Idaho Radio News Etc.

Revenue for Journal Communications pulled back in the 3rd quarter – though the company did see a profit. Profit dipped 23 percent – but they think things will get a bit better in the all-important 4th quarter.

“We are looking ahead to next year when we hope we will see improved business conditions for our customers, a recovery in the ad spend in our core markets, as well as the lift that additional political and Olympics spending will provide,” Chief Executive Steven Smith said on a conference call.

Here’s the story

McClatchy – owner of Boise’s Idaho Statesman had a good quarter, and was able to turn a profit, despite shrinking revenue. This from the AP:

Newspaper publisher McClatchy Co. rode a wave of traumatic cost cutting and a one-time tax adjustment to a higher third-quarter profit, overcoming yet another jarring decline in revenue.

McClatchy earned $23.6 million in the quarter. The company was able to turn a profit despite the decrease in revenue by aggressively cutting costs (and, unfortunately – jobs).

There’s one very sober line in the AP piece:

McClatchy probably wouldn’t be making money if it hadn’t been dumping payroll and other costs more quickly than its revenue eroded.

But, the company’s online revenue grew by about 3% in the quarter.

So far in the last two months, Peak has posted jobs for PT traffic, a sales AE, KAWO program director, directory of digital management, talk show host and a producer slot. That’s six jobs…

As has been noted in comments – and confirmed by Peak Boise SVP Kevin Godwin – Peak Broadcasting has hired Dave Tester in the role of account executive.

Citadel Boise has a new sales executive – one with a long history in the market. Blair Crook, who has stayed in one job as his bosses have changed over and over (independent, Jacor, CC, Peak…). Crook was one of the original AEs for KCIX/K-106 and was a founder of the popular annual Mix 106 Easter Egg Scramble.

He is now on the beat for Citadel…

The Treasure Valley is a beautiful place. Lush trees, a meandering river, relatively low pollution and pristine foothills.

Many local radio stations talk about the quality of life here – in promos, in job ads and in their overall imaging. But most of those same stations think it is OK to junk up the environment with their roll-a-sign banners. Here’s an example from today:

Both KSRV/96.1 Bob FM and KAWO/WOW Country 104.3 left a few segments of those cheap plastic banners hanging on some poles near Bronco Stadium. In this case, there was no active remote going on nearby… in fact — there wasn’t any activity whatsoever.

While this example uses these two stations – they are not alone — it’s something you see all the time.

While I may personally consider this to be unsightly – it’s more than that. It’s a violation of Boise City Code:

No person shall post, paint or attach in any way any sign as defined in this Code on any curbstone, telephone pole, telegraph pole, electric light or power pole, wall, hydrant, bridge or tree on a
public street, sidewalk or on a public property except as provided in Section 4-7-14.

No person shall paint, paste or attach any sign whether or not defined in this Code on any building, structure, sidewalk, street or property of Boise City except as provided in Section 4-7-14.

PS: Section 4-7-14 (referred to twice above) gives “Municipal, County, State and Federal government and special nonprofit” groups some outs to that clause — but there is no special carve out for radio stations.

Not so long ago, banners were an expensive and prized material. The vinyl signs were carefully collected after each remote or event and reused time and again. The 1990s advent of the cheap plastic roll signs changed that practice – and made it easy for stations to leave behind their banners long after they have packed up the station van and headed back to the studio.

Perhaps station personnel think they’ll get some boost in the ratings numbers if they “forget” to take down their signs. Maybe. But I guess I wish they would respect the beauty of our area by collecting their visual collateral rather than leaving it behind.

UPDATE: As of 6:30pm Sunday night, the signs are gone.

The Associated Press reports Journal Communications has agreed to sell KCID-AM and KGEM-AM. The buyer is listed as Salt and Light Radio — the same group that purchased KDJQ last year, before the deal with owner Rob Coombs fell through.

The surprise here might be the small price tag: Just $950,000 for both frequencies.

This will be the second shift in Journal’s Boise concentration of assets this year, after the acquisition of KNIN-TV. Journal will now be made up of KIVI-TV, KNIN-TV, KRVB/Idaho’s 94.9 The River, KTHI/107.1 K-Hits, KJOT/J-105 and KQXR/100.3 The X.

