Saga free cash flow up, other numbers down


It’s always nice to have at least one pleasant number to point to, and for Saga Communications in Q2 2008, it was free cash flow, up 5.5% to $5.9M. Other key figures required red ink, however, including a 2.8% dip in net operating revenue to $37.3M, and a 12% dip in operating income to $7.8M. Honcho Ed Christian observed, “It’s just not a fun time to be in business in the United States, unless you’re an exporter.” He said that while economists may not yet be ready to call the current economy a recession, consumers certainly are, and he believes the consumers. He expects broadcasting to bounce back strong, like it always does – he just isn’t sure when that will happen.

Christian had a number of prescriptions for the industry: He believes each station should “create” its own geography, not let some research company come in and dictate what it is – that’s what clients do, and broadcasters must do the same. He thinks the lateness of flight purchases – he called the buys “just in time” – is not a sign of the weak economy but is in fact more of a paradigm shift. It’s just how companies will prefer to advertise going ahead, even after the economy stabilizes.

Christian believes there is no imminent danger of a performance royalty being established by Congress. First off, it isn’t currently in session. But there’s much more. “This is a greed attempt by the RIAA — I think this is becoming more and more apparent.” The fact that the companies, not musicians, will get at least 50% of the proceeds makes “performance” an inapplicable word, in his view, and he believes Congress will eventually see through the RIAA’s scheme.

Christian believes private equity players will snap up CBS radio stations, and that the eye-to-eye relationship one can maintain with clients is the key reason small market business is not suffering to the same degree as large market business.

Does he believe in his own company? In a word, yes. He’s buying back Saga stock because he sees it as an investment in an outstanding property at a bargain price.