RBR's Daily Morning Epaper

Volume 23, Issue 93, Jim Carnegie, Editor & Publisher

Thursday Morning May 11th, 2006

Radio News ®

Cumulus sets mega stock buy-back
This is reminiscent of what Emmis did last year when it bought back what was then 39% of all outstanding stock. Cumulus Media will conduct a Dutch auction, beginning next week, to buy up to 11.5 million shares (24.1% of Class A) of its stock within a range of 11.00-12.50. It will also buy back some Class B shares from Bank of America Capital Investors, which was one of its founding investors nine years ago, so the total buyback could hit 200 million bucks and cash out around 30% of the stock that Cumulus has outstanding. In his quarterly conference call, Cumulus CEO Lew Dickey was careful to note that the BofA fund is not cashing out entirely, but is selling only a minority of its position. He insisted that buying back stock is the best use of the company's cash stockpiles. But under questioning by analysts, Lew said Cumulus and Cumulus Media Partners, the public/private entity that bought Susquehanna Radio, both have mechanisms in place to buy desirable acquisitions, should any become available, and that the capacity to make accretive acquisitions won't be diminished by the stock buyback. So no, don't rule Cumulus out of the bidding for anything that CBS or Citadel puts on the market.

RBR observation: With a cap of 12.50 per share, only an 8.1% premium to Tuesday's closing price, it remains to be seen how much stockholder interest there will be in this tender. But then, you can never tell what shareholders will do. We remember a few years ago that some shareholders of Heftel Broadcasting actually tendered shares to Clear Channel for less than what was by then the price they could have gotten on the public market. Go figure...

Inventories down 5.4% in April
Harris Nesbitt analyst Lee Westerfield finds that commercial clutter was down again in April, with total radio ad time in the top 10 markets down 5.4%. That's tracking well, with year-over-year reductions for the past two months dropping to the 5-6% range, from 8-9% December-February, to reflect the one year anniversary of Clear Channel's Less is More initiative. Westfield is impressed that yield-per-minute is rising, but he sees no sign up radio revenue growth improving, so he has reduced his industry estimates for 2006. After seeing radio companies, as a whole, underperform in Q1, Westerfield sees the same thing happening in Q2. His estimate now is that Q3 and Q4 will be up only 2% and 3% respectively, dropping his estimate one point for each quarter.

Will Congress finish Telecom in a back room?
The rewrites of the Telecom bills taking place in the Senate and House have all the elements you need for interminable delays. Start with a highly technical and complex industry which seemingly experiences structural revolution faster than Ted Stevens (R-AK) can schedule a hearing to talk about it. Add in competing, well-heeled industries buying ads on the public airwaves and working the lobbies of Washington. Throw in another gaggle of strange bedfellows agitating for a regulatory structure that will assure that their message, whether it will be from the far left, the far right or anywhere in between, can still be heard. Finally, factor in a hot mid-term election looming closer every day, with numerous incumbents in jeopardy of having to find a real job like the rest of us. These factors have odds makers less than certain that Stevens and his counterpart in the House, Joe Barton (R-TX) can turn the bills into legislation before the 110th Congress is sworn in. All of which makes the comments of influential House Subcommittee on Telecommunications and the Internet Chairman Fred Upton (R-MI) mighty interesting. According to the Austin American-Statesman, he told a Technology Daily forum that all he needs is something, anything, from the Senate. Then the details can be worked out beyond the glare of C-SPAN cameras in conference committee. Common Cause VP Celia Wexler told the Statesman that it was "appalling" to hear a member of Congress outright admit to such a plan.

RBR observation: Remember the national broadcast television audience reach cap? Telecom 1996 took it from 25% to 35%. Michael Powell tried to put it at 45%. Out of all the elements in the 6/2/03 ownership rulemaking, that particular item got them howling on both sides of the aisle in both houses of Congress. Congress said no way, it stays at 35%. An unrelated bill went to conference committee, and suddenly, the national cap, as a matter of legislative law rather than agency rule, was 39%. Funny number, 39%. 25%, 35%, 45%...39%? There was at no time any public discussion of a 39% cap. But do you think there was any lobbyist discussion? It conveniently spared Viacom and News Corp. of having to shed some stations. Wild things go on in those conference committees.

