|Next chapter for Cumulus
Mary Berner led Reader’s Digest through Chapter 11. Could that be in her future at Cumulus?
Sure, Berner’s not familiar with the radio business – but the skills that Crestview Partners really wants from her are in the specialized field of re-structuring and Chapter 11 re-organization. That’s the most natural way to read her recruitment to the board and now the CEO position by Cumulus shareholder Crestview Partners. Former CEO Lew Dickey probably understands that. Though you suspect Lew didn’t understand how soon he’d be a “former CEO.” Berner was interviewing key people inside Cumulus and Westwood as part of a board initiative, and perhaps Lew felt a draft then. By the time his brother John Dickey hit the “elevator down” button last week, Lew probably saw the handwriting – he is sidelined and Berner will likely lead Cumulus Media through reorganization. It’s what she did at debt-laden Reader’s Digest in 2009-2010, earning good reviews. A 2011 AdAge story might preview what’s ahead for Cumulus. Berner moved the Digest headquarters (could Cumulus HQ space or other facilities be cheaper?), reorganized the company internally (Cumulus needs to fully integrate Westwood), and “packaged its assets better for advertisers.” And there’s all the arcane stuff involved in a Chapter 11 situation that may be a “pre-pack” – pre-packaged bankruptcy filing. Of course that’s not a foregone conclusion – there could be a re-structuring outside of bankruptcy, with lenders converting debt to equity. Cumulus could also earn its way out of this hole.
Berner is a quick learner, and “intense.”
There’s a mountain for the incoming Cumulus CEO to learn not just about the radio and syndication businesses, but also individual Cumulus deals. (As one wag puts it, “You’ve got a station crisis on Line 1 and the NFL on Line 2.”) AdAge says Berner arrived at Reader’s Digest “determined to update and invigorate the company, quickly poaching other high-power magazine executives.” Actually, Lew Dickey’s been working from that playbook, himself. He’s hired away key management talent from rivals like CBS and instituted a new Chief Marketing Officer position with Pierre Bouvard. Another analogy between Reader’s Digest and Cumulus – RD had about $2 billion in debt, and Cumulus is around $2.4 billion. That could mostly be shaved away through a Chapter 11 re-org (not Chapter 7, which is liquidation). Cumulus could emerge from Chapter 11 with manageable debt and some desirable assets. Let’s see what Berner says at her October 13 all-employees phone call, and then on the Cumulus Q3 conference call. She may have some pretty grim numbers to report – but they’re Lew Dickey’s, not hers. But there are some numbers that are hers -
New CEO Mary Berner starts out making $1,450,000 a year.
Plus a signing bonus of $1 million, a to-be-determined performance bonus for this year, plus options to buy up to four million shares of “CMLS” stock. As of 2016, the new Cumulus CEO is eligible for an annual bonus based on performance goals. Her “target award bonus” is 100% of her salary, so another potential $1,450,000). But it could possibly as much as 150% (or an additional $2,175,000). Read the Cumulus SEC filing about Berner’s compensation (and how the board’s handling former EVP John Dickey’s underwater stock options) here.
It’s the “Programmatic Radio Show.”
Besides being “The Radio Show where the Dickeys were out,” we can also crown this as the NAB/RAB Radio Show where you hear the phrase “programmatic buying” not just in yesterday’s well-attended sessions, but in knots of three, four or five people around the Marriott’s various lounge areas. (And no doubt also behind closed doors.) At one public session, there was a prediction that 50% of ad sales will be conducted via programmatic buying. Others say that’s way too optimistic, especially given what one expert calls the relatively low-tech interface at many agencies. But those agencies and buying services are demanding that radio begin to match what digital can offer them – much more specific data about who was actually exposed to the ad. (The humorous phrase used in one session was, they want to know “bacon intentionals,” as in people with an immediate interest in bacon.) The hope is that radio can learn from the experience of other industries and begin to render extinct the old complaint that “radio’s too hard to buy.” iHeart and Katz have their Jelli-based solution, announced in the Spring. WideOrbit has its solution for online buying/selling of radio spots. And today at 11am, Marketron will snip the ribbon on a new product, with some group heads punching the buttons on real-live buys.
