In part four of our series on the future of radio, broker Ed Henson checks in to give us his thoughts on where radio is headed following the emergence of cleaner balance sheets from iHeart and Cumulus. And he says there are many more great companies out there that we could be focusing on.
Radio Ink: How does 2019 look to you in terms of possible deal-making now that Cumulus has restructured and iHeart is nearing the completion of its restructure?
Henson: The Cumulus and iHeart developments are really good for the radio industry. Radio is still producing large amounts of cash flow. When a large amount of that money doesn’t have to go to retiring debt, it can go to operations and that’s good for the industry. Its a real positive, but it doesn’t have a huge effect on the trading in small and medium markets that I specialize in.
Radio Ink: We’ve heard a lot of chatter that the restructures needed to happen before we saw any new investment. Is that your read?
Henson: So much of the trade press I read is focused on iHeart, Cumulus, and other huge players. Those are great companies and they have an impact on the industry. People need to realize that the FCC, on December 31, listed 15,508 full-powered radio stations in the United States. The top 10 groups in the country own only a small percentage of those stations. I think our focus sometimes should be on what’s going on with those other stations outside of the big groups when we analyze the trading market.
What drives the deal-making in the markets you specialize in?
Henson: There has been some stability in the small and medium markets I deal with. I see transactions picking up for a couple of reasons. One of the things that is really driving it, at least on the supply side of the trading equation, is that you have a lot of owners who got into the business in the 70s and 80s who are now looking to exit; they want to retire. I think we are going to see a steady amount of trading in small and medium markets driven by that. Now my concern on the demand side is will there be sufficient demand for those stations? There are still a number of people out there that want to continue to build regional groups and the addition of stations is an important part of that strategy. I think there will be a significant amount of trading going forward over the next few years. Ownership rules are going to be a big factor.
Radio Ink: What are you hearing on the deregulation front?
Henson: It’s not a totally straight line or clear path as to what will happen there. There are court challenges that need to be worked out, that are pending on previous ownership rules decisions. We will have to see how they play out going forward. Dereg is a factor, as far as ownership and who they can sell to, but a lot of the sellers I work with are driven more by their own personal considerations.
Radio Ink: Look into your crystal ball. Where do you see growth in the industry?
Henson: Over the next five to 10 years I think what is going to drive growth in small and medium markets is the desire for older owners to retire. For our industry to grow strong we need to embrace all the different types of ownership. Gordon Smith was interviewed in Radio Ink and he used the term “breadth of diversity of ownership,” and I think that’s true and our industry is stronger when we embrace that breadth of diversity.
Reach out to Ed Henson by phone at 502.458.4222 or e-mail [email protected]
Read part one in this series HERE
Read part two HERE
Read Part three HERE
