As a follow-up to my December 29, 2008 piece ("Broadcast Networks Weathering the Storm"), Barclays Capital media analyst Anthony DiClemente recently threw his support behind CBS (NYSE: CBS) as the broadcast network to outshine the rest once advertising spending stabilizes.

The New York Times is featuring a piece today about how the television broadcast networks are managing to stay afloat during these turbulent times- while other forms of mass media are suffering significantly.

Just this week as well, AdAge noted we are now two years into the worst advertising recession since the Great Depression, and yet even coupling this with massive fragmentation of audiences as a result of new digital media platforms, the television networks seem to be holding their own. Though ratings across the board are not what the networks might have hoped driving future make-good pressure on inventory, it may be indeed this massive audience fragmentation that is actually helping these networks the most right now as they still command sizable audiences night after night. Today, no other media source consistently delivers the kind of audiences night after night that broadcast network television does, and though it’s not what it once was, it’s still a pretty great business to be in.

Variety is reporting that in a first of its kind:

Fox (NYSE: NWS) will stream the premiere of "Fringe" and season opener of "Terminator: The Sarah Connor Chronicles" online at the same time as they bow on TV.  But there's a catch: Only computer users on college campuses will be able to log in to watch the simul-stream.  Move helps Fox expose the trend-setting college audience -- who are more likely to have computers than TVs in their dorm rooms -- to the shows.

Last week, Bloomberg reported that "Walt Disney Co. (DIS), the second-largest U.S. media company, may sell its 10 ABC television stations, fetching as much as $4.8 billion, said David Miller, an analyst at Caris & Co. who has covered the company since 2000."

This was pure speculation on the part of the analyst based on his own research and not an inside tip, according to Miller. Also in the article, A Disney spokesman called the report "purely speculative" and declined to comment further.

The Indian film industry, commonly referred to as “Bollywood”, has received much attention in past few weeks with reports of Steven Spielberg’s potential deal with India’s Reliance Entertainment for a substantial equity infusion allowing him and his Dreamworks partners to break away from their current ownership structure at Paramount Pictures (VIA).  Additional reports this past week also have Sylvester Stallone starring in his first Bollywood picture with Indian star, Akshay Kumar.  However, Bollywood is no overnight sensation despite the mainstream U.S. media’s recent attention to it, and upon closer examination one can see there is far more depth to these moves than meets the eye.

The chart below, taken from a recent Credit Suisse report entitled “Challenges for Hollywood in Bollywood”, shows just how far the industry has come in recent years:

Last month, Credit Suisse put out an in-depth report (5/21/08) revising its estimates downward and forecasting only modest growth in advertising spending worldwide for the next 2 years, with the United States and most other developed nations dragging the trend downward. Given the broader economic slowdown underway brought on by the credit crisis, this was not news to anyone, nor is it shocking to see that the bright spots were again China and India; however, the in-depth analysis of the individual trends and mediums was very illuminating. Most stunning is the firm's quadrennial comparisons and historical trending.

In summary, the team had this to report:

I received an email from a SA reader who shared his skepticism about the radio market “coming back”. A very valid opinion, but I offer this brief take to others in the financial community with similar beliefs that I shared back with him.

Terrestrial radio is evolving into a wholly new form of media, less about music and more about audio entertainment. Internet subscription services like Napster (NAPS), satellite services like XM (XMSR) and Sirius (SIRI) and nonlinear devices like Apple’s (APPL) iPod are all much better suited to be the key music sources going forward for consumers- no dispute there, whatsoever.

As a follow up to my Seeking Alpha commentary from last week, Clear Channel Moves Closer to Buyout, radio industry journal Radio Business Report has this latest update on the Clear Channel buyout by two private equity firms:

It's looking like Friday of this week (3/28) is the earliest that the 26.7 billion bucks buyout of Clear Channel Communications might go to closing. The company has moved the expiration date for its bond tender again, this time to Thursday, March 27. The bond tender is having no trouble drawing takers. Clear Channel reported that, as of March 20th, approximately 98% of the outstanding Clear Channel 7.65% Senior Notes due 2010 had been tendered and approximately 87% of the AMFM Operating Inc. 8% senior Notes due 2008. Citi is acting as lead dealer manager for the tenders and Deutsche Bank Securities and Morgan Stanley as co-dealer managers.

