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Radio Business ReportVoice Of The Radio Broadcasting Industry®
May 21, 2001
TM
Volume 18, Issue 21
AMERICANURBANRADIONETWORKS
THE URBANRADIO LEADER
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NETWORKS
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NEW YORK, NY 10017(212) 883-2100 FAX: (212) 297-2571
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RADIO NEWS
Tichenor upbeat about Hispanics 2
HBC honcho Mac Tichenor was buoyed by news from the Census Bureaunoting Hispanic growth, but is unsure where economic bottom is.
Mays decries lack of economic visibility 2
FM, TV locked in Indiana interference controversy 3
Radio fares better than competitors in slowdown 3
ABC ready with new streaming scheme 3
411111111fIliiii111:0
Agency perspective: Does Arbitron deserve bible status? 6
SALES
Radio bigwigs converge at DC's Howard U. 8
ENGINEERED FOR PROFIT
Is Cart Chunk approaching standard status? 8-11
MEDIA MARKETS a MONEY
Big City ordered to put away the plastic 12
Chase Manhattan has cut off Big City's revolving credit account,
sending the group scrambling to meet upcoming payments.
Multimedia Jones had tough 111 sledding 18
Liggins invests in Liggins with big ROIA buy 13
Regent will play in Peoria for 820M 15
New FCC Commissionon the way tobeing seated
It seems apparent that themakeup of the new FCC isgoing to be as suggested byPresident George W. Bush.Chairman nominee MichaelPowell and Commis-sioner nominess KathleenAbernathy, Michael Coppsand Kevin Martin sailedthrough comfirmation hearingsby Senator John McCain's (R -AZ) Committee on Commerce,Science and Transportation.
Though never stated assuch, an underlying themeof the proceeding seemed tobe a commentary on, thesometimes maverick activi-ties of the Commission tin-der former Chairman BillKennard. All of the
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Radio Business ReportVoice Of The Radio Broadcasting Industry ® Radio News®
May 212001, Volume 18, Issue 21
BPA International membership
applied for September 2000
Executive Editor Jack MessmerManaging Editor Dave Seyler
Senior Editor Carl MarcucciProduction Michael Whalen
VP Administration Cathy CarnegieFCC Research Consultant Mona Wargo
Administrative Assistant April Olson
Publisher Jim CarnegieVP/GM, Associate Publisher Ken Lee
Senior Account Executive John Neff
Account Executive June Barnes
Editorial/Advertising Offices
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nominess stressed a commit-ment to execute the law aspassed by Congress. Indeed,not only was this a focus ofsome of the questions posedby committee members, but atone point Powell requestedstatutory guidance to helpdetermine a course of action.
Powell said that the Com-mission is not elected, andshould not impose its opin-ions on the public. It shouldenforce the rules of estab-lished by Congress, which asan elective body reflects thewill of the people.
Powell reiterated earlierstatements to the effect thatcurrent broadcast regula-tions, many of which are from30-60 years old, must con-stantly be examined to de-termine whether or not theyare still producing the in-tended results in the rapidly -changing media universe. Hesaid he is not in favor ofderegulation simply for thesake of deregulation.
As a parent, he expressedhis dismay over the content ofsome television programming(as well as video games), butqualified this with remarks onthe difficulty of writing regu-lations which effectively de-termine where the line is with-out running into First Amend-ment problems. This was spe-cifically in reference to a ques-tion about violence on TVduring the family hour. Withthe courts knocking downsuch rules, the challenge wasto find a way to write a defen-sible set of regulations.
The committee spent thebulk of the session withPowell, devoting only 15 min-utes or so to introductions andquestioning of the remainingthree candidates (all of whomhad been interviewed privatelyby committee members).Those senators who remarked
at all professed their intention tovote for confirmation across theboard, and there were no indi-cations otherwise at all.
The confirmation is expectedto be marked up for consider-ation by the full Senate nextweek -1)S
Tichenor bullish
on Census, cautious
on economy
With Wall Street bulls celebrat-ing the Fed's latest rate cut andsome broadcasters suggestingthat advertising demand is firm-ing, Hispanic Broadcasting Corp.(N:HSP) CEO Mac Tichenortook a more cautious tone atyesterday's (5/16) Banc ofAmerica Securities media con-ference in New York. Tichenornoted that some people said thebottom of the ad market ap-peared to have occurred in Feb-ruary, then April, then Tuesday(5/15, with the Fed's action)."We're not ready to call the bot-tom," Tichenor said. "Businesscontinues to be erratic. It getsyour hopes up and then breaksyour heart the next week."
Tichenor was bullish, how-ever, on prospects for Spanishradio, based on the new Cen-sus numbers, which foundabout 2.8M more Hispanics inthe US than had been ex-pected. Because of that,
www.rbr.com
Arbitron will be adjusting di-ary placement to reflect thoseCensus numbers. "On aver-age, we expect to see a 7-8%increase in the weighting ofHispanic respondents in thosesurveys," Tichenor said. Healso proudly noted that His-panic Broadcasting Corp:managed to post a revenugain for Ql, while mangeneral market groups camein below the previous year.That, he said, proved thatadvertisers don't abandonSpanish radio when there'sa recession.
As for concerns by some in-vestors that the proliferation ofnew Spanish radio stations inLos Angeles might have gonetoo far, Tichenor noted that theHispanic population of LA,around 7M people, is about thesame as the entire population ofChicago. LA, he said, now has13 Spanish formats. Would 13radio stations be too many forall of Chicago? "It's not par-ticularly scary to us as opera-tors," he said, seeking to quietfears about the Spanish radiobattle in the nation's biggestHispanic market.-JM
Mays cautious on outlook
"Visibility has never beenshorter," Lowry Mays told a
packed luncheon at the Bancof America Securities Confer-ence in New York. The ClearChannel (N:CCU) CEO saidhe hoped the turnaround hasbegun, but noted that the cur-rent situation varies by mar-ket. Mays said ad demand willpick up when consumer con-fidence improves. Earlier,Beasley Broadcast Group(O:BBGI) CEO GeorgeBeasley said he won't be con-vinced that the downturn isover until he sees four con-secutive weeks of year -over -year sales improvement.-JM
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Who's getting flaggedfor interference?
In ease you didn't know, Channel 6IV audio broadcasts on 87.7 ml I z-two clicks firm 88.1 mI-Iz FM. InCarthage, IN, 30 miles east of India-napolis, a battle is heating up. Homes
in that community that don't havesatellite or cable get Christian WJCF-
FM's audio when trying to watchWRTV Channel 6. The IndianapolisStar reports residents of the smalltown are furious about the 2,700 -watt radio station's eminations ontotheir ABC-TV affiliate. "This is ruin-ing our life," said Mike Small whocan see the tower hum his home. "Itcomes through our television, ourtelephone and our computer. It'stoo much."
Marty Hensley, who operatesWJCF from his home, said he'sdoing nothing illegal and has triedto help Carthage residents by install-ing filters to improve reception.
