Marci Ryvicker

Marci Ryvicker is the old EF Hutton TV commercial come to life. When she talks about the radio business, Wall Street and the media industry listen. After five years at Price Waterhouse, Ryvicker went back to college at the Wharton School of Business at the Univ. of Pennsylvania and the Harvard Business School before heading for Wall Street at Wachovia, which has since been co-opted by Wells Fargo. Recently, Ryvicker's prognosis of 2010 revenue growth in radio was posted here on All Access, as well as media sources nationwide. Here, she offers a bigger picture perspective on radio, its current situation and future growth prospects.

What made you decide to become an analyst for media companies?

Actually, I wasn't sure what I wanted to do. I had been an accountant for five years prior to going to business school. And before I became an accountant, I was an English major with visions of one day becoming a writer. Adding the writing aspect to my accounting skills led me to research, where I could do both. My goal coming into this job was to use both skills and learn about the stock market. I didn't intend to be doing this for eight years, but it has been a lot more fun than I expected. I've had great opportunities, first at Wachovia and now at Wells Fargo.

Did you actively seek out media analysis or were you handed the industry?

It was handed to me. A spot was open in media where broadcasting was the focus. I fell into radio that way.

Were you at all familiar with the radio business? How fast did it take you to get up to speed?

Every industry has its nuances; the issue for me with radio was in understanding the language - 60-second spots, utilization - as well as understanding not just the industry, but what investors focus on. What are the drivers of the stocks? The answer to this has changed over time. Every industry is different in terms of the metrics investors use. Companies can be judged on various multiples; the most common multiple we hear of is P/E. But there is also EV-to-EBITDA, Price-to-Free Cash Flow or Price-to-After Tax Cash Flow, which was the historical metric used for the radio industry. .

Are you comfortable in your knowledge of radio now?

I'm always learning because I'm not a true part of the industry. I'm looking in from the outside, so I've made sure to identify the people who can educate me on the industry - both public and private operators. I focus on industry contacts, particularly those who operate radio stations. Obviously, it's a constant learning experience. The more people I talk to, the more I realize I don't know. But I do know enough to make an informed investment recommendation. Even if investors don't act on my recommendations, they need to understand my point of view. Oftentimes investors may disagree and make their own decisions, which is fine because my job at the end of the day is to provide accurate data and analysis.

As a media analyst for past eight years, could you tell that radio was gong to go through such a painful downsizing in the past year or two?

Radio has had its challenges. When the stocks started to decline in late 2007, I wasn't completely surprised. However, at the point when we really got into the recession there was a tremendous amount of panic and fear outside of the radio industry. Understandably, the recession drove economically sensitive and highly leveraged media companies into penny stock territory given the real fear of potential bankruptcies. That kind of uncertainty lasted for an extended period of time, which caused radio stocks to tank even further.

Now, as a few broadcast companies started to get relief from their lenders, primarily the banks, it became obvious that the industry was not going under, which takes us to today. From where I sit today, what do I think?

For 2010, radio is likely to experience significant growth. We're right now trying to figure out if that's due to a really easy prior year comparison vs. true organic demand. Looking ahead to 2011 and 2012 and beyond, the question really becomes, do prices continue to firm up? I don't think anyone can predict that yet.

What impact has the rollout of the PPM, which has allowed buyers to get discounted rates from radio, hurt radio's bottom line?

PPM has had challenges being accepted by the radio community. It's a different mentality and a different way of selling radio, but I wouldn't say PPM has been a major disruption. It has been something of an issue in the top markets, but you really couldn't blame the PPM for the decline in revenue. I do blame the radio industry for discounting ad rates so significantly that it put them at a severe disadvantage. There's simply not enough demand to help boost rates. It has been a continuous downward cycle for the industry, which has frustrated investors. You've had two potential innovations - PPM and HD Radio - that were supposed to be saviors, but they haven't panned out.

Aside from the PPM and HD, had these guys been able to manage their inventory appropriately -- to provide sufficient value for their spots -- they wouldn't have been in the predicament they put themselves into when faced with the recession.

On the plus side, it seems that the highly partisan political climate could be good for radio. The question is, how much good will these election and issue ad campaigns be for radio?

I think it can be significant even though, historically, political comprises just 3% of radio's ad revenue. But any demand that can soak up supply is good for radio. We see radio benefiting from political in two ways - there is the direct political dollars from political groups themselves, such as the various parties and candidates; and there is the indirect benefit when advertisers are squeezed off TV because there's no inventory or the rates are too high.

