Summary
With fewer analysts looking at commercial radio, the industry begins to fall off investors' radar screens.
Analysis
If Wall Street's eyes are not watching, does the commercial radio industry have any viability a world of publicly traded companies? It has come as no great shock to those that have been observers of the commercial radio industry that increasingly brokerage houses have let their radio broadcast analysts go. The most recent was John Klim of Credit Suisse. In total, six analysts have been let go. They include Jason Helfftein, Laraine Mancini, both from Merrill-Lynch, James Dix of Deutsche Bank, Jonathan Jacoby from Bank of America, and Eileen Furukawa from Citigroup. Less coverage by Wall Street analysts is less visibility for the radio industry. As investment banks are increasingly fighting battles on other fronts, and with radio revenues essentially flat, they are no longer interested in investing in this industry. Ironically, it also means that the satellite services XM and Sirius will also get less coverage. For the radio industry, this is not a good thing. With all but three of radio's publicly traded companies having stocks trading in single digits, one has to wonder what the industry's next move should be. In my last post, I suggested that no radio company ought to be a public entity and should simply return to being a private company and worry about nothing more than running its own businesses. With seemingly no end in sight to the credit crunch and two large deals in question (more on those in moment), that might not any longer be an option. The two large deals that are hanging in the balance are the privatization of Clear Channel and Cumulus. In the case of Clear Channel, the offer by Thomas Lee Partners and Bain Capital was for $39.50 per share. As of late yesterday, the stock was trading at around $30.00. This indicates that Wall Street does not have much confidence that the deal will go forward to closure. It is also indicative of the fact that if the deal, which has now received FCC approval does move ahead, it will certainly require a renegotiation and then be re submitted to shareholders. Cumulus is in a similar situation, though the offering price and its current stock price are not as disperate. Where should radio go next? The answer, I believe, is no different than when I suggested radio companies attempt to go private. It is to return to running their businesses as local entities. Unfortunately, that does not appear to be happening. Just last week Emmis, CBS, and Clear Channel announced another wave of job cuts and layoffs. Once again, if fewer people will accomplish the same work that was there before in an effort to maintain or even grow profit margins and while it is true radio revenues have essentially been flat for six years, by not investing in the actual product that is on the air it is even more difficult to grow revenue. How ironic it is that for the fourth straight week, the largest radio advertiser, that is the advertiser running the most spots on commercial radio, was not a paying advertiser at all. It was the HD Radio Alliance. Its spots are the ones used to promote the coming of age of High Definition Radio. The spots are produced nationally while programming decisions are made locally. How oxymoronic is that? Radio is setting itself up to do everything possible to make no kind of a recovery from flat growth, much less revenue expansion. From reduction, in investment in local product, to openly and publicly fighting about audience measurement or the People Meter, or under investment in content for High Definition Radio to combat threats from the world satellite radio, and the list goes on. Radio needs to heed this wake up call. It might not get to many more opportunities.
