Analysts Discuss Radio Outlook, Credit Crunch At NAB Show
September 26, 2007 at 6:46 AM (PT)
At the NAB RADIO SHOW's DICKSTEIN SHAPIRO LLP Broadcast Financing forum in CHARLOTTE WEDNESDAY morning, BEAR STEARNS TV and Radio Broadcasting Analyst VICTOR MILLER ran through the many external forces impacting the radio industry's performance and prospects for 2008, including the economy, oil prices and the rollout of ABRITRON's PPM. MILLER warned, based on TV's experience with LPM metering, of an initial decline in revenues tied to the new measurement.
MILLER described himself as "very upbeat" on the Internet, citing a MEDIA AUDIT study showing the youth and wealth of the online audience and suggesting that radio can find more revenue from that audience going forward. He also predicted higher political spending on radio in 2008, with PENNSYLVANIA cited as a particularly hot spot for political advertising and FLORIDA as questionable due to the dispute over the timing of the Democratic primary.
MILLER said that radio, unlike any other business he's ever seen, fights their battles in public, saying, "It would be good if there was a little more consensus and a little less fighting." He cited GOOGLE, consolidation, the PPM, HD RADIO and "Less Is More" as hot battles in the coming year.
THOMAS H. LEE PARTNERS' SOREN OBERG said that the credit crunch has limited available funds for radio investment, although he said radio has historically been able to attract investment funding. He added that the crunch is "temporary" and that things on that front have been turning around even in the last week.
GE COMMERCIAL FINANCE's GARRET KOMJATHY asserted that for smaller deals, the credit crunch is less of a problem because such deals tend to be financed by "friends and family." He did admit that the problems are "trickling down" to the smaller deals, especially on the higher end of the price range. The challenge in the last few months, said KOMJATHY, is "can we sell this deal," and how much the leverage has to come down to get the deal accepted in the marketplace, since investors have "so many alternatives." He added that radio has to play up its strengths, which he described as "local brands and access to local advertisers," to compete with the threat of a combined XM-SIRIUS satellite service.
WELLS FARGO FOOTHILL's JAMIE LEWIS agreed that the credit crunch's "ball's rolled downhill" to affect smaller "stick deals," even though most of those smaller deals are not handled by larger lenders and the deals have not been materially impacted by the crunch. He suggested that pricing has been hurt by the depression in pricing for larger deals.
DEUTSCHE BANK's DREW MARCUS said that the Fed's cut in interest rates will help ease the credit problems, saying that the move will return the credit market to "normal," but that it will not return to the levels of six months ago. Leverage levels like the 12% in the UNIVISION deal and 10% for the CLEAR CHANNEL deal will not be seen anytime soon, MARCUS added.
When moderator LEW PAPER's asked whether WALL STREET has "orphaned" the rado industry, MARCUS agreed, noting that most WALL STREET firms have eliminated the broadcast analyst position, including MERRILL LYNCH last week. He said that investment firms only assign analysts to industries where there is enough trading and liquidity to warrant the position, and that many pure-play radio companies are "practically penny stocks." The ramification of the lack of analysts, said MARCUS, is that it has become more difficult to raise broadcast equity.