Late Tuesday, CBS chair and CEO Leslie Moonves said the company was exploring strategic options, including a sale or spinoff, of its entire radio division. "The aim here is to unlock value for our shareholders," said Moonves, who made the announcement during an investor day in New York.
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| Les Moonves |
For several years radio has been seen as a drag on CBS’s results. In the fourth quarter, CBS took a $484 million write-down on the value of its radio licenses. For all of 2015, radio revenue fell 6%, a drop CBS attributed to a soft advertising market and lower revenue from political ads.
Wells Fargo Securities analyst Marci Ryvicker said in a report last week that CBS would likely have to sell its stations on an individual basis. “We just don’t see any realistic buyers for the whole kit and caboodle,” she wrote.
From 2011, the broadcaster has received various offers, but hasn’t accepted any of them. Now, it appears Moonves is done stalling. Radio revenue had fallen 5 percent compared with the year-earlier period, the company stated.
The move underscores the decreasing value of commercial radio. With podcasting, subscription Internet radio services and digital streaming now being the standard method of consuming non-visual media, broadcast radio is no longer considered a growth industry.
Other than political ad spending, which allows radio stations to bank millions during election years, advertising is exponentially less that it was in the past.
Still, according to The New York Business Journal, CBS Radio is the nation's second-largest radio chain, in terms of revenue, reaching an estimated 70 million listeners nationwide each week. It boasts 117 stations, down from 130 in 2011. Among the stations it has sold, are KFWB-AM (980) in Los Angeles. In 2012, however, it bought local New York station 101.9 FM from Merlin Media LLC for $75 million.
As the gravity of the CBS move began to sink in, some CBS Radio executives in Chicago insisted on clinging to the positives. "We're still making money!" said one. Yes, but for how much longer?
The Chicago Business Journal reports no matter how the CBS move is sliced or diced, it is tantamount to a death knell for the traditional radio industry. Increasingly radio is up against major competition ranging from Spotify and Pandora to Apple Music — all providing consumers with music they want to hear when they want to hear it free of major commercial interruption. Only a Chicago radio station such as CBS Radio's WBBM 780 AM & 105.9 FM, which offers locally-focused breaking news, weather and traffic, seems still to be able to muster a legitimate reason for being these days with an audience and ad revenue to support it.
The changing — and not for the better — face of the radio business has led to shrinking audiences and advertising revenue. Still CBS Radio's all-news WBBM brought in more ad revenue than any other radio station in the Chicago market in 2015 with $43.9 million in ad sales, up 11 percent year over year.
But tellingly, most of the other CBS Radio holdings in Chicago posted significant ad revenue drops in 2015, including Top40 WBBM 96.3 FM, which was down nearly 12 percent, and Rock WXRT 93.1 FM, down a whopping 21 percent in ad sales year over year. Even sports talk WSCR 670 AM's ad sales were flat in 2015 compared to 2014.
CBS’s decision to sell off had Boston industry insiders buzzing about the future of the five in Boston — N/T WBZ 1030 AM, WBZ 98.5 FM The Sports Hub, WZLX 100.7 FM , AC WBMX Mix 104.1 FM and Top40 WODS AMP 103.3 FM — and who would be the likely buyers.
And depending on how the sale shakes out, Entercom — owner of WEEI, WRKO and WAAF — could become a key player in the game.
The Boston Herald two of the nation’s biggest radio groups — iHeartMedia and Cumulus Media — are buried in debt and likely are unable to finance a purchase. Other possible suitors include Alpha Media and Connecticut-based Townsquare Media. But thus far both have concentrated on accumulating smaller-market stations.
Entercom already owns a sports station in Boston — WEEI — but would no doubt love to control the fate of arch-rival WBZ 98.5 FM The Sports Hub. The rest of the CBS Boston stations do not compete with any of Entercom’s other local holdings, which is a plus.
The other big local player, Greater Media, is not expected to be in the hunt. The company is privately owned and debt-free. The owners are unlikely to want to rock the boat with an ambitious expansion, insiders say.The FCC limits the number of radio stations that any one entity can own in each market. So if the CBS stations are sold to a competing local entity, they would no doubt have to divest one or more of the stations that they already own.
According to The Detroit News, Moonves’s announcement comes less than a year after CBS Radio Detroit laid off more than a dozen staffers, including on-air talent, producers and salespeople.
In Detroit, CBS Radio holdings are Newsradio WWJ 950 AM, a sports talk radio station on AM 1270, 97.1 The Ticket, Country 99.5 WYCD, Classic Hits WOMC 104.3 FM and Top40 98.7 AMP Radio.
Moonves had told investors that “there is no better time for a content company to thrive” than an era where companies have so many properties available for advertisers. “It’s a time for confidence,” Moonves added.
“We are now being paid in more ways for our programming, advertisers are extremely confident, and consumers are spending more and more on entertainment,” Moonves said.
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