Processing Your Payment

Please do not leave this page until complete. This can take a few moments.

December 11, 2006

Channel surfing | Who might be in the market for Clear Channel's 17 Maine radio stations?

By Whit Richardson
Clear Channel Communications made its name in the radio world by being big. In the 1990s, following the loosening of federal media ownership rules, the San Antonio-based company began acquiring hundreds of radio stations across the country, including more than a dozen in Maine. At its peak, it owned more than 1,200 radio stations, making it the largest station owner in the nation.

But it appears Clear Channel has reached its high-water mark. In mid-November, the company announced plans to jettison 448 of its 1,150 radio stations located in small markets, as well as its 42-station television group. The stations up for sale include its entire roster of 17 Maine stations, located in the Bangor and Augusta-Waterville markets ˆ— stations such as WTOS, "The Mountain of Pure Rock," and Bangor's Kiss 94.5.

The company, which also is being acquired by Boston-based private-equity firms Thomas H. Lee Partners LP and Bain Capital Partners LLC in a deal worth an estimated $26.7 billion, says the divestiture will allow Clear Channel to concentrate on more profitable stations in the top 100 U.S. markets. "This is basically a realization on Clear Channel's part that they did some overreaching," says Scott Fybush, Rochester, N.Y.-based editor of NorthEast Radio Watch, a website that tracks industry news. "I think they thought by operating in every market in the country they would end up with significant economies of scale, but the truth of the matter is it still costs a bit of money to run a cluster of radio stations even in Bangor and Augusta."

Even though all 448 radio stations Clear Channel is selling, combined with the television group, only account for 10% of the company's revenue, its Maine stations are still valuable properties in healthy markets, says Larry Julius, market manager for Clear Channel Radio Bangor. (Mainebiz provides radio news to WVOM, a Clear Channel station in Bangor.)
Still, changes in the radio landscape mean that no one knows how the proposed sale will proceed, says Fybush. "Radio is rethinking itself right now," he says. "There's acknowledgement all around that the days of steady revenue growth are largely over in the face of all the competition radio has now."

There's also uncertainty in Maine, where Clear Channel is the largest radio station owner and employs 50-60 people. This many stations going on the market all at once is "unprecedented," says Suzanne Goucher, president of the Maine Association of Broadcasters. Of course, how Clear Channel plans to sell off the stations ˆ— whether in clusters or piecemeal ˆ— will have a large effect on the landscape. "A lot is going to be determined by how the sales shake down," Goucher says. She hesitates to speculate further, but says the news "opens up some opportunities for more local ownership."

To complicate matters further, a recently changed but still fuzzy rule in how the Federal Communications Commission calculates the number of stations a company owns in one market may affect who can buy certain stations in certain markets like Bangor. FCC guidelines say that in a market Bangor's size, no owner may own more than six stations. However, Julius says he believes Clear Channel is still compliant under FCC guidelines because many of the stations considered in the Bangor market actually are located in places like Skowhegan and Ellsworth.

But Mark Fratrik, vice president of BIA Financial Network, a Chantilly, Va.-based media firm that tracks the radio industry, says Clear Channel was compliant, but under the new calculation method, adopted by the FCC in 2004, the company "exceeds local ownership limits of the Bangor market," Fratrik says. "So what I'm getting at is ˆ— they can't sell all that to one person."

Another corporate buyer?
One man who had an inkling that Clear Channel was looking to get out of smaller markets is Mark Osborne, who last year, along with business partner Natalie Knox, purchased a 50,000-watt radio station in Ellsworth from Clear Channel. He says Clear Channel wasn't putting much effort into developing properties it owned in markets like Hancock County and he saw an opportunity to do better. So last year he paid slightly more than $800,000 for the FM station WNSX. (See "On the air," Sept. 5, 2005.) "Clear Channel is a good company, a solid company, and if they had an interest in developing Maine properties I'm sure they would do very well with them," Osborne says. "But the return on the dollar for smaller markets is a lot less."

He says costs like electricity and "hard assets" like antenna towers is the same whether you're in Ellsworth or Los Angeles, except that the return is much greater with the latter. "You can put the same amount of money in a market like Los Angeles and make money by the wheelbarrow full," Osborne says. "What Clear Channel is doing from a corporate standpoint simply makes sense."

As for what the sale might mean for Maine's radio market, Osborne says it depends on who buys the stations. "I think the first shoppers are obviously going to be the big players, those with the deeper pockets," Osborne says. "And if they want to and are able to, they'll scoop up the better properties, leaving the weaker stations to be plucked off the vine by local operators."

But local operators may have a hard time affording one of these stations, Osborne says. He estimates Clear Channel paid between $6 million and $7 million for WKSQ, one of the better performing stations in the Bangor market. The more likely buyers, says Fratrik, are the other ownership groups currently in the Bangor and Augusta-Waterville markets ˆ— companies like Las Vegas-based Citadel Broadcasting Corp., which owns 13 stations in the state, including four in Augusta, and Princeton, N.J.-based Nassau Broadcasting, which owns 11 stations in Maine, including one in each of the Bangor and Augusta markets.

How the sales will affect the radio market in Maine will remain unknown until buyers step forward. When asked if he could be one of those potential buyers, Osborne gives a noncommittal answer. "A year ago when we put this version of the station on the air we had no intention of expanding further," he says. Though he adds, "you never say never."

Sign up for Enews

Most Recent

Most Recent

Comments

Order a PDF