Westwood One shareholders will vote June 26th on a number of issues at a special shareholders meeting, including the authorization of a large number of new shares, most of which would cover the commitments already made to The Gores Group to recapitalize the company, and a 1-for-200 reverse split. Even after covering The Gores Group shares, WW1 will have more new shares available and it is rumored that the company is in talks to hire Thomas Weisel to sell shares in a private placement to raise more capital. Westwood One did not respond by deadline.
To aid that process, it appears WW1 made a decision to get (on 3/12 it signed a two-year extension with the NFL) and leverage NFL rights. The assumption is that the NFL has big marquee value to potential investors for considering a secondary offering. The pitch, we hear, is they have a two-year deal locked with the NFL; they have contracts with the teams and they have a stranglehold on the radio rights.
This explains their actions of late: Doing a bit of a kamikaze mission, putting all of their eggs in the NFL basket. In addition to the Sunday Night, Monday Night and Playoff Package games, they are rumored to have overpaid paid two to three times for the Sunday afternoon games—incremental inventory on the books for the most part.
This also explains why they partnered with Sports USA and why they got very aggressive against Compass Media Networks—almost in an effort to lock them out of the marketplace from an affiliate and ad sales perspective. But Compass does have secured rights to its slate of games, so this was not able to be done.
RBR/TVBR observation: In the short terms this may be a good strategy to get more investment dollars. WW1 CEO Rod Sherwood is savvy and has done a great job for the company so far in righting the ship. However, because they may have overpaid (20+ million for rights fees alone, not including expenses, from what we’ve heard) for the NFL and the marketplace is what it is. NFL radio ad spend is very tied into network television, and the upfront is bit stalled right now/questionable as to spend—especially automotive. We also wonder about Metro Traffic, which is tied into spot radio. The end result may be a few programs jettisoned. Their RADAR networks could also take a hit because they are compensation-based. The season starts 8/9 with the Hall of Fame game, so hopefully Westwood has been able to score some good ad deals to support the 125 games that they are scheduled to air.
