If 2016 was the year of the dead rock star, 2017 is already shaping up to be the year of the radio deal. The year got off to a roaring start with one of the biggest ever – the Entercom/CBS merger, changing the hierarchy of the entire radio industry.
As a result of Entercom having to spin off several stations, there will soon be a series of sales, swaps, or combinations that will likely involve several companies reconfiguring their station rosters in many U.S. markets.
And then there’s the much-discussed fates of both iHeartMedia and Cumulus, two mega-companies that have been facing mega-debt for years. They are the twin 800 pound gorillas in the radio room, and many in the industry believe another big shoe will drop possibly before this year is out.
A recent article in Variety by Gene Maddaus – “iHeartMedia CEO Bob Pittman’s Efforts may Not Be Enough to Avoid Looming Bankruptcy” – is a fascinating look behind-the-scenes at radio’s biggest company, its iconic leader, and the challenges it is facing.
In an even-handed fashion, Maddaus breaks down the good, the bad, and the impossible behind Pittman’s efforts to transform the former Clear Channel into a multimedia company while kicking the massive debt can down the road.
In the article, iHeart board member Irving Azoff puts it this way: iHeartMedia is an “incredible company” with a “terrible balance sheet.”
So with all these rumors of pending changes, moves, and shifts, many, many radio stations could be on the market. But when you talk with industry insiders, they will often tell you there simply aren’t a lot buyers out there who can absorb a significant number of radio stations.
But there are overseas.
And that’s why the quiet FCC ruling late last month about an Australian company getting the governmental seal of approval to own 100% of Frontier Media, is worthy of discussion. These Aussies have been given the green light to purchase American radio stations in Juneau, Alaska and Texarkana, Arkansas.
The FCC has acknowledged the circumstances behind the deal are specific to this situation involving Australian nationals Richard and Sharon Burns, but the precedent has been set. And given that the ruling was one of the first decisions under newly minted Chairman Ajit Pai, speculating about more foreign ownership of U.S. radio stations isn’t crazy.
At a time when America seems to be looking inward, the idea of investors in China, Germany, or Saudi Arabia purchasing stations in Omaha, San Diego, or Wilkes-Barre is novel. And it reminded me of something I remembered hearing at a Jacobs Media Summit in Austin, Texas almost a decade ago.
A couple months before the Obama/McCain election in November, 2008, we put together a “President of Radio” presentation featuring nine of the industry’s best and brightest. Each had 3-5 minutes on stage to offer their opinions about “How To Make Radio Great Again.”
There were some fascinating ideas shared that morning, rousing speeches from these broadcast mavens, and a full house of radio managers cheering them on . Eric Farber (then with Radio & Records) came on stage wearing a tiara. It turned out she was radio’s first female President. Gerry Boehme (then with Katz) gave an especially energetic address, firing up the radio base.
But perhaps the most prescient stump speech came from a guy who’s no stranger to the political arena, Edison’s Larry Rosin. Here’s an excerpt from Larry’s “platform” nearly eight years ago:
“If I’m elected President, I will immediately send Congress a bill calling for the elimination of the cap for foreign ownership of American radio stations. Currently, that cap is 20%. In other words, the ownership of any given station can’t be more than 20% from a foreign individual or company. In today’s global economy, why are we not allowing capital from anywhere in the world to be invested in American radio stations?
OK, not anywhere. We will have a strict test of fit and proper ownership. The FCC will have to approve ownership as it does now by the way, to make sure that Osama Bin Laden doesn’t buy radio stations. But think about it – if the Mexican ultra-billionaire, Carlos Slim, wanted to buy radio stations in Los Angeles or anywhere, why shouldn’t we allow him to do so?
If Richard Branson thinks that putting his Virgin brand on American radio stations would work, shouldn’t he have the chance? Or public companies from Europe, India, or somewhere if they wanted to?
The basic point is many of these people or entities could just write a check and buy American radio stations. They don’t have to put together their own loans and their own financing, and make money by cutting things once they buy the radio stations. And you guys are typically making tremendous returns at your radio stations. Most importantly, they can invest in all the initiatives that we all know we need to take radio to a more positive future.”
(I should add that of the nine “Presidents” we featured back in 2008, Larry is the only one of the group still with the same company in the same role.)
I know for a fact Chairman Pai was not in Austin that day at the Jacobs Summit. But here we are two election cycles later, and this is now an idea that has a precedent. From the cruel winds of deep debt, to several rounds buying, selling, trading, and swapping stations, different financial and ownership models could help reshape the American radio industry.
Upon issuing the ruling in the Burns’ favor, the FCC noted, “We find that the public interest would not be served by prohibiting the foreign ownership of Frontier, as the ultimate controlling U.S. parent.”
And as Larry suggested more than eight years ago, foreign ownership of U.S. radio companies could usher in a period of change not just in ownership, but in the ways stations operate. After attending the Radiodays conference in Europe over the past few years, it is a fact that many radio companies outside North America run their stations quite a bit differently. An infusion of new thinking and new operational philosophies could alter the competitive foundation of the industry.
At a time when the Trump Administration is moving from policies that reflect globalism to a philosophy clearly more nationalistic, an open door policy for foreign ownership of radio by a new-thinking FCC could be a game-changer for an industry that has historically been slow to change.
Billionaires in countries from Spain to India to Sweden might rewrite the financial model for radio companies, from research to marketing to sales, helping “make radio great again.” It’s hard not to imagine positive things coming from the outside influence of other countries on our systems.
OK, maybe the FCC draws the line at Russia.
Jacobs Media has consistently walked the walk in the digital space, providing insights and guidance through its well-read national Techsurveys.
In 2008, jacapps was launched - a mobile apps company that has designed and built more than 1,000 apps for both the Apple and Android platforms. In 2013, the DASH Conference was created - a mashup of radio and automotive, designed to foster better understanding of the "connected car" and its impact.
Along with providing the creative and intellectual direction for the company, Fred consults many of Jacobs Media's commercial and public radio clients, in addition to media brands looking to thrive in the rapidly changing tech environment.