Marketron partners with cloud-based Synchronicity for a “live log” of programmatic.
Marketron’s Jeff Haley expects the typical transaction will begin with the seller (the radio station) inputting what it’s offering, though the agency/buyer can also initiate the process. The new “real-time spots platform” addition to “Mediascape” allows for a buy to happen even after the station’s normal log-production process is done for the day. The log is sent to both the station’s automation system and John Armstrong-founded Synchronicity, and Synchronicity pulls order information out of the log and “makes it available for both ad agencies and radio networks for inspection.” If there’s a buy, Synchronicity collects the order, gathers the creative (real one-stop shopping) and sends it all to the station – so it’s merged for, let’s say, the morning show log. Haley says this is “an important step in enhancing the overall workflow for broadcasters to include a live log and the real-time delivery of ad spots.” Also speedy delivery of airplay information to the agency/buyer. No doubt there’s more to come about programmatic. As one GM who attended both “programmatic” sessions yesterday said, “There’s a lot to learn…it’s like a fire-hose of information to drink from.”
Cumulus – and iHeart – color the way Wall Street looks at radio.
And it’s not a particularly favorable hue. When Wells Fargo analyst Davis Hebert calls them “distressed equity” during opening remarks at the Pillsbury Broadcast Finance session, he means their high levels of leverage relative to other publicly-traded radio groups. iHeart’s at 9.7-times cash flow, and Cumulus stands at 6.3-times. Hebert says if you exclude that pair, “radio has performed in-line with traditional media.” Add in bigger factors like the jittery stock market and “the worst year for the high-yield bond market since 2008,” and that’s the bulk of his “bad news” for radio. There’s more “good news” than you’d expect. Hebert (“AY-bear,” Louisiana-style) says “radio has only slightly under-performed” all ad-driven media, with a revenue share of about 8%. Magna Global expects that to slip to 7% by 2019. Davis says the automotive sector, radio’s #1 advertising category, generally is thriving at could be an annualized rate of as high as 18 million cars, for the latest month. And one thing everybody at yesterday’s NAB/RAB Show-opening Pillsbury session kept praising is radio’s ability to create cash flow.
“What do investors want to see” from radio?
Analyst Davis Hebert offers a list, and it starts with “Positive/stable core ad sales.” Then there are “new growth catalysts” (NextRadio, events and digital/mobile are mentions). Conservative balance sheets. Consolidation. Regulatory clarity (on issues like a performance royalty, which nobody here in Atlanta seems too concerned about). And continued free cash flow generation. Investors want radio to play a bigger role in the streaming world, but they’re wary of its low margins. The Wells Fargo analyst (filling in for colleague Marci Ryvicker) also supplies a list of things that radio investors worry about. Those are audience fragmentation…radio’s place in the dashboard…the challenging economics of digital…uncertainty about royalties…and – here it is again – too much leverage. Davis opines that it would be “healthy to see more consistency” across the radio sector, between “the leaders and laggards.” Of course operationally, iHeart’s hitting doubles and triples. The analyst says it’s turned in “nine straight quarters of positive growth and is pacing up about 3% now.” While this is “a bit of a rough patch” for Cumulus,” given the integration of Westwood One and troubles in big markets like New York, L.A. and D.C. Hebert say that Entercom’s got “a nice groove” going, and that Townsquare is “carving out an interesting niche in small markets.” Saga has out-performed, as has Spanish-specialist Entravision.
“A slight decline” in radio revenues” this year, and “a bit of a bounce-back in 2016.”
Another takeaway from the Davis Hebert presentation – Wells Fargo is forecasting 1% to 2% growth next year, with “flat to slightly up advertising sales growth.” That general vibe affects things like the M&A space. Wells Fargo charts the recent deal history and finds that the amount of announced deals, three-quarters of the way into 2015, is low – just $300 million or so, compared to an average of around $1 billion over each of the last three or four years. And to salt in a comment that came during the panel session of the Pillsbury event, Jeff Warshaw of Connoisseur says “it’s hard to convince” private equity players that radio’s “going to do anything but decline,” revenue-wise. That makes it a tough sell. There were definitely some brokers, bankers, equity people and other folks in Ballroom A of the Marriott Marquis who’d like that situation to change – and we’ll see the results of a lot of quiet meetings later this year and next. But for now, the consensus is that for companies that have a checkbook, there aren’t a lot of prime stations/clusters on the market. And heck, Larry Wilson of Alpha Media and K-Love parent EMF are vacuuming up a lot of what’s available.