On Monday, March 24, 2008, Radio One, Inc. (ROIA) announced it would sell its Los Angeles radio station to Bonneville International Corp. in a transaction that both analysts and the market seemed to widely applaud - sending the stock as high as $1.95 intraday from its previous Friday close of $1.10.

This transaction not only solidifies Radio One for the future, it also sends a signal that strategic deals in the radio business may be back in play.

The Association of Public Television Stations released a new survey last week that finds “more than half of over-the-air consumers prefer free broadcast television after the DTV transition.” The survey also declares the transition from analog broadcasts to digital is getting much more attention and consumer awareness of the impending switch has now increased to 76.4%.

There had been a fear that the estimated 20+ million Americans who still receive their television programming via a free over-the-air broadcast, as opposed to through a cable or satellite television subscription, would suddenly be left without service on February 17, 2009 when the hard date for the digital television transition comes, and a broad awareness program was launched by the U.S. government and broadcasters to inform the public.

Media General, Inc. (MEG) is currently engaged in a proxy battle with activist hedge fund Harbinger Capital Partners, which reportedly holds about 18 percent of the Class A shares of MEG. Media General owns television stations, newspapers and some internet properties.

On March 19^th, Media General filed a letter with the Securities & Exchange Commission that it sent to shareholders encouraging them to vote for the company board designees and not for Harbinger’s proposed nominees. Frankly, I find it extremely laughable.

On March 17th, Credit Suisse updated its outlook for Global Media stocks. While it reiterated its overall Neutral position on Media, there are a number of areas of strength that it expects to be found in the sector this year.

Highlights of the report include:

There was a great video interview posted on Yahoo Finance’s Tech Ticker on March 20th by Sarah Lacy titled “The Real Way to Profit from Social Networking” in which she discussed the concept of the “Personal CPM” with Charlene Li of Forrester Research (FORR). For those not in the industry, CPM stands for “Cost Per Thousand” (where 'M' is the roman numeral of 1000) and is the core metric by which advertising is generally sold. The CPM is basically dictated by the combination of how demographically valuable a particular audience is to an advertiser versus how hard it is to generally reach.

There is an old adage in media that an advertiser “wastes half their advertising, only they don’t know which half”, as I have heard several car dealers proclaim over the years. What they mean is traditionally a media buyer had to cast a wide net to reach an appropriate target, but would end up reaching many others in the process that would have no interest otherwise in a product or service, effectively wasting ad dollars. This is why advertisers have become particularly interested in social networks such as MySpace (NWS), Facebook and Bebo (TWX) because they hold the power for advertisers to be able to drill deep down to the exact customer they want, without requiring wide reach to do so. A television, radio, or print advertisement will reach statistical samples of a general age group, sex and wide geographic locale, but a social networking advertisement can instead reach quantifiable numbers of specific ages, zip codes, marital status, religion, political orientation, fan groups, etc.- in theory. As Google (GOOG) has declared publicly lately, it’s not as easy as it would seem to effectively monetize social network inventory though.

As I do every day, on March 18^th I received a breaking news email from Inside Radio. To me, the three headline stories for the day pretty much sum up the entire state of the radio industry right now. I have discussed my thoughts on all three in depth in other Seeking Alpha commentary, but they definitely fall into the categories of the Good, the Bad and the Ugly.

The Good:

Late last week, LIN Television (TVL) announced it had secured a retransmission deal with Dish Network Corp. (DISH), formerly Echostar Communications, for 26 television stations in 17 of its local markets. In its March 13, 2008 note to clients, a Bear Stearns analyst estimates this deal to be worth approximately $3.6 million per year (based on an estimated 1 million subscribers at $0.30 per subscriber, per month). The note goes on to state that, “we believe TVL is on track for $13 million of retransmission fees in 2008 based on the 4Q run rate and now are more confident of the $25 to $30 million in fees longer term as reflected by this deal”. They maintain an Outperform rating on TVL.

