Lew Dickey: “It’s a buyer’s market”


It’s primarily lower rates, not fewer units sold, that accounts for the decline in radio revenues, says Cumulus Media CEO Lew Dickey. His company reported that Q2 revenues were down 21.1%, although July was slightly better.

In his Q&A with analysts, Dickey noted that, “We don’t know when the turn is going to happen,” but he insisted that Cumulus is well positioned to grow once the marketplace improves. For now, though, he said the downturn in revenues is 80% rate-driven, not fewer units being sold. Rather than a bid and ask market, he called it a bid and acceptance market. “Buyers each time they come back are looking for a lower rate.” Dickey said broadcasters need to learn the value of saying now, and he said Cumulus has passed on some business where the rates being offered were just too low. For now, though, “it’s a buyer’s market,” he said.

So, how does he see the rest of 2009 shaking out? “Let’s start with the most important category, which is automotive. The second quarter in essence represented a run-rate of car sales of some 10 million [annualized], and we expect, we’re already seeing that starting to rebound. I think in the month of July it was north of 10 million, closer to 11 million. With the Cash for Clunkers program it’s continuing to improve. And so we’re seeing that market starting to firm up. The automotive business really hit the skids September and October last year, so we like to say they can’t cancel you twice. We do expect to start to see some firming in that category, starting in the fourth quarter, maybe the last month of this quarter. Plus, on top of that I think you’re starting to get a little bit of a wind at their backs, with the government stimulus to help that sector of our economy along,” Dickey said.

Looking back at Q2, he said “May was a very difficult month.” April was down 19% for Cumulus, May 25%, but then June was down 18.8%. Dickey said earlier in his prepared remarks that July was down 19.8% to start Q3.

For now, Cumulus is focused on defending its cash flow, paying down debt and deploying its new technology platform for managing business, which he said is proving to be more robust than originally thought.

So, for Q2 Cumulus saw net revenues decline 21.1% to $66 million. But station operating expenses dropped 25.9% to $39.2 million, as a result of workforce reductions and other cost-cutting measures implemented over the past year. Station operating income (SOI) declined only 12.8% to $26.7 and the SOI margin actually improved to 40.5% from 36.7% a year ago.