Radio in the black north of the border
Whatever the ills of US radio, they seem to have been quarantined or otherwise arrested at the Canadian border. According to the Toronto Globe and Mail, commercial radio in 2005 enjoyed a 24% gain in pre-tax profit to 277M, on a raw revenue gain of 9% to 1.3B. The bulk of the business, as in the US, goes to the FM side, which raked in 1B+ overall, with a 20% gain in pre-tax revenue to 263.3M. The AM side experienced a loss in gross of 1% to 300.4M, but actually increased its pre-tax profit nevertheless, going from 3.4M to 13.6M, thanks to savings in the expense ledger tracing back the National Hockey League 2004-2005 labor dispute. Still, commercial radio companies are petitioning the Canadian government for a round of dereg, focusing on upping local cluster caps and easing of rules forcing them to air a certain amount of Canadian programming. They are citing new competition from iPods, the Internet and satellite radio as justification for the changes.

Rupert and Hillary, together again
The general press is getting all excited, flustered and confused because Rupert Murdoch, seen as an arch-conservative, is hosting a political fund-raiser for Sen. Hillary Clinton (D-NY). Readers of RBR/TVBR know that Murdoch and News Corp. have long nurtured relationships with Democrats, even more so than with Republicans. While Fox News Channel is viewed by many on the left as a right-wing mouthpiece - not to mention what they think of the New York Post - we have run several stories on how New Corporation executives tend to contribute more money to Democratic campaigns, than to the GOP. Murdoch himself has contributed campaign cash to Sen. Chuck Schumer (D-NY) and other News Corp. big-wigs have previously given cash to Sen. Clinton.

RBR observation: It always pays to have friends on both sides of the political sense. Rupert may not need to court Republicans too much, since they love Fox News Channel. That may explain why he and other company officials have concentrated on supporting key Democrats, while not forgetting their Republican friends. The key seems to be backing winners. We do not recall Murdoch or others at News Corp. contributing to people who aren't likely to win and hold power. By the way, kudos to new NAB CEO David Rehr, whose reputation puts him on the Republican side of the Washington power struggle, for his efforts to reinforce relationships for the organization on the Democratic side. It looks like the next two years will be so near a 50/50 split power-wise that it will be important to have friends on all sides.

Wall Street Media Business Report TM

Q1 2006 Conference Calls
Local leads, but national recovering at Cumulus
Q1 revenue growth of 4.4% to 75.3 million beat guidance of 3% for Cumulus Media. The rounds of applause go to the company's local sellers, as Cumulus is still recovering from the big loss of Home Depot advertising on the national side last year. In his conference call, CEO Lew Dickey noted that local was up 5.1%, while national fell 1%. However, national would have been up 7.6% if you exclude Home Depot. For Q2, local is pacing up 3%, while national is down 9%.

Ad Business Report TM

Julie Roehm on online ad auction test
Wal-Mart VP/Marketing Communications Julie Roehm spoke to RBR/TVBR regarding the RFP and call for an online auction system to buy and sell TV ads unveiled at the ANA Management Conference this week (5/10/06 TVBR #92):

"I started this thing over a year ago, and it's really not about any singular company, I mean I think the headlines are making too much of this being any Wal-Mart kind of thing. This is really kind of an industry idea, and the fact is while I started it, what has happened is there has been a lot of other companies who have been working with me over the past 14 months, as well as agencies. At the ANA, I didn't present, but I was on the panel for the Q&A. Ann Bybee from Lexus presented; Steve Grubbs from PHD presented; and we had Howard Rosenberg from Ebay.

So the point of this is there are a lot of companies who are seeing interest and think that it's time to test this idea. We all think that it has merit and that it potentially could garner more savings and more efficient buying for people, but we won't know until we test it. And what was great about yesterday was when we asked for people who thought it was either a good idea or an interesting idea, all but three people raised their hand. And it was a room of well over 100 people. So what that signifies, I think, to the group of us is there are a lot of companies who are ready to try something. It's not about changing the whole upfront, it's about biting off a piece that we could test - whether it's scatter or the digital market or some other piece of the television market. It's about trying to create a test with a lot of advertisers, because there has to be a huge number of advertisers involved - like 100. That would be great - we want to get a smattering of companies from multiple industries so that when you get test results you're getting it from a lot of different perspectives and points of view. The needs that retail and CPG and auto and pharmacy have, typically are different - they're buying patterns tend to be slightly different. Having a good mix of these industries participating is really what's going to be important to be able to evaluate this properly.

