And Why 2006 Might Not Be Much Better

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NEW YORK ( -- Face it, 2005 was not a great year for radio companies. And 2006 may not shape up to be much better. As full-year earnings came pouring last week, few winners floated to the top.
CBS Radio CEO Joel Hollander

Stations faced a dearth of political advertising in the fourth quarter, creating unfavorable comparisons to the previous fourth quarter, an election year. And while one benefit out of Hurricane Katrina was to demonstrate the resilience of radio and the medium’s ability to communicate in the middle of chaos, it hurt the bottom line at several companies that had a major presence in the New Orleans area. Here’s a handy guide to how the major companies shook out.

Wishing 2005 never happened:
Entercom’s fourth quarter was hit particularly hard by Hurricane Katrina -- the New Orleans market represents 6% of the company’s total revenues -- and for first quarter of 2006 ad revenues were pacing down 4% to 6%. CEO David Field said that “while it is early, business conditions look brighter for [the second quarter]. ... Conditions in New Orleans continue to improve and we will have all the stations back on the air.” Entercom, ranked as the sixth-largest radio company in revenue, also lost out on a bid for ABC Radio when Citadel was willing to pay $100 million more. “We simply were not willing to do that," Mr. Field said. "We made the right business decision for our shareholders.” He noted 2006 momentum should improve as several recently launched formats catch on with listeners and drive ratings.

Facing toughest comps:
No. 2-ranked CBS Radio lost its biggest and most expensive personality when Howard Stern officially jetted to Sirius Satellite Radio. According to CBS Radio CEO Joel Hollander, Mr. Stern contributed $100 million to the bottom line. Merrill Lynch’s Jessica Reif Cohen, who covers CBS Corp., estimated in a research note that the company will only replace 15% to 20% of the revenue from Mr. Stern's show, which means that for Les Moonves’ company, “radio remains the most significant risk.”

2005 bright spot:
Spanish-language radio continues to be a bright spot, thanks to rapid population and buying power growth, and Entravision, which has both radio and TV assets, beat the Street’s estimate by 3.5% (4.4% when you look at radio only). CEO Walter Ulloa told analysts that advertising for the World Cup is robust -- the company’s booked almost four times as much revenue as it had in actual sales from World Cup games in 2002. “About 56% of the total World Cup revenue on the books is incremental,” he said. “The company's ratings momentum in all segments should also result in continued outperformance,” wrote Marci Ryvicker, VP-equity research at Wachovia Capital Markets.

2006 is looking up:
The leading radio company, Clear Channel, reported radio revenues had dropped 6% over the past year, in large part a reflection of its commercial inventory-cutting plan, Less Is More. But that means its comps are going to improve in 2006. The company reports better yield per minute -- meaning its pricing is getting stronger -- but it hasn’t actually broken out what that is, so the jury’s still out. Many buyers remain hesitant to buy a 30-second spot at 75% the price of a 60-second.

Biggest changes ahead:
Citadel CEO Farid Suhelman was bullish on his company’s earnings call, the first one since Citadel acquired ABC Radio, which makes it the country’s third-largest player. He claimed that for radio the “worst is over” and said one of his weapons in 2006 will be a greater national presence. At Citadel prior to the acquisition, he said, “it was very hard for us to develop national business with not being in the top 20 market. We couldn't really go to Home Depot and make a pitch with Citadel when you didn't even have coverage in the top 20 markets. ... We will be more in control of our destiny from developing new national revenues for our company compared to what had in the past.” In January and February the company was pacing slightly above 2%, far ahead of most of its radio peers, which were pacing down.

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