This will mark the separation of two pairs of long-time assets — KCID-AM and KTHI-FM used to share call letters, and KJOT-FM and KGEM-AM were also paired as an AM/FM combo dating back to the 1980s.

While it is hard to get a full fix on the state of Peak Broadcasting — we have little ways to judge the health of the company. Things like employee morale, programming — and usually the most telling aspect: staffing.

In March, 2005 – just before Peak took over the operations of six Boise Clear Channel stations, I noted here how many on-air staffers each station in the group. CC had been derided for its staffing practices in markets like Boise. Stations that used to be live 24/7 had been cut, cut and cut again. Across the group, just nine shifts had live and local talent.

Here’s how it broke down:

KCIX: Two shifts, three personalities
KSAS: Two shifts, three personalities
KTMY (now KAWO): One shift, one personality
KXLT: Three shifts, four personalities
KFXD: One shift, one personality *
KIDO: One shift, three personalities

That’s fourteen staffers total (KFXD laid off Mitch Pruitte just before Peak took over and switched the shift to a VTer).

The picture now?

KCIX: One shift, two personalities (-1)
KSAS: Three shifts, four personalities (+1)
KAWO: Four shifts, four personalities (+3)
KXLT: One shift, one personality (-3)
KFXD: None. (-1)
KIDO: One shift, two personalities (-1)

Old total – 14. New total – 13. Neither total includes part-timers, news anchors or production personnel who don’t hold air shifts.

In March, we noted that Citadel Broadcasting’s stock scraped the bottom of the barrel — costing just $0.02. It popped up to about 4 cents a share later that week — which led me to ask if you’d take the bet and put $1,000 into the stock – taking home about 20,000 shares.

If you’d made that bet – you’d be… in the exact same position. The stock ended the day at $0.043 — just more than four cents per share. The stock has not traded higher than 13 cents.

Related: Journal Communications is currently trading at $1.10 – up quite a bit from the March low of $0.39.

Journal Communications announced it will cut salaries for all non-union employees by six percent.

“There is a high probability that this environment will continue for at least the balance of 2009,” CEO Steven Smith said in a letter intercepted by the AP. “As we manage for the long-term success of the company, we must identify constructive ways to continue to reduce costs.”

But to somewhat soften the blow of the six percent cut, JC will give all employees an extra ten days off this year. Those days will technically be paid, albeit at the lower pay rate. Ten days works out to be about 4% of total work days – so it’s not an even trade… but it certainly isn’t nothing.

Journal says it hopes to restore pay in 2010. Shares jumped almost 60% on the news.

JBG is now the third Boise groups to cut salaries. In February, Citadel cut pay by 5% and Peak made a 10% cut.

“I’m tired of seeing people become unemployed in this town.”
-Todd Lawley, 2/13/09, speaking of the Fresno, CA market

Peak Broadcasting laid off another employee late last week — less than three weeks after employees were forced to take a ten percent pay cut. At the time, folks were told this would help avoid further staff reductions – but now that doesn’t seem to be the case.

Multiple people in the Peak staff meeting where the pay cut was announced say that a Peak manager told the assembled staff that the company was healthy, and would use the cost savings to buy more stations. Either that’s untrue (meaning these cuts are happening because Peak’s in trouble), or the company is taking money from its employees to buy new stations. Either way… it isn’t a good thing.

Previous coverage: Analysis: Peak’s tough situation; Is Peak’s maneuver legal… or fair?

Citadel Communications’ stock has jumped ten times since its low this month — but unfortunately the low was a single penny and the current level is just 8 cents. If you put $1,000 into Citadel’s penny stock at its low and sold Friday you’d have about $8,000.

The company said this week that its radio stations had a punishing fourth quarter – generating revenue of $59 million in the fourth quarter — down from $78 million in the same period of 2007.

No… that headline isn’t riddled with my usual typos — that’s a lyric from a song getting airplay on Idaho CHR stations.

Begging to if you seek Amy? It’s the latest single from Britney Spears — If U Seek Amy — and it’s a not-so-coy attempt to spell out the F- word on the radio.

