What happens following Tuesday’s revelation that Good Karma Brands will conclude its LMA of Emmis Communications’ “98.7 ESPN” WEPN-FM New York when its contract comes to an end in August 2024 will tell a lot about the state of the industry going forward.
Who would be interested/willing to buy 98.7? The New York Post reported that Emmis was looking for $50 million for the 98.7 facility. The last full-powered FM signals sold in New York were the 2019 sale of Cumulus’ 95.5 WPLJ along with five other stations to EMF for $103.5 million and Emmis’ sale of 97.1 WQHT and 107.5 WBLS to MediaCo for $91.5 million in cash, a $5 million note, and 23.72% of the new company. Both deals would be in line with Emmis’ current asking price before continued deprecation of station values.
Under the current ownership caps, which under the Democratic led FCC are unlikely to change, both Audacy and iHeartMedia are at the limit of FMs owned in New York. That would leave in-market options in MediaCo, SBS, and Telemundo/Univision to potentially grow. With Radio One in growth mode, do they see an opening to say bring back “98.7 Kiss-FM“? Would a suburban operator such as Connoisseur Media or Press Communications see viability in adding a full market station?
You can’t completely rule out another non-commercial buyer, but it would be very hard for another Christian network to find an audience at the price that Emmis would be seeking with EMF, VCY America, and Hope Media Group already in the market on FM. Similarly, between the purchase price, acquiring and building real estate for studios, and staffing a new station, you’d be looking at around $75 million in expenditures just to operate the facility before a single penny in revenue comes in. Does that leave someone like billionaire John Catsimatidis to pair with his 770 WABC or another entity not currently in radio with a business model that can use a 24/7 audio outlet to reach consumers as potential buyers?
That leads into whether there still is a viable format hole in the New York market? We’ve seen multiple attempts at Alternative Rock and Country come and go over the past few decades. Unless there is a buyer who is looking at running that format as a loss-leader, it makes them unlikely. A cluster strategy could see a MediaCo wanting a music format such as Variety Hits that could chip away at iHeart AC “106.7 Lite-FM” WLTW and Classic Rock “Q104.3” WAXQ along with Audacy Classic Hits 101.1 WCBS-FM to boost their Adult R&B 107.5 WBLS in demos, but otherwise any music format would be looking to be middle-of-the-pack at best without a major investment in talent and marketing.
New York has two non-commercial Talk stations in 93.9 WNYC-FM and 99.5 WBAI, but commercial Talk remains on AM between iHeart’s 710 WOR and the aforementioned WABC. But outside of Catsimatidis potentially moving his product to FM, Talk formats take time to build an audience and would require an even bigger investment in talent and marketing making it an very expensive proposition.
Can a startup FM brand breakthrough in our modern crowded audio landscape? There are currently seventeen stations in the New York market above a 2.0 share. The newest brands of those seventeen are Audacy’s “New 102.7” WNEW, which adopted that brand in July 2018, but has been a variation of AC going back to 2007 and Univision Spanish CHR “X96.3” WXNY, which launched in 2009 but its format was moved from another signal under a different name “La Kalle 105.9“. Many other brands launched since then have gone away such as “Alt 92.3” WNYL, “94.7 Nash-FM” and “New York’s Country 94.7” WNSH, “New Rock 101.9″ WRXP or have failed to take off like WEPN-FM, “K-Love” 95.5 WPLJ or “94.7 The Block” WXBK.
What would make a new format on 98.7 any different?
Unlike WFAN, the “ESPN 98.7” format was not specifically designed to be a top player in the market. Under the operation of ESPN Inc. from 2012 until 2021, the station made sure to keep national ESPN Radio programming in key dayparts such as morning drive since the primary purpose of the station was to promote and expand the national ESPN brand, not just be a New York centric outlet. It wasn’t until December 2022 that Good Karma went completely local in morning drive as it expanded the station’s local output to sixteen hours weekdays, while Audacy’s WFAN remains of the few live & local 24/7 stations in the country.
The business model under Good Karma is also different. While the company operates “ESPN Radio” Sports stations in Chicago, Cleveland, Los Angeles, Madison, Milwaukee, New York, and West Palm Beach, it has remained on AM and streaming only in three (and soon all) of its four biggest markets. The company handles all local ad sales for ESPN.com and in July took over all sales operations for the national ESPN Radio platform. It has built alternate revenue models such as keeping all on-demand content in Cleveland and Milwaukee under paywalls.
WEPN-FM had a weekly CUME audience in the August 2023 Nielsen Audio ratings of 462,100. WFAN’s streaming ratings are broken out separate from the AM/FM signals showing a CUME of 217,900. If WEPN-FM can convert half of its audience to streaming and get the other half to listen on 1050 WEPN it would be saving its reported $12-13 million in annual LMA fees while keeping its current audience. That’s not out of the realm of possibility, while continuing to grow as a digital media asset more in line with Good Karma’s overall business model.
Since signing the lease in April 2012, ESPN and Good Karma have reportedly paid nearly $130 million in LMA fees. A few months later, CBS Radio paid $75 million outright for 101.9. Emmis has already received twice the value of the station through the deal. Any proceeds they receive for selling the license to another buyer will be a major bonus. Are station valuations in the biggest market still what they were when WPLJ and WQHT/WBLS were sold four years ago? Are there any buyers out there who see value in launching a new FM in New York? Is there an audience for a new format? And most importantly will anyone care about the new product launched?
As we get answers to these questions over the next year, it will tell us a ton about the viability of continued growth in broadcast radio.
This story first appeared on radioinsight.com