Radio Waves Podcast #151

Radio November 11, 2016

You may not know his name but you have probably heard (literally) his work; from 1970 until he retired in 2013, he has been an engineer at numerous stations throughout Southern California including almost four decades as Chief Engineer at KIIS/KPRZ (now KEIB, 1150 AM) and sister KKDJ/KIIS-FM (102.7 FM). His expertise and ear for sound helped shape many stations.

Just over three years after his retirement, Mike Callaghan passed away last week at the age of 72.

He arrived on the LA radio scene in 1970 when he decided to take classes in electronics at Pasadena City College. He tested out of one of his classes and within two weeks was hired as an engineer at KPPC AM/FM, owned at the time by the Pasadena Presbyterian Church even though it ran a freeform rock format. Studios were located in the basement.

The key word is “were.” A month after starting, he had to move the studios; legend has it that it had to do with church elders being perturbed by a system that had been rigged up in the studio to help with programming. As explained on Callaghan’s website, a set of plastic statues of the Holy Family with lights was set up “so that when the first commercial was done, Joseph would light up, when the second commercial was done, Mary would light up, and when the jock turned up the volume too loud for the transmitter, Jesus would light up.”

Besides KPPC and his many years at KIIS, Callaghan engineered for a year at KWST (now Power 106) during K-WEST’s beautiful music era.

His many projects included designing a huge 46-foot cruiser with two studios, a transmitter system that had two transmitters feeding the antennas -- the first time it had been done, designing and building home studios, and installing the AM stereo system at KPRZ/KIIS. If memory serves correctly, though I may be wrong, he was a consultant in the development of digital radio transmissions before USA Digital Radio evolved into Ibiquity with its HD Radio system.

Career Day

The Sound (100.3 FM) programmer Dave Beasing took time out of his busy schedule to speak with San Pedro Senior High students last Friday as part of the school’s Career Day.

Beasing explained that radio is much more than what is presented on the air. So much is off the air marketing: Facebook, websites, Twitter. Much creative content is done in those areas, which opens up numerous opportunities for creative individuals interested in working in radio.

He also spoke of how stations are run, talked -- positively, I might add -- about personalities and talent from stations throughout the area including his competitors, how ratings work, and the various ways that stations try to gain a competitive edge.

Beasing was one of over 50 speakers at the school, the second year he has done so. In the past, KFI (640 AM) personality Mo’Kelly (Morris O’Kelly) gave a similar presentation; it is nice to see that radio supports our local schools ... the students were very appreciative.

Trouble in paradise

Just three weeks ago, Cumulus did an eight for one reverse stock split to artificially boost its stock price above $1 and avoid being delisted from the NASDAQ exchange. The day it happened, the stock was valued at about $2.40 per share.

Last week the price hit a low of $1.03; as I write this it recovered to $1.13. But the signs are clear as day: Cumulus in its current form is not long for this world.

So I have an idea. At $1.13 per share, the market cap of the company is a little under $26 million. Meaning you can buy the entire company for about the same price as one or two of their large market stations. Problem is, you have to assume a huge amount of debt, incurred when the company overbought and overpaid for its 454 stations over the years. About $2.5 billion in debt. Yes, billion.

My plan: buy the company for $26 million. Then sell all but the best ten properties or so. Assuming an average of $11 million per station (likely far lower than most stations would fetch but a figure that matches the latest sale price of KFWB 980 AM), selling 444 stations would yield almost 4.9 billion in revenue. 

In other words, if I went by my own ideas for ownership limits, I could buy the company, sell most of its assets to other independent owners, own ten stations outright, pay off the debt, reclaim the purchase price and still have $2 billion left to run the remaining stations. And that’s being exceedingly conservative.

Considering this is an easy way to make money AND end up with a set of solid radio properties owned debt-free, can someone please explain to me why anyone still thinks large debt-laden ownership groups are working at all?

Now do you want me to tell you how to save retail companies like Sears? It’s just as easy ...