The filters, residents counter, im-prove the picture but won't eliminatethe music. He daims to have receivednearly 50 complaints about the inter-ference and that some residents havethreatened to blow up the tower andmade threats on his life.
Hensley says it's possiblyWRTV's fault because the sta-tion changed its antennas whenconverting HDTV last year-the same time WJCF began ops."It's unfortunate, but from atechnical standpoint, Carthageis in a hole with hills around it,"Hensley said. "Channel 6 has aweak signal out there becauseof lowering their antenna."
WRTV's CE says his station'santennas were altered but saidthey aren't causing the problems."We did an investigation and foundwe have an adequate signal in theCarthage area and past there. Theproblem is, the closest thing wins,"The Star quoted the CE.
It looks like the issue will have tobe solved locally. WJCF isn't break-ing any FCC regulations at thispoint. The Commission won't alloweducational FMs to interfere withmore than 3,000 people. Carthagehas a population of 928.-CM
Turpin sees ad slowdown
Growth in ad spending will slowsignificantly this year, but radio
4
Radio Newtshould still come out better thanmost of its competitors, accord-ing to a new CIT (N:CIT) fore-cast released by Steve Turpin.Yes, that Steve Turpin-the long-time broadcast lender is nowheading CIT's Equipment Fi-nancing division, part of theSpecialized Finance Group.
"Ad growth in the broadcast in-dustry has been fueled by the dot-corm phenomena, the 2000 presi-
dential election, the SummerOlympics and an optimistic con-sumer outlook about the USeconomy in recent years, Turpinnoted. "Although the economy isthe main culprit behind the adrevenue growth slowdown, theslowdown is also reflective of thedot -corn meltdown that beganlast year and continues into 2001.The dot -corn's needed to get theword out about their Web sites sothey began to advertise like therewas no tomorrow-which it turnsout there wasn't for many! In-deed, in many cases, well over50% of a dot -corn's expenses werespent on advertising."
CIT researchers MichaelPaslawskyi and Malory Pikarare forecasting that total broad-cast ad revenues will rise only4.4% this year. Radio ad rev-enues are expected to rise5.1%-a far cry from last year's13.8%, but well ahead of TV's2.3%. Cable TV is expected tobe more robust, rising 10.5%.The CIT forecast sees radio re-turning to a more normal growthrate of 7.8% in 2002.-JM
News Briefs
Philadelphia gets NAB Radio Show 2003
The Philadelphia Convention and Visitors Bureau has announcedthat the NAB Fall Radio Show will be held in the City of BrotherlyLove in October, '03.-CM
NRB President Gustayson dead at 64
Dr. E. Brandt Gustayson, President of the National Reli-gious Broadcasters, died 5/14, just a few weeks after NRBannounced that he had been diagnosed with cancer of the liverand pancreas (RBR 4/30, p. 3). Gustayson, who had headedNRB since 1990, was 64.-JM
Kennard boards another company
Former FCC chairman Bill Kennard has been elected to theBoard of Directors of the New York Times Company (N:NYT).Said Times Chairman Arthur Sulzberger, Jr., ''...His knowl-edge of telecommunications networks-broadcast, cable andInternet-will be immensely helpful as we evaluate our initia-tives and opportunities in those areas."-DS
SMR names Dave Kerr President
Strategic Media Research has appointed radio veteran DaveKerr as its President, joining Founder/CEO Kurt Hanson andCOO Amy Vokes. Kerr will be charged with staffing SMR'sSales and Marketing efforts and investigating joint venture andmerger/acquisition opportunities.-CM
ABC Radio unveilsstreaming strategy
Just two and a half months afterABC Radio killed its streams fromthe new AFTRA fee requirements(RBR 4/16, cover; RBR.com 4/8),New Media EVP GeoffRich tellsRBR the company's new stream-ing media solution should beginto launch next month. The needto replace or substitute onlinematerial was first discussed atABC last December, stemmingfrom the RIAA fees controversy(RBR 2/12, p.8, 12/18/00, p.4).
Workingwith Real Networks prod-ucts and assistance, ABC has chosenMedia Touch/OMT Technologies'"iMediaAdCast" for its streaming adinsertion solution, instead of usingReal exclusively (RBR 5/14, p.8).
RBN is also working with ABCRadio on a number of these issues,in particular, international "gat-ing." Rich explains: "If someonelistens to one of our radio stations
www.rbr.com
in another country, we've causedan international performance ofthat show or music. The DMCAonly covers performance rightsrelating to the US. Disney hasbusinesses throughout the world,so we are much more vulnerable."
Rich says ABC will be doingits own streaming ad represen-tation for the network of sites."Real did help us early on withour first ad replacement system,which was with The TomJoyner Morning Show. We'vebeen repping our own adver-tisements, both streaming andwebsite ads, since the beginning."
ABC will begin the new stream-ing model with its AM stations."Because basically, they have lessissues. And we're hoping to havesome of those stations up andrunning in June. My goal is tohave all of the AM stations up byJuly 1, but with the Internet, I
have yet to find anything thatgoes exactly as planned."-CM
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NTR: Home and health
categories spring ahead
For the second month in a row,the Clothing NTR category cameup empty, which is perhaps goodnews, depending on the physi-cal attributes of the radio listen-ers in your area. It is good newsin the sense that the "Nudefest"promotion we suggested lastmonth (RBR 4/23, p.4) can nowbe extended into April! We notethat the Health & Beauty Carecategory was way up, providinga critical underpinning for thisinnovative promotional idea.
The Home Improvement andOffice categories also pickedup steam as America chuggedinto spring cleaning season. Au-tomotive, .while slipping somefrom March, was still well aheadof its YTD pace. -DS
Radio AdBiz
Non-traditional Revenue Trackof vendor/new business by category (April 2001)
Category Nov Dec 2000 Jan Feb Mar Apr YTD
Automotive 12.11 1.55 10.27 0.22 2.45 9.33 6.43 4.84Food/Grocery 19.52 29.28 26.35 19.89 33.05 27.85 27.10 26.91Leisure 38.11 53.56 30.15 24.17 43.86 47.35 38.84 38.61Health & BC 7.25 4.16 6.30 8.48 4.21 3.62 9.52 6.67Home Improv. 4.97 1.81 6.39 1.24 5.49 6.28 9.98 6.06Office 6.62 0.00 5.62 5.51 2.34 1.57 4.04 3.41
Clothing 1.05 5.63 4.67 8.32 2.44 0.00 0.00 2.47Recruiting 10.37 4.02 10.22 32.12 32.12 4.00 4.08 11.03
Source: Revenue Development Systems, based on revenues from 76 stations in 32 markets
Should Arbitron be the Radio Bible?by Amy Nizich
Certainly we need to have something to guide us when choosing the properstations for our clients' radio buys. We need to have some estimate of audiencedelivery so that intelligent decisions can be made as to how much to buy and tellus the relative value of stations.
Arbitron goes a long way towards filling many of these needs. We can look atage cells, check turnover, and get share and average quarter hour (AQH) informa-tion. We can average books and use the information to trend stations as well as findout our schedules reach and frequency. It sure beats buying blind!
