This document is for the purpose of providing background information for listeners to radio stations and people interested in the history and current troubles of the Radio business. It is not intended to be, and should not be taken as investment advice.
CBS Radio (Website) is a division of CBS Corporation (Website), a large integrated Entertainment conglomerate. CBS’s history goes back to the beginning of Radio and has a long history with many threads. The focus of this page is CBS’s radio business.
CBS Radio operates about 134 radio stations, only one of which is not in a top 50 radio market. CBS Radio also operates CBS Radio News which syndicates a few news features like Charles Osgood. CBS has an arrangement with AOL to stream many of its stations on their service.
History
CBS and Radio History are inseparable. Today’s CBS Radio is the story of a three legged stool, one leg of which didn’t match the others.
During the 1920s, a bitter patent dispute involving overlapping and contradictory patents among Marconi, RCA, Armstrong, and AT&T bounced back and forth. There was no FCC yet, and the courts were reluctant to jump in and guide the development of radio. The National Radio Group (mainly composed of General Electric, AT&T, Westinghouse and RCA) struggled through most of the 1920s trying to cut up the future radio business. In the end, it worked out something like this: (oversimplified)…
Westinghouse would build and run radio stations, GE would run NBC, with two networks (the Red and Blue) that would produce programming, and AT&T would get out of the radio business – and build a nationwide telephone network to rent to NBC and Westinghouse to connect the radio stations together in a national network.
Those not part of the group would license their patents and pay into the radio monopoly to make and sell radios or build radio stations. Westinghouse/NBC is one leg of the eventual CBS radio stool.
With that agreement in place, AT&T was approached by Columbia Phonograph Company (competing against the Victor Phonograph – later to become the Victor of RCA/Victor) and United Independent Broadcasters (who ran WOR in New York) that wanted to rent circuits for a competing national radio network (including WJAS, KMOX, WMAQ, and WKRC) to compete with NBC.
Enter one William Paley. Paley was a Wharton School graduate, and found himself in Philadelphia selling cigars for his father’s company. Radio station WCAU approached him about sponsoring a radio show. He agreed to sponsor the local show for a brief time, but when dad back in Chicago found out, he said “no” – what a silly waste of money to pay a radio station to promote cigars. When the sponsorship was pulled and the show was canceled, the cigar company was flooded with complaints asking why they had pulled out of the radio show. That feedback had never happened with a newspaper ad. Paley had an “aha!” moment and saw the potential of this new radio thing.
Cigars started to fly off the store shelves. To make things really work, Paley realized he needed a national network. The Columbia Phonography Broadcasting Network was not doing very well – in 1927 they had bought a radio station in New York with call sign of WABC (WABC becomes WCBS in 1946). The Columbia Phonograph Broadcasting Company was more than willing to sell itself to Paley. RCA/NBC was now organized as the radio monopoly and it was futile to fight the power. Those who didn’t sell out would be crushed.
So begins the modern CBS Radio.
In 1929, Paley takes control and removes Phonograph out of the name. With radio, the record player is soon going to be dead and nobody will by buying record players any more or records from the Columbia Record company. In 1929, CBS makes $475,000 on revenue of $5 million, while the bigger NBC had sales of $15 million and only made $713,000. CBS had a much higher return than NBC and the investment community noticed. The stock market was booming, and any company that could make money was flooded with investors.
CBS linked together WCBS (WABC), KNX (Los Angeles), KCBS in San Francisco (KQW), WBBM (Chicago), WTOP in Washington DC (WJSV), KMOX in St Louis, and WCCO in Minneapolis. With those as the anchor stations, other radio stations not owned by CBS affiliated with their network.
Then October 1929 happened – the stock market collapsed, major banks went under and the Depression hit and all bets were off. The enthusiasm of the roaring 20s was replaced with the need to survive.
The FCC is created in 1934, partly to resolve the simmering disputes with the people frozen out by the RCA radio monopoly. Radio Owners are limited to one radio station per city (FM doesn’t exist yet), and a nationwide limit of 8 stations. The era of the big radio monopoly is over. FDR, the Progressive Movement and the New Deal are in charge now. Big is evil (except if it is run by the government).
In 1943, NBC is forced to break apart its Red and Blue Networks. They keep the Red Network and the Blue network would become ABC Radio.
After World War Two, Armstrong’s FM radio invention starts to gain acceptance in the 1950s and 1960s – AM radio dies for a second time. CBS goes on to build CBS TV and CBS’s Radio network is stored in the back of the attic. AM Radio is going to die any day now. William Paley rules CBS with an iron fist until his death in 1990.
