U. S. Radio (Jan-Dec 1960)

sons radio is an attractive investment ()])p()rtunity is that "il contrasted to oilier l)usinesses, the return on the (lolhir is high; there are also favorable tax situations, and the glamor of owning a radio station has not lost its appeal." As for fm, the Haniilton-Landis executive says there is great buyer interest, especially over the past year. "Those interested in fm," he states, "are looking at it as a long-term investment, with an eye on showing a retin n in four or five years." Henry Hovland, associate in (lie New York office of I»aul H. Chapman Co., Atlanta, observes that the "demand for radio stations is growing. The principal media turnover today is in radio because there is a multitude of stations and the price is rarely prohibitive." Mr. Hovland declares that radio appeals to a broad range of investors— those interested in a smaller properly that requires between ^2(),()0() and $40,000 down as well as those who are eyeing properties in the top 50 markets. He also declares that "more people than ever before are realizing the value of brokers. We know, for example, that we have many repeat clients." In addition to bringing buyer and seller together, Mr. Hovland states that the broker's second most important function is determining the fair market value of a station for a buyer. He also oljserves that many sellers "don't realize what their property is worth on the market." Aside from California and Florida, the Chapman executive declares that stations in the Northeast are also in demand because of New York. Many advertising and broadcast executives located in that city, he obser\'es, prefer investing in a station that is near at hand for quick observation trips. As lor fm, Afr. Hovland says that the demand for stations is growing, especially in large markets. Edwin Tornberg, who started his own companv in June 1959 after years in the brokering business, says that the "rate of tinnover in radio properties is higher than ever." He also cautions that "prices mav be getting unrealistic. A deal must make sense after the romance is over." Mr. Tornberg, who deals exclusively in radio and tv stations as ^vell as entertainment properties, declares that the high demand for Florida and California properties carries premium jirices. The national averages as repcjrted by the FCC and the proposed management of a station are among the two most important guides in determining what a station can do, Mr. Tornberg explains. As for financing, he states that there are instances where some brokeis will help finance a station either on their own or by airanging borrowing through a third party. With a relatively optimistic outlook for the future of radio station trading, Mr. Tornljerg sees as a possible dark cloud on the horizon the possibility of FCC^ restrictions. (Changes as to programming regulations will not be a factor, he says. Rut sales will be affected if any positive steps are taken to change the requirements as to how long a station nuist be owned before it can be put up for sale, he concludes. Geoige Romano, associate of Howard E. Stark, New York, states that radio station trading is currently in the forefront of the company's activities. As a broker of newspapers, maga';ines, radio and tv stations, he observes that it is difficult to state what the situation will be next vear. • • • Rule of Thumb The following guide to what a station can do revenue-wise was developed by the Paul H. Chapman Co. The materials used in the analysis were the FCC annual financial re)3orts as well as Sales Management's Snrxjey of Buying Poiver. The ratio figure compares total broadcast income with retail sales and shows the radio ojierator what percent of all dollars spent in the market place he can expect to receive, basing the final figure on the station's share of the market. PROVEN AVERAGES Ratio of Broadcast Revenues to Metro Area/Home County Retail Sales Market group Broadcast income Retail sales Ratlo^ (in thousands) (in thousands) Major New York $ 34,078 $18,838,362 .0019 Next 11 markets^ 102,752 46,769.550 .0023 Next 15 markets* 51,619 20,066,790 .0027 Metropolitan"' 140,662 50,098,440 .0030 Medium'^ 25,601 7,666,550 .0035 Small' 121,407 35,322,450 .0036 Adjusted to include revenue from incidental broadcast activities, an additional 5.2%, to broadcast revenues as per FCC report in each group. New York with its estimated metropolitan area population in excess of 14 million ranks by itself. In order of population and all in excess of 1 V2 million. Includes Chicago, Los Angeles, Philadelphia, Detroit, Boston, San Francisco, Oakland, Pittsburgh, St. Louis, Washington, Cleveland and Baltimore. Range from ^A to Wi million. Included are Dallas-Ft. Worth, Minneapolis-St. Paul, Buffalo, Houston, Providence, Seattle-Tacoma, Milwaukee, Cincinnati, Kansas City, Miami, San Diego, Atlanta, New Orleans, Portland and Denver. All metropolitan areas in FCC report except top 27 shown above. Non-metropolitan areas of 3 or more stations, FCC report. Non-metropolitan areas, one and two-station markets, FCC report. U. 5. RADIO September 1960 37