The problem is that we are dealing with samples and statistical models. Reliabilityis what Arbitron is all about, nowhere is the word "accurate" used. We are looking athighly fragmented audiences in most major markets. Many of the samples must beweighted to compensate for poor diary return among certain target demographics.There is no real statistical difference between a station that has an AQH of 0.8 or a 1.3and yet we buy the station with 1.3 as if it were a much better station.
People further complicate the inherent Arbitron statistical problems by buying toward very narrow demographics andnarrowing dayparts, even buying by the hour. This may make the numbers look better and yield a better cost per pointon paper, but sample sizes begin to get very shaky.
So what's a buyer to do? Market specialists should use multiple sources when making decisions on which stations shouldbe included on buys. Qualitative sources such as Scarborough and Media Audit should be consulted. Formats should becarefully chosen to complement each other and help target your audience.
Talking to the station people in the market is extremely important as they can guide you as to how the ContemporaryHit Radio (CHR) station in market A is different from the same format in market B. Daypart narrowing should be kept toa minimum. They can also give you the latest gossip as to what might occur down the road that could impact your schedule.
When there are market changes, which are not yet reflected in Arbitron, buyer logic must prevail over existingdata. Sometimes just looking at the overall demographic composition of a market can guide you as to how a newformat might be received.
Buy by the numbers? The answer is yes and no. All possible sources of information should come into play allowing thebuyer to use broad strokes to create the best and most effective buys to help our clients sell their products.
Amy is EVP/Director of Local Broadcast Negotiations at Initiative Media.She can be reached at 323-370-8490 or [email protected].
6 www.rbr.corn 5/21/01 RBR
Howard UniversityMedia Sales Institute
draws big names in radio
National Association of Broad -
asters Education FoundationNABEF) recently provided a $48K
41 -ant to fund the 10 -day Howardniversity Media Sales Institute tak-
rig place 5/15-5/24 on campus inashington, DC. The first -ever
_Tent, developed by Personal Sell-ng Principles (PSP), a media man-'gement and training company6undedby radiovetsJeffreyMyersmd Bartt Horton, includes some1 the biggest names in broadcastmarketing, all of them speakingand recruiting!) to students in
attendance from universities fromaround the nation.
Howard University'sSchool of Communicationshas been recognized for pro-ducing the largest number ofAfrican American graduatesin the field of communica-tions. Said recent Howard GradDana Camak on the event:"I've learned so much fromthis opportunity. The ten daysreally have been vigorous, butthe training has been awe-
. some. We've had some reallywonderful people come in andreally take time with us, and that'sreally good to see. They're trying togive back to younger people andpave the way for us. Through it all,I believe that we all will succeedand do well. It's good to see that wehave a leeway into the industry."
The event is designed to serveas a pipeline for funneling tal-ented students with diverse back-grounds into the broadcast in-dustry. Speakers include: EddieFritts, President & CEO, NAB;Chuck Sherman, President,NABEF and EVP, Television, NAB;
Richard Ferguson, VP/ Co -COO, Cox Radio; Gary Fries,President/CEO, Radio Advertis-ing Bureau; Chris Rohrs, Presi-dent, Television Bureau of Ad-vertising; Jay Williams, Presi-dent, American Urban Radio Net-works; Tony Washington, VPCorporate Sales, Radio One;Bennett Zier, EVP, Clear Chan-nel Communications -DC; JimWinston, Executive Director, Na-
/21/01 RBR
Salestional Association of Black Broad-casters; Ralph Guild, CEO/Chair-man, Interep; John Hare, Presi-dent ABC Radio Division; LarryJulius, VP Sales, Lightningcast;Stu Olds, CEO, Katz MediaGroup, Kevin Barry, VP, LocalSales & Marketing, Cable Televi-sion Advertising Bureau; andRBR's Ken Lee.
RBR attended lectures by DickFerguson, Stu Olds and Gary Fries.Telling his story, Ferguson describedhis ascent from setting up a brokendown college carrier current AM
9) Do your homework. Don'tshow up unprepared. It's betterto apologize and postpone thanshow up not prepared.10) Follow through. Make sure allyou say you are going to do gets done.11) Keep balance in your life-take a few minutes to pull backand look at the big picture.12) Life isn't always fair. Clientsand employees will give you somereally bad breaks. It's how youdeal with that that's important.13) Be a leader. Leadership is the"Spreading of hope."
Olds, Fries and Ferguson were speakers at the Media Sales Institute
with ad sales dollars, to the sale of 18stations to Cox for $20M in 1997.Ferguson, an excellent speaker, pro-vided some valuable advice for theattendees, summed up in a list of 13principles to work and live by:1) Your name and your reputa-tion are your most valuable asset.Building a career is like buildinga house. A good house is built ona strong foundation and a goodcareer is built on honesty andintegrity. Do the right thing.2) Build on your strengths, man-age your weaknesses.3) Keep growing. You've got tofight the comfort zones to be-come successful.4) Pick the right company-"hirethe right company."5) Work with the big rocks, don'tget hung up with the small rocks.6) Be a really good listener. Findout what the client needs.7) When selling, think like amarketing person-strive to meetthe client's needs.8) Ideas a really powerful. Youare a creative problem solver-use that to your advantage
www.rbr.com
Stu Olds, who happens to ar-rive at work each morning at 6:30AM, gave sage advice on makingthe right choice for the first em-ployer. "As you go through thatprocess of selecting a job, I reallythink it's very important that youthink very carefully about the com-pany that you want to partner withto start off your career. That firstjob you get is really kind of a post-graduate degree. It kind of sets thestage for the rest of your life."
As to suggestions for good salesstrategies, he offered a number oftips. Among them, "I want you tostart thinking as if you were acustomer or a client when you aregetting involved with them. Be-cause there's nothing more impor-tant to a media sales person thandeveloping relationships that pro-duce dollars. How you treat people,how you build relationships, thingsthat you do from day one are goingto build the relations that are goingto make you a lot of money in thisbusiness and others going forward."
Olds closed by stressing the im-portance of values. In the 30 years
By Carl Marcucci
he's been a manager, he has onlyfired three people, two of whichover a loss of trust and respect. "Ican't tell you how important I thinkcore values are and the courage tostand behind them. The core valuesyou have to live by in this businessare trust, integrity, excellence, dedi-cation. And I want to tell you, onething to never do is compromiseyour integrity or personal values.The reason I say that is once that'stainted, good luck. But if you thinkof a person that's very principledon a personal basis, you think of an
individual that you know isgoing to do the right thingevery step of the way. That'sa person you feel comfort-able doing business with.That's a person you willshare information with.That's the person you willgive the benefit of the doubtto. And in selling mediatime, you're going to need
the benefit of the doubt a lot."Fries spoke to the students on
the role RAB plays in the indus-try-a spokesperson, a providerof station support, a training en-tity, and an organization that workswith national advertisers, educat-ing them on radio's benefits andbringing that business to radio.
