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800.275.2840 MORE NEWS» insideradio.com THE MOST TRUSTED NEWS IN RADIO WEDNESDAY, MARCH 11, 2015 Christian to investors: It’s the economy, stupid. From the view of one of radio’s longest-running CEOs, 2015 is starting off a lot like 2014 did. Saga Communications’ Ed Christian sees “a calm river of business, with no apparent rapids or rocks just yet.” The company is pacing down 0.5%-1% for the first quarter, not unlike where the industry stood this time last year. But with 2016 election talk already heating up, Christian suggested “things could be changing near the end of 2015, hopefully for the better.” Political brought $22.2 million in radio revenue for Saga during 2014’s fourth quarter, which helped its net radio revenue grow 6.5% to $30.5 million. Quoting financial columnists and cracking jokes (“Saga in 2015 will be offering only antibiotic-free commercials”), Christian asked investors on yesterday’s results calls to step back and view broadcasting through a wider angle lens. “Certainly 2014 wasn’t a jump up and shout-out year,” he noted. But it also wasn’t a great year for other industries. It was the ninth straight year where the U.S. economy grew less than 3%, he noted. New business formations are at a 35-year low. Despite falling gas prices, retail was down in the first two months of this year. “And yet with all this negative information, broadcasting is up or flat,” Christian said. “Like it or not, that’s a win and a vote of confidence for what we do for our advertisers. Radio and TV advertising works and it offers a great return on investment.” Christian said radio and TV get unfairly slammed as “outdated and outmoded” from pundits who fail to see the correlation between the economy and broadcasting’s performance. Salem says radio’s in a ‘turf war’ with digital. Could lower gas prices and an improving job market finally be having an impact on marketers? The jury’s still out, but over the past few weeks Salem president of broadcast media Dave Santrella says he’s seen an uptick in spot spending from clients ranging from Home Depot to regional car dealer associations. “That may be a result of what they feel looks like an improving economy,” he said during a conference call with analysts. It may not be enough to save the quarter. Salem Media Group estimates revenue will decline 1% to 3% during the first quarter. That follows a flat fourth quarter for its radio division as year-end revenue grew to $266.5 million for the company overall. On a larger scale, Santrella sees a “turf war” going on for ad dollars pitting radio against digital media. Nowhere was that more evident during Q4 than with the political ad category. CEO Ed Atsinger thinks the evidence is clear those dollars shifted to digital with a 39% drop in political spending compared to when the last mid-term election occurred in 2010. “Radio and TV audiences are holding up very well, some of the dollars are not,” Atsinger said. He said Salem sales teams are working to figure out how to play up radio’s strengths in ways the web can’t duplicate for candidates. “We are back to the drawing boards, working on proposals that play to those strengths, and we hope that we can get some of those dollars back,” he said. Slower pace of business puts new pressure on expenses. With first quarter business weaker than a year ago, Salem Media Group has laid off a number of employees. “We are concerned about the fact that we had little organic revenue growth,” CEO Ed Atsinger said on a conference call with analysts. The layoffs follow other cost-cutting measures that began late last year. CFO Evan Masyr said in recent weeks the Christian broadcaster realized it needed to “go a little deeper and little further” and that led to the downsizing. No headcount was given, and it’s not clear how many of the layoffs came in radio, digital or publishing. And the company is still advertising for new general manager and general sales manager candidates. “We are getting as aggressive as we can on the expense side,” Masyr explained yesterday. Salem projects it will save $2.5 million this year with all the cutbacks that have been made. The company has rapidly expanded its digital business — it attributes 18% of 2014 revenue to digital — but executives rejected the notion that radio will simply become a cash machine to pay for online growth. “We are not satisfied with just keeping flat station operating income,” Masyr said. [email protected] | 800.275.2840 PG 1 NEWS insideradio.com WEDNESDAY, MARCH 11, 2015 “We’d like to see that grow, and that’s why we’re being aggressive on the cost cuts.” It’s why he said Salem has also recently invested millions of dollars to buy three Radio Disney AMs. “The opportunities are big,” Atsinger said, urging