In a deal which marks the first under the FCC chairmanship of Ajit Pai, CBS Radio announced Thursday morning it was merging its station group to Philadelphia-based Entrecom Communications for $1.7 billion. The merger creates a new mega-station group, with 244 stations nationwide and in 23 of the top 25 radio markets. When the deal is done, Entercom would be the second-largest radio group in the country only behind iHeartMedia.
The deal includes some of the most distinguished branding and historic call letters in radio: WCBS-AM/FM and WINS In New York; KNX In Los Angeles; WBBM In Chicago; WCCO In Minneapolis; KMOX In St. Louis; WWJ, in Detroit; and the old Westinghouse stations, including the first radio station on to sign-on In the country, KDKA In Pittsburgh.
In addition to WBBM-AM and FM, CBS Radio properties in Chicago are: Adult Alternative WXRT-FM; Country WUSN-FM (Us 99); Classic Hits WJMK-FM (K-Hits 104.3); WCFS-FM (105.9 FM, simulcasts all-news WBBM-AM) and all-sports WSCR-AM (The Score).
Entercom owns stations in mostly mid-size markets including Kansas City, Sacramento, Denver, Memphis, and Wichita, Kan.
There are some markets where Entercom and CBS Radio overlap, such as Los Angeles, San Francisco, and Boston. It is not known how this would be addressed under current ownership rules. The latter market could get a hard look at, since Entercom owns five stations there.
The deal is tax-free: had CBS Corporation not spun off the properties in advance of the sale, the company would have been hit with a huge tax bill. Thus, CBS is spinning off the unit first, then sell to Entercom, using a “Reverse Morris trust” transaction. Entercom’s board of directors are remaining in place.
With the deal, the CBS Radio name is expected to vanish. Entercom will be the new name of the company and based in Philadelphia. The CBS radio call letters – some of them they share with CBS-owned television stations (including in the top four markets) are expected to be retained.
The Entercom and CBS deal is the first under Pai and the new President Trump administration. Many media experts predicted media mergers would accelerate under a Republican administration and a Republican commissioner at the FCC since they are more receptive than Democrats on the issue.
As for how the merger affects Chicago stations, don’t look for any wholesale changes yet as the deal does not take effect until late 2017. But a few CBS Radio properties have underperformed in Chicago recently. For one, former country music leader WUSN-FM (US 99) has fallen behind iHeartMedia’s WEBG-FM (Big 95.5FM) in ratings and assumingly, revenue. In the Top 40 arena, longtime leader WBBM-FM (B96) is now getting reguarly beaten by rival WKSC-FM (Kiss). WJMK is in a tight race with Cumulus’ WLS-FM; and WXRT-FM has seen better days.
On the other hand, WSCR-AM (The Score) posted its highest ratings ever thanks to Chicago Cubs baseball and their historic World Series run and WBBM-AM leads the market overall. Sports has been a boon for CBS Radio here, as they hold the rights not only to the Cubs but also the Chicago Bears.
As for Entercom, the company did manage to survive a major public relations disaster ten years ago as their Sacramento Top 40 radio station (KDND-FM, known as 107.9 FM “The End”) held a “Hold Your Water For a Wii Contest” as a woman died in a water-drinking contest with a Nintendo Wii as the grand prize. As a result, the producers and radio personalities behind the stunt were fired, the station’s management was replaced and Entercom reached a settlement with the victim’s family (an FCC license challenge was filed recently in conjunction with this incident, which could delay the sale.)
Around the same time, Entercom was also hit by a fine from the FCC for payola violations.
This is not the first time Entercom and CBS had inter dealings with one another: in 2006, Entercom bought several CBS-owned radio stations after the latter split from Viacom.
The divestiture leaves the industry with very few television companies owning radio stations – notably Tribune Broadcasting with lone radio property WGN-AM, Hearst, Bonneville (with KSL-TV as its lone TV property) and Hubbard Broadcasting. Over the years, many broadcasters have divested radio stations including Clear Channel (now IHeartMedia), NBC, ABC/Disney, and Sinclair (although it recently bought three Seattle radio stations in a package deal with ABC affiliate KOMO-TV.)