One student asked if Friesthought emerging technologies likesatellite radio would hurt today'sradio broadcasters. "Radio has re-invented itself many times. Thereason I became a GM at 24 yearsold was because everyone wasmoving to TV. Radio survived TV.Radio survived the eight -track, theCD player and it will survive satel-lite and the Internet. We know themusic, the socioeconomic back-ground, etc. We have a handle onthe audience of our communities.So if anybody is going to reinventthat infrastructure, I'd like to see it."
Scheduled speakers back-to-back, both Fries and Olds encour-aged students to apply for Baylissfoundation grants, of which theyboth serve on the board.
7
Part II: Digital Debuts:
What's Next in Automation?
In Part I of this Engineered forProfit series on digital audio andautomation systems (RBR 4/9,p.8), we focused on NAB2001product debuts and upgrades. InPart II, we look at the latest on the"Cart Chunk" file sharing stan-dard, webcasting and compat-ibility with IBOC DAB.
"Cart Chunk" communication
Lan we call it a standard yet? Justabout-Cart Chunk is becomingat least a de facto protocol be-tween production and automa-tion/on-air control systems. CartChunk, which began as aMicrosoft -developed tagging al-gorithm, allows users to embedlabeling information-program-associated data-directly into a.WAV (or WAVE) file. That addi-tional data is attached as part of a.WAV file in the form of chunks,or units of data, so spots or promosfrom a production system cancommunicate the files' info withmultiple on -air control systems.Cart Chunk, with its inherent prosand cons, believers and non -be-lievers, has been submitted to theAudio Engineering Society forconsideration as a standard. It'scurrently awaiting the "call forcomments" period.
Broadcast Software Interna-tional (BSI) President Ron Burleytells RBR his company not onlysupports Cart Chunk, but a fewother tagging schemes as well:"We support the Microsoft RIFFtagging method, the Cart Chunkand the MP3 ID2/1D3 taggingmethods. Interestingly, theMicrosoft RIFF tagging scheme isthe oldest, but still the most ver-satile. The information is placedat the end of the file, after thelarge audio data field. This allowsfor quick review and editing ofthe information without rewritingthe audio data. The RIFF specifi-cation is highly used in the musicand audio production sectors,less so in broadcast where digitalaudio developers historically fa-vored proprietary constructions."Cart Chunk, on the other hand,places information at the begin -
8
Engineered For Profitning of the file, and "forces arewrite of megabytes of audiodata any time the length of theinformation is changed. The CartChunk also limits users to a spe-cific set of data fields. RIFFdoesn't," Burley adds.
"DADpro32 has been CartChunk compliant since March2000. Enco believes strongly inCart Chunk and we will con-tinue to support and act as anadvocate for the standard," saysEnco Director of Sales and Mar-keting Don Backus.
CartWorks and RCS also sup-port Cart Chunk. All of RCS'sproducts are XML (see Part I) andCart Chunkready. And forCartWorks, "Wenow support theCart Chunk for-mat and see it asbeing the bestchoice for thistype of ex-change. Our lat-est release of theCartWorksWav/MpegDigital AudioSystem includessupport for theCart Chunkstandard, and automatic website content generation," saysPresident George Thomas.
Still, support is not yet univer-sal for the developing standard,and it may not be the best solu-tion in the long run, according toProphet Systems Innovations Di-rector of Marketing JackieLockhart. "We currently haveno plans to use Cart Chunk tocommunicate between differingon -air systems," she says.
"Support of Cart Chunk todate has been spotty. At BE, wesupport as standard a Cart Chunkformat as we can, given thespecifications. Sound Forge 5.0supports a standard implemen-tation of Cart Chunk which al-lows edited pieces to be trans -
Ron Burley
ferred to our Vault systemsseamlessly," Broadcast Electron-ics Director of Studio SystemsRay Miklius explains.
To get around the fact thatother systems still use their origi-nal proprietary formats, BE hashad to take extra steps to maketheir systems compatible. "In or-der to move audio files from anolder BSI version to AudioVaultwe had to build a custom soft-ware tool to convert that propri-etary data into a standard CartChunk format. We expect moreand more suppliers to migrate tothe format. But in the meantime,we still develop many import
tools to allowfor seamlesssharing of au-dio assets,"Miklius adds.Cart Chunk,
while probablythe best sharingsolution outthere today,doesn't solve allof radio's needsand is limited inthe amount ofdata it can carry.According toScott Studios
President Dave Scott, "The CartChunk doesn't allow rotatingmultiple cuts under one number,doesn't honor start/end times (justdates) and many other qualitiesessential to a real radio station. Itmay please the engineers but it isway short of what the trafficmanagers and program directorswant. Also, it has yet to be reallyadopted as anybody's standard."
Arrakis Systems VP BroadcastDivision Rod Graham agrees,"The only standard we can see isthe file name itself. All of the datawe have is put on the file name.And because it's there, it's easilyretrieved. I'm not sure how all thediffering on -air systems oper-ate, but as far as the DigilinkFree and our Digilink Max that
www rbr com
By Carl Marcucci
we're selling, all of our informa-tion is on that file name."
Dot -corn dollars diminishing?
The latest hype surroundingAFTRA's rates charged to radioadvertisers for streaming theirspots over the Internet simulcast(RBR 4/16, cover) may be hurt-ing the webcasting software in-dustry with hundreds of stationssilencing their streams. Othersstill have gone to on -demandplayback of content rather thancontinuous audio streaming."Many are using on -demand au-dio for highlights, news report-ing, etc. They are more for build-ing brand than for monetization.Based on Internet economic con-ditions, the market will be spottyfor awhile. But over the longhaul, new concepts and businessstrategies will emerge," saysMiklius. "Obviously, the goldendays of audio streaming are over,for now. Many projects we werequoting or involved in have ei-ther scaled back plans, held offon investment, or went away. Butwe also have had many signifi-cant success stories."
"While Dalet has a strong baseof webcasting clients, the currentdot -corn fallout is causing manypotential webcasters to questiontheir investments in content pro-duction and delivery tools. Whilewe see this market as an importantsource of revenue, we have madeplans to explore and develop othermarkets," confirms Dalet Directorof Marketing Robin Wang.
Nevertheless, what's good forthe radio studio is good for thewebcaster studio. Some vendorscontest there's a fine line distin-guishing between the two. "Wedo business with a number ofwebcasting companies," Backusattests. "While the volume is in-creasing, I believe that the basicneeds of that market overlap sosignificantly with our more tradi-tional broadcasting market, it's
5/21/01 RBR
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best to look at webcasting as essen-tially another facet of the broadcastmarket, and that is an importantsource of revenue for us!
"In our 21 years of experience,this is the most exciting and prof-itable time of all for RCS. Be-cause we are at the intersection ofradio and the Internet, we areseeing people from terrestrial ra-dio and Internet radio," says RCSPresident Philippe Generali."Both market segments need ourtools for their Internet broad-casts; terrestrial radio needs ourInternet integration systems andInternet radio needs our digitalautomation and music schedul-ing experience. With the dot-com economy frenzy lessening,we are seeing fewer new compa-nies, but the serious and signifi-cant players are still around andstill building their futures withtools and support from RCS."
