We have experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of radio station businesses. Below is a brief synopsis of the industry.
Description of Business
Companies that own and operate radio broadcast stations and radio programming services.
General Industry Information
The radio broadcasting industry includes about 6,800 companies with combined annual revenue of about $18 billion. Major companies include Clear Channel Communications, Cumulus Media, Citadel Broadcasting and CBS Radio. The industry is highly concentrated and top heavy, with the top 50 companies accounting for 75 percent of the market share. The top four companies earn around 45 percent of the industry revenue. Companies that broadcast exclusively over the internet are not included.
Demand is driven by consumer demographics and business advertising. Individual station profitability is dependent on advertising volume and mix as well as efficient operations. Naturally, larger companies will have a competitive advantage in market dominance for advertising.
The major product lines in the industry are programming, air time broadcasts, production and post-production services. Program rights, merchandise sales, equipment rentals and the sale of website advertising space are other products offered by radio stations. Broadcasted air time accounts for 90 percent of revenues. Air time includes network compensation and advertising.
Radio companies produce or acquire radio programs as well as operate broadcasting studios and transmission facilities. Large corporations will own multiple radio stations in order to achieve economies of scale in negotiating advertisement and programming contracts. Independent, or non-network companies will have much smaller revenues.
Red Flags and Risks
The main risk for a radio station is threat from competitors in attracting listeners. Part of this is determined by the strength and quality of the signal that the station transmits. The transmission signals and broadcasting licenses are both regulated by the FCC. Because most of the revenue for radio stations comes from selling air time to companies for advertisements, successful radio stations need to establish a listener base in order to convince the buyers of airtime that there is a large audience to relay their message to.
Because the industry is regulated by the FCC, it is highly sensitive to any sort of regulatory changes that may come into place.
Technology is also rapidly changing the industry. Stations are converting to digital broadcasting. Digital signals are higher quality and easier to edit than analog signals, while using less broadcast spectrum. The signal transmission is also digital as opposed to using radio frequencies. Further changes, like this one, could change the industry dramatically. Internet radio and satellite radio has also had an impact upon profits.
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