Beasley Broadcast Group, Inc.

views updated

Beasley Broadcast Group, Inc.

3033 Riviera Drive, Suite 200
Naples, Florida 34103
U.S.A.
Telephone: (239) 263-5000
Fax: (239) 263-8191
Web site: http://www.beasleybroadcasting.com

Public Company
Incorporated: 2000
Employees: 669
Sales: $115.2 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: BBGI
NAIC: 513112 Radio Stations

Based in Naples, Florida, Beasley Broadcast Group, Inc. (BBGI) is America’s 17th largest radio broadcasting company in terms of revenue, according to BIA Financial Network. Unlike many of its competitors, BBGI is a pure-play radio operator, currently consisting of 26 FM and 16 AM stations. Most of BBGI’s stations are run in “clusters” located in 11 large and mid-sized markets, which include Philadelphia; Boston; Atlanta; Miami/Fort Lauderdale; Las Vegas; New Orleans; West Palm Beach/Fort Myers, Florida; Greenville/Jacksonville/New Bern, North Carolina; Augusta, Georgia; and Fayetteville, North Carolina. Although a public company since 2000, BBGI remains managed by the Beasley family. Four children of founder and chairman George Beasley hold top positions in the organization.

George Beasley’s First Radio Station: 1961

George Beasley was an assistant high school principal in Danville, Virginia, in the early 1960s, earning $12,000 a year and attempting to support a wife and four children, with another child on the way. Assuming that he would never be able to afford to send his children to college, he searched for a way to supplement his income. He turned to radio, a business he knew through his uncle and cousin, having spent time at both of their stations while growing up. With a net worth less than $2,000 he applied for an FCC license to build a 500-watt, daytime-only AM radio station in Benson, North Carolina, a town of 2,300 people. Only when he obtained a letter of credit for $12,000, after nearly a year of effort, was he able to secure a license in 1961 for what would become WPYB-AM. With his limited resources, Beasley arranged a $19 per month lease for the land on which his single nondirectional tower stood. His studio and other operations were housed in a one-story modular home, financed by bartering radio advertising with a pre-fab home-builder. Beasley made a $1,700 down payment on $17,000 worth of necessary equipment and saved on installation costs by having his uncle, an engineer, do the work for just $1,000. Beasley further conserved his limited resources by having the furniture built by another uncle, who asked for no down payment on the job.

With just five employees, WPYB-AM went on the air in December 1961, with a manager running the station while Beasley continued to work as a high school principal. Located between the North Carolina towns of Benson and Dunn, the station had a signal range of 12-15 miles. The only local competition came from a 1,000-watt station in Dunn, which had a far stronger signal. Only by establishing a strong relationship with local advertisers was WPYB-AM able to gain a foothold in the small market. Within three years Beasley recouped his investment in the station and soon was earning as much from radio as he was from being a high school principal.

The next step for Beasley in radio was to trade up in the industry. With a chance to acquire a 1,000-watt station in the larger market of Goldsboro, North Carolina, Beasley sold WPYB-AM for $125,000 in 1966, making a tidy profit that was reinvested in the $115,000 purchase of WFMC-AM. This new station would set the pattern for many of the company’s purchases: move into a larger market by identifying an underper-forming station that can be bought at a reasonable price, then restructure the operation and reformat the programming to unlock its potential to generate revenues and cash flow. Years later Beasley would tell a reporter from Southwest Florida Business, “If I have some ability it is the ability to spot an opportunity and see the moment. If I see it and I believe it I don’t back off until it happens.” The Goldsboro purchase also helped Beasley make the transition to working in radio full-time in the fall of 1969. Despite having devoted many years of his life to the education field, earning a master’s and other advanced degrees, Beasley decided that for monetary reasons he should quit his chosen profession.

Major Stepping Stone: 1971 Purchase of Fayetteville Station

Beasley’s goals in broadcasting were modest at this point in his career. He considered ownership of three radio stations to be a lofty, and perhaps unattainable, lifelong goal. He was also content to operate in smaller markets well outside the top 100. Very quickly, however, he acquired a pair of smaller stations and his 1971 acquisition of a Fayetteville station proved to be a major stepping stone to larger markets. FCC rules at this time required stations to be owned for at least three years, and for tax reasons most sellers preferred only 29 percent of the purchase price to be paid in cash. The rest came in the form of a ten-year note. This practice proved beneficial to Beasley as he built up his business with the limited financial backing of three minority investors. He explained the advantages to Radio and Records in a 2001 profile: “If you do a good job operating the station, you can create some pretty good cash flow. It doesn’t take long when you have very low capital payments. That’s what we were able to do; then we moved on to other markets. Each time we sold a station, we’d sell it for 29% down and take a note.”