BSI is seeing both an expan-sion and contraction in thewebcasting sector. "Traditionalbroadcasters, reeling from licensedisputes with record companiesand license holders are scalingback their efforts," states Burley."They'veveloping a profitable webcastingmodel. On the other hand, web-
' only broadcasters appear to bemaking ambitious plans for thefuture. They use our products toprovide a very economical corestream from which listeners/view-ers can fork to other content."
Nevertheless, the issue of tostream or not to stream lies muchmore with streaming expensesthan software and equipment.The ISP, AFTRA and RIAA feeshave the greatest impact on de-mand for these vendors-insteadof their individual pricing struc-tures. For example, LPB offers its"Web Jockey" automation sys-tem for only $99 (it doesn't inter-face with traffic and billing). Whilethat price point should bring in aton of business, National SalesManager Dave Strode says notnecessarily: "We are getting inter-est from tons of wannnabes. Andthen they run up against theiractual costs. Buying the softwareand putting the station online isone thing, but getting that ISPconnection so that you can serve
10
Engineered For Profita few people-that's where thebig dollars run in. So then theyrealize they actually have to makemoney doing this. I'd say 1% ofthe people who are interested init actually do it."
IBOC integration
Another important considerationfor both broadcasters and digitalaudio systems manufacturers isconfiguration decisions in antici-pation of DAB. Nobody wants tohave to throw out their existingsystems to suc-cessfully add aDAB broadcast.We asked IBOCdeveloperiBiquity Digitaland the automa-tion systemsvendors whatsort of changes,if any, may needto be made.
As part of themerger with Lu-cent Digital Ra-dio (RBR 7/17/00, p.2), iBiquitywill be using Lucent's PAC (Per-ceptual Audio Coding) compres-sion scheme in its final system.Actually, iBiquity has its ownversion of PAC, "Q -PAC," whichis customized for use in broad-cast channels, STLs and studiostorage. Because broadcasters arecurrently running MPEG-II, DolbyAC2 Apt -x or other data compres-sion types, will these differingalgorithms conflict with Q -PAC,causing audio artifacts or worse?
The issue centers around"transcoding," where a digital sig-nal that's already been com-pressed is turned back to equiva-lent CD -quality, and then re -com-pressed. "You actually turn it backto digital audio, uncompressedand then you re -compress it
again," says iBiquity VP Broad-cast Engineering Glynn Walden."We're not going to lie to you and
Glynn Walden
tell you that there are no issueswith transcoding. To be honest,the full effects of transcoding arenot known to us. We don't knowhow every other codec will workwith PAC, but what will happenis broadcasters will implementIBOC and they will find whichcodecs are friendly and whichones aren't. And eventually,the marketplace will weed outthe unfriendly codecs."
Q -PAC actually attempts tosolve some of the conversionissues. "With Q -PAC, we don't do
transcoding, wedo tandem cod-ing-we takethe Q -PAC thatcomes out of thestudio or STLand translate itto broadcastPAC-with-out uncom-pressing andrecompressing.We do the trans-lation directlyfrom the Q -PACat the highercoding rate to Q -
PAC at the lower coding rate. Weare working on versions of PACthat are specifically intended tosupport STLs and studio storagesystems. These versions are de-signed to be free from artifactsthat happen in typicaltranscoding operations. In thecase of Q -PAC, we don'tuncompress the audio. Wemerely convert it from the higherbit rate storage device, or STL, tothe appropriate bit rate for transmis-sion over the AM or FM channel."
Apparently, there's no needfor alarm, at least not yet. Incor-porating an existing automationsystem (i.e. one that uses MPEG-II) with IBOC may work justfine if it uses linear, uncom-pressed audio. "The best opera-tion is where you don'tdo this transcoding, whereyou're uncompressing and
www.rbr.com
recompressing," stresses Walden."For example, Apt -x runs at 384kbps. A lot of broadcasters usethat for storing audio, but it's ahigh bit rate. So, consequently, itmight work fine. Over a period oftime, broadcasters will learn whatis compatible with the transmis-sion system and what isn't andthey will slowly adopt the tech-nologies that are compatible. Wethink that we have the best solu-tion, which is Q -PAC, of course,and we will be actively marketingit as part of the overall IBOCsolution. Many of the digital au-dio storage system manufactur-ers have discussed this with usand are aware of what we thinkthe right thing to do is."
"Prophet Systems currently of-fers configurations that allow forboth compressed anduncompressed audio," confirmsLockhart, who doesn't anticipatea problem for client stations us-ing the company's NexGen digi-tal automation systems.
"Most of our storage custom-ers employ some level of lossycompression to save disk space,"says Miklius. "The fidelity affectsof driving an audio stream gener-ated from MPEG I Layer II filesthrough PAC is still unknown.We are working with iBiquity toinsure that cascading compres-sion effects with PAC are under-stood and overcome."
Enco, Scott Studios, MediaTouch, and others are also in-volved in the process withiBiquity. The solution is alreadybeing standardized to some de-gree just by using uncompressed,linear audio. "More and morestations are using uncompressedaudio in their air studios becauseof the potential for dueling algo-rithms later in the air chain. ScottStudios and Computer Conceptsboth have been pioneers in that,"Says Scott. "Scott Studios' newSS32 is also playing apt -X as wellas MPEG-II or MP3 oruncompressed in our systems for
5/21/01 RBR
Dmpatibility with our legacy di-nts who have a large library ofrevious recordings using apt -X.Ii of these formats (plus Dolby£-2) play seamlessly in Scott sys-!ms, and those classic units wheremight not can mostly move to theitest with a software upgrade."
Backus agrees, any systemlat uses linear storage shoulde a good start for working withBOC. "Most people are not giv--ig DAB an enormous amountif consideration at this pointAlen it comes to designing and,mplementing a digital deliveryystem. Those that are, are typi-ally most concerned with theiotential for degradation ofound or artifacts appearing inudio due to cascading data re-luction algorithms. In these cases,ngineers are choosing to go withinear storage instead of the MPEG-I which is widely used with digitalystems like DADpro32."
"Certainly testing needs to beperformed to determine what ifmy changes need to benade. Obviously, supplyingincompressed audio to the DAB,ystem input would be a good:hoice. However, this may not berecessary in every case. It will
'ilsb depend on the compression
PROPHET SYSTEMSi n n o vations877/ [email protected]
types used in other portions ofthe station's on -air chain (Satel-lite, Digital STL, etc.)," observesThomas. "Our company is devel-oping solutions for stations whohave their valuable music librar-ies stored in a compressed format
they've been monitoring the in-troduction and development ofDAB overseas for years: "The lastthing the world of digital needs isyet another wannabe standard,mainly because there are so manyalready out there. RCS has been
(L to R) Frank Edenburn, Sales Manager; Jackie Lockhart,Director of Marketing; Casey Pascale, Sales Engineer
(apt -X, Mpeg layer II, layer III,etc.) and wish to convert touncompressed audio without re-recording everything."