All of the boys and all of the girls are begging to if you seek Amy

Clever.

The song is on Spears’ album released earlier this year — but it’s just breaking on pop stations nationwide – including here in Idaho. Stations are referring to the song as “If You See Amy” – but the song still sounds like “seek.”

MTV.com has a good backgrounder here. Listen and watch the video here

The KTVB News Group announced today it cut two positions – one full-time and one part-time. Until today, KTVB had been the only local media company to not cut jobs. Story here.

I try not to report much TV news here primarily because of the comments… I cannot be a fair arbiter of comments that affect my friends and co-workers (whether they be at KTVB or another station in the market). Even though I haven’t posted KBCI or KIVI’s layoffs here — I think it’s fair to mention this.

A couple quick notes on The Idaho Statesman:

- KTVB’s Doug Petcash has put together a two part series on the future of newspapers – specifically looking at the Boise area and its two daily papers (Statesman and Press-Tribune). It runs Sunday and Monday on News at Ten (I haven’t seen it and wasn’t involved in any way).

- There’s buzz that announcements are coming from the Statesman building on Monday. What that may be isn’t known – though there are lots of rumors swirling of course. Keep you posted…

Citadel Communications joins some big national brands like Arby’s and Krispy Kreme on a new list provided by credit rating agency Moody’s.

Unfortunately, it’s a list no one wants to be on. Moddy’s says Citadel is on the “bottom rung” — a list of about 280 companies most likely to default on their debt in the coming year.

Moody’s thinks about 45% of the companies on the list could default within a year.

On the stock watch – Citadel (CTDB.PK) is hanging at four cents.

The Citadel stock watch continues – Friday’s close left the stock at $0.049 – less than five cents per share. You can’t buy a piece of candy for five cents anymore, but you can buy a share in one of the nation’s largest broadcasting companies.

CTDB.PK, (the company’s new ticker symbol) has a market capitalization of $13 million…

The big question: if you had $1,000 to spare, do you think buying 200 20,000 shares in Citadel would be a wise investment?

On one hand the stock could double in value to a dime and your investment would double. On the other, the company could go bankrupt and you would have nothing.

Citadel Communications stock finished the day at $0.02, plunging almost 90% on the day.  The stock was dumped from the NYSE last Friday and is now traded over-the-counter.

That puts Citadel’s market capitalization at a puny $2.70 million… meaning if you could wrangle all the sellers – you could buy the company for less than $3 million

Both Peak Broadcasting and Citadel Communications announced they would slice paychecks for employees this month.  PB said it would pull 10% from all non-sales employees, while Citadel Boise asked for a 5% slice.

Peak and Citadel are doing what they think the must to survive, and clearly taking money from employees pockets is not an action taken lightly. However there’s a unique wrinkle here: the presence of personal service contracts.  Employees – especially on-air talent – are asked to sign these agreements.

The bargain is simple: you sign a piece of paper guaranteeing you compenstation and a series of raises, and in exchange you promise not to work for a defined set of competitors. In some cases it is just the local market area, but in others it can apply to larger geographic areas or markets by rank (i.e. you can’t work for stations in anything smaller than market 50, for example).

Employers like this deal because it legally binds you from going to work across the street (disclosure: I am employed under a PSC).  Employees don’t generally have a ton of choice in the matter since this is generally a requirement of employment — but they do provide some stability and a guaranteed raise each year.

Multiple source tell me that in Peak’s case, the company is requiring the contracted employees to take the cut.  They have been told they must sign a document agreeing to the pay cut.  However, it’s the other half of the deal that is at best problematic.  Employees tell Idaho Radio News that they have been told if they did not sign the agreement, they are subject to immediate termination without cause.

Those employees have a contract – a piece of paper that guarantees them a job. Peak is telling employees that they must sign the pay cut addendum or be terminated.  Experts I’ve talked to indicate this could be tricky for PB if an employee chose to challenge the tactic. A check of court filings shows no current lawsuits by employees against the company.

