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Arbitron (ARB) and Edison Research released their The Infinite Dial: 2011 study (pdf) on Tuesday. The results focused on online radio and smartphone streaming, but also hit other areas, including terrestrial radio. The end report shows that in face of competition from satellite radio, social media and other new media, terrestrial radio lives on. What this translates to for investors, however, remains murky, given the dearth of radio investment choices that inspire any level of confidence at all.

For a snapshot of the study's methodology, see the Edison Research website.

First, the good news. While the percentage of people 12 years of age and older who listen to local AM/FM radio dropped from 96 percent in 2001, to 93 percent in 2011, the medium still holds sway with large numbers of the people advertisers covet. For instance, 77 percent of the 12+ population that is employed either full-time or part-time (24 percent of the general 12 + population) listens to radio stations on a regular radio while at work. Another 21 percent listen to streams of local AM/FM stations on a computer in the workplace. While the median age of "heavy" radio users is 41, that's 7 years younger than the median age of "heavy" television users. Forty percent of terrestrial radio's listenership falls in the 25-54 year old sweet spot for advertisers.

On the downside, 53 percent of 12- to 34-year olds look to the Internet to find out about new music. Only 39 percent of people in that demographic go to radio first. Forty-two percent of individuals who are 35 years of age and older turn to radio first, while just 19 percent go to the Internet. It's no surprise that radio skews older. And, for most forms of talk programming, it likely tends even higher.

One of the "implications" the study authors list from the report, which I agree with but am not married to, is that Radio is relevant and resilient. And given radio's continuing rebound with advertisers, the overall business looks somewhat attractive as a value play. If you could invest in separate local radio stations you'd be all set. Traditional radio actually does a fantastic job of creating programming for niche audiences and then serving them well. In well-executed situations, a radio group like Clear Channel (OTC:CCMO), and even smaller players, can offer local, regional, and national advertisers access to several segments of multiple key demos by selling ad space and other promotional opportunities on clusters of stations it owns.

Revenue figures for radio's top billers from 2010 look impressive. For instance, Bonneville's all-news station in Washington, D.C., took in the most money of all radio stations in 2010 with $57,225,000. Clear Channel held four of the top ten spots with two top 40 stations -- one in Los Angeles, and one in New York, billing $54,000,000 and $43,000,000, respectively -- and talk station KFI in Los Angeles, and adult contemporary station WLTW in New York, billing $46,000,000 and $44,300,000 apiece. CBS took the remaining five spots in the top ten, ranging from the number three biller, all-news WCBS in New York, at $49,000,000 to the number ten biller in Los Angeles, alternative rock station KROQ at $39,000,000. Combined, radio's revenue leaders for 2010 brought in $456,525,000. Some public companies would give a semester's worth of interns
for this type of revenue. Radio's problem, however, is that these and other top billers subsidize an overall operation ridden in debt and generally bleeding from the nose thanks to it.

The pickings look slim if you want to make a pure radio play. It's tough to make the case that you are investing in terrestrial radio through CBS or Disney (DIS). Neither group reports results from radio operations separately. They both combine them with larger television divisions. For example, in its latest annual report, CBS states that "local broadcasting" accounted for 20 percent of the company's revenues in 2010. This includes CBS television as well as radio. And while its "media networks" segment brought in more than $17 billion in revenue for Disney in FY-2010, radio certainly represents a pimple on Mickey's nose. Media networks consists of not only Disney's local radio stations and radio networks, but local and national television, including massive operations ranging from ABC to the entire ESPN franchise to the seven properties that make up the A&E/Lifetime media component.

Cumulus Media (CMLS) recently made big news went it bought Citadel Broadcasting (OTC:CDELA), but the combined company probably shouldn't hit your watch list anytime soon. Despite a presence in some of the nation's largest markets and a total of 572 stations, Cumulus takes on significant debt as a result of the transaction, in addition to its own $600 million or so.

Several smaller companies deserve a mention. Entercom (ETM) owns about 100 stations in markets such as San Francisco, Boston, Seattle, Denver, Portland, and Sacramento. The company turns a profit (EPS of $1.23), has a low P/E (9.36), and, with some fits and starts along the way, ran from a recent low of $9.63 on January 31, 2011, to as high as $13.63 about a month later. The shares closed at $11.51 on Tuesday.

Emmis Communications (EMMS) dabbles in a bit more than just radio. The company publishes magazines and even designs and develops websites. While it has a presence in the nation's two largest radio markets -- New York and Los Angeles -- it has no profits to show for it. EMMS closed at $1.06 on Tuesday and sports a 52-week low of $0.43 and a high of $2.45.

Radio One (ROIAK) is yet another radio company with a debt problem. The company, which primarily caters to African American audiences, carries about $643 million in debt versus just $9 million in cash on $279 million in revenue and no profits, according to Yahoo! Finance. The shares have dumped over the last year from a 52-week high of $5.44 to Tuesday's closing price of $1.98, which is an improvement over ROIAK's 52-week low of $0.55.

While Saga Communications (SGA) certainly provides little if any sex appeal, it might be radio's most financially healthy play. Saga has a relatively low debt load for a radio company at about $96 million. The company is profitable -- earnings of $3.58 per share -- and sports a low P/E of 9.77 despite an impressive run from its 52-week low of $16.53 to its recent 52-week high of $35.50. SGA shares closed at $34.99 on Tuesday. Reading about Saga's business probably won't excite you. According to its latest annual report, the company runs radio stations, primarily in smaller markets with the exception of places like Columbus, Ohio, and Milwaukee, Wisconsin, and it owns five relatively low-profile radio networks and several low-power television stations.

I want to go long Clear Channel. I like a whole slew of the things the company is doing. As an investor, however, it's difficult, if not impossible, to look past its mountain of debt. While it still produces some sound programming around the country, cost-cutting prevents it from focusing completely on content. Morale in some Clear Channel divisions is at all-time lows, years after it appeared it could not get any lower. Shares of Clear Channel Media holdings, the CCMO.PK ticker, trade with little volume and are stuck in a less-than-exciting range. They closed at $7.60 on Tuesday, down from the 52-week high of $16.00. You have another option to access Clear Channel, however, under the ticker symbol CCO. Clear Channel Outdoor is a business with a bit more promise, less debt, more hopeful share price potential, but still no profits. It's probably best to stay as far away from CCMO and CCO as you would China MediaExpress Holdings (CCME).

If it weren't for Clear Channel, I would probably give the co-author of the above-discussed report, Arbitron (ARB), a closer look. The way Arbitron has penetrated the nation's top 50 markets with its Portable People Meter (PPM) ratings measurement technology impresses me. The company is profitable, pays a modest dividend, and looks set to retrace back toward its 52-week high of $44.95, but there's one big problem -- Clear Channel accounts for about one-fifth of its revenue.

Given all of the exciting things happening in the media space these days, it's tough to justify putting your money into pure radio stocks. That said, CBS and Disney might be the best plays out there. They give you some exposure to radio -- primarily in relatively strong markets -- but you hedge your bet with heavier stakes in other businesses ranging from digital to theme parks to television.

Source: Terrestrial Radio: Dialing Up a Few Investment Opportunities