RCS hasn't yet sat down withiBiquity to examine compatibilityissues. Generali says because RCShas 22 offices in 18 countries,
watching the development ofDAB in Europe for quite sometime and we have found thateven public broadcasters inScandinavia have become luke-warm after five years of tryingvery hard. Because iBiquity, likeothers before them, have created
a receiver -based concept, the enduser can't hear the new transmis-sion unless he gets a new radio.We've seen over and over that it'svery hard to get people to adaptto new hardware, whether it'sAM stereo, Quad FM or DAB.RCS has not yet had contact withiBiquity but we would be de-lighted to explore the possibili-ties with them."
Strode hasn't made technicalcontact with iBiquity yet, either.However, he's not too worried:"This is the stuff that we can't getout of iBiquity now-all theirspecs. It's a chicken and the eggthing. The chicken hasn't laid theegg yet, so which one do youwant me to fix first? The worstcase is you'd have to change outthe audio card or compressionscheme for a better samplingrate. But that's all based on theaudio card-much less to do withthe automation system. That prob-ably applies to everybody."
Adds Burley: We can handle anyaudio technology supported eithervia audio hardware or softwarecodec in the playback PC. This iswhat we mean by "non-propri-etary." Broadcasters can make theirown choices about audio format.Our tools don't limit their options."
Another NexGen Digital System is Ins Hilltd.What do Clear Channel,CBS/Infinity, Sirius SatelliteRadio, and the largest privategroup of stations in Mexicohave in common?
NexGen Digital.
What sets Prophet Systems apart from our competitors?
Our attitude towards service and support!
NexGen Digital, the latest generation in a long line ofcutting -edge digital audio systems.
YOU GO piProW !Inio u L L NEVER GO BACK'21/01 RBR WWW I br corn 11
Jeff -Pilot atakeover target?
Following the biggest insur-ance company deal everthe $23B purchase of Ameri-can General (N:AGC) byAmerican International Group(N:AIG)-there are rumblingsof a consolidation spree. OneReuters report lists the toptwo takeover targets as Lin-coln National (N:LNC), val-ued at $9B, and Jefferson -
Pilot (N:JP), valued at $7B.Many of the potential buy-ers are European insurancecompanies, who wouldhave to spin off J -P's radioand TV groups.
Jefferson -Pilot Communi-cations recently reportedthat Q1 revenues weredown 5% to $50.6M. Broad-cast cash flow declined16.7% to $16.8M.
II edia Markets a MoneyBank cuts off
Big City's credit
An SEC filing by Big City Radio(A:YFM) reveals that its banklender, Chase Manhattan, hascut off access to its credit line.Big City asked to draw on therevolving credit facility in April,but was refused. "The lenderinformed the Company that itwould not permit the Companyto draw on the Revolving CreditFacility due to the Company'slack of compliance with a cov-enant that required that theCompany's consolidated finan-cial statements for the yearended December 31, 2000 bereported on by the Company's
independent accountants with-out a 'going concern or likequalification or exception,- BigCity reported to the SEC. In-stead, the radio group borrowed$425K in May from an "affili-ate," apparently another com-pany controlled by Big CityChairman Stuart Subotnick.
Big City faces the first cashinterest payment of $9.8M on its$174M in outstanding publicbonds (senior discount notes)on 9/15 and had only $478K incash on hand, as of 3/31."TheCompany is in the process ofseeking a new debt facility tofinance its operating and debtservice requirements and capi-tal expenditure programs
John Borders. President, of
Sunburst Mediahas agreed to exchange the assets of
KLTY-FM(Highland Village) Dallas, Texas
Ivith
Edward G. Atsinger. III. President. of
Salem Communications Corp.
for
KDGE-FM(Gainesville) Dallas, Texas
StarMediaGroup, Inc.
Total Value
$65,000,000"Radio's Full Service
Financial Specialists" 111
5080 Spectrum Drive, Suite 609 East Addison, TX 75001 (972) 458-9300
www rbr corn
by Jack Messmer
through December 31, 2001,"Big City said in its SEC filing."There can be no assurance thatany such financing will be avail-able or available on acceptableterms. Management believes thatits long-term liquidity needs willbe satisfied through a combina-tion of i) achieving positiveoperating results and cash flowsthrough revenue growth andcontrol of operating expensesand ii) the implementation andexecution of its growth strategyto acquire and build a majorbroadcast group. In order tomeet its long-term financingneeds, the Company is currentlyconsidering all means availableto it, including the raising ofadditional equity and the re-structuring of the Notes."
At another point in the filing,Big City says, "Cash and cashequivalents are not sufficient tosupport the Company's opera-tions through December 31, 2001and its growth strategy. In addi-tion, because of the Company'ssubstantial indebtedness, a sig-nificant portion of the Company'sbroadcast cash flow will be re-quired for debt. These mattersraise substantial doubt about theCompany's ability to continue asa going concern."
Big City's Q1 revenueswere down
In a departure from normal Wall"street practice, Big City RadioA:YFM) did not issue a press
release informing investors ofits Q1 financial results. It hasnow, as required by law, sub-mitted its financial results to theSEC. Net revenues for Q1 weredown 9.1% to $4.2M. Expenseswere also lower, but the com-pany remained in negative cashflow. Q1 negative broadcast cashflow was $1.4M, compared to anegative $1.5M a year earlier.The company said that revenueswere down in New York and
5/21/01 RBR
hicago, but up in Los Angeles. For Ql,ig City's net loss was $8.8M, up $139KNom a year ago.
Tough 01 for Jones
Vith virtually all of its business lines depen-, em on national advertising, Q1 results wereof pretty at Jones Media Networks Ltd.;ompany-wide, revenues were down 7% to18.7M and EBITDA plunged 92% to $300K.Jones Radio Networks actually posted a
.()/0 gain in revenues, to $9.9M, which'resident Ron Hartenbaum attributed tohe launch of new programs and a new 24 -tour format, "Rhythmic Oldies, in lateWO and early 2001. New costs more than)ffset the modest revenue gain, sendingadio EBITDA down 62% to $900K.
Cable ad sales, the cable infomercial busi-less and satellite uplinking services-theAlter main businesses of Jones Media Net-works-were down even more than radio.
Having just jumped into national rep-vsentation of Internet streaming a fewnonths ago, Jones is already having sec-)nd thoughts. In Jones' conference call.with Wall Street bond analysts,-lartenbaum noted that many radio corn-
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panies have stopped streaming becauseof the AFTRA/SAG demands for paymentsfor union talent. He also recounted theimpact of the generally soft ad market andthe reluctance of advertisers to enter newtypes of media in a time when they'recutting back on traditional media spend-ing. "All of these issues have prompted usto re-evaluate and make a decision re-garding our future involvement in thisbusiness-a decision we expect to makevery shortly," Hartenbaum said.
