[IRCA] Observations on Scott Fybush's rebuttal

[Charles A Taylor <MWDXer@xxxxxxx>]

Scott,

Your rebuttal deserves to go into IRCA Reprints!

Charles

        -----
Charles A Taylor, WD4INP
Greenville, North Carolina


>With all due respect...what in the world are you trying to say?
>
>If a station's been dark for over 12 months, it no longer has a license
>as a matter of law. There's no asset to sell.
>
>Yes, there's such a thing as "stick value." Yes, there are people out
>there crazy enough to bid ridiculous amounts of money for new FM
>construction permits that won't ever be anything more than rimshots in
>overcrowded markets, or AM signals with 50 kW days, 230 watts at night,
>aimed out at sea. That's nothing new. There's always been a "greater
>fool" out there. (If there weren't, a certain high-powered AM in Rhode
>Island would have gone dark years ago.)
>
>And yes, there are some broadcasters - national religious networks,
>mainly - whose only interest is in the "sticks" they're acquiring. They
>buy the stations, shut down the local studios, and plug into the
>satellite. They can make it work because they're operating on a
>completely different financial model, based primarily on listener gifts.
>(That's still, thankfully, a very small percentage of commercial station
>sales.)
>
>You seem to believe that when an existing licensee goes to sell his
>station, an FCC auction is somehow involved. That is not the case.
>Existing radio stations are sold the same way they've always been - by
>private contract between buyer and seller, as a multiple of annual
>revenue. Do anything to disrupt that revenue stream (like, say, going
>off the air for a week at a time when the community desperately needs
>information) and you've diminished the value of that station, at least
>in the short term.
>
>My credentials on this? I advise broadcasters on station sales and
>acquisitions, including pricing.
>
>Here's a real-life example: a cluster of stations in a medium-sized
>market is currently for sale. Two of the stations are class B (50 kW)
>FMs with substantially identical signals. If what you say is true, those
>two stations should be valued identically. News flash: they're not,
>because one has declining revenue with a format that's hard to sell,
>while the other one has a solid revenue base and strong ratings in an
>advertiser-friendly demographic. Station B is going for twice as much as
>station A, and it'll be worth every penny to the right buyer.
>
>By the way, outside of the biggest markets, station values are actually
>on a downward swing. Clear Channel just checked out of northern New
>Hampshire and Vermont at a sale price that was several million dollars
>less than they paid for those stations in 1999-2000. Galaxy
>Communications lost a couple of million dollars on the stations it just
>sold in Albany. The last couple of rounds of FCC auctions for new
>construction permits have fallen short of expectations, too, as bidders
>from the earlier rounds discover just how much they overpaid for
>marginal facilities.
>
>They're not getting the big bucks you think they are for those stations,
>because - wait for it, now - station buyers need to be able to make a
>business case to justify paying a certain price for a station. In usual
>practice, that means taking out a loan, which has to be repaid. And
>how's that done? Yup, by selling a certain amount of advertising, which,
>last I checked, only works well when a station is ON THE AIR and
>broadcasting programming that an audience wants to hear and that can be
>sold to advertisers.
>
>Without that, all you've got is a piece of paper and a big bank loan to
>repay somehow. Good luck with that.


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