnings on kiddie rules
The FCC's ongoing enforcement efforts regarding the rules on children's advertising has netted a few more victims in the television community, but in all cases, the violations were deemed mild that monetary penalties were not imposed. In two cases, at Viacom's WTOG-TV Tampa-St. Pete FL and Fox Television's WRBW-TV Orlanda FL, the failure was the airing of a commercial for Buzz Lightyear cereal during the Buzz Lightyear cartoon program. This is a no-no since children are considered to already have enough difficulty differentiating program material from commercial material without the two featuring the same basic cast. In both cases the error was acknowledged, inadvertent and dealt with simply with an admonishment. Two other stations accidentally slipped over the commercial time ceiling. Post-Newsweek's WPLG-TV Miami was 15 seconds over the limit in 2002 and Pacific and Southern's WTSP-TV Tampa-St. Pete was 30 seconds over the limit way back in 1997. The FCC called the violations "de minimis" and didn't even trouble itself to hit them with an admonishment.

Entertainment Media Business Report TM

Envision Radio adds
Lex & Terry Morning Show
The Lex & Terry Morning Radio Network has selected Envision Radio to syndicate its network going forward. Leaving Cox Radio Syndication, Lex & Terry targets men ages 18-49 with a daily lifestyle program offering advice, humor and on-air community. Hosts Lex Staley and Terry Jaymes create the show's original balance of "guy" advice about relationships and life with lots of listener interaction.

Transactions

41M KMXE-AM Los Angeles (Orange CA) from Radiovision Los Angeles LLC (Jeanette Tully) to LAA 1 LLC (Arturo Moreno). 2.05M escrow, balance in cash at closing less LMA payments. Includes non-compete. LMA 2/6/06. [File date 2/15/06.]

N/A WJBW-AM & WDJA-AM West Palm Beach (Jupiter, Delray Beach FL) from James Crystal Jupiter Inc./James Crystal Delray Beach Inc. (James C. Hilliard) to AM of Palm Beach Inc./Quality Broadcasting Corp. (Laurie Silvers, Mitchell Rubenstein). Buyers sued seller for default. Stations go Silvers, Rubenstein for forgiveness of debt and dismissal of litigation. LMA 2/1/06. [File date 2/14/06.]

Stock Talk

Radio stocks fall again; How low can they go?
Ouch! The Dow had an up day, rising 25 points to 11,006, but radio stocks had another down day. The Radio Index fell to its fifth straight year-to-date low, falling 0.663, or 0.4%, to 160.390. Salem fell 6.2% after failing to inspire The Street with its Q4 results and Q1 guidance. SBS was off 4.3% and is again flirting with penny stock territory. Entercom didn't suffer much damage from being sued by Eliot Spitzer, which had been expected, and declined 0.9%.

Radio Stocks

**Here's how stocks fared on Wednesday**
Company	Symbol	Close		Change	Company	Symbol	Close		Change
Arbitron	ARB		34.68	+0.14	Hearst-Argyle	HTV		23.41	+0.15
Beasley	BBGI		10.53	-0.26	Interep	IREP		0.25	unch
CBS CI. B	CBS		24.14	-0.22	Jeff-Pilot	JP		58.50	-0.53
CBS CI. A	CBSa		24.11	-0.24	Journal Comm.	JRN		12.01	+0.03
Citadel	CDL		11.61	-0.02	Radio One, Cl. A	ROIA		7.88	-0.11
Clear Channel	CCU		29.14	+0.14	Radio One, Cl. D	ROIAK		7.86	-0.15
Cox Radio	CXR		13.25	+0.14	Regent	RGCI		4.07	-0.05
Cumulus	CMLS		11.41	-0.11	Saga Commun.	SGA		9.00	-0.03
Disney	DIS		28.05	+0.04	Salem Comm.	SALM		13.11	-0.86
Emmis	EMMS		16.80	+0.14	Sirius Sat. Radio	SIRI		4.77	-0.15
Entercom	ETM		28.50	-0.26	Spanish Bcg.	SBSA		5.17	-0.23
Entravision	EVC		7.65	+0.02	Univision	UVN		32.71	-0.29
Fisher	FSCI		42.73	+0.15	Westwood One	WON		11.69	+0.84
Gaylord	GET		45.08	+0.89	XM Sat. Radio	XMSR		20.61	-0.74

Bounceback

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

It was with great interest that I read in last month's RBR/TVBR Magazine how excited a number of media brokers are that hedge funds have over the last couple of years become a great alternative source of funding for acquisitions. Then today (3/8/06 RBR 47) comes this sobering news: Stop 26 Riverbend's WGFT-AM/Campbell (Youngstown), WVKO-AM/Columbus, WRBP-FM/Hubbard (Youngstown), WVKO-FM/Johnstown (Columbus) and WASN-AM/Youngstown, OH to D.B. Zwirn & Co. per a bankruptcy court-ordered sale, for an undisclosed price. Bottom line: An entrepreneur who seeks funding from hedge funds, or any other unregulated, "non-traditional" funding source should do so only with their eyes wide-open. If you don't make your numbers, it is clear that you risk losing your business and your investment. That's the harsh reality.

