When I was managing public radio and television stations in the Pacific Northwest, I used as a decision-making tool what might be the effect on the imaginary equity value of our organization of this or that significant decision. It tended to move me in a “build” or new product direction, sometimes to the patient consternation of my excellent team. I found it helpful as one of multiple indicators.
Equity values are determined by a lot of things, including market forces largely outside the control of management. We’ve all been concerned about declining television audiences while public radio audiences have continued strong, so I suppose it was inevitable that station equity values in the two media would meet at some point. There is now evidence we’re there and it has significant implications for the FCC’s effort to free up spectrum for wireless services.
Yesterday, it was announced that Nashville Public Radio has purchased a second station in Nashville for $3.35 million plus full time access to one of its HD Radio channels (congratulations to Rob Gordon, his board and team). Reports say it will be a classical music station. Link: Nashville Scene. In television terms, Nashville is the 29th market with just over 1 million TV households. It therefore paid $3.22 per household for Vanderbilt’s student-managed station.
In the recent past, we’ve seen the sales of public television stations for $3 million each in Pittsburgh (the 24th market with 1.16M TVHH) and Orlando (the 19th market with 1.45M TVHH). Pittsburgh’s was not the primary PBS station, but Orlando’s was – and that market had two secondary stations. So, the Pittsburgh station brought $2.58 per household while, more recently, Orlando’s brought only $2.06.
All of this may lead a gloomy television station exec to look at the possibility of a whole or partial sale to the wireless industry as a good thing. Perhaps that’s so if you’re sitting on a pile of debt you need to quickly liquidate, but these valuations wouldn’t produce much as an endowment investment. The median of 864 college and university endowment investment returns was –18.1% in 2009 (source: NACUBO). Things are up from there, of course, but even a long term average of +5% seems optimistic these days. So, if that $3M spectrum sale produces only $150,000 per year and you can’t net better than that with more traditional revenue sources from that spectrum, you’ve got some pretty serious problems.
There are other factors, too, that make a sale to wireless problematic. It’s likely, said the CTIA and CEA in an FCC filling, that they can get all the spectrum they need through repacking and will need to resort to auctioned spectrum only in the top 30 markets (full disclosure: I’m executive director of the Public Television Major Market Group, but the usual disclaimer about these being my own opinions applies). Further, one presumes that the marketability of your spectrum will vary by where you are in the UHF TV band, with a preference for spectrum that can be contiguously aggregated.