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Saturday, August 9, 2008

An Open Letter to Investors in the Radio Business

Dear investor-person:

I have tremendously good news to share with you.

Our great national nightmare is over.

After 12 years of consolidation that is the universal field theory of why the radio industry is in its current state of woe, the business that for decades was not only delivering better cash flow than just about any business you could find, but was also growing, is set for a renaissance.

I haven't been hitting the tequila; I'm referring to the sudden flood of radio properties - generally excellent properties - that are on the market. With Clear Channel setting free 60 stations and Dan Mason & CBS putting up their 50, immediate reaction from some might be "the radio business must really suck, look at these major players bailing!"

Not so fast.

Finally, the radio industry is experiencing the first phase of its rebirth and that is the return to the transition phase of its business cycle to what amounts to 'circling the wagons and concentrating on the segment of the business that is delivering the best financial results.' Clear Channel and CBS should be proud of the fact that they actually have significant numbers of stations they can operate that are throwing off cash flow. By trimming the fat, these two companies can concentrate on running a number of stations that may be more comfortable for them.

These 110 radio stations up for sale now offer an opportunity for two things to begin occurring: 1) the return of more intelligent operators who one way or another were no longer needed by those companies that were so greedy in 1996-2000 that they grabbed up as many radio properties as they could without a consideration as to whether they could operate them all effectively. They THOUGHT they could...but time has proven them wrong.

And 2) many of the profoundly intelligent general managers, program directors and owners who got out of the radio business because they were forced or just gave up, will now start re-entering a business they have loved for years and who had become sickened by what we all have witnessed - the gutting of a business that lost its way.

Yes, I am giving all you investors out there a BIG early tip now so you can start realigning your portfolios or - even better - if you've got money to lend and you've given up on the industry, now is the time for you to feel inspired.

I can count on all my fingers and toes a partial list of highly qualified radio managers who at this moment could take a cluster of any of these soon-to-be-sold groups and make them profitable, compelling to listen to and maybe most importantly, return the fun to working in the radio business that got skewered by operators who saw an opportunity in the late 90's and 2000's but never had a clue as to the 'secret sauce'.

Me and my compatriots who have been in this business since the good times (pre-1996), completely get what made the business such a great investment then and why it attracted some of our country's most creative minds through the years. The time may be coming when you see the return by these individuals to the business as operators. Smart operators.

Expect those who have been on the sidelines in recent years to begin pulling money together and buying some of these stations. I know because I've spoken with them!

Expect those Clear Channel and CBS stations that will be sold to out-perform under these new owners.

Expect this to be the watershed we've been waiting for. 2009 will be the year of the turnaround.

2009 will prove to be a great year for investment in the radio business.

These new independent owners know more about the terrestrial side of the business than most of their peers who seem to have no clue what to do with this vast new frontier.

They have been cooking up digital solutions that will expand the radio business.

If they haven't been scared away for good; if they haven't given it up through disgust, this infusion of lifeblood into station ownership will be the beginning of a return to pre-consolidation days when men were men and radio ROCKED!

1 comment:

MIB said...

Like you, I have been urging investors to seriously consider terrestrial radio. There's the aforementioned divestiture by CC and other large ownership groups. Two, prices on media properties are coming back to Earth after being overvalued for many years. Three, I believe technology and lifestyle are coming together in ways a savvy, experienced management team can translate into consistent profits, and solid returns on investment.