Radio sales enter mop-up mode

After two years of basically governing the radio-station marketplace, one would think Clear Channel Communi-cations would take a step back. Well, it probably will. But, most likely, it's because it could never continue at the same pace it's had recently.

In 1999, in the largest radio deal ever, Clear Channel spent $23.8 billion on AMFM Inc. and its 443 stations, or 83.3% of all that was spent on radio stations that year. Last year, it paid more than $551.6 million for some 140 radio stations and sold $4.3 billion worth. Altogether, Clear Channel was directly involved as a buyer or seller in deals representing an astonishing 82.8% of the total $5.86 billion that changed hands in radio in 2000.

"You can sum up [the action in 2000] in three words: Clear Channel Communications. They were
the market, in every sense," radio-station broker Gary Stevens says.

"Clear Channel really set the pace and tone for last year's market," says Elliot Evers, a media broker with Media Venture Partners. And in the fifth year of radio deregulation, "there are more buyers than sellers." Stations tagged for sale "are few and farther between." Clear Channel fueled the radio-station market last year first by having to sell $4.3 billion worth of stations (108 of them) to gain Justice Department approval of its merger with AMFM. Then, the San Antonio-based company went on a spending spree to take advantage of an IRS incentive that allowed it to spend up to that amount on new radio stations by the end of the year-tax-free.

Brokers expect Clear Channel to continue to buy this year, just not as much as it has in the past. So far this year, the company already has spent $29.2 million on 11 stations, a mere 1.2% of the total dollars spent so far on radio.

Other companies cited as current buyers by broker W. Lawrence "Larry" Patrick of Patrick Communications include CBS, Entercom Communications and Radio One, which just last week bulked up even further by agreeing to pay about $190 million for 15 stations owned by Blue Chip Broadcasting.

Stevens also names those companies as buyers, along with Cox Radio and perhaps ABC Radio. On a smaller-group level, he cites Saga and Salem Communications.

The same troubles that hindered TV sales last year also affected radio, including a souring economy and higher interest rates. Lenders tightened up across all industries. But radio was especially hard hit by what looked like a Wall Street backlash. The industry has yet to recover.

In addition, a decline in spending by dotcom companies and an overall national ad pullback hit radio hard last year, though the industry finished 2000 with a 12% increase in both local and national ad revenue, the Radio Advertising Bureau reported on Feb. 2.

Even if companies had the money to spend on radio stations, "it's an inventory issue. There's nothing to buy," says Stevens. "Clearly, a majority of what's good that's out there [is gone]." He expects companies to "just trade stuff between themselves now. That's the paradigm."

Media broker Richard A. Foreman concurs. "2000 was a wind-down year in radio. There were few properties available," he observes. Even Clear Channel slowed its pace as the year wore on and its stock price got clobbered.

As for 2001, "this year has been a little slower starting off," radio broker Dick Blackburn says. "You can only consolidate a market so far." But consolidation, launched with the Telecommunications Act of 1996, is not completely over, he says. He expects "regional plays" and deals mainly in smaller markets this year. Things could improve if companies turn in good first-quarter numbers and the economy revives, he says.

But don't look for any more gigantic group deals, Foreman cautions. "Consolidation has taken hold. Most of the work has been done," he says. "Anything out there now is just mop-up."

Fred Kalil, vice president of Kalil & Co., is more optimistic. "There's always a lull in the action, but radio [always] seems to come out of it pretty quickly."