To explain the second point further, for those who still need to advertise yet cannot get on television; they may go to radio, so radio becomes an indirect beneficiary of high advertising demand. That being said, the last political cycle, in 2008, was different. Given that we were in the midst of the worst advertising recession in history, clients who didn't get on TV held onto their purse strings. They just didn't advertise anywhere else. This year, it may be back to what has historically happened - if advertisers can't get on TV, they will likely come to radio, so there's a lot of room for significant growth from political.

Does the Internet and streaming hold a significant potential as a revenue stream?

I see that only as slow growth. The Internet cannot save all of these industries. In general, I see two fallacies when it comes to the Internet. The first fallacy from the investors' point of view is that "all the traditional advertising dollars are eventually going to go to the Net." While some investors believe this, I find it impossible to actually occur given that the Internet cannot in reality soak up such a significant amount of advertising dollars. The Net is a very different medium - going back to Marketing 101, it is a "pull" medium versus the "push" medium of broadcast. Secondly, the Internet cannot make up a significant revenue stream for radio. I just don't see how radio can effectively monetize an online product - it is different from television content, and even that is difficult to monetize.

Judging by your previous comments, would it be correct to presume that you don't hold high hopes for HD Radio being a significant revenue source?

At best, HD's impact is way, way down the road. And if it hasn't made a big impact by now, I don't know when it ever will. I will give you an example: Every time I go to the Auto Show in New York City, I do see an HD Radio Booth, but when I actually go to the specific auto booths, no one is "selling" HD Radio as an option - in fact, a lot of times I ask about HD Radio and the auto people either have no idea what it is or they tell me that they do have HD Radio - called Sirius XM. And when I think outside the cars, I just don't know how compelling it is to buy "another radio;" there are so many other types of audio technologies out there that are a lot sexier than radio. Now, Bob Struble has done as good a job one can do to market this product, but unfortunately I just don't see demand being there.

A one-time lightning rod with the FCC, cross-ownership, is back, only this time radio is almost seen as a savior to the newspapers, which are in ever worse shape., Your thoughts?

My view on ownership and on radio specifically is that consolidation would be great for this industry ... IF the end goal would be to shut off stations. There are so many radio stations -- too many stations in a lot of markets. If further consolidation can help minimize the sheer amount of inventory in each market, that can save radio. Unfortunately, some companies may go away if stations go away. But if you want a purely objective answer, you will solve lot of problems by shrinking the inventory - and the best way to do that is to shrink the number of stations

I think the fear regarding consolidation and cross-ownership is that in the past, companies bought each other to just become bigger, not leaner. And we have seen how the ones that became really big failed. I look at Citadel, I look at Clear Channel. CBS gets it right; they have been trying to sell assets, not buy them. Hopefully, should further consolidation be allowed, the parties would no longer have the mentality of getting bigger just to get bigger, but rather they would consolidate and do what is best for the industry in the long run. .

So it all comes back to managing their inventory properly...

I don't know if that's true in every case, but there is so much inventory out there and radio operators just haven't been able to price it right. There are just too many spots. Too many stations. Again, how many stations do you really need in a market? While it sounds harsh, I don't think a lot of radio companies disagree with me; I've heard the same thing from some of their mouths as well. They just don't want to be the ones who go away.

If inventory supply and demand is radio's biggest obstacle to growth, wouldn't the addition of more inventory on a slew of HD channels simply exacerbate the problem?

Exactly.

What's your take on satellite radio's place in the business universe?

When it first came out, it was thought of as a huge threat, which was exacerbated with Howard Stern. I don't know at this point what entices a subscriber to subscribe to satellite radio. Not that my own personal situation is the same for everybody, but my husband just bought a car that had free Sirius for three months. When the three months were over, we got the calls asking us to subscribe, but who wants another monthly bill -- especially in this environment? And especially when there are so many other audio choices, like an iPod?

And what about Internet radio ... including the Pandoras of the world?

That's something that we listen to at home via the computer. But since most radio listenership is outside the home and your computer doesn't yet go with you to the extent you can use it at home, it is not a huge threat YET. It is something for radio to be aware of and it will become an issue once mobile offerings like Wi-Fi, WiMAX, LTE and other technologies become more widespread.