U. S. Radio (Jan-Dec 1960)

big year nomic drama of mergers, consolidations and closings, like tv those profitable dailies are in major markets carrying extremely high price tags. Radio on the other hand, because of the multitude and diversity of stations appeals to a wide range of investment opportunities, from the very small to the very large. Radio also affords the maximum economic freedom of "trading up" — starting small, building and then buying a bigger property. And even more to the point, radio station operation continues to be a neatly profitable enterprise. In a decade, the number of am stations on the air has increased from 2,086 in January 1950 to .S.156 in January 1960. Fm stations on the air have jumped from a low of 554 in 1957 to the current figure of 741. -Vccording to the latest sinvey of the National Association of Broadcasters, revenue of the "tvpical" radio station increased five percent in 1959. The association states that the "tvpical radio station received about $104,000 in total revenue, with total expenses of ,S96.000 and a profit margin of about eight cents on every sales dollar, a slight increase over last year." The survey also points out that of every time-sales dollar taken in, about 85 cents came from local advertisers and about 15 cents from national and regional accounts. The generally healthy state of radio station operation is reflected in the activity of brokers' offices across the country. In dollar volume, 1960 is well on its way to achieving a record year in radio station sales. The sentiments of brokers reflect that view. Here are highlights of opinions reported to u.s. radio: • Blackburn & Co. believes that demand for stations is running at an all-time high and confirms the fact that most media brokers are making more money in radio. The firm maintains that management ability is becoming an increasingly impor tant consideration in the competitive station field. • Hamilton-Landis & Associates Inc. believes that radio station trading will certainly continue at the pace set over the past two years. The firm oljserves an influx of investor interest from non-allied businesses. • Paid H. Chapman Co. asserts that not only is the demand for stations growing, but that more people are realizing the value of brokers. The firm j)oints out that there are many repeat clients. • Edwin Tornberg & Co. says the "rate of turnover is higher than ever." The firm cautions that |3rices may be getting unrealistic. California and Florida properties carry premium prices, the broker states. • Howard E. Stark Co., wliich just negotiated the largest single-station radio sales involving the purchase by Storer Broadcasting Co. of \viNS New York for .SIO million, believes the turnover of radio stations shoidd remain strong this year. "Unless something unforeseeable happens, such as restrictive legislation, this should be a big vear in radio station trading," states Joseph Sitrick, associate, Blackburn & Co., ^Vashington, D.C. He notes that full-time facilities in major markets are the most sought after buys, while small-market daytimers are the hardest to sell. The Blackburn company believes that management ability is becoming an increasingly important consideration in the highly competitive station field. "As opposed to situations in other media, management appears to be an especially stiong equalizer in the radio field," states Mr. Sitrick. A great deal of broker activity stems from people who are "trading up," it is observed. "There is great opportunity in radio, completely consistent with our economic philosophy, for owners to start with a small property, build it and then ac quire a larger operation," states the Blackburn executive. Mr. Sitrick outlines five guideposts that help the buyer in determining the revenue-producing ability of a station: • Existing gross income. • Advertising dollars being spent in total market. (Federal Communications Commission has figures on radio dollars spent.) • Cash flow — the difference between operating expenses and income. • Station facility — power, operating hours, dial position, among others. • Market itself — population, industry, retail sales, among other factors. Bringing two parties together is rarely an easy chore, although it remains the prime function of a broker. However, before the deal is consuiiunated many problems can arise. Chief Roadblocks Among the chief roadblocks that stop a sale, exjolains Mr. Sitrick, are the difficidties in raising the needed cash, a technical problem at the station that seems too tough to tackle, the station may be presently at peak position leaving little room for further growth, or a station may require too much investment after the sale to put it in competitive shape. John Hardesty, vice president in the San Francisco office of HamiltonLandis &: Associates, declares that radio trading is higher than ever and should continue that way for some time. There are two factors he cites that are affecting the active trading. "Many stations being put on the market today are owned by the original operator, who started the station in the late 1920's and early 1930's. These owners are seeking to sell for a variety of reasons, such as retire ment, lack of an heir to pass the i operation on to and the depreciation factor has run out. "Secondly, there is an influx of people into the radio business from non-allied fields. Most of these are absentee owners and, in many cases, are willing to pay more for a property because of a lack of opportunity to 'shop around.' " Mr. Hardesty says among the rea 36 U. S. RADIO • September 1960