Cumulus

Posted on October 16, 2016 by kavincen

By: Kaitlyn Vincent and Cairo Spencer

Cumulus Logo

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

Mary G. Berner – President and Chief Executive Officer

John Abbot – Executive Vice President, Treasurer and Chief Financial Officer

Richard S. Denning – Senior VP, Secretary & General Counselor

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]

Cumulus and Westwood One Stations

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]

The New Cumulus CEO, Mary Berner

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]

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Cumulus Media Equity Stub 2016

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.

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.

Cumulus

Link

Sarah Rebetje, Kate Weyant, Eddie

Cumulus Logo – [1]

History

Cumulus Media is a radio broadcasting company with an audience reach of 245 million. Cumulus distributes its sports, news, talk, and entertainment content through its 447 stations that are owned-and-operated by the company. The company’s reach expands across 90 markets in the United States, including eight of the top ten markets in the country [1]. In a $260 million deal in December of 2013, Cumulus acquired Dial Global, Inc., and renamed it Westwood One. Westwood One now serves as a programming service, allowing Cumulus to deliver its content across multiple platforms [4].

Key Executives

Mary G. Berner, President and Chief Executive Officer [2]

John Abbot – Executive VP, Treasurer, and Chief Financial Officer [3]

Richard Denning – Senior VP, Secretary and General Council [5]

Westwood One

Westwood One is a national syndication company that was acquired by Cumulus Media in 2013. Originally known as Dial Global, the company functioned under CBS for over three decades and specialized in syndicated sports broadcasting. Currently, they cover sports such as football in the NFL, golf during The Masters, and broadcast Olympic coverage every two years for both the Winter and Summer games [4]. Westwood One is producing four Christmas from Nov 26th to December 1st 2016. Some of the featured acts will include Train, Neil Diamond and Rascal Flatts. Westwood One looks to create relevant content that pertains to the upcoming Holiday of Christmas [15].

NASH FM

NASH FM is a Cumulus-owned media brand and group of radio station broadcasting across the country. Named after the cultural center of country music, Nashville Tennessee, the NASH FM brand includes 36 different local radio stations that all broadcast on an FM frequency. This brand’s content is broadcasted through the the nation and covers genres from country to rock to hip-hop. It has over 300K followers on their official Twitter account, and often host shows with famous country singers as guests.

Pictured above is the winner of the NASH Next 2016 Contest, Todd O’Niell. Hosted by NASH FM, this contest seeks to find the best talent that might be the next big thing in country music [13].

As well as being a local station in Iowa, NASH FM also syndicates its shows on a national level under the guidance of Cumulus [7].

The Downfall

For Cumulus, 2015 was a year of tragedy. The company accumulated $2.5 billion in debt. The share price of Cumulus was worth spare change, dropping from its original price by almost 90 percent [8]. One reason this striking increase in debt occurred was because of the hit that the overall radio industry has taken from a significant decrease in listeners these past few years as online streaming content has become more popular. Just in 2016, the revenue of the industry has fallen flat [10]. Cumulus’ top competitor, iHeartmedia, even suffered from this online conversion with its share price dropping by 95 percent [8]. Cumulus has also still been struggling with paying off the debt it accumulated when it bought Citadel, taking on a debt count of $2.8 billion [9]. Cumulus also made the mistake of neglecting tp focus on local markets and caring only about its acquisition of Westwood One and Citadel. Cumulus’ risky business decisions have led the company to drown rather than thrive [8]. However, the new CEO of the Cumulus, Mary Berner, seems to have turned the company in a more positive direction [12].

Financials

In the past three years, Cumulus has seen a decline in sales revenue, a rise in sale expenses, and thus a decline in its net income.

Net income comparison between 3Q2015 and 3Q2016 [6]

In 2014, Cumulus’ net revenue was $1.26 billion, with a net income of $11.4 million. The following year, in 2015, their net revenue was $289.44 million with a net income loss of $542.18 million. This is in part due to the massive amount of debt that it has accumulated ($2.5 billion). In 2016, Cumulus announced at the end of the Third Quarter that its net revenue so far for the year is $286.14 million, which is 1.1% down from 2015. The company also reported that 2016’s net income is $32.96 million, which is up from a net income loss of $541 million. 895 million in the first three-quarters of 2015, $14.4 million of its expenses were spent on a legal dispute with CBS over syndicated content.

President Mary Berner expressed the failures of previous years and the somewhat hopeful future of the company by stating that Cumulus, “gained share for the first time in at least four years (in 2016)” [6].

Future

As the newest CEO, Mary Berner is leading a key initiative to turn around the company. Berner has an extensive resume, including her position as CEO at Reader’s Digest Association, Fairchild Publications, and Association of Magazine Media [12]. Berner has experience with companies in trouble, helping Reader’s Digest at a time when it was undergoing reorganization due to bankruptcy [8]. With her expert background in managing large companies, Berner has immediately taken on the challenge of addressing key issues of decreased focus on national syndication, and increased focus on employee satisfaction and local affiliates [12].