Yahoo HotJobs has some excellent advice:

If you have an employment contract, you may be able to refuse the cut altogether or at least quit and collect unemployment, but only if the contract states terms of compensation and says that your employer cannot alter the terms without your consent. The pay cut could constitute a breach of contract and an attorney can help you negotiate the terms of your release or fight for your full pay.

Another avenue is to contact your local unemployment office.  IRN regular Jim Smith has offered to talk to anyone with questions – wheter it is from Peak, Citadel or elsewhere in the state. Call your any Job Service office statewide and punch in extension 3283.

Journal Communications saw revenue fall in the fourth quarter of 08 — down 9%.  The company lost a stunning $223 million – which compares with a profit of $9.5 in the same quarter of 2007.

Publishing – down 10% (to $60 million)

Radio – down 7.7% (to $19.7 million)

TV – down 5.5% (to $33.4 million, despite an extra $6 million in political revenue)

“The overall economic environment and continued deterioration of advertising expenditures in Journal markets impacted our business in the fourth quarter causing lower revenue across all segments,” said CEO Steven Smith. “Fourth quarter total publishing revenue was off just over 10% and total broadcast revenue was off just over 6%. Overall Journal Communications revenue decreased 9.0% in the quarter and 6.5% in 2008. To date in the first quarter, we continue to see revenue declines across all of our businesses,” he added.

ANALYSIS

I’ve mentioned this to several people privately in recent months – and even ran a poll at the beginning of the year that foreshadowed my thinking – but Peak Broadcasting is facing a serious challenge this year. Now another round of cuts at the group have brought the issue front and center.

Peak Broadcasting

In 2007 a group of former Citadel executives purchased two radio clusters.  One from CBS Radio in Fresno, and one from Clear Channel Communications in Boise. The company forked over $90 million to buy the Fresno stations, and although the price for the Boise cluster was not disclosed, filings indicate it was in the $25 million range.

If you think that those Citadel execs -  Todd Lawley, Kevin Godwin, Tim Lyons and the crew – had $115 million in their pockets – you’re crazy.  Instead the group purchased the stations by taking out a loan or series of loans.

One of those was a cash infusion from GE Capital of nearly $70 million – expressly for the Fresno cluster purchase. The deal was announced in April 2007 – right after Peak closed the deal on the Boise stations.

“(GE)’s knowledge and experience in the broadcasting space is unrivaled, and their financing guidance allowed us to move forward with ease and to focus on transitioning our quality programming, customer-based advertising solutions and new media innovations to the Fresno market,” Lawley said at the time.

GE was excited too. A GE VP said this of the deconsoldation that allowed Peak to spring up: “This trend provides opportunity for new industry players to break out into new markets and expand programming to reach new audiences.”

Peak is also backed by DAG PE – a private firm that has an equity position in the company in exchange for cash.

Now that the economy has cratered and advertising receipts have dramatically fallen – Peak faces a challenge far different from that of Citadel or Journal (and in a different way, Impact).  PB has to service the extensive debt by making payments of some frequency to GE Capital.

It isn’t much different than buying a house: you sign an agreement and say you’ll make payments on the principle plus interest.  If you lose your job or take a pay cut or something else catostrophic happens – you still have to find a way to make that payment – or you go into default… and eventually get booted out of the house.

When things were great and all the PB stations in Fresno and Boise were generating tons of cash, servicing debt wasn’t really an issue.  Now – when the stations aren’t – Peak’s highly leveraged nature is an achilles heel.

No one knows where Peak is in relationship to its debt payments. In all likelihood it is fine right now. But the series of recent moves show that it could be struggling to service the debt: layoffs, PT cutbacks, more layoffs and now a 10% pay cut for staff.

Todd Lawley, courtesy R&R

“It’s hard because we’re still the market leaders, and everyone is working really hard,” Lawley told the Fresno Bee. “But, when faced with everybody taking a nominal pay cut versus us letting go several people, I think it’s a pretty easy decision that we can do that. I’m tired of seeing people become unemployed in this town.”

Lawley is right: most people would say that a company-wide pay cut is better than people out on the street without a job.  Peak has 75 people in Fresno and a similar number here.  Ten percent of that would be 15 people looking for work across the two clusters – not an insignificant number.