Following his move into the Fayetteville market, the company bought a station in Augusta, Georgia, then Mobile, Alabama. With success in these and other mid-sized markets, Beasley began to gain confidence that he could operate in larger cities, too. During this time his children began to become involved in running the business, which was already known as the Beasley Broadcast Group, a name it would formally adopt when taken public in 2000. Bruce G. Beasley started working for the company in 1975, and after filling a variety of posts rose to the rank of chief operating officer in 1997. Brian E. Beasley became involved in broadcasting in high school and went to work for the company full-time in 1982, initially serving as general manager of the company’s short-lived venture in cable television before ultimately becoming vice-president of operations in 1997. Caroline Beasley joined the company in 1983 and like her brothers held a number of positions before joining the ranks of senior management. She became vice-president and chief financial officer in 1994. Another son, Brad Beasley, became the market manager of five radio stations in Fort Myers, Florida.

Beasley Broadcast’s entry into a major market came with the 1976 purchase of a Cleveland station, WDMT-FM. The acquisition also reflected a greater commitment to FM radio. Until the early 1970s the company shied away from FM stations, which despite the strength of their signal had difficulty competing with smaller AM stations for local advertising dollars. As FM receivers became more common and the format began to reach a critical mass in listeners, Beasley Broadcast began to acquire smaller FM operations in the early 1970s. The addition of Cleveland’s WDMT-FM was also the quintessential Beasley Broadcast acquisition of an underperforming property at a bargain price. Eschewing offers to buy FM stations in such markets as San Diego and Rochester, New York, as well as another Cleveland station, all priced in the $1 million range, the company paid $200,000 for WDMT-FM, an amount in keeping with some of its smaller-market AM purchases. Although licensed to serve Cleveland, the station and its broadcast tower were separated from the city by a mountain, which resulted in almost nonexistent ratings and cash flow. According to Beasley, people in Detroit had a better chance of receiving the signal than people in downtown Cleveland. He had the tower raised to reach his target audience and an urban format installed. Cash flow grew to $1 million a year, and ultimately Beasley Broadcast was able to sell the station for $4 million, realizing a tidy profit on the venture.

Continuing Growth Through Acquisition: 1980s-90s

The company continued to buy and sell radio stations in the 1980s. It also upgraded stations in order to enter into markets from out-of-town locations; such as a move-in with a Conway, South Carolina, station to enter Myrtle Beach. A station in Lumberton was able to become the number one station in Fayetteville, North Carolina. As the company expanded its operations across the country, Beasley Broadcast picked up WRXK-FM in Fort Myers, Florida, which also served the Naples market. Not only did George Beasley like the area, Florida offered tax advantages over North Carolina, prompting him to move the corporate headquarters of Beasley Broadcast to Naples in 1988. The most important acquisition of the decade also came in 1988 when Beasley Broadcast purchased the Los Angeles AM and FM stations of KRTH for $87 million, thereby cracking the top ten markets. By now Beasley Broadcast was comprised of nine AM and 11 FM stations. In order to finance the KRTH-AM/FM deal four of those stations were sold. Los Angeles at first proved to be a tough market for the company and it soon sold off the AM station for $23 million. Not only was the growth in advertising revenues slow during the first year of ownership, the FM station faced a direct challenge on its format from a CBS FM station. With KRTH-FM’s ratings on the decline by 1990 the company brought in a new program director and was able to reverse the trend. With the economy in recession during this period, Beasley Broadcast faced difficulties on another front. Many banks decided to reduce the number of broadcast loans in their portfolios, which brought tremendous pressure on radio operators. As a result, the value of radio stations collapsed and many owners, forced to sell, were left with little from their original investments. One of the fortunate ones, Beasley was able to work with his bankers to ride out this period, which he called “probably the toughest time I recall in broadcasting.”

