Entercom is selling for a whopping 70 cents. Market cap a paltry $26.5 million.
Cumulus $1.68 a share. Market cap $71.38 million.
Salem 88 cents. Cap $20.83 million.
Emmis 60 cents. Market cap $21.82 million.
Regent 38 cents. Market cap $15.14 million.
Radio One 9 cents. Market cap $8.86 million.
Beasley $1.50 with a market cap of $35.61 million.
Spanish 19 cents. Cap $12.31 million.
Saga $4.92. Market cap $96.83 million.
And the winner is ...
Cox trading Friday at $6.19 with a market cap of $530.62 million.
God, that was ugly!
It's hard to believe that radio stocks are basically penny stocks and the super achievers still can't get anywhere near $10 a share. This in spite of the fact that some radio stocks were close to $100 a share in the peak following consolidation when even the bad radio groups had good stock prices.
We've talked endless times about what led to the demise of radio -- with listeners, advertisers and the next generation, but in the end the question will be is the radio industry as we know it going bankrupt?
Wall Street seems to be saying it.
Potential buyers seem to be saying it because there are a ton of radio stations for sale right now and no buyers are willing to pay anywhere near the multiples the sellers want.
Refer back to the market cap numbers above and you'll think, Entercom is worth $26 million. Well, that's just not so. The $26 million is the public value. Private value is determined by what buyers are willing to pay. Of course, lately, there is no reference point -- no comps.
I had an interesting talk Friday with one of radio's brightest, Larry Rosin of Edison Research. Larry had a few controversial and stimulating ideas I'd like to share with you that may benefit a declining radio industry.
1. Drop the foreign cap. Currently investors from other countries cannot own more than 20% of U.S. stations.
This is a great idea. That cap means nothing. It does not present a security danger if a wealthy Mexican businessman wants to buy heavily into U.S. media. Maybe it harms the ego, but I'll take the money. It's safe to say large sums of investment capital to help radio reinvent itself is not coming from the public trough. Looking outside the U.S. is prudent under such circumstances.
2. Put a sunset limitation on the AM band. Say, five years to switch radio's best AM brands to FM.
Larry's idea helps reduce competition for listeners and advertisers because it takes an entire band of programming and forces it onto FM. I'm sure this will rile a lot of people. Personally, I think five years from now will be too late. You won't want to think about what radio will be like then, but if you want a preview just look at it now.
Think back to when mega stations like WABC Music Radio in New York -- a great and powerful brand -- died on the vine because AM couldn't figure out how to move it to their one FM station (remember, you could only own an AM and FM in each market -- and a max of seven AMs and seven FMs total).
For some reason radio thinks listeners should come to where they live rather than where the listener lives. By the way, there is no shortage of examples such as WABC. What's CBS' excuse for not taking its money rich all news AM stations and putting them on FM. Only Bonneville seems to get this message as it has migrated some AM formats to FM.
Same problem exists with FM.
In a few years, the FM numbers will be even more watered down and any remaining good brands will die on that frequency while listeners embrace Internet streams, podcasting and mobile entertainment. Of course, that's not new radio -- or is it?
Radio has a long history of blind ambition. When HD radio was developed, HD failed because for one thing it wasn't really about the fidelity (boy, that's for sure). It was about creating even more competition for itself. Thousands of additional stations to help operators commit operational suicide by competing with the same advertising pool.
What don't they understand?
Are they not listening to their prophet The Honorable John Hogan whose career will someday be remembered for his famous words "less is more". More stations mean more competition for fewer advertising dollars. That's plain nuts. And if you consider the growing competition from new media, it's even crazier.
Without capital, the radio industry will be -- well, what you have today. A carrier of syndicated or packaged regional programming -- very cheap, not very local. That's going to kill radio. Watch.
Some think that if a few radio groups go bankrupt, then they'll be forced to sell their stations presumably to people who will know how to run local radio.
But radio is all about free cash flow. There's nothing wrong with the way radio generates its revenue. The problem is bigger than that.
Debt service.
All those champagne corks that popped back in the late Nineties to celebrate yet another station or cluster acquisition was premature as it turned out. No one seemed to care at the time that the prospect of servicing the debt on borrowed money to make their acquisitions was impossible.
One broker friend of mine called it from day one. But to say it -- to dare to suggest that these cash rich radio stations one day would not be able to handle their debt was sacrilegious. I know because I said it.
Look today.
Groups obviously worth billions or hundreds of millions are capped in the relatively low millions with share prices from hell and no realistic promise of turning it around without the next generation that bolted for new media.
And if you're hoping you'll be able to put a group together and buy some of these distressed stations some day, be careful what you wish for. Yes, the prices will continue to go down but the money you'll need to buy this Model T technology will be too risky.
I think I have a better idea -- admittedly a radical suggestion -- that can help group owners where they are weak (programming, sales and operations -- just about everything) and at the same time make it possible for individuals or small groups of owner/operator/investors to get their hands on radio stations only a few monopolies can currently own.
I'll write about that very soon.
For now, remember this: I don't think radio will be bankrupted. You probably don't either.
But we don't get a vote.
As of today, Wall Street is playing with real money and they are voting nay to radio every day.
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