By: Kaitlyn Vincent and Cairo Spencer

History

Cumulus was co-founded in 1997 by brothers Lew and John Dickey in Atlanta, Georgia. The company broadcasts local programming as well as sports, syndicated media, entertainment brands and much more. The company has 447 owned-and-operated stations in 90 different US markets. The two platforms of Cumulus includes Cumulus Radio and Westwood One which contribute to massive reach of 245 million listeners per week. [1] 

Similarly, Cumulus is known for the station NASH, which launched in 2013 and is the Nation’s leading provider of country music. In addition to the NASH radio sector, NASH has a country weekly magazine, television, live events and their own record label. Cumulus is now the second largest radio company behind iHeartMedia. [2] [13]

Key Executives 

Affiliates

Cumulus Radio and Westwood One are both syndicated services of Cumulus Media. In 2013, Cumulus acquired Westwood One which focuses on selling syndicated advertisements. Together they have become the exclusive radio broadcast partner to some of the biggest brands in news, entertainment, sports and talk. This includes major sports such as NFL, the NCAA and the Olympics, major events such as the Academy of Country Music Awards, the American Music Awards, the Billboard Music Awards, and even the Grammys. Cumulus has risen to become the nation’s leading provider of country music and lifestyle entertainment through its renowned NASH brand; named for the country music center that is the Nashville, Tennessee brand. NASH caters to country music fans nationwide through the use of radio programming, exclusive digital content, and live events. Cumulus Radio serves a demographically-diverse group across its 90 US markets. [1] 

Management

Cumulus hired Mary Berner, a former CEO of Reader’s Digest Executive, as the new Chief Executive Officer to try and turnaround the company in 2015. Before Mary stepped in, Cumulus’ stocks were dropping tremendously. One of Cumulus’ major shareholders, Crestview Partners, pushed out the founder Lew Dickey as the CEO and replaced him with Mary Berner. Before the turnover, the shares had dropped 80% of their value whereas after the turnover the shares dropped 39% after a couple of months. [8] [13]

In the coming months Mary is striving towards a “multi-year exercise” starting with fixing the operational basics. Secondly, she’ll be working on retaining the employees and improving satisfaction within the company due to a 50% turnover rate in 18 months in the company of 6,000 people. Her final area of concern is the rating decline for the company. [5] 

“This company has lost more than a dollar of revenue for every dollar of expense reduction over the past four years,” she said. “So I’m focused on intelligently managing the cost structure.” – Mary Berner [7] 

Although Cumulus’ headquarters is in Atlanta, Mary Berner is stationed within New York City, within the large market in which its syndicated service Westwood One caters to. According to Mary, there are four challenging feats she is facing with Cumulus which includes inescapable clean-up items from prior years, non-existent investment in systems, annual cost escalation due to the dynamic industry, and major capital investments. [5]

Financial

Cumulus had a low third quarter with a $286.1 million in the quarter. This was down from the $289.4 million in 2015. The low numbers are due to CEO Mary Berner’s adjustment period, the falling rating decline, and the lack of company structure. Recently however, Cumulus is heading into the fourth quarter with a positive stride with a 35.58% increase over the past 5 days. The price target for the company is currently at $5.00. Consequently, the Wall Street analysts recommend a hold recommendation for investors. [5] [8]

Cumulus is consumed in $2.5 billion in debt ever since the former CEO, Dickey Berner bought up several stations and lost Citadel back in 2010. However, a spokesperson disclosed that enough generated operational cash and asset sales will prevent Cumulus from becoming bankrupt and expects to gain $200 million at the end of 2017 from real estate sales. Furthermore, “We have no plans to file for bankruptcy and the next maturity for debt is not for three more years until May of 2019, so we have significant runway to begin to stabilize and ultimately grow the business,” the Cumulus spokesman said. [16]

In terms of trends, as of November 28, the 14-day ADX for Cumulus Media is at 39.28 which indicates a strong trend for investors. However, this number reflects the trend strength but not the direction of the trend. In another technical reading, Cumulus presently has a 14-day Commodity Channel Index of 31.93 which reflects the company’s normal oscillation since the reading is between -100 to +100. This represents how the Cumulus commodities are in a normal range between the overbought and oversold territory. These technical readings further reflect the positive direction for Cumulus entering into the fourth quarter. [6] [7] [12]