Naturally what this is about is trying to get the ANA's endorsement, and I think we're really close to that now. Once that happens, the ANA will set up a steering committee and try to get a list of interested companies. Just since yesterday we've had many calls from a lot of companies who said they were really interested in participating. We had one company that said they were interested in putting as much as 25M into the test. And I think they were serious [she can't tell us who, but it may be eBay]. It is one of those things where I think there is some serious interest out there and I just think that's exciting, to be able to test something different. And you learn little by little - you move, you change and you see what happens from there. I don't think it's scary - it's a controlled test."

The whole idea of an online ad buying/auction system - does it cut out any function of the media agency? "I don't think it cuts anybody out. I think it potentially changes the expertise level or the skill set at the agencies, but some of the biggest proponents for it are agency people on our panel - Ray Warren at Carat, Steve Grubbs at PHD. Bill Cella from Magna Global wasn't there but he supports it. I don't think they would be standing up and cheering this on if they felt like it was going to be hurting their business."

Entrex launches national campaign
The global source to find, research, track, manage and trade interests in private companies, announces the launch of a 4.5 million national campaign with Global Media Fund, Inc. This partnership will provide Entrex with a comprehensive nationwide media campaign. The agreement calls for the regular distribution of feature articles to over 10,000 newspapers, news and wire services, more than 2,000 magazines and to more than 6,000 radio stations across the nation.

Media Business Report TM

Double O does double market deal
Terry Bond's Double O Radio is a mid- to small-market radio group that is on the move. According to broker Bill Lytle of Media Services Group, it has a deal with Bick Broadcasting that will bring it into two new Midwest markets. It's getting KHMO-AM, KICK-FM, KPCR-AM & KRRY-FM in Quincy IL-Hannibal MO, which, although an Arbitron-free zone, gets TV ratings from Nielsen and radio ratings from Eastlan; and KSIS-AM, KSDK-FM & KXKX-FM in Sedalia MO, which is squarely in unrated territory about halfway between the state capitol in Jefferson City and Kansas City, while being close to neither. Bond indicated that Bick's Bud Janes would be staying on to operate the clusters. According to documents filed with the FCC, the price tag is 10.5M cash. An LMA kicks in 6/1/06. The seller also agrees to pursue a CP which will upgrade KPCR-AM and move it from Bowling Green MO to Quincy IL. This marks a territorial expansion for Double O which has also acquired stations in New York, South Carolina and Texas.

Washington Media Business Report TM

Auction No. 62 sticks proceed
The FCC has cleared a number of auction winners to apply for their CPs and start building their stations. A gentleman known to his mom as Benjamin L. Homel, but better known to the radio community as Randy Michaels, has the go-ahead for four of them under the banner of his Radioactive license company. World Radio Link also picked up a quartet. Final payment is due 5/22/06 with a grace period extending the drop dead date to 6/6/06.

Here are the lucky winners. A&J Media LLC in Indian Wells CA; ABC Media in Columbia City FL; Ace Radio Corp. in Coalinga CA, Jenner CA & Gallup NM; Airen Broadcasting in Wells NV; ASRADIO in Glade Spring VA; William W. Brown in Hodge LA; Sheila Callahan and Friends in Boulder MT; Cedar Street Holdings in Reseau NM; Cochise Broadcasting in Tuba City AZ & Casper WY; Cumulus Licensing in Brandon SD; Dr. Pepper Pepsi Cola Bottling Co. of Dyersburg in Tiptonville TN; Equinox Broadcasting in Windsor NY; Fields Pond Group in Sunriver OR; Daniel W. Finch Jr. in Arnoldsburg WV; Halfway Creek Broadcasting in Calhan CO; Porter Hogan in Hailey ID; Horton Broadcasting Company in Lynn Haven FL & Satellite Beach FL; Jackman Holding Company in Stratford NH; Kansas City Catholic Network in Ravenwood MO; Matthew L. Kietelsen in Belview MN; KM Communications in Breckenridge TX & Centerville TX; L.M. Communications of Kentucky in Westwood KY; LiveAir Communications in Old Forge NY; Lovcom in Clearmont WY; Matias C. Martinez in Las Vegas NM; Milner Broadcasting Company in Gilman IL; Mini Me Media in Flasher ND; MJFM in Viola AR; Charles R. Nelson in Pilot Rock OR; Nicolet Broadcasting in Sister Bay WI; Lorenz E. Proetti in Silverton CO & Dubois WY; Radioactive in Midland MD, Little Valley NY, Minerva NY & Burnsville WV; Robert R. Rule in Wright WY; Shamrock Communications in Livingston Manor NY; Shirk-Mays in Kahului HI; South Sound Broadcasting in South Bend WA; Louis Vitali in Machias ME; World Radio Link in Vienna GA, Cuba MO, Cannon Ball ND & Farmington Twp PA; Randall C. Wright in Eldon MO; and Kevin J. Youngers in Burlington CO, Walden CO.

