With the radio industry rapidly becoming dominated by a dozen or so huge station groups, companies that syndicate radio programming are facing a squeeze.
A wave of radio station consolidation that began when ownership rules were relaxed by the Telecommunications Act of 1996 is resulting in fewer opportunities for companies that produce syndicated talk shows or other content.
As a result, the handful of major players are attaching themselves to station groups which helps explain why Sherman Oaks-based Premiere Radio Networks Inc. agreed to be acquired by fast-growing Jacor Communications Inc.
The recent acquisition offers advantages to both firms Premiere provides programming and Jacor owns radio stations looking for material.
Premiere is the nation's biggest producer of syndicated comedy programming for radio. It owns syndicated talk shows by such hosts as Jim Rome and Michael Reagan, but most of its content consists of scripted comedy bits sent out to morning and evening radio shows around the country.
Jokes, parody songs and commercials, and interactive recordings in which the local DJ voices one part of a comedy routine, and Premiere supplies a tape of the other part make up the majority of the company's offerings.
"We make the local disc jockey sound funny," explained Harold Wrobel, Premiere's head of business affairs.
The newly emerging radio powerhouses, such as Jacor, Westinghouse Electric Corp., American Radio Systems Corp. and Evergreen Media Corp., are looking for programming arms to supply content to their rapidly growing groups of stations. Giant programmer/syndicator Westwood One Inc. based in Culver City, for example, is now closely connected with the biggest radio group in the country, Westinghouse's CBS Radio Network which bought Infinity Broadcasting Co. for $4.9 billion in December.
Infinity owned 25 percent of Westwood One, and that stake is now owned by the CBS group whose new head after the merger, Mel Karmazin, is also chief executive of Westwood One. There is considerable speculation that Westinghouse will buy the remaining 75 percent of the programmer that it doesn't already own.
In that environment, it became increasingly important for Premiere to affiliate itself with a large station group.
"For most syndicated radio shows, the program originates within the station group, so the so-called independent programmers were disappearing," said research director Arthur Rockwell with Yaeger Capital Markets. "With all the consolidation going on, I don't think it helped the situation for Premiere."
Back in January, analysts began recommending that investors buy shares in Premiere, when it became clear that the company was an acquisition target.
Those who took that advice had reason to celebrate last month after Jacor's $185 million deal for Premiere was announced. Under the terms, Premiere stockholders will get about $18 per share, with $13.50 coming in cash and the balance in Jacor stock.
Premiere's stock was trading at just over $11 in January.
Reaping most of the benefits will be two men who don't really need the money, Rupert Murdoch and Michael Milken. The two own about 34 percent of Premiere's stock through media investment arm Archon Communications Inc.
The acquisition, expected to close this summer pending shareholder approval, will not result in layoffs at Premiere's 142-employee local office, according to Wrobel. Premiere's management, including President and Chief Executive Steve Lehman, will remain in place.
Covington, Ky.-based Jacor spent more than $1.6 billion acquiring radio stations in 1996, more than any other company in the country except Westinghouse.
From 24 stations at the beginning of last year, it now owns 122 radio stations and a Cincinnati television station, paid for with funds raised from public offerings and bank loans.
"What they're looking to do now is acquire programming to put over that large station group," said media analyst Paul Sweeney with Salomon Brothers.
Just a month before announcing the deal to buy Premiere, Jacor announced that it was buying EFM Media Management Inc., which owns and distributes syndicated radio shows hosted by such popular personalities as Rush Limbaugh and Dr. Dean Edell.
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