Clearly, the radio industry got shocked today with the announcement of Entercom and CBS Radio being combined into one company. For several months, the prospect of CBS Radio as a separate public company through a new IPO has led many to consider the potential dynamics of the radio industry as it moves forward facing new competition. Now, in light of the news, the dynamics are quite different.
What has emerged (assuming the deal goes through and gets regulatory approval) is a stronger radio industry. The combined Entercom-CBS Radio group would be closer to the size of the industry leader – iHeart Media – which only can foster the radio industry’s ability to compete against its many new competitors.
Here’s how the revenue landscape will be changed by this merger. Below are the shares of the major radio groups, pre-and post-acquisition, according to BIA/Kelsey’s estimated revenues. Where CBS Radio was more than 50% lower than iHeart, and Entercom was over 66%, in terms of over the air advertising revenue, now the combined company is only approximately one-third lower.
While the total share has increased, it is important to realize that in the local markets, the markets in which these stations compete, the competitive outlook has not changed much. Of course, the combined company will have to divest itself of some stations in markets where they exceed the present local ownership caps – Los Angeles, CA, San Francisco, CA, Boston, MA, Seattle-Tacoma, WA, San Diego, CA and Sacramento, CA. But, in most markets there is little, if no overlap. The competitive outlook in those markets will remain the same except that the name of the parent company will be different and that parent company will be stronger to invest and compete.
Perhaps this combination was inevitable. While it is striking that CBS no longer will own radio stations where they have owned radio stations for nearly a century, it is more indicative of the new environment in which radio stations find themselves. More competition for listeners and more competition for advertisers has led to many changes to the industry. This combination is just another one of those changes.