Entertainment Media Business Report TM

Stern says "No" to terrestrial radio
Made it clear yesterday he is staying put on satellite radio and has no plans to simulcast his Sirius show back on terrestrial radio. This, after admitting three offers have been made (5/10/06 RBR #92): "I'm very flattered terrestrial radio can't let go of me. But I would throw up if I had to go back. I'm never going back to commercial-filled, horrible terrestrial radio...I'd be the biggest sell-out if he did something like that." We will see...

Transactions

1.2M KUHL-AM & KTMO-AM Santa Maria-Lompoc CA (Santa Maria, Lompoc CA) from Mapleton Communications LLC (Adam Nathanson) to Knight Broadcasting Inc. (Sandra C. Knight, Shawn T. Knight). 60K escrow, balance in cash at closing. Duopoly with KSYV-FM Solvang CA. [File date 4/17/06.]

36K FM CP Lake Odessa MI from Great Lake Community Broadcasting Inc. (James J. McCluskey) to Edgewater Broadcasting (Clark Parrish, Diana S. Atkin, Earl Williamson, Dennis Clounch, Gary Phelps). 10L down payment, balance in cash at closing. CP is for Class A on 89.7 mHz with 400 w @ 131'. [File date 4/18/06.]

Stock Talk

Fed rate move leaves stocks mixed
A quarter-point rate hike by the Fed, the 16th in a row, wasn't unexpected, but still produced a mixed day on Wall Street. The Dow Industrials edged up three points to 11,643, but other major indices were slightly lower. The Radio Index rose 0.430, or 0.3%, to 163.324. Cumulus shot up 4.3% after announcing a big stock buyback. Disney gained 1.8%, SBS rose 1.3% and Citadel gained 1%.

Radio Stocks

**Here's how stocks fared on Wednesday**
Company	Symbol	Close		Change	Company	Symbol	Close		Change
Arbitron	ARB		36.32	-0.38	Hearst-Argyle	HTV		23.25	+0.10
Beasley	BBGI		8.16	-0.18	Journal Comm.	JRN		11.86	+0.02
CBS CI. B	CBS		26.30	-0.37	Lincoln Natl.	LNC		58.60	+0.28
CBS CI. A	CBSa		26.30	-0.38	Radio One, Cl. A	ROIA		8.47	+0.03
Citadel	CDL		10.65	+0.11	Radio One, Cl. D	ROIAK		8.47	+0.01
Clear Channel	CCU		30.00	unch	Regent	RGCI		4.25	-0.05
Cox Radio	CXR		15.05	+0.06	Saga Commun.	SGA		9.34	-0.01
Cumulus	CMLS		12.06	+0.50	Salem Comm.	SALM		15.23	-0.09
Disney	DIS		30.11	+0.53	Sirius Sat. Radio	SIRI		4.54	-0.09
Emmis	EMMS		16.25	+0.07	Spanish Bcg.	SBSA		5.54	+0.07
Entercom	ETM		29.30	-0.04	Univision	UVN		35.69	-0.14
Entravision	EVC		8.78	-0.03	Westwood One	WON		9.13	+0.02
Fisher	FSCI		43.02	-0.53	XM Sat. Radio	XMSR		17.47	-0.73
Gaylord	GET		47.59	-0.41	-	-	-	-	-

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]

So minority and female ownership is down and dropping (5/8/06 RBR #90). Let's not forget new entrants as well. So let's see...we do away with minority tax certificates, we change the ownership rules, we refuse to let banks take a collateral position on licenses, we do away with open/competitive filings on new allocations (not to mention the loss of comparative hearings and preference points), all new allocations get thrown into an auction where only the deepest pockets can get the overly-priced CPs, the FCC has never been able to understand the value of pioneer preferences when applying for new allocations, LPFM is allocated to non-commercial status only, and everybody wonders why there aren't any minorities in ownership? All problems come wrapped in their solutions.
Brett Miller
MCH Enterprises, Inc.