“If we don’t start believing” that radio should be taking more of the ad pie, it won’t happen.
Entercom CEO David Field continues his familiar public role on panels like yesterday’s Pillsbury-sponsored event, preaching about radio’s reach and resilience and its potential as a platform. But Anish Aswani of investment bank Moelis & Company says the attitude of private equity toward radio is “very tepid.” So where will the money come from, for radio deals? Echoing a refrain frequently heard at the April NAB Show in Las Vegas, Garret Komjathy of US. Bank tells yesterday’s Radio Show event that there are “family investors” curious about radio. That’s the vein Jeff Warshaw of Connoisseur tapped, with the Texas-based H. Ross Perot family. Komjathy (“com-YAH-thee”) says family investors “like the free-cash flow yield, they’re longer-term players” who don’t have the typical three- to five-year horizon of traditional investors. Moderator Scott Flick of the Pillsbury law firm asks whether loosening up the limits on foreign investment might help with radio deals – and the panelists who responded didn’t see much happening. Komjathy utters a number of fundamental truths about radio, as seen by money people, and here’s one – “If you have strong management, if your capital structure has too much leverage, it’s very difficult to grow out of an over-leveraged situation.” He didn’t mention Cumulus or iHeart – but they’re two poster children of that pickle, at $2.4 billion and over $20 billion in long-term debt, respectively. The banker says some groups “will have a reckoning down the road.”
“Our biggest threat is ourselves.”
CEO Jeff Warshaw of Connoisseur gets a bright glint in his eyes, before answering the question posed by moderator Scott Flick of Pillsbury. Jeff’s talked about this before (like at the 2013 Orlando Radio Show), and near the end of yesterday’s 90-minute session, he unloads – about radio being so over-leveraged (in debt) that it doesn’t have the maneuvering room it needs. About how radio seems to keep lopping people off the payroll. About “when we’re trying to hit our monthly budget and a competitor comes in with lower rates.” About how there are just too darn many spots to be sold (“there’s a limitless amount of commercials being run”). Garret Komjathy of US Bank has his own answer to the “biggest threat” question – he’d like it “If you could just snap your fingers,” and go back to the way radio was about 15 years ago.
Doing Business at the Radio Show -
• TrafficCast releases TrafficCarma, “the first mobile app truly focused on the 120 million daily U.S. commuters and their journeys to and from work, train station, airport, sporting events and other destinations.” CEO Al McGowan says, “Local commuters don’t need directions. They want to know which of their routes is best, right now.” The company’s in Atlanta looking for media partnerships for the app, which provides a way for (let’s say) music stations to keep a hand in the traffic game. Also talk-based stations to go deeper with info. The app is customizable, and can be used together with existing traffic services. Data flows to TrafficCarma from crowd-sourcing (“updating the ‘traffic tipster’ to the mobile environment”). Also from “GPS and Cell Probe, the DOT, cameras and other data in the TrafficCast Data Fusion Engine.” The company says the mobile ad inventory can be sold by stations or TrafficCast, on a revenue-share basis. Gary Lee (Gary@TrafficCarma.com) is the VP/Media Sales at TrafficCast.
• “Create a 30-song test in less than five minutes” with the new Emergence.fm music-testing platform being announced today at the Radio Show. They’re doing it in partnership with web developer Eldarion, and promise the ability to learn “exactly what music the audience loves, hates, is passionate about, and is tired of hearing, all in real time.” Also to “identify ‘stealth hits’ and songs with high ‘tired’ scores.”
