Employee Pricing for Radio Stations

Have you noticed how many radio stations are on the market right now and how few are selling -- even below value.

I mention this because the other day CBS President Les Moonves said publicly that someday the company might sell its radio division. A lot of folks reacted to this comment. Moonves pointed out that the free cash flow advantage that CBS Radio is contributing to the corporation is not lost on CEO Sumner Redstone.

What is significant and getting a lot less attention, however, is how many companies are trying to sell radio stations with no apparent luck at all.

CBS is one of them -- vowing to sell off its smaller markets and keep the large ones -- for now.

Citadel is another -- they're reportedly looking to relieve themselves of some of their stations in their never ending battle to configure a radio group that actually makes money.

I'm sure Clear Channel's new owners would like to trim and snip here and there.

Privately, other radio operators are looking to sell down assets because this is a far different world than the heady days of consolidation (post-1996). Radio is literally a dying industry. To put it kindly, its available listeners are getting older every day and the new blood that radio needs to be a growth business went missing with the next generation. Gen Y moved on to the Internet, iPods, mobile devices and social networks. Their time is consumed with media -- but not so much with terrestrial radio.

Radio revenues decline every month and have done so for 17 consecutive months. There's no end in sight for this financial dilemma.

The industry frets over satellite radio (no threat at all, really). Conducts a public fight over the People Meter and hangs on to the diary system that has been under reporting listening levels for decades. (By the way, the big PPM stink Hispanic broadcasters are making by pressuring politically ambitious politicians in New York City is another black eye on radio. If I'm an advertiser or agency I'm getting real nervous right now about the reliability of the People Meter).

So radio has peaked and is on its decline. I will say this for those of you who may be new to my pieces -- it is a sad time for me because radio people are the most talented, hardworking and loyal employees who have taken the brunt of consolidators' hubris as well as paying directly for their CEOs mistakes with their careers. They are working for some of the most block headed, clueless owners in any industry. What a pity.

With all the problems the industry is experiencing, it seems as if everything is for sale in radio right now.

And at the high prices sellers are demanding, there are no buyers -- you may have noticed.

A few companies are doing minor acquisitions -- these are the smaller companies who apparently think there is still a future in the terrestrial radio business. Don't get me wrong. I agree with Les Moonves -- radio still has a lot of listeners and pumps a lot of cash flow, but the growth element is gone. No next generation.

It is very possible that the geniuses who put together these radio clusters city by city may soon be eating them -- financially, that is. In other words, they may have little option other than to run the stations, take the cash flow and avoid selling the assets at a devalued price.

Luckily most brokers who made their money the first time around in consolidation are well off and living in Florida, California or the desert. They'll be fine.

Two things:

1. If radio groups are going to have to keep the stations and run them, then they had better learn a lot more about generational media. True, they can't launch any format that will attract lots of Gen Yers, but they risk losing the interest of their older, "available" listeners through poor programming.

2. If owners decide to sell, they'll need what is called "value pricing" hoping that there will be a few more suckers or investment buyout firms (maybe they are the same thing, I don't know) to rollup a few groups into one giant entity. That prospect may be good for investment banks, but remember my warning on mastering generational media -- I'm not just speaking about students. This also applies to Gen X and baby boomers.

So, what to do?

Can radio groups do like the auto industry and offer "employee discounts" and let station people band together to buy a station or two?

Maybe the only way to unload radio stations is to do the unthinkable -- sell them to the people who actually know how to run them. You won't have any trouble finding them. They're probably working for you right now. If you'll just price them fairly and hold the paper to help with the financing -- it's as good as done. Damn, and I won't get any commission for this idea, either. (Speaking of that -- anyone remember the days when the person who introduced the buyer and seller of radio stations to each other were paid an "introduction fee" -- usually in the millions of dollars?)

Now, you know what I'm going to say (again) -- terrestrial radio alone is never going to be a growth industry so who would want to buy a radio station?

Someone who knows that:

1. Radio works best locally.

2. Radio people who care and who can make local decisions will run the best radio operations.

3. Terrestrial radio alone has no future, but franchises started on AM or FM may. For exam[;e, all-news is a brand. WINS 1010 or KYW 1060 are brands that don't need to have terrestrial radio as their main delivery system. Same is true of thousands of station brands in all kinds of markets. There know that there may be intelligent life beyond the transmitter and tower for radio.

4. Mobile content, Internet streaming and podcasting are the tools of growth from which radio can emerge as a new media business with real growth potential.

5. Local radio in small to medium markets have the best chance of paying returns on investment.

The dictionary says there is no such word as "un-consolidation" or "de-consolidation" and maybe the idea of selling radio stations -- the ones big companies are wishing they could sell -- to employees is a stupid idea. It wouldn't be my first and I'm sure will not be my last.

But, it's not a terrible concept, either.

So be warned that one guaranteed way to give terrestrial radio a future in the digital age is to put stations back in the hands of local employees who by instinct alone know the way to the future.

If this helps big corporations make a future financial burden all the way, all the better.

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