Lawyer Article

Abstract

As the public marketplace for broadcasting pure-play stocks reaches maturity, and public investors become sophisticated in broadcast economics, it is becoming increasingly difficult to maintain the type of growth that continues to impress Wall Street analysts. Over the past couple of years, growth in broadcasting stocks has slowed enormously. Some large investor groups are looking to “pare down” their broadcast holdings and several large broadcasters are bolstering their stock price with huge stock buy-back programs. Radio revenue is not growing as fast as the analysts would like and radio groups are running out of strategies to feed Wall Street’s expectations of ever-increasing profits. Costs have been cut as much as sanity will allow, maximum economies of scale have been reached and spot inventory has been expanded to the breaking point, particularly for traditional radio groups who are facing competition from satellite radio providers. Clear Channel’s “less is more” campaign seems to have hit a resounding note.

As the industry moves toward the second half of 2005, there is an increasing “buzz” that broadcasting companies – and the radio sector in particular – must look for new options. Some believe that the creation of more cohesive station groupings, achieved by selling off clusters of stations that do not fit the basic group strategy, is the answer. Others, however, believe that a better way to enfranchise broadcasters to serve their audience is to “go private.”

In this article, Gregg Skall a member of the Womble Carlyle Telecommunications Practice Group and Ross Parr, a member of the firm's Corporate and Securities Practice Group outline the advantages and perils of going private in light of the current regulatory environment.

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Republished with permission ©2005 Radio Business Report/Television Business Report, Inc. All rights reserved.