• Vipology offers a new line of station-branded apps together with “a high-quality, content-rich station website” in a package during the Radio Show. It promises “automated feeds of format-specific content and fresh news every day” – as a “budget-friendly solution” for stations. New Chief Technology Officer Brian Parsons says “adding an app with the website service and powering the app content through the website makes it easy and affordable.”
• Radiate Media teams with “Shout to Me” to “market the next-generation of innovative geo-audio traffic crowd-sourcing products and services,” for radio/TV and “its network of audio partners.” What is “Shout to Me,” you ask? It “enables easy two-way voice communication between our broadcast media partners (producers, talent, etc.) and their geo-targeted audience.” It’s also powering new features that go into Radiate Media’s TruTraffic product. Radiate will take crowd-sourced info about traffic tie-ups and “curate and verify user-contributed ‘shouts.’” Shout to Me (“give your audience a voice”) is here.
A cool $12 million cash is the price “K-Love” parent Educational Media Foundation is paying for San Diego-market KPRI. The deal was announced but not the price accepted by Jonathan Schwartz and Bob Hughes of Compass Radio of San Diego. Once again we see Sacramento-based EMF reach deep into its pocket for an all-cash purchase, compared to its earlier practice of paying about one-third down. This one’s all cash-on-the-barrelhead, for adult alternative KPRI. It’s a full Class B licensed to Encinitas, California and it’s already abandoned its commercial music format under an LMA that introduces the contemporary Christian not-for-profit K-Love service. Broker – Media Venture Partners.
The Bubba-watch continues – he’s not on live with Beasley-Tampa, but his syndicated show continues. Nothing heard yet from Nielsen about its investigation into the Tampa PPMs and any possible involvement around Bubba the Love Sponge. But it appears there’s a temporary split between Beasley (owner of Tampa-market “Bubba 98.7” WBRN-FM) and BTLS himself. Keep up with Bubba on his own website here.
DGital Media, the “audio engagement company” founded earlier this year, opens the door on the new “DGital Media Studios.” It will be led by former Westwood One and NBC Sports Radio pros such as Sean Cherry (the new SVP/Programming and Operations), Chris Basil (VP/Production) and Lou Pellegrino (Executive Producer). DGital Media CEO and co-founder Spencer Brown says “key to our success will be developing and selling compelling on-demand audio, converting the popularity of personalities and brands into audiences for content that we can distribute and sell.”
More Nielsen September-book PPMs –
Phoenix – Another win for iHeart’s AC KESZ (going 6.8-6.7-6.5, from the July book to now, with age 6+ AQH share). But there’s a new tie for second place, between CBS Radio’s classic hits KOOL (5.3-5.3-5.9) and Hubbard’s classic hits KSLX (5.8-5.8-5.9). That drops iHeart’s talk KFYI back to fourth, 5.5-5.7-5.4. Nice recent uptick for Bonneville’s news/talk KTAR-FM, up from a 2.9 share six months to a run of 3.2-4.0-3.9. At 1,160,600, AC “KEZ” is the market’s only station to top a million in average weekly cume. All shares in this section are age 6+ AQH for the total broadcast week. Nielsen’s “September” book encompasses more of August than its titular month, running August 13-September 9.
Minneapolis – The Twin Cities market continues to produce lots of big shares and ties or near-ties. The new #1 (by a tenth of a share) is Hubbard’s hot AC “KS95” KSTP-FM (8.4-7.4-8.4). Just behind is iHeart’s classic hits “Kool 108” KQQL (8.4-9.3-8.3), followed by iHeart’s top 40 KDWB (8.0-7.6-7.8). Then we get to the country combatants – iHeart’s “K102” KEEY (6.8-7.5-7.3) and CBS challenger KMNB (6.3-6.5-6.5). iHeart’s all-sports “Fan” KFXN is back in the 5-share range it inhabited this Spring (4.2-4.6-5.2). CBS Radio’s news/talk WCCO is brighter, 4.1-4.2-4.7. Hot AC “KS95” has the cume lead at nearly 1.1 million.