Retransmission fees, for those not in the day to day of the television industry, are fees paid by cable and satellite operators to local broadcast television stations for the right to retransmit the over the air broadcast signal to their subscribers as part of their overall programming offering to consumers. While the concept of retransmission consent has been around for a while, it is only in recent years that television broadcasters have been able to maximize the revenue opportunities therein, primarily as a result of the ongoing battle between satellite operators such as Dish and Directv (DTV) and cable operators including Comcast (CMCSA), Charter (CHTR), Cablevision (CVC), Time Warner (TWX) and a myriad of smaller carriers. Television broadcasters have historically had two options by law when negotiating with cable carriers- retransmission consent and “must-carry”. Must-carry is simply an obligation of the cable operator to carry the local television station on its system so long as the television station meets certain standards and conditions, but no consideration is otherwise given by the cable companies. On the other hand, retransmission consent is the free-market negotiation between the parties for cable carriage. In the past, it may have had a monetary component to it, but more often provided the broadcaster better or additional channel positions and other promotional consideration for the right to redistribute their signals. Both create a no-lose situation for local broadcasters in expanding their reach beyond the over the air signal, but retransmission consent heavily rewards broadcasters who invest in quality news operations, syndicated programming and network affiliations that consumers desire. Rupert Murdoch was known to use retransmission consent to his fullest advantage in the 1990’s. Newscorp (NWS) capitalized heavily on the strength of the Fox Network and its owned and operated television stations to secure national carriage for many of the then fledgling cable networks that are now highly profitable franchises for that company. EW Scripps Co. (SSP) is another company that used this strategy to create lucrative national cable networks on the backs of its television station group. Others, such as Belo Corp (BLC), used the negotiating leverage of their station groups to launch local and regional news networks on cable systems. Cable operators were willing to provide additional channel capacity then as they wanted to ensure they continued to offer such things as local news and sporting events, but did not want to pay-out rights fees to do so. In addition, capacity was not as constrained or as valuable as it would become, hence the concessions were made. However, cable positions did eventually became much more in-demand with the proliferation of niche cable networks on both the analog and digital tiers of their systems, and cable operators significantly curtailed this practice. The introduction of satellite television as a formidable competitor forced the cable companies to revisit their stance on retransmission consent, though. The likes of Dish and Directv began aggressively seeking new ways to offer differentiated content, and broadcasters eventually persuaded regulators to mandate certain retransmission rights on satellite as well. This put many broadcasters in an enviable position, and finally gave them significant leverage to demand cash payments from the cable companies in the retransmission consent process.

Bear Stearns put out an interesting note recently titled “Answers to Key Questions about the TWC Restructuring”. For anyone who has not seen this, it lays out rationale for Time Warner (TWX) to completely spin off its cable holdings as part of its broader restructuring under new CEO, Jeff Bewkes.

Bear Stearns states, “On 2/6/08, TWX announced it has entered into formal discussions with the board of Time Warner Cable to restructure its 84% stake in the latter.” This restructuring is in addition to other efforts already underway realigning its AOL division, and shuttering certain of its redundant film units.

Clear Channel Communications, Inc. (CCU) took another step forward last Friday in its $19.5 billion go-private transaction led by Bain Capital and T.H. Lee Partners with the sudden closing of the sale of its television division to Newport Television, LLC, a company backed by another private equity group, Providence Equity Partners.

I can’t tell if Jim Cramer really hates radio stocks or if he just desperately wants the Sirius (SIRI) and XM (XMSR) merger to be completed and is boycotting the broadcasters out of spite. I am a big fan of Cramer, and though I think he’s wrong about the general state of radio broadcasters I do agree with him that the satellite merger should go through. Broadcast radio simply has nothing to fear from a consolidated XM and Sirius, and should stop trying to block this merger.

I may be the only person connected to the radio industry who thinks this, but in my opinion it’s a completely hypocritical position that the broadcast radio industry has taken here. The industry can’t credibly argue for less ownership restrictions of its own and push for cross ownership with newspapers and then argue that consolidation in another sector is anti-competitive. Terrestrial radio and satellite radio have such different business models and competitive nuances that broadcasters can easily compete with a merged satellite radio operator. In many ways, they could even find ways to work together for everyone’s betterment.