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Radio Earnings Season is Upon Us

10-24-2012

There was a certain expectation that 2012 would be a turnaround year for radio, following an anemic 2011. Even though political advertising is a once-every-four-year shot in the revenue arm, it was coming at the right time. The economy was stabilizing, automotive sales have been strong and a completed election would mean stability in the eye of the consumer. Well, so far political advertising doesn't seem to be coming to radio as much as anticipated and overall revenue growth so far in 2012 hasn't been anything to write home about. Wells Fargo analyst Marci Ryvicker says, "trends have been somewhat disappointing."

Ryvicker says she expects to hear a "muted tone" from radio CEO's when they report 3rd quarter earnings, starting with David Field's Entercom Friday at 10AM. "We do think a lot of the weakness is macro-related -- recall that radio has the shortest term contracts of all traditional media; therefore, top line growth tends to ebb and flow muchmoreso than what we see in both broadcast TV and outdoor. As a result of the cautious commentary we heard during our checks, we reduced our revenue growth assumption for ETM, to +2.4% from +5.4%, which suggests a core of -1.5% (although if we were to include KBLX, our core moves to +0.6%) and political of roughly $2MM."

She also believes the upcoming earnings calls will focus on the following points:
Core ad trends for Q4 and potentially for 2013 (although it is still early, especially for radio);
M&A especially post CBS recent acquisition of 101.9 FM in New York from Merlin Media for $75MM
(SNL puts this sale at an $4.51 per pop) to simulcast its WFAN 660AM sports station;
The state of the sports network landscape post CBS and CMLS decision to create and syndicate CBS
Sports Radio, which is expected to launch on January 2, 2013.
The potential for shareholder returns;
Competition from new media as well as other local advertising categories;
The impact of lower radio royalties (ASCAP and BMI) specifically on operating expense;
The potential for groups to join Clear Channel and ETM in signing with Nashville label Big Machine for
both terrestrial and streaming performance royalties; and
An update on the state of the iHeartRadio platform, now that it boasts over 1,500 live stations from 150
cities.



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