With the Paley legacy now turned over to a new generation, things start to change.
In 1992, the FCC relaxes the ownership limits – one company can now own 36 stations, and up to 4 AM and 4 FM stations in a single market. Westinghouse merges with and takes over CBS in 1995 – the merged company keeps the CBS. name. The RCA and CBS histories merge. The Radio Monopoly has reformed.
Enter the third leg of the stool – a guy named Mel Karmazin has a radio company called Infinity Radio. He’s young, he’s brash, he’s got a guy named Howard Stern in tow who wants to remake radio and is drawing great ratings on the Infinity stations. Since 1981, Karmazin has been buying up a group of assorted of mostly distressed radio stations of many flavors. Infinity is the exact opposite of CBS and Group W. The relaxed ownership limit allows Infinity to keep growing, while CBS is slumbering, resting on its 50 years of history. Infinity is getting a reputation for taking under-performing stations and making them profitable.
In 1996, the national ownership cap comes off completely. Infinity Broadcasting pounces on the sleeping CBS at the end of 1996 and that’s that.
Mel Karmazin restructures the merged Group W, Infinity and CBS stations and the merged group is called CBS Radio. Mel goes on to also become responsible for the TV portion of CBS.
In 1999, Sumner Redstone enters the story. Redstone runs Viacom which is in the cable TV and movie business. He takes over CBS and the company gets even bigger. CBS is now Too Big To Fail. In 2004, Mel Karmazin and Viacom part ways. The company is not big enough for both of them.
Howard Stern is now at CBS without his mentor and guardian. Howard had been wildy successful with the freedom he enjoyed with Infinity. He is syndicated not just on CBS, but on stations run by other competing radio owners (from the Infinity days). In February 2004, Clear Channel decided to pull the plug on Stern because of threats of fines from the FCC – even though it was CBS that produced the show(!). Mel was now gone from CBS, and Howard did not fit into CBS’s idea of radio. CBS had way too much at stake to take on the FCC, and doesn’t have the will to fight the FCC. Stern is being smothered by the cautious CBS culture that still views the world through the eyes of “What would Bill Paley have done?”.
Facing pressure from the FCC on his show’s content, and unhappy with CBS, Howard signed a reported $500 million deal with the newly formed Sirius Satellite radio being started by his old friend Mel Karmazin. Howard was obligated to continue working at Infinity/CBS for the remainder of the contract. Stern let it be known he really really wanted out of the contract early with CBS so he could get to Sirius. Normally in radio, the moment the “talent” suggests he’s even thinking about the door, he’s out in the parking lot and all evidence of his entire life is scrubbed from the official station history. CBS didn’t want to keep Stern, but they didn’t want not having him. CBS hoped Howard would give them ammunition to terminate his contract, but leave him unable to go to Sirius. Stern served out the remainder of his prison sentence at CBS – literally counting the days until the show ended in December 2005. The King of All Media had to do what he had to do, but his mind was already elsewhere.
Stern was replaced initially by rocker David Lee Roth with a new Hot Talk format called “Free FM”. It was an immediate and dismal failure. One by one, the Free FM stations failed to meet expectations of CBS Radio. The other hosts that had been part of the Free FM format slipped away and the final station dropped the Free FM brand in November 2008.
In 2006, Viacom spun off CBS Corporation back into a Radio & TV company and the radio division was renamed back to CBS Radio – essentially undoing the Viacom/CBS merger. CBS then started to sell its stations – especially the smaller market stations which it didn’t believe could be run profitably (mostly the ones they got from Infinity) – but the collapse of the value of radio station licenses has somewhat stalled that process of selling off stations.
AM Stations
CBS’s original AM radio network has changed very little since the 1930s. The Group W Stations were added in during the Westinghouse / CBS merger. Infinity had acquired an eclectic mix of AM stations that were folded into to the CBS portfolio, but not really ever “merged” in any meaningful sense. Howard Stern had been on many of them, and they were rudderless without him being the Morning show.
