Disney exits the radio business, sort of
The big media companies are busy restructuring these days. No sooner had Disney bought out Pixar to rescue its failing animation business, than it announces it has spun off its chain of ABC radio stations in the United States to join with those of Citadel Broadcasting. Citadel reported beat out rival Entercom Communications.
The $2.7 billion deal will end up with a company owned 52% by Disney shareholders and 48% by Citadel, 67% of which is owned by New York buyout firm Forstmann Little. Its CEO will be Citadel's current CEO. The new company will own 177 FM stations and 66 AM stations across the country in a range of formats. Citadel added around 200 stations in midsize markets, while ABC's stations are generally in larger cities. The deal does not include several ESPN and Radio Disney stations.
The new company, which will be called Citadel Communications, but also will use the resources of ABC News, will end up as the #3 radio network, behind only Clear Channel and Infinity Broadcasting (owned by CBS Broadcasting, once a part fo Viacom). The company will also own a number of syndicated radio shows that are broadcast in non-affiliated stations.
The radio move comes in a time of worried shakeup in the media industry. Not only did Disney buy Pixar and Viacom spin off CBS, but DreamWorks was bought by CBS (Paramount), which also announced plans to leave the amusement part industry. Time-Warner is under ever greater pressure to divest assets, while TV networks WB and UPN are merged. All these have happened in just the last few months, an extraordinary rate of change.
My cynical view is that all these deals are attempts to squeeze out some kind of short-term growth (whether in profits or cash flows) in an otherwise pretty static media business. Media companies face mature businesses in both the US and Europe, and the expectations of growth cannot be met easily. After all, for most people leisure time is pretty well maxed out, whether with DVDs, music, TV, movies, computer games, radio, magazines, newspapers, and (even) books.
So media is a zero-sum game - if I watch a basketball game on ESPN, I'm not at the same time going to a Disney movie in the cineplex, listening to ABC radio, or watching a DVD of Aladdin. And, while I might do those things at some other time, there is a limit in terms of time in the day. For many of us, the time expended in consuming media of all kinds (especially TV) has expanded greatly over the past 30 years, but there is a limit. Shuffling around assets at least distract investors for the time being.
Follow-up: 2/7/2006
We're reading contradictory reports about exactly what Disney gave up. The latest is that it handed only a third of its stations over to the new Citadel along with the radio ABC network rights.
Disney also recently unloaded the majority of its stake in Moviebeam, a three-year old video-on-demand company. The buyers (for $mrrely $58 million) were Cisco Systems and several venture capitalists. For Cisco, the deal meshes nicely with its recent acquistion of Scientific Atlanta, a cable set-top maker. So far, at least, Moviebeam has been a bust since it was started up three years ago.
