$500 Million for a Radio Cluster?

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In its recent report on CBS Radio, BIA/Kelsey provides a detailed analysis on the radio industry, the leading radio groups and the markets in which CBS Radio competes. One conclusion is that the CBS Radio cluster in New York City could be worth $450 to $500 million: BIA/Kelsey assigned a $467 million value.

CBS Radio operates seven radio stations in New York, and it has long been the dominant radio group in terms of collective market position. As shown below, it operates four FM stations and three powerful AM facilities.

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(BIA/Kelsey’s MEDIA Access Pro, 2016)

Led by WFAN(AM/FM) with its Sports/Talk format and WCBS(AM) and WINS(AM) with their News formats, BIA/Kelsey estimates that the CBS Radio Cluster in New York garnered a 35 percent share of the estimated $546 million in over-the-air radio advertising in New York in 2015. CBS Radio’s estimated 35 percent share leads the market, followed by iHeartMedia with an estimated 31.9 percent share. Emmis Communications and other groups trail far behind, as shown in the following chart.

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(BIA/Kelsey’s MEDIA Access Pro, 2016)

CBS Radio’s dominance in the most populated markets provides an incredible beachhead for the entire group of stations. Overall, CBS Radio’s estimated gross advertising revenues from its New York stations contribute 15.1% to the company’s total revenues. BIA/Kelsey estimates that this cluster would generate net revenue of approximately $193 million in 2016 and EBITDA of over $50 million.

Analysis of the publicly traded radio broadcasters indicates that their EBITDA margin (EBITDA/Net Revenue) averaged around 20 percent in 2015, while CBS Radio was more in the 27 percent range. The analysis of the most comparable publicly traded companies also indicated enterprise value between 2x and 2.5x net revenue, and 9x to 11x EBITDA. From that, BIA/Kelsey concludes the aforementioned $467 million value.

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CBS RADIO AS IT APPROACHES IPO: Industry Position, Competitive Assessment, Valuation Estimates was prepared by BIA/Kelsey media valuation analysts. It draws on the company’s proprietary broadcast data to deliver insights and observations for executives and analysts involved and/or invested in the radio industry.

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