+------+-----------------+----+ | WCBS | NEW YORK | NY | All News (former WABC - original CBS) | WFAN | NEW YORK | NY | Sports (Former WEAF-AT&T, later WNBC) | WINS | NEW YORK | NY | All News (Group W since 1962) | KFWB | LOS ANGELES | CA | All News (Group W since 1966) | KNX | LOS ANGELES | CA | All News (Original CBS) | WBBM | CHICAGO | IL | All News (Original CBS) | WSCR | CHICAGO | IL | Sports (formerly WMAQ) | KCBS | SAN FRANCISCO | CA | All News (original CBS) | KFRC | SAN FRANCISCO | CA | Oldies (formerly Group W KPIX) | KRLD | DALLAS | TX | News Talk (original CBS) | KYW | PHILADELPHIA | PA | All News (Group W) | WIP | PHILADELPHIA | PA | Sports (Dumont -> Infinity (1994) | WPHT | PHILADELPHIA | PA | News/Talk (former WCAU - Paley's inspiration) | KIKK | PASADENA | TX | CNN News (daytime Only - Infinity) | KILT | HOUSTON | TX | Sports | WHFS | MORNINGSIDE | MD | News/Talk (former WPGC) | WWJ | DETROIT | MI | All News (Detroit News -> Infinity 1986) | WXYT | DETROIT | MI | Sports (Mutual->ABC->Infinity (1994) | WAOK | ATLANTA | GA | Urban Talk (Infinity) | WBZ | BOSTON | MA | Mostly All news (Group W) | KPTK | SEATTLE | WA | Progressive Talk (Infinity) | WCCO | MINNEAPOLIS | MN | News/Talk (original CBS) | KMOX | ST LOUIS | MO | News/Talk (original CBS) | WJZ | BALTIMORE | MD | Sports (Infinity) | KDKA | PITTSBURGH | PA | News/Talk (Group W) | KCMD | PORTLAND | OR | News/Talk (Acquired by Infinity in 1997) | KHTK | SACRAMENTO | CA | Sports (CBS wants to divest) | KXNT | NORTH LAS VEGAS | NV | News Talk (Infinity?) | KYDZ | NORTH LAS VEGAS | NV | Children (Infinity?) | WFNA | CHARLOTTE | NC | Sports (Expanded band pair of WFNZ) | WFNZ | CHARLOTTE | NC | Sports (Formerly WAYS) | WTIC | HARTFORD | CT | News/Talk (Traveler's Insurance -> ) | KRAK | HESPERIA | CA | Adult Standards (Infinity) | WQYK | SEFFNER | FL | Sports (Infinity) +------+-----------------+----+
Major Market FM stations
+----------+----------------------+--------+---------------------------+ |Call Sign | City | State | Format | +----------+----------------------+--------+---------------------------+ | WWFS | NEW YORK | NY | Soft/Lite Rock | | WCBS | NEW YORK | NY | Oldies | | WXRK | NEW YORK | NY | Contemporary Hits | | KCBS | LOS ANGELES | CA | AC / Variety / Mix | | KLSX | LOS ANGELES | CA | Contemporary Hits | | KROQ | PASADENA | CA | Alternative/Hard/New Rock | | KRTH | LOS ANGELES | CA | Classic Rock / Hits | | KTWV | LOS ANGELES | CA | Jazz | | WBBM | CHICAGO | IL | Contemporary Hits | | WJMK | CHICAGO | IL | AC / Variety / Mix | | WUSN | CHICAGO | IL | Country | | WXRT | CHICAGO | IL | Contemporary Hits | | WCFS | ELMWOOD PARK | IL | Soft/Lite Rock | | KFRC | SAN FRANCISCO | CA | All News | | KITS | SAN FRANCISCO | CA | Alternative/Hard/New Rock | | KLLC | SAN FRANCISCO | CA | AC / Variety / Mix | | KSFM | WOODLAND | CA | Young Urban / Hip Hop | | KMVQ | SAN FRANCISCO | CA | Dance/Party Music | | KRLD | DALLAS | TX | Sports | | KLUV | DALLAS | TX | Oldies | | KMVK | FORT WORTH | TX | Spanish CHR/Latino | | KJKK | DALLAS | TX | AC / Variety / Mix | | KVIL | HIGHLAND PARK-DALLAS | TX | Soft/Lite Rock | | WOGL | PHILADELPHIA | PA | Oldies | | WYSP | PHILADELPHIA | PA | Alternative/Hard/New Rock | | KHMX | HOUSTON | TX | AC / Variety / Mix | | KILT | HOUSTON | TX | Country | | KLOL | HOUSTON | TX | Music - Other | | KKHH | HOUSTON | TX | Contemporary Hits | | WTGB | BETHESDA | MD | Classic Rock / Hits | | WJFK | MANASSAS | VA | Sports | | WPGC | MORNINGSIDE | MD | Young Urban / Hip Hop | | WLZL | ANNAPOLIS | MD | Spanish (unclassified) | | WOMC | DETROIT | MI | Oldies | | WVMV | DETROIT | MI | Jazz | | WYCD | DETROIT | MI | Country | | WXYT | DETROIT | MI | Sports | | WVEE | ATLANTA | GA | Young Urban / Hip Hop | | WZGC | ATLANTA | GA | Country | | WBMX | BOSTON | MA | AC / Variety / Mix | | WODS | BOSTON | MA | Oldies | | WZLX | BOSTON | MA | Classic Rock / Hits | | KMPS | SEATTLE | WA | Country | | KZOK | SEATTLE | WA | Classic Rock / Hits | | KJAQ | SEATTLE | WA | AC / Variety / Mix | | KMLE | CHANDLER | AZ | Country | | KOOL | PHOENIX | AZ | Classic Rock / Hits | | KZON | PHOENIX | AZ | Young Urban / Hip Hop | | WLTE | MINNEAPOLIS | MN | Soft/Lite Rock | | KYXY | SAN DIEGO | CA | Soft/Lite Rock | | KSCF | SAN DIEGO | CA | Contemporary Hits | | WLLD | HOLMES BEACH | FL | Young Urban / Hip Hop | | WRBQ | TAMPA | FL | Oldies | | WSJT | LAKELAND | FL | Jazz | | WYUU | SAFETY HARBOR | FL | Spanish CHR/Latino | | WQYK | ST PETERSBURG | FL | Country | | KEZK | ST LOUIS | MO | Soft/Lite Rock | | KYKY | ST LOUIS | MO | Contemporary Hits | | WLIF | BALTIMORE | MD | Easy Listening | | WQSR | BALTIMORE | MD | Classic Rock / Hits | | WWMX | BALTIMORE | MD | AC / Variety / Mix | | WJZ | CATONSVILLE | MD | Sports | | WDSY | PITTSBURGH | PA | Country | | WZPT | NEW KENSINGTON | PA | AC / Variety / Mix | | WBZW | PITTSBURGH | PA | Contemporary Hits | | KINK | PORTLAND | OR | Classic Rock / Hits | | KLTH | LAKE OSWEGO | OR | Classic Rock / Hits | | KUFO | PORTLAND | OR | Alternative/Hard/New Rock | | KUPL | PORTLAND | OR | Country | | KXJM | BANKS | OR | Young Urban / Hip Hop | | WDOK | CLEVELAND | OH | Soft/Lite Rock | | WNCX | CLEVELAND | OH | Classic Rock / Hits | | WQAL | CLEVELAND | OH | AC / Variety / Mix | | WKRK | CLEVELAND HEIGHTS | OH | Alternative/Hard/New Rock | +----------+----------------------+--------+---------------------------+
Management
Sumner Redstone is the Chairman of the Board of CBS. Mr Redstone is also the Chairman of Viacom.
Leslie Moonves is President and CEO of CBS Corporation. Prior to joining CBS in 1995, Mr Moonves was President of Warner Brothers TV
Ownership
CBS Radio is a division of publicly traded CBS Corporation. CBS Corporation employs about 26,000 people.
Sumner Redstone is effectively the owner of CBS. He has a tangled web of corporation ownership, that is further complicated by disputes over control of the companies with his daughter Shari. Sumner Redstone has been facing difficult finances recently, but has vowed he won’t sell his voting interest in CBS.
CBS has two classes of stock.
Class A stock is voting stock. Class A Stock is publicly traded on the NYSE as CBS/A There are about 58 million shares of Class A Stock outstanding.
Sumner Redstone’s privately held National Amusements, Inc (which owns a large chain of movie theaters), owns about 81% of the Class A stock. While Sumner (through NAI) only owns 10% of CBS, he controls 81% of the votes.
Institutional Owners:
| Class A Owner | Location | Approx# Shares |
|---|---|---|
| To Do | ||
Class B
Class B stock doesn’t have a vote. There are about 733 million shares of Class B stock outstanding. Because Class B stock is non-voting, foreign investors can purchase the stock without creating any issue with the FCC over foreign control of U.S. Radio and TV station licenses. 83.% of CBS Class B stock is held by institutional investors.
in late 2008, NAI sold about $233 million of its Class B Stock to raise cash related to its debt owed on the acquisition of Midway, a video games company. Midway declared bankruptcy, and Sumner Redstone is now being sued by creditors on the basis that Sumne’s sale and subsequent bankruptcy of Midway was a fraudulent transaction structured to improperly protect Sumner’s other assets in NAI, Viacom and CBS, according to the LA Times Story.