But calling ten percent a nominal pay cut is at very least insensitive.  If an employee is making $25,000 per year – that’s $2,500 that they lose.  After taxes that would be about $72 per paycheck – the equivalent of a power bill or even a trip to WinCo.  It certainly isn’t nominal.

Journal and Citadel have a similar challenge – but it isn’t as all-or-nothing dire as it is for Peak. If JBG or CDL can’t service their debt payments, they have lots of assets they can attempt to sell because they operate in lots of markets and have economy of scale.

Impact is privately funded by Wendell Stark – which is why the company has been able to beef up in the face of this economic blizzard we’re all facing.

Back to the house example: it’s like Peak owns one house.  They can clamp down on expenses by turning down the heat and laying off the maid and can stop watering the lawn to save money and pay the mortgage.  Journal and Citadel own a whole neighborhood of houses: they can sell a few and still operate.  (And Impact owns its own dang house and doesn’t have to pay a mortgage to anyone. )

Revenue across all media – heck… across all business – is going to have a tough time in ‘09. But it’s what radio companies do in the face of that revenue crunch that could define the future.

A sharp eyed reader points us to a piece by the Seattle Post-Intelligencer’s Bill Virgin that sums up the potentially deadly feedback loop that could be upon us:

[R]adio… faces a long-term issue of retaining listeners those advertisers want to reach. While satellite and Internet radio have yet to prove themselves as substantial competitors, radio’s bigger problem is potential listeners who have dropped the habit of tuning in because of portable music players or the like, or who (in the case of younger consumers) never got started in the first place.

And that gets to the issue of how much money radio has to spend, and what it spends its revenue on. In times of tight budgets the temptation is to unload expensive locally based announcers and hosts and substitute automated or syndicated programming.

But the more stations do that… the greater the risk of a disconnect between stations and their audience. The one point of differentiation local radio has is local talent and personality.

The bottom line? Companies are going to start cutting talent. Part of it is necessity – part of it is trying to hit nearly-impossible revenue goals. The margin on a typical Boise station is much higher today than it was 15 years ago. Pre-deregulation, most of the stations were independent or just an AM/FM combo or duopoly. That isn’t to say they were all locally owned – but they all had a support staff, full sales staff – and still managed to find dollars to staff evenings and overnights. Today, stations are virtual jukeboxes for much or all of the day.

Someone recently boasted about how well their station was doing in a particular demo – but the share was just a 12… in a DEMO. Yes, it scored second place in that area – but the number of people listening is getting smaller and smaller. On an average day, the two big local websites in town connect with far more people than even the top-rated station.

For now, radio advertising is still particularly effective – which is what is keeping the medium going. But with more and more options and the rise of technology, radio could have a hard time keeping afloat in a crowded marketplace without points of differentiation – which rests primarily on localism.

Journal Communications reported results for May – with an 8.4 decline in revenue from the same month a year ago. The drop was fueled by a 14.2% drop at the Milwaukee Journal-Sentinel, which is seeing classifieds advertising dry up. The broadcast segment (TV and radio) fell 5.9% – while the radio subset dropped 4.1%. Radio revenues in Boise, Witchita, Springfield, MO and Tucson were cited as “soft.”

The economy continues to pinch broadcasters across the nation – including Journal Broadcast Group. The latest report has the JBG TV outlet in Green Bay, Wisc. cutting its sportscasts. It will instead produce them out of WTMJ/Milwaukee.

Journal Communications, parent of JBG and the collection of Boise assets (KRVB, KTHI, KGEM, KCID, KJOT, KQXR and KIVI/KSAW) saw April revenue slip in both its print and broadcasting divisions. Publishing dropped 6.2% from the same period a year ago, while the TV/radio side of the ledger fell 4.3%. Weakness in Vegas, Ft. Myers and Tucson was cite for the loss.

The company also noted “softness in all of our radio markets except Omaha.”

Sources tell IRN that the Boise operations are under a hiring freeze – and the company cut at least one on-air talent.

It’s been a string of bad news for media companies with local operations – including Citadel, McClatchy, Belo . Even Fisher announced it would sell its swanky Fisher Plaza at the base of the Space Needle in Seattle.