More Radio Industry Market-Maneuvering Afoot

Although iHeartMedia’s dance with bankruptcy is widely seen as a key indicator of the health of the radio industry more broadly, that company is not alone in reconfiguring its approach to finance capital. Two other conglomerates are also making moves — one trying to leave the stock-trade behind while another wants to jump back into those waters.
First up is Emmis Communications: the Indianapolis-based company has been hammered in the stock market over the last few years, threatened with delisting by NASDAQ after its stock dropped below $1 per share in 2015. After conducting a reverse-stock split earlier this year (reducing the number of shares in circulation, thereby inflating the price of remaining shares) which brought the company back into compliance, company founder and CEO Jeff Smulyan has announced a $46 million bid to take the company private.
The move comes with some caveats. First, several of the company’s radio stations and publishing outlets will be sold in order to help cope with the debt necessary to buy out Emmis investors. Second, and more controversial, is Smulyan’s wish to downplay the value of its NextRadio project.
NextRadio is the Emmis-developed Android smartphone app that allows selected mobile devices to function as FM receivers — considered by many to be the industry’s best (and perhaps last?) hope to expand radio’s platform beyond traditional in-home/office and automotive listening. This proposal is getting some push-back from existing Emmis investors (and the rarified class of rich-folk who may be allowed do invest in its private incarnation) since they see NextRadio as one of the rising stars in its corporate constellation.
Smulyan himself sounds quite bearish about the state of play for investing in radio: “Investors have fled the radio and magazine industries,” he wrote in an e-mail to Emmis employees last month. “Trading volume in our stock has dwindled, meaning investors who want to sell are limited in their ability to do so.” Furthermore, most stock analysists no longer provide guidance on the radio sector. At the same time, he’s touting the fact that NextRadio is now beginning to bring in some money — though he predicts that it’ll be several years before it’ll turn a profit.
This is not sitting well with current Emmis investors, who believe Smulyan is low-balling the value of the company and working to take it private at this point in time precisely to capture for himself and his compatriots what may be more than a billion dollars in future revenues if/when NextRadio finds profitable traction. “This is the most opportunistic highway robbery I’ve ever seen in my 35-year career,” remarked one investor. For his part, Smulyan says this is all posturing in hopes of driving up the buyout price.
As Emmis makes moves to exit the stock market, another would like to re-enter. CBS is exploring a plan to spin off its radio properties as a stand-alone company, perhaps as early as next year. Initially founded in 1972 as Infinity Broadcasting Corporation, this company first went public on the stock market the mid-1980s, went private again a few years later, and went public again in the early ’90s.
In 1997, after Westinghouse acquired CBS’ TV station and network properties, it made a bid for Infinity — all part of the investor-heyday related to post-1996 Telecom Act industry consolidation. Two years later, all CBS/Infinity properties were merged under the moniker of Viacom. That lasted until 2005, when Viacom separated its film and cable TV properties from its broadcast-assets, keeping the broadcast properties under the CBS name and leading to the creation of a CBS Radio division.
Since then, CBS has incrementally sold off several stations and traded some to other companies. It’s been seeking to divest itself of the remainder of its radio properties for quite some time now — but with other conglomerates finding themselves in cash-strapped positions, there’s been no viable buyer. This has led to the exploration of spinning off CBS Radio as its own publicly-traded company…most likely under the old Infinity brand.
According to long-time industry analyst Robert Unmacht, this is directly related to the finance-capital maneuverings the industry’s seen over the last two decades. In addition to the fact that CBS CEO Les Moonves “is not a radio guy” who “never liked radio much,” there’s also the problem that “we are not investing anything in the product. Companies are mostly just paying off debt, especially iHeart, Cumulus — not CBS — they’ve been trimming for a while as they approach the spin off.
“Another issue is how the Telecom Act of 1996 moved the business from one of serving the community to one of ensuring or attempting to ensure that profits are made. . . .Radio was interesting to locals because it was locally run and programmed. Now all the money has to go back to a corporate entity. No innovation is taking place. No attempt to monetize the internet from radio business. A lot has been left on the table since not much investing is taking place. Lack of local content is not an advantage.”
So why would the market want skin in the game with a “new” CBS/Infinity? The hope may be that investors won’t remember the on-again, off-again convolutions with public investors and simply pony up to a “brand name” media stock they can “trust.” In reality, it’s just the latest chapter in a saga to pump the price of broadcast assets and rake in some stock-profits while the industry itself continues to suffer malaise. I’d eat my shoe if a significant portion of any future CBS/Infnity stock-related income was actually invested in the production of broadcast content.
So, to summarize: one company (Emmis) thinks that investing in radio is on the wane, and in order to avoid futher stock-pummeling would like to get out of that game…at just the time that its “killer application” (NextRadio) may be finding some traction. In this respect, taking Emmis private is not so much about preserving the company as it is about consolidating future revenues in the hands of those individuals who control it.
Yet another company (CBS) can’t find a buyer for its radio properties, so it would like to repackage them under some 20-year old branding, call it “strategic innovation,” and hope the facade can garner enough gullible investors to make the move worthwhile…at least for a few years, when it might be re-conglomerated or, if the market sours, taken private again…with some healthy boodle sucked out of the market in the interim.
Note that in neither case are these efforts directed toward bringing investment into the radio industry for the sake of radio: it’s all about leveraging the vagaries of finance capital to enrich an investor-class. One of my professors back in grad school observed that in our era of “digital capitalism,” the function of capitalism itself is to sustain the unsustainable — financial growth and profits at all costs, even if it means the diminution of political/economic/envinrommental sustainability and the human condition.
Seen in this light, both the Emmis and CBS sagas are more about attempting to squeeze a few more drops of blood from the radio-stone before the industry runs out of ways to keep its self-importance in our media environment overly inflated. Some crack-smokers in the industry honestly think that revenues will blossom if radio simply recommits to “telling its story” and wooing advertisers with happy-talk. What story is that?
It’s all part of the 21st century American hyper-capitalist ideology, where the impetus for economic “growth” doesn’t come from making things or providing services, but from using money to speculate in hopes of making more. It’s not a sustainable trend, any more for the radio industry than it is for the larger economy itself. But it’s one we’ll have to suffer through while those in the business continue to deny or ignore the disease of greed.