Although the sector generated "no sig-nificant revenues" during Ql, Jones' Internetbusiness posted an operating loss of $600K.
liggins buys Radio One stock
There's no better way to show confidencethan for a CEO to invest in his own company'sstock, so it appears that Alfred Liggins hasgreat confidence in Radio One (O:ROIA &
ROIAK). The company says Liggins recentlybought 1.5M shares of its Class D (O:ROIAK)stock at the market price. Based on recenttrading, that would put the price tag around5301. The entire purchase was made witha loan from Radio One.
The company also announced that ithad granted a total of 1.25M in optionsto buy Class D stock to Liggins, Founder/Chairperson Cathy Hughes and COOMary Katherine Sneed. That increasesthe company's tally of fully dilutedshares to 89M.
Radio One issued updated guidance(5. 15) for Wall Street analysts, reflecting
the increased stock numbers and theimpact of this month's $300M bond sale(RBR 5/14, p. 12). The advisory did notchange the basic numbers from RadioOne's previous guidance: Q2 shouldhave net revenues of approximately$64M and broadcast cash flow of $34.5Mand the full year should have net rev-enues of $248M and BCF of $132M. Italso repeated the estimate that BlueChip Broadcasting, whose acquisitionby Radio One has now gotten a greenlight from the FCC, will have BCF ofapproximately $11.5M this year.
Radio One hasn't said anything yetabout a Cable World report that it is partof a group making a $110M cash infusioninto New Urban Entertainment Televi-sion (NUE-TV), along with AOL TimeWarner (N:AOL), Goldman Sachs and anumber of other investors. The cable TVstart-up seeks to challenge Viacom's(N:VIA) recently -acquired Black Enter-tainment Television (BET).
RBR observation: Liggins had previ-ously revealed that Radio One had taken asmall equity stake in NUE-TV, mostly intrade-providing expertise in program-ming, marketing to African Americans andpromotional support from Radio One'sUrban stations-but very little cash. Aclose reading of the Cable World reportindicates that the new deal is much thesame-with Radio One providing little ofthe cash. In addition to Radio One, ClearChannel (N:CCU) and Hubbard Broadcast-ing are NUE-TV investors.
The RadioIndexTMThe Radio IndexIMpushed to a year-to-date high of 203.897 19C
on 5/16, up 11.963from a week earlier.
210
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Read about thesetransactions and more
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Transaction Digestby Dave Sayler & Jack Messmer
The deals listed below were taken from recent FCC filings.RBR'sTransaction Digest reports on all deals that involve assignment of a station license (FCC Form
314) and substantial transfers of control of a licensee via a stock sale (FCC Form 315), but not internal
corporate restructurings (FCC Form 316). All deals are listed in descending order of sales price.
$80,000,000 KQQK-FM Houston (Galveston )from KQQK License Inc., a subsidiary of ElDorado Broadcasting Inc. (Roel C. Campos,SVP) to HBC License Corp., a subsidiary ofHispanic Broadcasting Corp. (O:HBCCA)(McHenry T. Tichenor Jr. et al). Cash.Superduopoly with KRTX-AM, KLAT-AM,KOVE-FM, KRTX-FM, KLTN-FM, KOVA-FM &KLTO-FM, forming three distinct radio markets.
$17,000,000 KOHT-FM & KTZR-AM Tuc-son (Marana, Tucson) from Royal Broad-casting of Arizona LLC (Art Laboe) to ClearChannel Broadcasting Licenses Inc. (LowryMays), a subsidiary of Clear Channel Com-munications (N:CCU). Cash. Superduopolywith KNST-AM, KRQQ-FM, KOYT-FM,KWFM-FM. Royal is also selling KXEW-AMSouth Tucson. CCU has assigned its right toacquire the station to a third party.
$9,000,000 KBZS-AM San Francisco (PaloAlto CA) from In Radio License LLC (N. JohnDouglas) to SCA License Corp. (StuartEpperson, Ed Atsinger), a subsidiary ofSalem Communications (O:SALM). $250Kadvance, balance in cash at closing. Sellermust obtain new 10 -year lease for its cur-rent transmitter site. Further, seller can earnadditional $2M if he successfully obtains aCP for a new transmitter site which reachesa nighttime population of at least 2,287,977,with a $100K bonus reduction for each 1%of diminished population reach. Duopolywith KFAX-AM & KSFB-FM.
$7,200,000 WMFS-FM Memphis (BartlettTN) from Belz Broadcasting Co. to Infin-ity Broadcasting Corp. of Illinois, a sub-sidiary of Infinity Broadcasting Corp.(N:INF) (Mel Karmazin et al). Cash.Duopoly with WMC AM & FM.
$2,150,000 WWUZ-FM Fredericksburg VA(Bowling Green VA) from RappahannockCommunications Group Inc. (W. WaldenAbernathy) to The Free Lance -Star Publish-ing Co. of Fredericksburg, Virginia (Flo-rence C. Barnick, VP et al). $150K escrow,balance in cash at closing. $150K put into
www.rbr.com
post -closing escrow account pending reso-lution of real estate litigation involving thestation. Duopoly with WFLS-FMFredericksburg. The Fredericksburg marketis initiating Arbitron measurement for theSpring 2001 survey.
$1,350,000 WAZR-FM Winchester VA(Woodstock) from Ruarch Associates LLC(Arthur D. Stamler) to Capstar TX LP, a subsid-iary of Clear Channel Communications (N:CCU)
(Lowry Mays et al). $67.5K escrow, balance incash at closing. Superduopoly with WACL-FM,WFQX-FM. WKCY-FM, WUSQ-FM & WKCY-AM forming two distinct markets.
$1,200,000 KBRE AM & FM St. George-
Cedar City UT (Cedar City) from KolobBroadcast Radio Enterprises (Arthyr T. ChallisJr.) to MB Media Group Inc. (Jerold W.Johnson, Wallace C. Brazzeal, L. Brent &Debra L. Miner et al). Promissory note.Superduopoly with KSUB-AM & KCIN-FMCedar City UT and KZNZ-FM Colorado CityAZ. LMA since 9/1/98. Merger of MB Mediaand Southern Utah Broadcasting Co. withMB as surviving company.
$1,000,000 KBLK-FM Burnett TX fromMunbilla Broadcasting Corp. (B. Shane Fox)to Blanco Television LLC (Charles Crawford).$100K escrow. balance in cash at closing.
$342,000 WHUG-FM CP Cooperstown PAfrom Fox Allegheny Inc. (John A. Bulmer)to Forever Broadcasting LLC (Kerby confer,Donald Alt, Carol Logan O'Leary, LynnDeppen). $50K escrow, balance in cash atclosing. Daisychain superduopoly prima-rily with WGYY-FM Meadville PA andWOXX-FM Franklin PA, along with an ad-ditional three FMs and four AMs, with nomore than five stations, and no more thanfour stations of one service overlapping.
$260,000 WRHB-AM Kendall FL. 52% ofBaja Florida Radio Inc. from Richard A.Bowers (52% to 0%) to New World Broad-casting Inc. (Adib Eden, to 95% and HerbertM. Levin, to 5%). Cash.
