Wells Fargo analyst Marci Ryvicker recently stated that “CBS Radio’s underperformance vs. the industry and Entercom seems to have resulted from poor management vs. station portfolio or brand.” And she believes Entercom can turn that around within 12 months.
A major expense for both 2015 ($322.7 million) and 2016 ($482.9 million) were impairment charges on FCC licenses. If you’ve never heard of that, here’s exactly what that means, straight from the SEC filing document…
For 2016, the Company performed a quantitative impairment test of FCC licenses in all of its markets. This impairment test compares the estimated fair value of the FCC licenses by geographic market with their respective carrying values. The estimated fair value of each FCC license is computed using the Greenfield Discounted Cash Flow Method (“Greenfield Method”), which attempts to isolate the income that is attributable to the license alone. The Greenfield Method is based upon modeling a hypothetical start-up station and building it up to a normalized operation that, by design, lacks inherent goodwill and whose other assets have essentially been added as part of the build-up process. The Greenfield Method adds the present value of the estimated annual cash flows of the start-up station over a projection period to the residual value at the end of the projection period.
The annual cash flows over the projection period include assumptions for overall advertising revenues in the relevant geographic market, the start-up station’s operating costs and capital expenditures, and a three-year build-up period for the start-up station to reach a normalized state of operations, which reflects the point at which it achieves an average market share. The overall market advertising revenue in the subject market is estimated based on recent industry projections. Operating costs and capital expenditures are estimated based on both industry and internal data. The residual value is calculated using a perpetual nominal growth rate, which is based on projected long-range inflation in the U.S. and long-term industry projections and for 2016 was 1.0% for each radio station. The discount rate is determined based on the average of the weighted average cost of capital of comparable entities and for 2016 was 8.50% for each radio station.
For 2016, the Company concluded that the estimated fair values of the FCC licenses in 23 radio markets were lower than their respective carrying values. Accordingly, the Company recognized a pretax noncash impairment charge of $322.7 million related to FCC licenses in these markets. For the remaining two radio markets, the Company concluded that the estimated fair values of FCC licenses in each market exceeded their respective carrying values and therefore no impairment charge was necessary.
For 2015, the Company recognized a pretax noncash impairment charge of $482.9 million to reduce the carrying value of FCC licenses in 18 markets to their fair value. The charge included $39.6 million to reduce the book value of KFWB(AM) in Los Angeles to its fair value. KFWB(AM) was classified as held for sale at December 31, 2015.
Are You Challenging Your Salespeople?
(By Dex Allen) The budgets are done, so now the hard questions begin. You and your sales managers have your revenue budgets, they’re yours — you own them! Of course, it was a bit of an arm twisting with corporate because their numbers are always more than yours. But after the negotiation you agree on the budgets. So now the first question: Do you have the talent on your sales team to hit your numbers?
Don’t put off improving your sales team because it’s difficult and takes time. And remember, it’s always difficult to let people go, but why wouldn’t you let a seller go if you could replace he or she with someone better? Make that decision now before you’re well into the year and you’re missing your numbers.
Next question: Do you have enough sellers to make your numbers? If you’re selling a five-station cluster, you certainly need more than five or six sellers. Remember, an average sales team for a five-station cluster probably has two top producers, three or four mid-level producers, and at least three entry-level “newbees.” Nine sellers or more. It’s always better to over-recruit than under-recruit.
Look for new sellers in a couple places. The Yellow Pages is a great place to find well-trained sellers who will love the idea of radio. Maybe the local newspaper is a good place to recruit. Ask around. Ask if the copy machine seller who calls on you is interested, as they generally don’t make much money. Recruit, recruit, recruit, all day every day.
Lastly, do you have two to three great sellers you can count on to exceed their individual goals? Challenge them to do this. They are usually quite competetive and love the challenge.
These are the questions you must be asking before the year gets too far along and you’re missing your numbers. If you’re not asking these questions, it says something about your leadership skills.
Is your programming department overstaffed or understaffed? If you’re managing a cluster of stations with separate formats, in many cases you have one or two PDs programing all stations — and that’s actually too few PDs programming too many stations !
Too often, budgets cuts leave you in this situation or a predecessor made that decision. In cases where these budgets cuts are adversely impacting your product, takes steps to correct it and don’t let cost-cutting drive your strategy to correct this. Sit down with ownership/corporate and sell them on why and how this is hurting your on-air performance and what you are certain needs to be done to protect the on-air product.
This may cost more money, and if it does, stick to your guns and find the money somewhere else if it means you have to sell ownership on your plan!
Now ask yourself: Are you satisfied with the structure and performance of your office staff, accounting and traffic personnel? Getting timely and accurate info on traffic and inventory issues? Hold your Sales Manager accountable for this all-important function so that he/she is maximizing your rate structure and inventory management.
Are you getting timely and accurate information from your business manager on your station’s monthly P&Ls? You should have this by the 15th of the month following the month that just closed. Don’t have it? Hold he or she to a higher standard and get it every month. It’s pretty hard to manage expenses when you don’t have timely P&L info every month. Make sure your Business Manager is giving you the tolls you need to manage the business. The message here is take stock of the people you have and make the tough decisions early, before someone up the corporate ladder starts asking you questions.
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