Below the Fold

Wall Street Media Business Report
Local leads, but national
Recovering at Cumulus rounds of applause go to the company's local sellers...

Media Markets & Money
Double O does double
Market deal with Bick Broadcasting...

Ad Business Report
Julie Roehm on online ad auction test
Speaks One on One with RBR says It is really not about any singular company...

Washington Media Business Report
Auction No. 62 sticks proceed
FCC has cleared a number of auction winners and they are...

Stations for Sale

25,000w FM Station
Low price opportunity, profitable station w. huge upside. Small town, NEast by interstate, county seat.
595K. Lv. msg. @ 781-848-4201 or
email [email protected]

More News Headlines

MBC in the home stretch
The Museum of Broadcast Communications (MBC) is very close to raising all of the cash needed to complete and outfit its new building in Chicago. In fact, founder and President Bruce DuMont tells RBR/TVBR that enough cash has been raised to complete the building – 27.6 million dollars – but that another 3.7 million is still needed to outfit and install all of the exhibits.

RBR Radar 2006

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

Wal-Mart, others issue RFP for online ad auction system
A group of advertisers led by Wal-Mart VP/Marketing Communications Julie Roehm issued a call for advertisers to contribute 50 million for a test of an online auction system to buy and sell TV ads. The initiative is also being backed by Hewlett-Packard, Masterfoods, Microsoft, Philips and Lexus.

RBR observation: The new beginning of media sales is here get used to it but more importantly understand it as another form of accountability. Key with the systems there are a few out there as RBR reported in our February issue of Solutions Magazine. The system that gets there first and right wins. "Technology waits for no one."
05/10/06 RBR #92

The Debate Continues
Less Clear Channel is More for radio
It is sad to see people, like Scott Winchell, who can get so brainwashed by the powers that be at Clear Channel.� Like I stated in my original commentary, "there is nothing wrong with being progressive in an ever-changing world." However,�what�Mr. Winchell doesn't realize is that Clear Channel's�primary objective�is to satisfy�Wall Street and its stock holders. Read if you have a bounce back send along and Share in the Voice.
05/10/06 RBR #92

California legislator targets junk food ads
A bill which would attempt to tie audience demographics to alcohol advertising, is back with one of her own. This time the target is makers of nutritionally-challenged food blamed for the state's childhood obesity program. A tax on TV ads for such food is part of the bill.

RBR observation: Is there any ill in America for which TV is not to blame? But keep your helmets on but not strapped to tight.
05/10/06 RBR #92

Smulyan is saying bye-bye to Wall Street pressures
There had been widespread speculation that if Jeff Smulyan didn't win the bidding for the Washington Nationals baseball team, he might turn his personal resources toward taking Emmis Communications private. Sure enough, the Nationals were sold to another bidder last week and before the stock market opened on Monday, Smulyan had announced a bid to buy out Emmis' public shareholders (RBR/TVBR Bulletin 5/8/06). Smulyan's offer is to buy the 83% of Emmis' stock that he doesn't already own for 15.25 per share.

RBR observation: Smulyan is not saying how he will fund the nearly half-billion dollars stock buy. He does not have to that is the beauty of being a private company. His announcement did say that his new company is getting financial advice from The Blackstone Group, Banc of America Securities and Deutsche Bank Securities. Its legal advisor is Paul, Weiss, Rifkind, Wharton & Garrison. So, who's next? In the depressing Wall Street environment that they have had to endure for the past couple of years, no doubt nearly every public broadcasting group CEO would love to be able to take his/her company private and escape The Street's quarter-to-quarter scrutiny and demands. Most likely candidates are Hearst-Argyle Television and Cox Radio, whose majority shareholders, Hearst Corp. and Cox Enterprises, respectively have ready access to plenty of cash to do such a deal.
05/09/06 RBR #91

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