5/21/01 RBR
Regent entersPeoria for $20M
Me Cromwell Group has decidedo part with its Peoria superduopoly:luster, selling to Regent Commu-lications for $20M. It will not be;one completely, however. $6M1 the deal will be paid in RegentCommon Stock, which can bestacked next to the $14M pile ofcash that it's taking away from thenegotiating table.
The stations are WVEL-AM &WGLO-FM Pekin, WPPY-FM.Glasford, WRVP-FM Eureka,WIXO-FM Bartonville and WFYR-FM Elmwood, all surroundingthe 141st Arbitron market. Thecluster ranks second in audienceshare to JMP Media and ahead ofAAA Entertainment, which itselfonly recently entered the market,striking four separate deals toacquire five FMs last year.
Regent also dosed on its $5Mpurchase of an AM and two FMs from
StarCom Inc. in St. Cloud MN, giving
it to 2AM/4FM cluster there-DS
Salem adds in SF,
Sacto, Richmond
Salem Communications (O:SALM)is adding a third station in SanFrancisco. The Religious mega -group is buying KBZS-AM fromJohn Douglas' In Radio LicenseLLC. The basic price tag is $9M,but Douglas will get a $2M bonusif Salem succeeds with efforts toboost the station's nighttime sig-nal (currently 140 watts) to coverat least 2,287,977 people with its11.1 mV/m contour.
The group is paying $8M toswim its "Fish" ContemporaryChristian format into Sacra-mento. Pacific Spanish Networkis selling KLNA-FM, with anLMA putting the new format onthe air immediately. The FMjoins Salem's pair of AM stationsalready running in the market.
Although Salem does not ownany stations in Richmond as yet,it does have tech subsidiaryOnePlace in Virginia's capital, aswell as an important group ofstations up 1-95 in the Washing-ton market. It is paying $735K toCox Radio Inc. (N:CXR) to bringWVBB-AM into the fold.-JM, DS
Greater Media getsgreater in New Jersey
New Jersey -based Greater Mediais expanding in "The Garden State"by acquiring four of the six sta-tion under the umbrella of BurkeRossy.'s New Jersey Broadcast-ing Partners. Terms of the salehave not yet been filed with theFCC. Until closing, Greater Mediawill LMA the four stations: WRAT-FM in the Monmouth -Oceanmarket and WMTR-AM, WWTR-AM & WHDA-FM in theMorristown market-both newmarkets for Greater Media.
Villalobos launching group
Hector Villalobos of Salinas,
CA is launching a new radiogroup with six spin-offs thathad been placed into trust whenZ -Spanish Radio was mergedinto Entravision (N:EVC). Tak-
ing the literal English transla-tion of his name, Villalobos hascreated Wolfhouse Radio GroupInc. to buy KCTY-AM, KTGE-AM, KHMZ-FM, KHNZ-FM,KRAY-FM & KZSL-FM, all in theMonterey -Salinas -Santa Cruz, CAmarket. The sellers are two trusts,with Mark Inglis as Trustee.Although the assignment appli-cations were filed electronicallyat the FCC, the contract wasfiled on paper and is not yetavailable. According to an SECfiling by Entravision, AmadorBustos and his Z -Spanish share-holders retained the right toreceive the proceeds from thesale of the spin-offs.
New details of SBS' LA deal
The quarterly 10-Q report that Spanish Broadcasting System (O:SBSA) has filed with the SEC reveals lots more details of the company's
LMA and pending $250M purchase of KXOL-FM (formerly KFSG) Los Angeles from the International Church of the FourSquare Gospel.
SBS has made $25M in payments thus far-$5M as a non-refundable deposit when the contract was signed 11/2/00 and an additional
$20M when it began LMAing the station this month (RBR 5/7, p. 2). That gives SBS the right to LMA the station through 3/13/02, but
it can extend that to 12/31/02 with an additional payment of $35M. All of those payments will be applied to the $250M purchase price
if SBS closes the acquisition by 8/1/02. After that date, each month's delay in closing will cost SBS an additional $1.2M.
Meanwhile, the FourSquare Gospel church's LMA of SBS's 93.5 mHz simulcast stations, which began simultaneously with the KXOL LMA
5/1, has an initial term of 60 days. If the church doesn't extend its LMA, it will receive warrants to purchase 234,375 shares of SBS at $6 per share
(the stock closed 5/11 at $5.12) each month until closing or 12/31/2000 (or termination of the sale contract). But if the LMA is extended, the
number of warrants will be reduced to 197,917 each month. All of the warrants will be exercisable for five years after they are issued.
SBS has yet to specify exactly how it will finance and close the LA deal, which is an all-time record for the purchase of a stick and
the second highest price ever paid for a single radio station. According to SBS' SEC filing: "The acquisition of radio station KFSG-FM
[now KXOL] will be funded primarily from the senior credit facility, cash on hand and internally generated cash flow, as well as potential
equity and debt financing and asset sales. There can be no assurance that the acquisition of radio station KFSG-FM will occur."The SEC filing of the LMA terms also gives a pretty clear hint of what stations SBS CEO Raul Alarcon is thinking of selling to
raise cash so he can close the big LA deal. If SBS sells any five of these six stations-KXJ0-FM San Francisco (Alameda, CA), KTCY-FM Dallas -Ft. Worth (Denison, TX), KXEB-AM Dallas -Ft. Worth (Sherman, TX), KSAH-AM San Antonio (Universal City, TX), KMJR-
FM (now carrying the KFSG call letters) Los Angeles (Redondo Beach, CA), and KNJR-FM Los Angeles (Ontario, CA)-it will thenhave to close the $250M LA purchase within 60 days.
Meanwhile, outside director Roman Martinez has left SBS' board of directors, but declined to discuss his reasons for leaving with
RBR. He'd served on the board since SBS went public in 1999 and says he'll continue to be involved with the company via his fulltimeoccupation, as an investment banker at Lehman Brothers. The company's quarterly SEC filing includes an amended credit agreementwith Lehman Commercial Paper-extending the term by six months to 12/31/06, but capping the principal amount of what had been
a $125M commitment at the amount which has been lent, $65M.RBR observation: The statement, "there can be no assurance that the acquisition of radio station KFSG-FM will occur," is a standard
legal disclosure under the SEC's rules, but the complexity of SBS' contract with the Foursquare Gospel church points up just howdifficult it is for a second -tier radio group to pull off such a big purchase in the current economic environment. At this point, the churchdoesn't have any incentive to want to pull out of this deal-and plenty of reason to give SBS the flexibility to get this mega-bucks
transaction to closing. Parishioners might even want to offer a prayer or two for SBS's stock price to go up and make those out -of -
the -money warrants valuable. Also, SBS has an unrestricted right to assign its purchase contract, so-in a worst case situation-itcouldtry to sell the station to someone else and recover at least part of its investment, rather than simply walk away if it can't come up with
the remaining $225M.
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