CBS gets two FMs that the Department of Justice is forcing Clear Channel to sell (Spanish KLOL and AC KHMX in Houston).
Clear Channel gets KBKS, Seattle, WQSR, Baltimore, KXJM/KLTH, Portland, OR and KQJK, Sacramento.
The deal must be approved by the FCC and DOJ -- no problem there and no cash changed hands.
I repeat, no cash was involved so the tax benefits were there for both groups.
This is about the best you're going to see for a while in a declining radio industry. Trades are better than accepting multiples lower than sellers are asking. And while CBS may position the move as being the first step in relieving themselves of some smaller market stations, don't hold your breath waiting for the second step.
CBS' Viacom parent Sumner Redstone is in short pants. Some think he's margined himself out of business. He needs to sell the company he started -- National Amusement, but there doesn't seem to be any buyers. Certainly, Redstone will have trouble getting the best price under these circumstances.
That brings us back to CBS -- also a Sumner Redstone investment. CBS President Les Moonves has already announced the sale of smaller market stations, but so far no deals have been revealed. It's going to be pressure on CBS if Redstone's financial mess doesn't improve. Right now it's hard to find anything that's improving.
Clear Channel, under new owners Lee & Bain, is supposedly readying the next phase of cutbacks and economic pruning to meet declining income. As we discussed recently, syndicating programming and realizing economies of scale is likely to be the blueprint for 2009.
The CBS-Clear Channel swap in and of itself is harmless. It makes sense for them and this kind of move was expected.
That's the big story on Action News today.
Behind the scenes you can expect a more complicated scenario going forward. You're likely to be reading about numerous owners who have decided to pull the plug and cease operating because they can't pay their bills. Then, you'll see licenses returned to the FCC.
The larger markets and even healthier medium markets will likely avoid this fate for as long as possible. It's unfathomable to believe that a major market operator would pull the plug. It's obviously the choice of last resort.
But, it's also unfathomable to have predicted radio's worst case scenario come true just a short while ago:
1. The distracting hubris from consolidators.
2. Unqualified CEOs running large broadcasting groups.
3. The fatal expectation that the youth audience would always migrate through their teens to become radio listeners -- instead Gen Y found their own way to listen, to share and steal music without the use of radio.
4. Cutbacks that were unnecessary -- other than to make profits look better for the newly consolidated radio companies -- even before the economy tanked.
5. Failure to come up with Plan B for the digital age. No podcasting revenue. No Internet streaming revenue (other than the meager effort in simulcasting terrestrial streams). No foot in the door to mobile content for the growing industries of smart phones and mobile devices.
As big a story as the Clear Channel-CBS station swap appears to be, the bigger story is that all of it doesn't matter now.
The world economy is in a deep recession. Banking is broken (that doesn't help sellers and buyers of stations). The real estate slump is affecting economies in communities in every media market. The scandals, Ponzi schemes, the auto industry bailout -- you name it -- doesn't make for a promising future for much.
Radio stations were always overvalued and now the industry is going to have to bite the bullet and get down to reality. Once stations are more properly assessed, the question will be which operators want to throw money at an industry that can probably never attract the youth market again.
How many will be smart enough to know that without a digital blueprint content providers can no longer make it on terrestrial towers and transmitters? Hell, the real estate upon which towers are built isn't even marketable right now.
Let's not forget the many talented people who have been losing their jobs while radio groups are sticking their fingers in the dikes to keep the red ink from drowning them.
It's a rough year ahead, but good will result from bad and here's hoping that the good will finally be a realization that radio companies can return to being local content providers and that they will seriously commit to looking beyond towers and transmitters for their future growth.
What you're seeing today -- a trade of stations -- is acknowledgement in a sense that stations are worth something only if the parties can come up with their own trade value.
Failure to produce buyers with cash or funding is not just the state of radio right now but the fate of radio in the year ahead.
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