Paul W. Robinson
Emerald City Radio Partners

Below the Fold

Wall Street Media Business Report
Salem posts modest gains
In Q4 revenue growth wasn't much...

VNU tops guidance
But tuff still being sold and not getting a dinner...

Ad Business Report
CC wins arbitration
Against XM: Channels to have ads...

Boyle analyses LIM
1 year later and noticed 3 trends that were notable...

Media Business Report
Knight Ridder bids due today
Biggest newspaper sale in history is about to take place...

Media Markets & Money
Sun sets on Sunbury deal
Agreement sending WMLP-AM & WVLY-FM closes...

Washington Media Business Report
Stations get off with warnings
On kiddie rules with the FCC's ongoing enforcement efforts...

Arbitrends

Stations for Sale

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(713) 789-4222 or e-mail
[email protected]

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More News Headlines

RTNDA counsel
to the Hall
Did you even know that there was a National Freedom of Information Act Hall of Fame? There is, and it elects new members every five years. One of broadcasting's own was in the 21-member class of 2006: Kathleen A. Kirby. She is an attorney for the Radio-Television News Directors Association.

Typo made
network switch
Amazingly, only one reader noticed and sent an email (kudos to Bill Pressly), and of course the PR folks at ABC called, but our story yesterday on Bob Woodruff's ongoing recovery incorrectly listed him as being employed by NBC in the story after the headline correctly placed him at ABC News.

RBR Radar 2006

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

Moody's disses Entercom dividend
Entercom cheered shareholders last month by announcing that it would start paying a quarterly dividend. But now Moody's has designated the company's outlook "negative"

RBR observation: Not a good sign seeing the word 'negative' pop up with radio companies.
03/08/06 RBR #47

Mandel comments more
on Nielsen debate
Point for radio: "I think you will see that there will be people, primarily in the cable business-and network television could do better than cable-stepping forward. And the same thing holds with radio. It is unconscionable to me in radio that if you're a program director you can get weekly numbers or in PPM you can get daily numbers...and we get quarterly?! They've got the same situation."
03/08/06 RBR #47

4A's insight; We're not encumbered by creative fighting for turf
One of the issues was the debate about re-bundling and creative control/ownership of media. Lately, some creative agencies have complained that the unbundling of media services over the past several years has led them to lose strategic ground. Read what the top guns had to say and their views in
03/07/06 RBR #46

Quiet steps toward dereg
not going unnoticed
Rep. Fred Upton (R-MI) did not exactly make national headlines however it didn't go unnoticed in San Antonio, where the San Antonio Business Journal (SABJ) has a front row seat for the actions of Clear Channel Communications. And SABJ has made it clear that another group has taken note: the watchdogs who helped derail, at least temporarily, the dereg efforts of the FCC back in 2003.

RBR observation: It remains to be seen what tack FCC Chairman Kevin Martin will take when he engages the Commission in the court-ordered redo of the 6/2/03 media ownership rulemaking, now that he is just days and/or weeks away from his first Republican majority. Look for loud noises from the FCC.
03/07/06 RBR #46

Like it or not,
the times they are a changing
At the AAAAs Media Conference Yahoo! COO Daniel Rosensweig said agencies and content providers need to rethink the rules of the business in order to be successful. Yahoo! sees a massive shift - - the consumer is now in charge.

RBR observation: Rosensweig's forecast caught our ear that the internet is going to be the center of all advertising. It's going to be connected to television, radio, and all devices. "We have the best chance we've ever had to actually create compelling environments, compelling messages and compelling marketing opportunities for these consumers." The key word is electronic as RBR editors viewed more execs with blackberry's sending and receiving content. Lots of thumbs got a workout.
03/06/06 RBR #45

Media honchos take
a look in the mirror
The Shape of the Modern Media Organization." Some of the biggest players in the biz participated: Jack Klues, Joe Uva, Irwin Gotlieb, Mark Rosenthal, Charlie Rutman, and David Verklin - Hone of the most compelling questions was - 'How happy are you with the way your shops are set up?' Most were happy, but a few good points were made -

RBR observation: Key at the agency level is the hard fought competition and the other C called Consolidation has occurred. Radio and TV are not the only businesses to see it happen but it has also happened at the agency level. Right now agencies face the problem of running these mega companies with One Big Long name with many agencies under one umbrella and many air miles being racked up by the CEO's. They are facing competition between one another as their landscape is also changing fast and quickly realizing that more - Collaboration - is needed between companies than Competition.
03/06/06 RBR #45

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