CBS Radio — the venerable broadcast company that owns 117 stations in 26 markets, including Chicago’s top-ranked news station WBBM and Los Angeles’ influential alt-rocker KROQ — will go public by the end of July, according to new documents filed by its parent company. CBS Corp.’s chief executive officer, Leslie Moonves, had told investors earlier this year that the company’s radio division, which is competing against Pandora and other high-tech radio companies for advertising dollars, would go up for sale — but the planned initial public offering, announced Wednesday, suggests it couldn’t find a buyer.
If the media giant had sold the radio division outright, CBS Corp. would have been on the hook for a huge capital-gains tax, so “exploring strategic options to separate its radio business,” as the company declared in its federal filing, might make more sense. “I’m not sure how seriously they really looked for a buyer,” says George Reed, managing director of Media Services Group, a radio and TV brokerage. “This is a really elegant solution that allows them to spin out the company to a new entity, and the same people who owned it yesterday own it tomorrow. It’s a smart move and really makes the most sense.”
In addition to competition from Pandora and SiriusXM for car-audio dominance, as well as on-demand services such as Spotify and Apple Music, top broadcast companies have struggled with internal financial issues the last few years. IHeartMedia, formerly Clear Channel, remains the world’s biggest radio company, but it has about $20 billion in debt and hasn’t been able to agree with creditors on how or when to restructure it; Cumulus Radio, the second-biggest company, has $2.5 billion in debt, and has slashed iconic stations such as San Francisco’s eclectic rocker KFOG. CBS Radio does not carry the same debt, although Bloomberg reports CBS Corp.’s local broadcasting division had $2.6 billion in sales last year, its lowest number since 2009.
CBS Radio reps declined comment, although a source with knowledge of the financial details says the IPO announcement is “a way of keeping all options open.”
“The biggest problem facing radio today, as it faces the challenges of entering the digital era, is the debt that it accrued in the analog era. If you could somehow lower the debt, radio is still a very viable business,” says Michael Harrison, editor and publisher of trade magazines Talkers and RadioInfo. “CBS doesn’t need to be rebuilt — they’ve got an extraordinary group of radio stations, music, news, sports and talk. But the key is these stations have to be in a situation where they’re not going to be drowning in debt.”