| Class B Owner | Location | Approx# Shares |
|---|---|---|
| AXX | Paris France | 102 million |
| Barclay’s Global Investors | London England | 42.8 million |
| Capital Research Global | Los Angeles | 22.0 million |
| State Street (Probably SPDR trust) |
Boston | 21.3 million |
| Ariel Investments | Chicago | 21.1 million |
| Vanguard | Valley Forge, PA | 20.3 million |
| BARROW HANLEY MEWHINNEY & STRAUSS INC | Dallas Texas | 17.3 million |
| Invesco | Atlanta, GA | 15.6 million |
| NWQ Investment Managment | Los Angeles | 14.8 mllion |
| LSV Asset Management | Chicago, IL | 14.4 million |
| Bank of New York/Mellon | New York | 7.7 million |
| Dimensional Fund Advisors | Austin, TX | 7.1 million |
| Capital World Investors | Los Angeles, CA | 7.0 million |
| Northern Trust | Chicago, IL | 6.8 million |
| Bank of America | Charlotte, NC | 6.7 million |
| Alianz Global Investing | Newport Beach, CA | 6.6 million |
| T Roe Price | Baltimore Maryland | 6.4 million |
| Morgan Stanley | New York | 6.1 million |
| Goldman Sachs | New York | 5.9 million |
Financial Condition as of 2008 (10-K)
Since CBS is a business unit of a much larger company, and has been the series of a number of mergers and spinoffs, judging its performance as if it was an independent company is very hard to do. The larger CBS Corporation includes CBS TV, Paramount, Showtime, Simon & Shuster, CNET (2008), last.fm (2007), and CBS Outdoor Billboards). CBS Radio is about 11% of the revenue of CBS.
‘Key Balance Sheet Items: (CBS Corporation: 2008)
Total Assets: $26,889 Million
- Value of Radio/TV Station licenses: $7,104 million
- Goodwill and other intangible Assets: $8,648 Million
- Cash: $419 Million
- Accounts Receivable: $2,749 Million (71 days of revenue)
(Company borrows against their receivables) - Land, Buildings, Equipment (net) $3,008 Million
Debt:
- Current Liabilities: $4,800 million
- Long Term Debt: $6,974 Million
- Unfunded Pension Liability: $2,273 Million
Stockholder Equity: $8,597 Million
Credit Facility
In 2008, CBS took out $3 Billion LIBOR based credit facility, but is only using $200 million of that facility. The facility expires in 2010. CBS is using the facility for its ongoing operations, not for funding acquisitions or buying up stock or debt.
The Credit facility is Administered by JPMorgan Chase Bank, and involves Citibank, Bank of America, UBS and The Bank of Tokyo-Mitsubishi, Ltd.
CBS owes about $7 billion on long term notes that mature from 2010 to 2056, at fixed interest rates ranging from 4.625% to 8.875%.
Swap transactions
CBS did own an interest rate swap that it ended in 2008 being used to reduce the costs of their fixed rate borrowing. It has not been replaced.
CBS has minor amounts currency swaps to protect its future cash flows from changes in exchange rates.
10-k Notes
Mostly information about the residual ownership and cross-company relationships about CBS, Viacom and Sumner Redstone, and the potential for conflicts of interest or implications of a forced sale of Mr Redstone’s NAI holdings. CBS guaranteed obligations of Viacom – Viacom has “indemnified” CBS from those guarantees, but CBS could theoretically still be on the hook if Viacom fails in the future.
Calculation of costs of their pension plan (CBS’s employees are unionized and CBS is the only major radio company with a significant pension plan)
Profitability
Since 2004, CBS Corporation has lost a total of about $33 billion.
| All numbers in $million | 2008 | 2007 | 2006 | 2005 | 2004 |
| Radio Revenue | 1,593 | 1,737 | 1,59 | — | — |
| License Impairment (Radio Only = (G)oodwill, (L)icense) |
$2,330(G) $984 (L) |
2007 | 2006 | 2005 | 2004 |
| Operating Income(Without Impairment) | 499 | 688 | 820 | ? | ? |
| Long Term Debt Balance | |||||
| Debt Service Cost |
Stock Performance
CBS Class B Stock only goes back to the Viacom/CBS Split in 2005.
At that point, the CBS Class B stock was valued at $25.39 per share. It hit a peak of $35.00 on July 23rd, 2007. The stock hit a low of $3.09 March 9th, 2009
As of May 18th, 2009, the stock closed at $7.32
- If you bought the stock at the Viacom/CBS split, you ‘ve lost 71% of your intestment
- If you bought the stock at the bottom in March 2009, you made 136% in less than 2 months.