Like gated thoroughbreds, the broadcast industry bolted before the ink could dry on the president's signature this February.
The ensuing race was a mad dash to see who could conglomerate the most. The act, among other things, raised ownership caps on TV and radio and invited local phone companies to compete directly with local cable systems.
AN EXPANSION ERA
Most top media companies were positioned to expand their media portfolios. Revenue of the Advertising Age 100 Leading Media Companies grew to $99.5 billion, up 10.5%, in 1995. Of the 53 media operations for which net income could be isolated, two-thirds showed profit despite higher paper and postage prices and lack of an Olympics or election stimulus.
Radio couldn't be more congested with buyers and sellers. Clear Channel Communications alone has amassed 104 radio stations through mid-1996, up from 30 the end of '95; CBS/Westinghouse has 83, up from 36.
"Accumulation is purely a function of the [telcom] act. There are no bargains," says Jim Duncan, radio analyst, pointing to multiples of 14 for radio stations and 17-18 for the Infinity Broadcasting Corp. stations paid by CBS/Westinghouse. At the turn of the '90s, multiples were 8. Multiples represent station cost divided by cash flow.
New-found revenue streams from radio elevated Clear Channel, Evergreen Media Corp., Jacor Communications, American Radio Systems Corp. and SFX Broadcasting into the Top 100.
CBS/Westinghouse grabbed the most by purchasing Infinity, last year's No. 76 media company and itself acquisition-bloated at the time. Federal Communications Commission didn't anticipate the feeding frenzy to be so great. Major market concentration is under review at the Justice Department. CBS/Westinghouse controls 36% of the Chicago radio market; 47% in Philadelphia; 44% in Boston; and 36% in Dallas/Fort Worth.
"It's silly to look at radio isolated from other media, though," says Mr. Duncan. Radio is only 7% of the media ad pie. CBS/Westinghouse total market ad share is 6% to 8% of those markets. "If radio overpriced itself, ad dollars would just go elsewhere," he says.
Dominating TV's acquisition-induced sea change are the purchases of Capital Cities/ABC by Walt Disney Co. and CBS Inc. by Westinghouse Electric Corp.-both completed at the turn of '96.
The revenue expanse of Disney Cap Cities/ABC of $7.39 billion pro forma, included an estimated $594 million from Disney. Cap Cities/ABC's contributed an estimated $6.8 billion, up 8.6%.
CBS/Westinghouse pro forma revenue of $4.32 billion includes Westinghouse TV and radio, CBS TV and radio and Infinity. The 5.6% decline in media revenue is attributed to a poor showing at CBS-TV, down 11.7% to $3.02 billion.
Two TV companies on the report entered for the first time with pro forma revenue fattened by acquisition: Sinclair Broadcasting Group and Young Broadcasting.
Deregulation produced three principal players in cable: cable operators, local phone companies and long-distance providers.
US West early last year bought Wometco and GCTV in Atlanta (renamed MediaOne), and this February acquired Continental Cablevision, No. 19 last year.
CABLE SETS THE TABLE
Cable acquisitions made the difference in Time Warner's toppling Disney CapCities/ABC from the No. 1 media company spot. TW purchased Cablevision Industries Corp., took two-third's equity in a partnership with Advance's Newhouse Cable, purchased KBLCOM and with that acquisition gained the 50% it didn't own in Paragon Communications.
TW, given the go-ahead to buy Turner Broadcasting Services, is credited with Turner's $1.97 billion revenue in '95.
Tele-Communications purchased Viacom's multiple systems operator business; Comcast Corp. bought E.W. Scripps' cable; Cox Enterprises merged Times Mirror Corp.'s cable into its cable unit and spun off the unit into a publicly held company. Cox is still 75% owner of the new company, merged into the Cox Enterprises revenue stream for this report.
OUTDOOR BOARDS SPINNING
Ownership was just as volatile among out of home. In the process, Phoenix has become the medium's undeclared capital.
Phoenix-based Outdoor Systems, which went public this year, closes this month with the purchase of Gannett Outdoor, a $253.2 million revenue package credited to OS in this report.
Outdoor Systems' President-CEO Arte Moreno at one time worked under Karl Eller, who delivered the other coup in out of home-Phoenix-based Eller Media's acquisition of Patrick Media.
Outdoor has become more attractive as ad categories have broadened to more than compensate for the loss of tobacco ads.
A covenant at Outdoor Systems, in fact, requires that revenue from tobacco not reach more than 15% of total-tobacco was 9.1% of '95 revenue.
Ownership changes are afoot among online services. Prodigy was sold last month to International Wireless Inc., forming Prodigy Inc.
H&R Block in April completed an IPO for 20% of CompuServe Inc. and plans a complete spinoff by April 1997. Revenue attributed to CompuServe in this report excludes its line-leasing operations, about 30% of its business.
Gannett made the biggest acquisition in newspapers, acquiring Multimedia, No. 48. Knight-Ridder bought Northern California's Lesher Communications last October (since renamed Contra Costa Newspapers), and Advance Publications grabbed American City Business Journals.
Magazine companies for the most part steered clear of the mergers & acquisitions market, excepting K-III. After going public via the selloff of 12% of its stock by owner, Kohlberg Kravis Roberts Co., K-III bought 14 magazines from Cahners Consumer Magazines (Reed Elsevier) at yearend.
Reader's Digest Association put Travel Holiday on the block this year. At the time, RDA reported a 10% decline in second-quarter profit and the ensuing layoff of 1,000 employees.
Paper costs-the bete noire of most publishers-were part of the problem: an added $50 million expense for fiscal '96.