Dying Radio Firms Wait For Their Own Demise
by Brian Maloney, October 23rd, 2008 at 12:02am
It’s not just Entercom, which had another miserable day on Wall Street (closing down eight cents to a new low of $.96 after touching $.74 midday): nearly all of radio’s current operators are in a state of chaos as the downward spiral continues.
Each company is going about it in a different way, however: while Entercom (NYSE:ETM) rearranges deck chairs on the Titanic by firing producers and hosts, Citadel (NYSE:CDL) pretends it still has a company to run.
In Chicago, Citadel’s stunningly incompetent managers have just hired mentally-challenged FM shock jock has-been Mancow for a midmorning position at megatalker WLS-AM.
Over at Emmis Communications (NASDAQ:EMMS), meanwhile, they’re left to cry in their beer over the firm’s near-zero valuation. In this story from the Indy Star, we also additional clues regarding Entercom’s dire financial situation:
Take a look at the stock price for Emmis Communications, and you’ll see a sign of the troubled times.
At 49 cents a share, Emmis has a market capitalization of $18 million. That’s right. Investors think Emmis, with leading radio stations in New York, Los Angeles, Chicago and Indianapolis, is worth just $18 million.
Any one of Emmis’ leading stations in the nation’s three largest cities is worth more than what the market says the entire company’s worth. Its string of city magazines is worth more than that.
Such a low stock price for a company rich in assets normally means a change of control. Either someone would buy the company, or shareholders would make the management sell it off in pieces because the sum of its parts is more than the whole.
But in these days of tight credit and no tolerance for risk, there are no apparent buyers for Emmis or its stations. It seems incredible to think that just two years ago, Chairman Jeff Smulyan offered to take the company private for 10 times what the market says it’s worth now.
Or consider this: Local investors Mickey Maurer and Robert Schloss sold three lower-ranked Indianapolis stations to Entercom for $73.5 million in 2004.
Yes, these firms are worth zero because nobody wants to buy dreadfully mismanaged dinosaurs with dismal future prospects.
Note the reference to Entercom’s foolish purchase of the Indy cluster for $73.5m in 2004. The ENTIRE company’s market capitalization is now less than half that figure. How much do you figure those Indy outlets are worth at this point? Five percent of that purchase price? Less?
Now consider the fact that Entercom also acquired many stations across the country at similar prices over the past decade in cities such as Austin, Buffalo, Rochester, Sacramento and elsewhere. By 2008, this led to a total station count of 111.
Do the math: is it any wonder why this house of cards is collapsing so quickly? When you repeatedly overpay for properties by a factor of 20, you LOSE THE GAME.
Now that game is over and no one will miss any of these horrible radio schlubs. In the meantime, who knows how many stupid moves they will make in their final days.
Will Mumbles Menino be forced to create a radio station foreclosure task force?
Entry Filed under: Entercom
6 Comments
1. neggy | October 23rd, 2008 at 12:54 am
hey it could be worse, they could be Radio One that is at best a penny stock. Brian says ETM is on the verge of Chapter 11, I don’t see it just yet, but I say they are de-listed by Thanksgiving. Stick a fork in them they are done? Citadel is much worse off and they are still not n life support. Can we put a DNR on ETM’s chart?
2. Chris | October 23rd, 2008 at 7:01 am
Here’s what they’re all privately thinking: “When advertising comes roaring back, our valuations will SOAR!!!” Laughing until milk comes out my nose at that one. We all generally believe that the stock market will ‘roar back,’ but NO ONE feels that way about the radio industry. Their market is the DRIVER, but drivers have IPODS and Satellite radio as happy alternatives to the mediocrity of terrestrial radio. There’s NO ‘comeback kid’ here, folks. Move along.
3. Celtic Frost | October 23rd, 2008 at 7:23 am
Egads, this is serious stuff. And, thanks to Brian, we all have a front row seat into the inner workings of a failing radio station.
I think Her Highness is already suffering on this score, as she has lots and lots of roots showing these days. Time to buy some more bleach, honey, and do a home touch-up if you can no longer afford going to Cristophe each month!
4. bjd | October 23rd, 2008 at 9:04 am
I’ve got RKO in the next Death Pool!
I’m figuring that RKO is gone before the New Year.
5. Eric | October 24th, 2008 at 9:45 am
“Will Mumbles Menino be forced to create a radio station foreclosure task force?”
I just want him to be able to say “radio station foreclosure task force”
6. Sparkle | November 10th, 2008 at 10:12 pm
Entercom has a very inept management team. There Rochester office lost Brother wease for a 200,000 difference. They are jokes. All the vps should be fired;period.