San Diego – Donald Trump might not object to this Mexican visitor. Rhythmic oldies “Magic 92.5” XHRM, managed by U.S.-based Local Media, is the new #1 (5.6-5.3-5.4). Second is iHeart CHR KHTS-FM (4.9-5.5-5.2), and third is Entercom’s country KSON/KSOQ (4.4-4.8-5.1). So as usual, the top stays crowded, followed by another Mexican-licensed station in fourth place – top 40 “Z 90.3” XHITZ (4.3-4.2-4.6). CHR KHTS-FM has the cume lead at 834,000.
Denver – A country station busts up the top-three monopoly enjoyed by various rock stations. The new #3 is Bonneville-run country KYGO (5.7-5.6-5.7). Ahead of it are iHeart’s adult alternative KBCO (5.8-5.7-6.1) and second-ranked alternative sister KTCL (5.9-6.0-5.8). Baseball may finally be boosting iHeart’s twelfth-ranked news/talk KOA (3.3-3.2-3.9). iHeart’s top 40 “Party” KPTT ranks #9 in AQH share, but #1 in weekly cume at nearly 670,000.
Baltimore – CBS Radio’s AC WLIF ascends to the top, 6.1-6.9-8.5. Tied at the second position are Radio One’s urban “92Q” WERQ (7.4-8.1-8.0) and iHeart’s country WPOC (8.6-8.7-8.0). Congrats to WPOC’s Laurie De Young, just recognized by the Baltimore Mayor for her 30th anniversary there. And watch how WPOC uses Laurie’s name-recognition in the market for this revenue-raising “video tour of the Chesapeake Urology Women’s Health” center, here. AC WLIF wins the monthly cume derby at 772,600.
St. Louis – Lots of “classic” at the top here, beginning with iHeart’s classic hits KLOU (9.6-8.9-7.9), and including Emmis’ classic rock KSHE in third place (6.6-6.2-6.2). It’s closely trailed by Hubbard’s variety hits (pretty classic, right?) “Arch” WARH (5.7-6.3-6.1). In between you fit in CBS Radio’s second-place news/talk/Cardinals baseball KMOX (6.9-7.4-7.5). Gateway’s contemporary Christian non-com “Joy” KLJY is fifth, 5.2-4.9-5.8. Nice move for Radio One’s urban AC “Old School 95.5” WFUN-FM (5.0-4.8-5.7). Classic hits KLOU holds the cume lead at 805,800.
San Jose – Giants baseball is an upper-deck home run in the South Bay on second-ranked KNBR. The Cumulus all-sports station swells 4.9-5.3-7.3. It’s behind only Digity’s AC KBAY (7.2-6.7-7.6). Third is Univision’s Spanish variety hits KBRG-FM (6.4-5.3-5.3). CBS Radio’s SF-based all-news KCBS/KFRC is fourth here, 4.9-4.6-4.8, followed by Northern California Public Radio’s non-commercial news-talk KQED in fifth (4.1-4.6-4.7). Local owner Empire’s country KRTY is softer (4.1-4.2-3.6), but apparently not because of Cumulus-managed “Nash” KSJO (1.0-1.2-1.0). Empire’s all-news KLIV spurts, 1.0-1.2-2.4. That tops Cumulus Media’s once-mighty San Francisco news/talker KGO (2.4-2.7-2.1). Digity’s hot AC KEZR is #6 in AQH share (4.5-4.3-4.6), but #1 in cume about just over 450,000.
Portland, Oregon – Another all-time PPM-high share for Entercom’s country “Wolf” KWJJ (7.0-8.2-8.3). Like the rest of the market, it trails iHeart’s AC “K103” KKCW (10.2-9.2-9.5). Third this time is Oregon Public Broadcasting’s news/talk non-com KOPB-FM (6.5-6.5-6.7), and then comes a pair of “classics.” #4 is iHeart classic hits KLTH (5.6-5.3-5.7) and co-owned classic rock “105.9 the Brew” KFBW (4.2-3.8-5.5). Entercom’s “Charlie” (variety hits) KYCH slips, 5.4-5.0-4.2. AC K103’s market-leading cume is 752,800.