investors not to look at radio revenue on its own. “You really have to couple it all up with digital, with print, with everything we’re doing because it’s all integrated,” he said. Scripps has a good idea where it will cut post-Journal merger. E. W. Scripps and Journal Communications shareholders will cast their votes on a proposed merger today. Ahead of the vote, executives said they still expect to find $35 million in cost savings when the companies combine and each spins out its print operations into a new unit. “We’ve validated those numbers and feel very good about the synergies,” CFO Tim Wesolowski told the Deutsche Bank Media Conference. Since first announcing the merger last autumn, the companies haven’t detailed where the savings will be found, however. Scripps CEO Rich Boehne said once a deal actually closes, often times that list can change. “You find other opportunities you didn’t think of, or sometimes rethink some of what you looked at initially,” he said. Both companies have been mum on whether payroll reductions will be part of the plan. With the print division being spun out on its own, there may be fewer staff cuts than is typical in a merger. Boehne said he expects to see the deal finalized “very early” in the second quarter. Radio and webcasters lobby Capitol Hill to keep consent decrees. It’s not often an industry goes to Washington and asks Congress to do nothing. But that’s the message broadcasters are essentially delivering as talk grows louder about reworking the decades-old consent decrees under which ASCAP and BMI royalty rates are set. Nearly as unusual, webcasters agree. “Those consent decrees have proven to work more or less over a period that now spans more than 70 years,” Bonneville VP Mike Dowdle said during a Senate Antitrust Subcommittee hearing yesterday. Without that framework, he said ASCAP and BMI would have “unfettered ability to extract above- market prices and terms” from radio stations. But the performance rights organizations think what was created in the 1940s hasn’t kept pace with today’s digital world. ASCAP president Beth Matthews said while she could foresee an “eventual sunset,” her members are only seeking “a few discrete changes” for now, like taking the decision-making out of a federal judge’s hands. “We are not asking to terminate the consent decree,” she told lawmakers. That’s because music publishers Mike Dowdle are threatening to leave the rights groups, a trend that if allowed to continue could mean radio stations would one day need to not only ink deals with ASCAP, BMI and SESAC, but also individual music publishers. “If they resign, collective licensing will collapse,” Williams warned. That’s another reason why Dowdle said the current consent decrees are better for broadcasters. Dealing with each publisher wouldn’t just be unwieldy, but also expensive. “Let me be clear, broadcasters would cease operations without the ability to clear these rights, and the consent decrees are critical to that end,” he said. Market power is key to what DOJ or Congress decides. Given how much market power the performance rights organizations and music publishers hold, it’s no coincidence that yesterday’s hearing on how songwriter royalties are set and collected was held before the Senate Antitrust Subcommittee. Bonneville VP Mike Dowdle told lawmakers that the dire warnings being sounded should be a clarion call for Congress and the Department of Justice, which is reviewing the current effectiveness of the consent decrees that govern performance rights organizations. “The very fact that music publishers can make a threat that scares ASCAP and BMI should raise a lot of eyebrows,” Dowdle said. He thinks it suggests there might actually be a need for a second set of consent decrees over the publishers. The strongest case for the status quo came not from broadcast radio, but Pandora, which has been trying to strike deals directly with music publishers for the past two years only to have its efforts stymied. Pandora VP Chris Harrison told lawmakers that four federal judges have turned up “the same types of egregious anticompetitive conduct that gave rise to the original consent decrees 70 years ago.” The webcaster proposes an independent database be created so all music users can determine who holds the rights to which songs. While broadcast radio is pushing to keep the status quo, Harrison said Pandora would be “open to sensible modifications” to the consent decrees. But if the consent decrees are altered and transparency isn’t improved, Dowdle said radio could be forced [email protected] | 800.275.2840 PG 2 NEWS insideradio.com WEDNESDAY, MARCH 11, 2015 to negotiate with companies without knowing how many of its songs stations even play.

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