High Frequency : Radio’s Continued Popularity Has Giant Firms Tuning In

There is one simple reason why giant conglomerates such as Westinghouse Electric Corp. duke it out for control of the $13-billion domestic radio industry: Everybody listens to the radio.

Whether you’re a Howard Stern fan in New York City or a Ludwig van Beethoven buff in Los Angeles, advertisers with deep pockets count on you--and 97% of the American population--to tune into your favorite local radio station on a regular daily basis.

“Radio has been around forever but it is still the most popular medium of entertainment in the U.S.,” said Jeff Pollack, owner of Pollack Media Group, a Pacific Palisades firm that consults more than 100 radio stations around the world. “You can listen to it in your car or while you’re jogging on the beach and it is virtually immune to the technological changes about to impact other entertainment businesses.”

Not only is radio programming cheap to produce, it generates huge local and national advertising revenues that have shown consistent growth over the past seven decades--despite the advent of movie theaters, television sets and, now, cyberspace.

Unlike the cable and broadcast television industries, which face challenges from new satellite and digital technological advances, the radio industry is in no immediate danger of being left in the dust. Even the Internet poses no grave threat to radio, analysts say, noting that cyberspace has embraced the medium and allows Internet users to tap into radio broadcasts from all over the world.

In addition, radio is not subject to the fickle cyclical nature of the film, TV or music business, where earnings can surge or plummet on the success or failure of a few seasonal blockbusters.

That’s why Westinghouse Electric Corp. was willing to make a deal worth $4.9 billion on Thursday to acquire Infinity Broadcasting Corp.

If the deal is approved by federal regulators and shareholders, Westinghouse will expand its position as the dominant player in the highly competitive radio business.

It’s not like Westinghouse, the largest operator of radio stations in the U.S., suddenly got the itch to gobble up Infinity, the second-largest radio station group in the country. Until recently, such a massive transaction was simply prohibited under federal law.

That all changed in March, when the FCC deregulated the telecommunications industry and removed most limits on the number of stations a corporation can acquire. The government kicked the door open even further by allowing companies to own as many as eight radio stations in the same market.

The deregulation has triggered a manic flurry of radio deals over the last three months that culminated Thursday with the merger of Westinghouse and Infinity.

“Everything is absolutely crazy now,” said Ben La Rue, a Beverly Hills media broker. “All of a sudden, you can buy 150 stations at a pop.

“Radio stocks have been doubling and tripling and radio broadcast companies are selling at multiples unheard of just a few years ago.”

Reaction on Wall Street was positive to the Westinghouse deal, which would create an operator of 83 radio stations with total revenue of about $1 billion a year. The deal would position Westinghouse to become a major force in the radio programming syndication business, allowing it to infiltrate more markets with such highly successful Infinity programs as Howard Stern’s talk show.

Westinghouse will be a power to contend with, becoming the biggest player in all the major radio markets.

The firm would own six stations in Los Angeles and six in New York, commanding almost 40% of each market’s radio advertising revenue.

Analysts predict the deal will be a financial bonanza for Westinghouse.

The stations it would acquire span an audience from 12 to 70 years old, thanks to a broad mix of program formats including alternative rock, rap, country, adult contemporary, oldies, news, sports and talk radio.

Radio listeners are typically a loyal audience and offer a more stable investment for advertisers. The merger, analysts say, should immediately make Westinghouse stations more attractive to both local and national advertisers.

“Radio is a very intimate medium in which you can reach a captive audience in the car or in the office and in the home,” said Harold Vogel, an entertainment analyst at Cowen & Co.

“It’s much different than TV in that advertisers know exactly what they are getting and can precisely target their audience for a very reasonable fee. It’s a very stable and profitable business.”

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Radio Giant

Westinghouse Electric Corp.’s planned acquisition of Infinity Broadcasting Corp. would create an 83-station radio giant with an estimated $1 billion in revenues. How the combined companies would look and what their revenue share would be in major markets:

San Francisco

4 Westinghouse stations

4 Infinity stations

19% of market

*

Los Angeles

4 Westinghouse stations (KCBS-FM, KTWV-FM, KFWB-AM, KNX-AM)

2 Infinity stations (KRTH-FM, KROQ-FM)

26% of market

*

Dallas/Fort Worth

3 Westinghouse stations

8 Infinity stations

38% of market

*

Houston

4 Westinghouse stations

1 Infinity station

20% of market

*

Tampa/St. Petersburg

2 Infinity stations

*

Washington

1 Westinghouse station

3 Infinity stations

21% of market

*

Baltimore

4 Infinity stations

*

Philadelphia

4 Westinghouse stations

2 Infinity stations

44% of market

*

New York

4 Westinghouse stations

3 Infinity stations

36% of market

*

Boston

2 Westinghouse stations

4 Infinity stations

39% of market

*

Pittsburgh

1 Westinghouse station

*

Detroit

3 Westinghouse stations

3 Infinity stations

30% of market

*

Chicago

5 Westinghouse stations

5 Infinity stations

32% of market

*

Minneapolis

2 Westinghouse stations

*

St. Louis

2 Westinghouse stations

*

Atlanta

3 Westinghouse stations

Source: Duncan’s Radio Comments, company reports, wire reports