4-10-13
Every April you can pretty much count on Spring flowers, the start of Major League Baseball, and very high-level radio meetings at some of the swankiest hotels on the Las Vegas Strip. The annual NAB show is an opportunity for those who have capital and those who have assets to get together to talk business. If a deal can be made, of course, Las Vegas is the town to make it. As the bigs meet in the penthouse suites of the Aria, the Wynn, and the Venetian, we wanted to get a feel for the dealmaking they might be discussing. Over the next few days, we'll hear from some of the industry's most well-known brokers and pick their brains on what they hear, what they see happening, and whether a blockbuster deal can be made in radio over the next 12 months. First up is Kozacko Media Services President Dick Kozacko.
What do you think we'll see over the next year?
I am not expecting to see any very different changes of what has been happening during the past year. I would like to see the FCC make things easier for stand-alone AM owners to obtain some type of FM companion. Yes, FM translators are fine. Stand-alone AM stations are very difficult to attract buyers, with the exception of major or large-metro-size markets where there is a large ethnic group that is pleased to have their own language programming on an AM station. This is even true in markets where a stand-alone AM has a profitable history and continues to show profits. Buyers, now-a-days, look at an "exit strategy" for the future and it's not very favorable for an AM by itself.
Would you call the past 12 months good, average, or bad for radio deals?
I would call it average at best. We are doing more deals with seller financing because there is no alternative when we are talking about stations in small and medium markets. Banks still have not come back into the market to any large degree. The exception which we see from time-to-time would be a local bank who has strong ties to a market or where the bank already knows the buying group because of their local involvement in the market.
What surprised you over the past 12 months?
This response actually ties into the last question and this is the fact that with the improving economy that banks have still stayed out of financing broadcast station sales. I think it was at the NAB Radio Show in Dallas last September that there was actual excitement because a new bank was in attendance at the show. No, I'm not expecting to see the turnout of banks as we had 10 years ago. Too many banks actually wiped out their media loaning departments, but broadcast stations still generate a higher profit margin than many industries and many banks are flush with funds to make business loans. Where are they?
What is the reality of multiples for radio these days?
They are improving. I know we hear about certain deals from time-to-time where a buyer will pick-up a cluster for something that works out "to five times cash flow." That may be accurate on some type of evaluation. However, I don't find many owners willing to talk at a figure of less than seven times cash flow. You also have to look at the assets included in the sale and if the station owns very attractive real estate, that's a little bit of a notch up in comparison with an owner that leases everything.
Do you think we will see Clear Channel move any of its smaller market stations?
They really haven't in the past, but I hope they do. I'm actually surprised that local merchants in some of these communities have been willing to support a station when they know that the "local programming" they hear comes from a source a thousand miles away. I also figured that the profit margin would be low with some of these stations because of lower local advertising rates that they wouldn't meet Clear Channel's profit criteria. It may be that Clear Channel recognizes they overpaid and would not receive anything in a sale close to what they paid -- so they continue to just hold the stations.
Where will CBS be in one year?
I think CBS has finished its "pruning" and will probably stay where they are in radio and the markets they serve. They own a lot of great stations and which, I'm sure, contribute well to the company's profit.
Do you think we'll see a blockbuster deal over the next 12 months?
Ed, I wish you had asked me that question last year. When we moved to Raleigh last July after 42 years in Elmira, NY, my "crystal ball" broke during the move and I can't give you these accurate predictions like I could in the past. I am even willing to buy a "used" crystal ball if you hear of one available at a decent price.
Reach out to Dick Kozacko at dick@kozacko.com
Tomorrow, we'll hear from Bill Fanning and Elliot Evers of Media Venture Partners
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