Looking At The Ramifications Of Today’s Three Entercom Divestiture Deals
In a series of three deals involving twenty eight stations in six markets, Entercom today finalized all of its necessary divestitures to complete its merger with CBS Radio. In the process it will completely change the holdings of the big three operators in Boston, consolidate operators in Seattle, bring a new entrant to Sacramento and San Francisco, and add two new markets for Entercom.
Let’s go on a market-by-market and cluster-by-cluster look at the impacts of the deals and what happens next.
Using the October 2017 PPMs released yesterday, the four big commercial groups (Beasley, CBS Radio, Entercom, and iHeartMedia) combined for 68.7% of all Boston market listening. CBS Radio’s cluster had a 22.7 share, Beasley a 21.0, iHeartMedia 12.9, and Entercom a 12.1 share. Taking into account today’s deals iHeartMedia becomes the dominant player with combined 27.9 share, Beasley a 20.6, and Entercom a 20.2 based on the October monthly.
iHeart’s acquisition of CBS Radio’s News/Talk 1030 WBZ, Classic Rock 100.7 WZLX and Entercom’s Talk 680 WRKO and Urban AC “The New 97.7” WKAF in Boston finally gives the company a full cluster in Boston with 1430 WKOX to be divested. WZLX gives the company a male targeted station to sell, while WKAF creates a sales combo with “Jam’n 94.5” WJMN.
How iHeart handles the two AMs will be the biggest story. The company doesn’t have anything like WBZ in its portfolio with its All News programming from 5am to 8pm and Talk at night. The company will likely integrate its Total Traffic and Weather Network into the station in place of some of the current staffers, but it could also use WBZ to feed a regional News hub to its other New England News/Talkers such as WTAG Worcester, WPOP Hartford, and WGIR Manchester. WRKO resolves a big headache for iHeart’s Premiere Networks as the company can now move Rush Limbaugh, and perhaps Sean Hannity and Mark Levin off of 1430 WKOX where the station fails to even appear in the ratings and back onto 680.
Entercom’s cluster has long focused on male audiences with Sports 93.7 WEEI-FM and Rock 107.3 WAAF. Those two stations remain in place, but now the company has created a “wall of women” by adding AC “Magic 106.7” WMJX from Beasley and Hot AC “Mix 104.1” WBMX and CHR “103.3 Amp Radio” WODS from CBS. That gives a much more balanced sales portfolio for the company.
At first the swap of WMJX and $12 million for Sports “98.5 The Sports Hub” WBZ-FM looks like a head-scratcher for Beasley as it gives up its cash cow in the process. However, WBZ-FM gives Beasley a true flagship and destination for advertisers with the rights to the Patriots, Bruins, and Celtics. The company hasn’t been big on Sports as it blew-up the stations it acquired in Detroit and Tampa and sold off Charlotte soon after acquiring them with only “97.5 The Fanatic” WPEN-FM Philadelphia remaining. With a reputation for running lean, would Beasley risk hurting The Sports Hub to rely more on syndication on nights and weekends?
Bonneville is back in San Francisco as it will take over the four divested stations from CBS and Entercom via an LMA. Bonneville regains AC 96.5 KOIT which it previously owned from 1975 through 2007, and three other stations. Two of those seem like a tonal shift for Bonneville. CHR “99.7 Now” KMVQ with its subfocus on the local LGBTQ community and Urban AC 102.9 KBLX are not the prototypical Bonneville stations as the company’s Mormon church ownership usually shys away from Rhythmic oriented formats. All of the company’s other music stations are AC, Country, or Classic Rock. Could this mean that Bonneville has another deal lined up to exchange those two stations for ones that more line up with its ideals?
Bonneville also gains 4/5ths of CBS Radio’s Sacramento cluster with all of the stations fitting within the formats usually run by the company with an AC, Hot AC, Country and Sports talker. The market fits with their focus on large markets in the western half of the country.
iHeartMedia strongly improves its standing in the market with the additions of Variety Hits “96.5 Jack-FM” KJAQ, Classic Rock 102.5 KZOK, and Sports “The Fan 1090” KFNQ and the pending divestments of rimshot Alternative “Alt 102.9” KFOO and Rhythmic CHR 104.9 KUBE. After the big four station format shuffle last year, the cluster has solidified its standing with female audiences in the market. The addition of KJAQ and KZOK to existing Rock leaning Classic Hits “95.7 The Jet” KJR-FM could lead to a change at 96.5 to eliminate overlap between the three. With Entercom set to own both Country stations in Seattle, could iHeart look to bring a competitor there or do they look to move either KFOO or KUBE’s formats to a stronger in-market signal?
Chattanooga & Richmond
In its swap with iHeartMedia, Entercom will enter Chattanooga TN and Richmond VA. On paper the deal to swap seven stations in two major markets for ten in two smaller markets makes zero sense. However, the SEC filing last month stated that Entercom would also receive $265 million cash from these divestitures. With $195.5 million still unaccounted for we know that amount will come from iHeart’s swap and Bonneville’s eventual purchase of the San Francisco and Sacramento stations.
Richmond makes for a great pairing with Entercom’s cluster in adjacent Norfolk and the CBS Radio cluster in Washington DC. iHeart spent much of the summer transferring employees out of the market to reduce costs so Entercom will need to staff up there. While Chattanooga becomes one of Entercom’s smaller markets, it is in the top 100 and gives the company a local powerhouse in Country “US 101” WUSY.
The biggest question that arises following today’s deals is where will the addition $195.5 million come from? And especially where will iHeartMedia get its money from? With the creditors closing in on due debt payments, iHeart will likely need to divest some additional assets to gain the cash needed for its acquisitions in Boston and Seattle.
These deals settle what Entercom needs to close on its merger with CBS Radio on or around its expected November 17 date. Yet it still leaves open the possibilities for additional swaps after the fact. With the CBS television stations no longer to-be counted towards Entercom’s limits it gives the company the ability to expand in some major markets like New York and Philadelphia should a property become available or to grow or divest some markets where they will only own a handful of properties such as Atlanta, Milwaukee, Minneapolis, and St. Louis.
This is just the completion of phase one of the deal making. The completion of the Entercom/CBS Radio merger opens the doors for much more in 2018.