... As Profitable Infinity Radio Unit Told to Stay the Course
By PAT MAIO
The chain of command at Infinity Broadcasting Corp., the Viacom Inc. unit that formed one leg of departed President Mel Karmazin's power base, has been sending out reassuring signals to the troops.
Maintaining continuity will be important to Viacom's bottom line. Infinity, the second-largest radio station operator in the nation, contributed an outsized 26 percent of its parent's 2003 operating income on a scant 8 percent of overall revenues.
In Los Angeles, where the company has seven stations, Infinity President and Chief Operating Officer Joel Hollander has already given his local vice president and market manager, Pat Duffy, assurances that "everything is running just as it did before," Duffy said.
Hollander was Karmazin's handpicked successor to John Fullam, whom he fired as president of radio operations in April 2003. One of Hollander's first moves was to undo a layer of bureaucracy created by Fullam by concentrating management on the coasts and focusing on strengthening mid-size markets.
Backed by Karmazin, Hollander's moves served to marginalize his direct boss, Infinity Chairman and Chief Executive John Sykes, according to several industry insiders. Sykes was moved to Infinity from his post as president of Viacom television's VH1 and Country Music Television in March 2002 by Viacom Chairman Sumner Redstone.
With his corporate patron gone, Hollander, former president and chief executive of Westwood One Inc., operator of Viacom's CBS radio network, has told regional managers that the status quo would be maintained.
Duffy said he called Hollander the day of Karmazin's departure to ask if there might be any changes in the offing.
"Joel said, 'I'm in charge and running the show. Now go back to work,'" Duffy said. "I love Mel Karmazin, but I'm committed to Joel Hollander and fixing my radio stations."
Hollander told Duffy that Redstone and Leslie Moonves and Tom Freston, Viacom's new co-presidents and co-chief operating officers, had called and complimented him for righting a ship that had been struggling prior to his arrival.
"Joel has restored order, and is getting things back on track," Duffy said. "I see no change for the Los Angeles cluster," he added. "I can't see the line up of radio stations changing, either.
Infinity's local holdings include KFWB-AM (980), KNX-AM (1070), KRTH-FM (101.1), KLSX-FM (97.1), KROQ-FM (106.7), KTWV-FM (94.7) and KCBS-FM (93.1). Together, they generated an estimated $289.8 million in revenues last year and commanded an 18.8 percent market share, second in L.A.
"If they run things sensibly, they'd leave the group in place," said one industry executive with extensive knowledge of the local market. "In L.A., (Infinity) has recovered lost market share. To throw out the structure now would be to throw out millions. If it was my business, I wouldn't touch it."
Infinity's share of the L.A. market, measured by fall ratings, slipped to 18.8 percent in 2003, down from roughly 19.5 percent the year earlier and 20.7 percent in 2001. In the more recent winter period, according to Arbitron Co., Infinity has reversed the trend, garnering a 19.5 percent slice of the market.
Viacom spokeswoman Karen L. Mateo declined comment on management of the radio unit.
Karmazin had been chairman and chief executive of Infinity when it was acquired by CBS in 1996. He assumed the same title at the CBS radio group before becoming the company's president and chief operating officer in 1999, orchestrating the acquisition by Viacom a year later.
As the architect of Infinity's rebound, Karmazin has left a stronger unit that is likely to weather any upheaval resulting from his departure.
"Management lines are solid," said George Nadel Rivin, partner in charge of broadcast services division of accounting firm Miller Kaplan Arase LLP in North Hollywood. "The departure of Karmazin won't be a factor with Infinity carrying off its business plan."
And while there has been speculation that Karmazin, backed by a private equity group or another media firm, might try to buy Infinity, it was downplayed by Redstone.
"I would say our chances of selling Infinity are minimal," he said in a CNBC interview. "The margins are high, the cash flow's great."
In 2003, the radio unit's $975 million in operating income represented 46 percent of its $2.1 billion in revenues. While last year's figures were flat compared to the year earlier, its $382.4 million in 2001 operating income was only 19 percent of revenues.
"Infinity has efficient operations and cost containment," said David Mantell, a cable and media analyst with Loop Capital Markets in Chicago. "This is a very significant amount of money, so Viacom has to ask how it would replace this high margin business."
Given the high margins, Mantell was unconcerned by the flat year-over-year numbers.
"There is a feeling out there that (Infinity) has definitely slowed. But I think it is a pretty good business," he said. "So what if it doesn't have the huge growth rates anywhere near approaching cable network programming? In my opinion, it remains a viable business."
Infinity Broadcasting Corp.
Revenues 2003: $2.1 billion
Contribution to Viacom Revenues 2003: 8 percent
Contribution to Viacom Revenues 2002: 9 percent
L.A. Holdings: KFWB-AM (980); KNX-AM (1070); KRTH-FM (101.1); KLSX-FM (97.1); KROQ-FM (106.7); KTWV-FM (94.7); KCBS-FM (93.1)
Formats: Classic Rock, News (2), Talk, Oldies, Alternative Rock, Smooth Jazz
Estimated L.A. Cluster Revenues, 2003: $289.8 million
L.A. Market Share: 18.8 percent*
*No. 2 in market, as of fall 2003 ratings.
Sources: Viacom Inc., BIA Financial Network Inc.,
Southern California Broadcasters Association, Arbitron Inc.
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