End of an era: CBS to sell its historic radio division
CBS Corp. is poised to exit the radio business that it helped create.
Eighty-eight years ago, the company’s founder, William S. Paley, bought the nascent Columbia Broadcasting System, and those radio stations became the nucleus of a budding broadcast empire.
But on Tuesday, CBS Chairman and Chief Executive Leslie Moonves said the company was exploring strategic options, including a sale or spinoff, of its entire radio division.
“The aim here is to unlock value for our shareholders,” said Moonves, who made the announcement during an investor day in New York.
The decision marks the end of an era and highlights the waning influence of commercial radio, which is no longer considered a growth industry. Young adults spend more time listening to digital music files, podcasts and subscription Internet radio services such as Spotify and Pandora. The shift has prompted major advertisers, including car dealerships, wireless phone companies and financial services firms, to steer more of their marketing dollars to digital platforms.
“For advertisers, radio is just not sexy any more,” said Adam Jacobson, a radio industry consultant and analyst.
CBS Radio is the nation’s second-largest radio chain, in terms of revenue, reaching an estimated 70 million listeners nationwide each week. It boasts 117 stations in 26 markets, including six in Los Angeles. Those include a leading news station, KNX-AM (1070), as well as KRTH-FM (101.1), KROQ-FM (106.7), KCBS-FM (93.1), KAMP-FM (97.1) and KTWV-FM (94.7).
Moonves provided few details, including a timetable for a sale.
“There are a number of different options for doing this, and we’ll be looking at all of them,” Moonves said. “We will be prudent and judicious as we go ... and we’ll take our time ... and make sure we get it done right.”
The company is likely to hang on to the division for several months, in part because this year is expected to set records for political ad spending. Radio stations are expected to rake in millions of dollars for campaign commercials.
Although CBS no longer separately breaks out its radio results, its most recent earnings report revealed that radio revenue had fallen 5% compared with the year-earlier period.
The proposed sale comes two years after CBS spun off its billboard unit. The company slowly has been jettisoning radio stations. CBS recently sold KFWB-AM (980) in Los Angeles to comply with Federal Communications Commission rules.
Nonetheless, CBS’ announcement rocked the radio industry because the radio outlets formed the bedrock of CBS.
In 1927, when talent agent Arthur Judson, who also ran the Columbia Phonograph and Records Co., failed to get airtime for his musician clients on the pioneering NBC radio network, he began cobbling together his own radio network to give them exposure, radio historian John F. Schneider said. He eventually called the network Columbia Broadcasting System.
“It was underfunded and failing when William Paley acquired the company in 1928,” Schneider said. “The Columbia name stuck, even though Paley had nothing to do with that. But he had the business acumen to put together what became, almost overnight, a very important broadcast network.”
Paley also saw the value of reaching West Coast audiences and teamed up with Don Lee, who owned Cadillac car dealerships and two stations in California: KHJ in Los Angeles and KFRC in San Francisco, Schneider said. “That was the beginning of the West Coast being established as a national radio program distribution center,” he said.
In the 1930s, CBS became a leader in radio dramas and boasted such talent as Orson Welles and Norman Corwin, said Ron Simon, curator for TV and radio at the Paley Center for Media in New York.
“They created dramas that lived on in listeners’ minds,” Simon said.
CBS would boast some of the most popular entertainers, such as Eddie Cantor, Al Jolson and eventually Bing Crosby, Jack Benny and Red Skelton. Some of those comedians came over in Paley’s raids on NBC for entertainers, Simon said, and eventually would help launch the CBS television network.
“That talent would become trailblazers in television,” Simon said.
CBS Radio’s most important contribution, according to the historians, was its vaunted news operation.
“From the beginning of World War II, radio was an important news medium, and CBS put foreign correspondents around the world, including Edward R. Murrow,” Schneider said.
Murrow and his team of fellow correspondents, the so-called Murrow Boys, provided live dispatches from trouble spots with an immediacy that eclipsed newspapers and magazines.
“The hallmark of CBS was its news reporting and journalistic integrity,” Schneider said. “It was CBS’ finest hour.”
A decade later, radio was eclipsed by TV, and Murrow and others shifted into television. CBS was acquired by Westinghouse in 1995, which later sold the radio and broadcast TV business to Viacom in 2000. At that time, the radio unit was called Infinity. Following the 2006 corporate breakup of Viacom, CBS became a stand-alone company.
In the last two decades, the radio industry has undergone massive consolidation, concentrating ownership of a bulk of radio stations in just a few companies. Some analysts said the consolidation stripped individual radio stations of their personalities.
The U.S. radio industry still commands about $17 billion in annual advertising revenue, according to the Radio Advertising Bureau.
“Radio stations aren’t a bad business,” said Michael Harrison, publisher of the trade publications Talkers and RadioInfo. “They are only a bad business if the companies that own them are burdened by debt.”
CBS Radio does not carry the debt loads of its major competitors, such as IHeart Media or Cumulus Media. Harrison said he hoped that CBS’ move to sell its radio division would spark more ownership changes.
“Hopefully this will bring the industry back to a more realistic business model — and more local ownership,” Harrison said.
Tuesday’s announcement comes less than six weeks after Moonves replaced ailing 92-year-old media mogul Sumner Redstone as chairman of CBS. Last month, Redstone’s other media company, Viacom Inc., said it was looking to sell the Paramount Pictures movie studio.
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