Earlier this year I heard about a couple of radio stations selling for $1 in markets that surprised me a bit. Especially because the stations weren’t off the air, dark as we say, or about to be because of aging and neglected equipment. They were just underperforming stations run by groups who no longer had the personnel or operating capital to sustain them, much less, turn them around and get them cash flowing. Which begs the question, is this where radio is heading? Here are my thoughts.

Not a new model

Although the headline “$1 Radio Station” gets our attention, how these deals are structured isn’t really anything new. For years radio groups have done LMAs where they pay little or nothing up front and take over the expenses to get an underperforming station off of another group’s books. In that situation I always advise both parties to agree ahead of time on a purchase price within a pre-defined window to protect both of their interests if the station does improve or crater further. It’s not always because of underperformance either. Over the course of my career, I’ve had a few people I had previously worked for ask me if I would take over their cash-flowing station because they were ready to retire, had no one to takeover, and wanted it in the hands of a radio operator they knew and trusted.

Better than walking away

I’ve also seen an uptick in abandoned stations over the past couple of years, although to be fair I may be seeing a lot more of that now because I’m a consultant. But, it’s hard to deny that recently more operators have taken a step that was once unimaginable to many, locking the doors and just walking out. The idea of selling for a dollar, or whatever a group can get, now is so they never get to that point where the license is returned to the FCC to be reauctioned.

Why so cheap?

There are many reasons why radio stations are no longer worth what they once were. The segmentation of media, changes in listener behavior and audio consumption, a higher volume of outside digital competitors, consolidation leading groups to nationalize things that should’ve stayed localized, inflation and cost of living increases making it harder to afford workers for radio wages and many others. All of which have helped contribute to a decline in revenues, that when coupled with lower multiples and increased cost of operating, has led to a steady decline in the value of a licensed frequency. The old rule used to be that there’s always value in a licensed frequency because there’s a finite amount of frequencies allotted by the government or available on the band in the broader sense. But, in truth a station that’s losing money and needs significant capital investment to improve is now less than worthless because there are few operators left who know how to turn a profit without a big staff around them.

So, to answer my opening question, is this where radio is headed? Yes and no. Groups that continue to adapt and evolve their business models to allow them to affordably operate in an effective capacity at the local level will always have value. Because there’s always a buyer for any business that’s profiting provided they have someone to operate it. However, this is where we’re headed for radio groups that continue to move toward a national management model with no employees left at the local level. As well as any group that doesn’t identify a self-sufficient local operator who can do a little bit of everything.

What do you think? Comment below or email me at Andy@RadioStationConsultant.com.

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