In order to combat a large amount of debt that has been accumulated by the company, Cumulus plans to create a more open dialogue with its stakeholders. This way, Cumulus can come up with strategies aimed at reducing the debt, because attempts in previous years have not worked. Cumulus also stated that it will review all possible options in order to its maximize its efficiency on both a corporate, national and local level.

Cumulus has announced that the company will undergo a restructuring of its organization. It will shift the control of the company into the hands of its localized affiliates and work from a “bottoms-up” approach by strengthening its foundation. Cumulus believes that this approach will increase ratings as well as improve the operation of the company.

Employee Turnover over the course of 2015 and 2016 [14].

With prior negative feedback from employees about the culture of Cumulus, the company looks to initiate a better work environment [12]. Communications will be enhanced through a “top-down” process, where Berner stated that she will answer any employee’s email within 48 hours. Policies about vacation and leave will be reevaluated so that employees will receive improved benefits. Though the merit system has not been manipulated for the past ten years, Cumulus declared that the system will be increased to promote motivation and work efficiency. This initiative has reflected positively among employees. As shown in the above graph, turnover significantly decreased between 2015 and 2016, where voluntary sales turnover experience the most impact, where turnover was reduced from 42% to 27% from April of 2015 to April of 2016 [14].

Cumulus has also started to improve its sales execution in hopes of decreasing its debt. The company aims to incorporate new sales strategies both on a national and a local level. Cumulus also stated that it will extend measurements of sales productivity in order to gather more research about what works and what does not work. That way it can tackle issues and create more productivity in the future. Cumulus is also trying to improve both its marketing tactics, and improve the training given to new employees.

As Cumulus strives to create a more optimal working environment with increased employee satisfaction, the future looks brighter than it did before Mary Berner stepped up as CEO. With the restructuring of management, as well as the focus on local markets over national syndication, Cumulus has taken the necessary steps in order to stay afloat. Although the company still needs to address the debt situation, Cumulus continues to make strides towards increasing revenue and slowly paying the debt off [11].

Sources

[1] Cumulus. Retrieved: 22 November 2016. http://www.cumulus.com/

[2] Mary G. Geber. Cumulus Media. Retrieved: 22 November 2016. http://www.cumulus.com/leadership/mary-g-berner.html

[3] John Abbot. Cumulus Media. Retrieved: 22 November 2016. http://www.cumulus.com/leadership/john-abbot.html

[4] Cumulus Completes Previously Announced Acquisition of Westwood One. Global News Wire. Retrieved: 22 November 2016. https://globenewswire.com/news-release/2013/12/12/596613/10061374/en/Cumulus-Completes-Previously-Announced-Acquisition-of-WestwoodOne-f-k-a-Dial-Global-Inc.html

[5] Richard Denning. Cumulus Media. Retrieved: 22 November 2016. http://www.cumulus.com/leadership/richard-s-denning.html

[6] Cumulus Reports Operating Results for Third Quarter 2016. Cumulus Media. Retrieved: 27 November 2016. http://www.cumulus.com/PR/CMLS_09_30_2016_Earnings_Release.pdf

[7] NASH FM 94.7. Cumulus Media. Retrieved: November 28 2016. http://www.nashfm947.com

[8] Radio giant Cumulus tumbles after flying high. Grantham, Russell. The Atlanta Journal-Constitution. Retrieved: 24 November 2016. http://www.myajc.com/news/business/radio-giant-cumulus-tumbles-after-flying-high/npx9H/

[9] Cumulus Media drowning in debt, stock slides. Ho, Rodney. The Atlanta Journal-Constitution. Retrieved: 25 November 2016. http://radiotvtalk.blog.ajc.com/2016/01/10/cumulus-media-drowning-in-debt-stock-slides/

[10] Will 2017 Be Better For Radio? Radio Ink. Retrieved: November 27 2016. http://radioink.com/2016/11/18/will-2017-better-radio/

[11] 2016 First Quarter Earnings Call Presentation. Cumulus Media. Retrieved: November 25 2016. https://www.cumulus.com/PR/CMLS_1Q_2016_Earnings_Release_Presentation-050616.pdf

[12] (9-19-2016) The Cumulus Turnaround. Radio Ink. Retrieved: November 27 2016. http://radioink.com/2016/10/21/the-cumulus-turnaround/

[13] And the Winner is: Country Singer Todd O’Neill Wins NASH Next 2016 Challenge including Cumulus Radio Airplay Across the U.S. and Big Machine Label Group Recording Contract. Cumulus Media. Retrieved: 28 November 2016. http://www.prnewswire.com/news-releases/and-the-winner-is-country-singer-todd-oneill-wins-nash-next-2016-challenge-including-cumulus-radio-airplay-across-the-us-and-big-machine-label-group-recording-contract-300351675.html

[14] 2016 First Quarter Earnings Call Presentation. Cumulus Media. Retrieved: November 25 2016. https://www.cumulus.com/PR/CMLS_1Q_2016_Earnings_Release_Presentation-050616.pdf

[15] Westwood One Making Christmas Special. Radio Ink. Retrieved: November 28 2016. http://radioink.com/2016/11/18/westwood-one-making-christmas-special/

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