Charlotte – Country is 1-2, with iHeart’s “Kat” on the top shelf (6.8-7.3-9.8). That’s not only WKKT’s largest PPM share ever, it’s the largest non-Holiday PPM share for any Charlotte station. Second is Beasley’s country WSOC (7.8-7.2-8.2) – meaning that the combined country share, between WSOC and the Kat, is up 3.5. Third is iHeart’s classic rock “Fox” WRFX (6.9-7.0-6.4). Soft month for Beasley’s urban WPEG (6.9-6.5-5.8). Top 40 sister is on the downslope of a recent up-trend (5.5-4.1-3.6). Top cume station is country WSOC at just about 595,000.
Take 2 on yesterday’s DC numbers, which were led by all-news WTOP. It’s owned by Hubbard and not Bonneville. Thanks to Senior VP/GM Joel Oxley and others there for their emails about the lost-in-time owner attribution. (Hubbard acquired ’TOP from Hubbard.)
“Can Cumulus Media be fixed?” Dave Van Dyke pulls his copy of the classic Ries & Trout “22 Immutable Laws of Marketing” off the shelf and applies them to Cumulus and new CEO Mary Berner. Dave runs through The Law of Leadership (“better to be first than it is to be better”), The Law of Category, The Law of the Mind and The Law of the Ladder. He says “The uphill battle for Cumulus is restoring a positive perception for their stations that have lost their position in the minds of listeners.” He singles out some of Cumulus Media’s largest and most important stations, as you can read here.
“The new auto dashboard isn’t as scary as radio thinks.” The graphic Mark Ramsey chose for his post depicts a woman holding up her hands in B-movie-style horror. Ramsey believes there will be “erosion from the edges…erosion that impacts the weakest radio brands most and the strongest radio brands least.” As for the encroachment of podcasting into the car environment, Ramsey slyly says “It seems to me there’s more enthusiasm about podcasting from podcast-makers than from consumers.” Read his don’t-be-scared posting here.
Renee Roth was recently profiled by Huffington Post as the middle link of a three-generation succession of women in radio. Her mom was Jo-Anne Silverstein, one of the early women in sales, and her daughter Rachel Roth is currently working in digital radio. Sorry to report that Marketron’s Toronto-based Regional Vice President Renee Roth has died, from a recently-diagnosed lung cancer. Marketron’s Jeff Haley says “Renee knew that success in a sales role was not the result of passive order-taking, or an exercise in lapel-grabbing manipulation." She spent 15 years as a GSM with Corus, and for seven years she was an associate professor at Humber College in the School of Media Studies - teaching sales and the business of radio.
Paul Donovan advances at CBS Radio from Northeast Director of Engineering to the corporate-level VP/Engineering position. Donovan’s promotion by COO Scott Herman comes not long after two retirements – Senior VP/Engineering Glynn Walden (August 11 NOW) and VP/Field Services Wes Spencer. Paul Donovan joined Boston’s news/talk WBZ/1030 in 1990, and he’s recently been handling Boston, Atlanta, Orlando and Hartford for CBS. He’ll now add D.C., Baltimore, Philadelphia and Miami.
Joy quickly followed by gloom – Robin Daniels, now at Bahakel’s AC “Sunny 92.3” WDEF-FM in Chattanooga, says “Years ago when I was in Anchorage, getting anything new from management was like pulling teeth. So we were all ecstatic when the boss sprang for a new production music library. The new vinyl had occupied its prominent position in the production room for only a few months when (like the story earlier this week) a bored weekend overnight jock decided to clean the new discs. He used Windex, or something similar. Only a few tracks were unaffected, so it was back to pulling out instrumentals for production music.” (While we’re on the general topic, NOW reader Brian Walker says “Windex does make a special cleaner for flat screens, but please tell readers that Windex, or any other cleaner with ammonia, will damage most flat-screen monitors, clouding the surface.”) Lots of “Windex”-type stories out there, and you can share your own true radio story. Email “You Can’t Make This Up” – Tom@RTK-Media.com.
Day 2 of the Atlanta Radio Show brings presentations by Voltair creator 25-Seven and Nielsen, about 90 minutes apart. A report in tomorrow’s Tom Taylor NOW Newsletter, along with the rest of the day’s news and a look at more September Nielsen PPMs - Tom