Radio Networks Face Debt Limits and Pain

Whenever I read the WSJ, it’s so full of terrible news, it’s almost hard to continue on with my life. How bad can it get? Bad, really bad. A few days ago I read dire reports about radio networks. One analyst said it was the perfect storm…highly leveraged companies in a business that wasn’t growing. One big radio network, Entercom, has seen its stock slide nearly 90%.

The problem is that radio station groups went on a big buying spree over the past few years, merging, buying, mixing and making big networks and thus, taking on big debt. The sales to debt ratio is what’s monitored by their creditors, and some of the big guys are right on the edge, where they may default. The biggest radio advertisers are cutting back, like GM, Verizon and others. So the biggest radio networks are facing huge, never-before-seen revenue shortfalls. Many are adding syndicated programs like Ryan Seacrest’s to save money…others have converted FM stations into talk formats, simulcasting the AM onto the clearer FM signal.

In the face of this bad news, I ran into a jovial radio ad sales guy at the cafe, who said business has never been better. That they were having boom times up in Greenfield. Who knows what will happen!? We still read the Recorder’s house ads claiming that 70% of the residents read the newspaper there. Wow that sounds optimistic, but I do often wonder when we’ll feel this pain that everybody reads about and talks about on TV. I don’t want to feel it, but I think it’s gotta be heading our way, in some form or another.