Company Perspectives:

We live by the credo that we are a local broadcaster, serving the needs of people and advertisers in large and small communities. However, by our sheer size, we acknowledge that BBGI is also a national broadcaster involved with important issues, trends and developments across the country.

In 1993 Beasley Broadcast sold its Los Angeles station for $117 million, a record at the time for the purchase of a standalone FM station. With the proceeds the company paid $26 million for WDAS-FM Philadelphia, an urban-formatted station that it hoped would complement a country music station it already owned, WXTU-FM. Although the two stations never developed the kind of synergy that it envisioned, the company was still able to sell WDAS-FM three years later for $103 million. The high price was due in large part to the 1996 Telecommunications Act, which allowed ownership of a greater number of stations across the country and several in a single market. With ownership rules loosened, the stage was set for radio station operators like Beasley Broadcast to acquire several radio stations in a single market, so-called clusters, which offered a number of advantages. Broadcast companies could run a number of radio stations more economically than one, and they could also better compete with other media for advertising dollars. With their stations offering a variety of formats, owners of clusters were able to deliver the demographics advertisers desired. Conversely, the new rules also resulted in the decline of local ownership and the kind of family-run stations that produced the likes of George Beasley.

Going Public in 2000

Beasley Broadcast Group pursued the cluster strategy during the rest of the 1990s, with multiple stations in such top 50 markets as Philadelphia and Miami. By the end of 1999 Beasley owned 32 radio stations in seven eastern markets, comprising the 16th largest radio broadcasting company in the United States in terms of revenue, according to BIA Financial Network. To sustain the company’s growth, which was becoming a virtual necessity in the rapidly consolidating radio industry, Beasley Broadcast went public in 2000, netting the company approximately $97.7 million. Proceeds were used to reduce borrowings under the company’s credit facility and to repay other indebtedness. Three AM operations were acquired in the Miami and West Palm Beach markets, and by February 2001 the company closed on the purchase of Centennial Broadcasting, a $113.5 million transaction that added clusters in Las Vegas and New Orleans. Moreover, by going public BBGI was able to reward key managers by granting stock options in the company.

Throughout its history BBGI was generally quick to adopt to changing landscapes and new technologies. George Beasley took advantage of the availability of low-powered radio stations to enter the business. Although cautious about committing the company to the FM format too soon, he eventually took advantage of FM opportunities as well. In the 1970s Beasley Broadcast stations began using syndicated network programming, delivered by several evolving technologies. Records and tapes that originally provided such programs as Casey Kasem’s “American Top 40” and commentaries by Paul Harvey gave way to CD and satellite transmissions. Beasley Broadcast stations also pursued systems that allowed on-air personalities to pre-record programming. Starting in the late 1980s the computerized Scott System was adopted, allowing announcers to record an entire show in a fraction of its running time. With the rise of the Internet in the 1990s, a large number of Beasley Broadcast stations began to stream their signals over the Internet, although copyright and royalty issues eventually forced non-talk streams to be switched off. As a public company, BBGI began to plan for the future of radio and the eventuality of digital AM radio, which would allow AM stations to offer the same quality as FM. In anticipation of this change, BBGI began acquiring AM stations in large markets such as Atlanta and Boston.

Beasley topped the $100 million revenue mark in 2000. Facing a recessionary economy soon thereafter, the radio broadcasting industry and BBGI adjusted accordingly. Cost reduction efforts were initiated and in March 2002 two FM radio stations in the New Orleans market were divested with proceeds used to reduce debt. When asked what he saw on the horizon for BBGI, Beasley told Radio Ink magazine in a May 2002 interview, “We’re going to do what we think is in the best interests of all the shareholders.”

Principal Competitors

Cox Radio Inc.; Clear Channel Communications Inc.; Cumulus Media Inc.; Infinity Broadcasting Corporation.

Key Dates:

1961:: High school principal George Beasley launches WPYB-AM in Benson, North Carolina.
1969:: Beasley quits the education field for a full-time career in radio.
1976:: The company enters its first major market with the purchase of Cleveland station.
1988:: Beasley cracks top ten markets with the purchase of a Los Angeles AM & FM station.
1996:: The Telecommunications Act permits ownership of several stations, clusters, in a single market.
2000:: Beasley goes public.