Recent Antitrust Lawsuit

Last April, Cumulus was sued for an antitrust suit by Talk Radio Network Enterprises LLC and three other Radio networks for allegedly conspiring with Westwood One, Cumulus’ advertising package bundler. This suit was filed in Oregon due to a group of radio producers claiming that Westwood One and Cumulus were trying to monopolize a national radio that solely benefits the Cumulus station while undermining independent programmers. By conspiring to monopolize, Cumulus Media and Westwood are violating the Sherman Antitrust Act. In addition, these companies are already thwarted due to Cumulus Media controlling 90% of the national syndicated ad bundling market. [9]

In a complex system of advertising bundling, the companies buying advertisements expect a certain amount of trust from Westwood One. These companies have been experiencing a lack of transparency of payment from Westwood. Similarly, Westwood has been accused of paying the companies lower than the deserved amount. However, this month the Oregon judges decided to gut the claim by rejecting half of the allegations based on prejudice. According to an attorney for the group of Radio Networks, they have no intent of stopping the suit. [10]

The Issue

While, Mary is working to solve the company’s problems, the main issue with the company is the large amount of debt it holds. This monetary debt is due to the former purchase of Citadel, a Nevada-based broadcasting holding company and the general decline in Radio revenue due to the amount of music streaming services online. Michael Harrison, a former radio station owner and publisher of RadioInfo agrees: 

“Cumulus is suffering from the tail end effects of the era of consolidation… The biggest problem in the industry, he said, is “smothering debt,” – Michael Harrison [7]

Overview

The biggest question for Cumulus is how to combat the growing online streaming music services and the consolidation of radio amidst their staggering debt and turnover struggles. Cumulus must continue to cut spending and manage to find a solution that will boost revenue through services that can compete as opposed to services that tail behind the forefront of the changing world of radio. In terms of debt handling, the company has until May of 2019 to pay it off which should hopefully be enough time for Berner to stabilize the company.

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Works Cited

[1] Cumulus Website. Retrieved: November 28, 2016.

[2] Jackson, Hazel. “Market Rating: Are Analysts Bullish Cumulus Media Inc (NASDAQ:CMLS) After Last Week?” Money Making Articles Hot Stuff. Retrieved: November 21, 2016.

[3] NASH Website. Retrieved: November 28, 2016.

[4] Cumulus Key Executives. Retrieved: November 28, 2016.

[5] “Big Challenges Remain For Radio’s Number Two.” Radio Ink. Streamline Publishing, Inc. Retrieved: November 28, 2016.

[6] Ho, Rodney. “Cumulus Media Drowning in Debt, Stock Slides.” Radio and TV Talk. Cox Media Group. Retrieved: November 29, 2016. 

[7] Grantham, Russell. “Cumulus Media Hit by Debt, Radio Industry Troubles.” Cumulus Media Hit by Debt, Radio Industry Troubles. Cox Media Group. Retrieved: November 29, 2016.

[8] Karp, Hannah. “Cumulus CEO Aims to Revive Radio Broadcaster.” The Wall Street Journal. Dow Jones & Company. Retrieved: November 29, 2016. 

[9] Sege, Adam. “Cumulus Hit With Antitrust Suit Over Advertising Payouts.” Law360. Portfolio Media, Inc. Retrieved: November 29, 2016. 

[10] Koenig, Bryan. “Cumulus Media Gets Advertising Antitrust Suit Gutted.” Law360. Portfolio Media Inc. Retrieved: November 29, 2016. 

[11] Oliveira, Michael Wiggins De. “Cumulus Media: A Highly Speculative Equity Stub.” Seeking Alpha. Retrieved: November 30, 2016.

[12] Weakley, Vanessa. “Looking at the Gauges on Cumulus Media Inc. (CMLS).” Microcap. Retrieved: November 30, 2016.

[13] Atkinson, Claire. “Cumulus Media’s New CEO Can’t Stop Company Slide.” NYPost. Retrieved: November 30, 2016.

[14] “Struggling Cumulus Media Loses its CFO” American City Business Journal. Retrieved: November 30, 2016.

[15] “Organizational Leadership Changes at Cumulus Media” MusicRow. Retrieved: November 30, 2016.

[16] Grantham, Russell. “Radio Giant Cumulus Tumbles After Flying High”. Cox Media Group. Retrieved: November 29, 2016.