Tuesday 25 Oct 2016

Matt Seinberg

The Chairman of CBS, Les Moonves, announced on 15 March 2016 that the company was either going to sell or spin off their radio division, "to unlock value for our shareholders."

What a crock of crap.

Let's face facts; the value of radio properties is in the toilet. Cumulus and iHeart Radio are close to bankruptcy, with their shares trading so low that they are underwater, given the values of their stations. That's the same as a homeowner owing the bank more than the home is actually worth.

What happens if they default or can't pull their properties values up? The creditors take over and have a fire sale just to recoup some of the money they invested at the height of the market. They will never regain all of the value.

This is a case of the dog chasing its own tail. The big corporations got bigger by swallowing up smaller companies and paying top dollar for them. They have homogenized the stations to the point that the programming sounds the same from city to city with voice tracking and syndicated programming.

The days of a radio station being manned 365/24/7 are long gone. The training ground of overnights and weekends don't exist anymore. The only live shifts on many stations are morning and afternoons and, even then, they may be originate from a home station and be syndicated to sister stations all over the country.

The days and nights of full-time, live radio a gone.

When Cumulus took over the Westwood One network, the first thing they did was consolidate its Denver and Dallas studios into one location, which was Dallas. Many on-air personalities from their live 24/7 formats lost their jobs, replaced by other Cumulus personalities at their radio stations.

Imagine being on the air live in Dallas trying to do a quality live and local show, voice tracking for a nationally syndicated show and also voice tracking for sister stations in other markets. Do you think any of that is going to be well done and engaging for the listener? I doubt it. You can't forge a connection with your audience if you're not with them, locally.

Back to selling CBS Radio, Wall Street wants to maximize the value of the properties for the shareholders. Who owns most of CBS, institutional stockholders and mutual funds, along with the Redstone family and Les Moonves. They all stand to gain in value if the radio stations spin into a separate company, with no tax liabilities. Here's what Scott Fybush, of the Northeast Radio Watch, has to say about a possible spin off. “Spinning off the whole division carries the existing tax basis forward; no capital gains accrue to the CBS Corporation and thus no liability."

Fybush also mentioned CBS would do this through a Reverse Morris Trust. The short version is that the parent company creates a new company that buys CBS and then another company takes it over. Check Wikipedia for the full version.

Here's the kicker, which Scott and I discussed. Nothing may happen. The announcement to sell CBS Radio could be smoke and mirrors; a way to placate Wall Street for years, while CBS searches for a buyer that could afford all the radio stations, in one deal.

No one large radio chain is positioned to buy all CBS Radio.

What company might buy all the CBS Radio stations in one swoop? None of the large companies like Cumulus or iHeartradio could take on more debt. The only other large national company left in good shape is Cox Communications, nut can it afford what CBS wants.

How about the large regional companies like Alpha, Entercom, Greater Media or Connoisseur Media? Can they afford the whole enchilada; or would, it, could it, they split CBS Radio into or among separate companies?

Let's remember one big thing here. It's not only physical property, brick and mortar, we're talking about; it is lives and careers, of women and men that work hard and are good at what they do. Much is at stake in the sale of CBS Radio.

Isn't speculation fun when it isn't your money?


Matt Seinberg lives on Long Island, a few minutes east of New York City. He looks at everything around him and notices much. Somewhat less cynical than dyed in the wool New Yorkers, Seinberg believes those who don't see what he does like reading about what he sees and what it means to him. Seinberg columns revel in the silly little things of life and laughter as well as much well-directed anger at inept, foolish public officials. Mostly, Seinberg writes for those who laugh easily at their own foibles as well as those of others.

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