Everywhere you look in country music these days, there is Cumulus Media. From being the second-largest radio station owner in America—and one that’s betting big on country as the radio format of the future—to partnering with Scott Borchetta’s Big Machine Records on the joint venture NASH Icon, to recently taking over the naming rights to the 20-year-old Country Weekly magazine, Cumulus has become a big mover and shaker in the country music space, launching reality TV competitions, and pushing their NASH “lifestyle” brand that among other things has plans for NASH-branded clothing, food, furniture, and even paint.
Cumulus Media’s NASH concept wants to become the one stop shop for corporate country consumers, and the country industry is more than willing to play ball as long as the company spreads its capital around to launch grandiose ventures and continues to play its artists on the radio.
But there’s a problem. A big one.
Cumulus Media’s financial particulars are terrible, and getting worse by the second. For all of their boisterous plans and big ideas, Cumulus is a company with over $2 billion in debt, and with a stock price that is rapidly going down the tubes.
Last Thursday (9-24), Cumulus Media’s stock got “obliterated” in the words of Economic News Daily, losing -15.54% at a trading volume of 19.40M shares to settle at a paltry $0.76 cents per share, down from a starting price of $0.87 cents per share. It was one of the stock market’s biggest losers on a day that saw the rest of the market only down slightly. Even after the huge selloff, Cumulus stock was only able to muster a $0.02 cent recovery on Friday, finishing at $0.78 cents. In the last year, Cumulus stock has stood as high as $4.51.
Part of the reason for the stock selloff was the crowdsourced equity research firm Seeking Alpha evaluating Cumulus stock as a “sell.” The logic from Seeking Alpha was:
” The company has generated very low levels of profits in spite of very high revenue growth over the past few years. In addition, leverage is a significant problem.
” We believe the shares are very optimistically priced, in spite of the poor operating performance.
Moody’s Investors Service also downgraded the company’s Corporate Family Rating on September 15th.
At the last earnings report for Cumulus in May, the company reported revenue of $271.08 million for the first quarter, down 7.2% from the year-ago quarter. It also reported a loss of 5 cents a share. Advertising fell 7% from the year-ago, digital advertising revenue fell 16.4%, and political advertising fell 67.7% (source).
Even worse are some of the reports about Cumulus management being in the midst of turmoil. According to Media Confidential, after Thursday’s stock slide, high-profile Cumulus Executive Vice President of Content and Programming John Dickey was cleaning out his desk. John Dickey is the brother of Cumulus CEO Lew Dickey.
Analysts have questions about Cumulus management. Who’s in charge? Jeff Marcus, currently non-executive Chairman of the Board has been rumored to be making the rounds at many Cumulus stations and unconfirmed reports have EVP of Content and Programming John Dickey cleaning out his office Thursday night. A year ago he stepped away from a Co-COO/EVP operating role shared with Jon Pinch to take the EVP of content position. He’s been a prime mover in Cumulus Media’s country NASH initiative one of the things his brother Lew has been touting as a growth engine for Cumulus.
Part of the problem may be how Cumulus bet big on country music, and the radio ratings for country have been falling in recent months. The ratings for the Cumulus-partnered inaugural American Country Countdown Awards were abysmal. Part of the strategy of the Dickey Brothers has been to move away from the conservative talk radio which kept Cumulus afloat in recent years to focus more on the NASH brand. However ratings remain mild, and country music is not turning into the cash cow some expected it to become during the heyday of Bro-Country.
Last year, Saving Country Music spoke to radio and media insider Jerry Del Colliano, who was suprious of Cumulus Media’s NASH plans, alluding that they were simply “sizzle” to hide the fact that the company’s financial were terrible, and the business was failing.
“Where Cumulus now has a successful country station, [Lew Dickey] is forcing the morning talent out and replacing them with a weak nationally syndicated morning show that is not local,” said Jerry Del Colliano. “Dickey should have no problem keeping big investors on board because they don’t understand the radio industry and probably don’t listen to any kind of country music. They hear the sound of money from a shrewd CEO who is selling sizzle, because if ratings or revenue is a yardstick, he is failing.”
“[Cumulus] throws nickels around like manhole covers they aren’t going to spend ANY money on NASH,” continues Del Colliano. “It is one format for 100 plus stations some day. In other words, they pay for one station and fire everyone else. How is that investing in country? It is hurting country by eliminating the local person center connection that is so unique to country music and artists. NASH is pop radio country style. NASH Icon will be traditional country but in a watered down cheap version. Icons is to be blunt just another format that will allow Cumulus to fire lots of local people and install a money saving 2nd national format. It could be Gregorian Chants for all the Dickeys care. This has little to do with country and lots to do with saving money by syndicating cheap national formats.”
But the risk of a Cumulus implosion is not just one for the company itself. The NASH Icon record label has a roster that includes Reba McEntire, Martina McBride, and the recently-signed Hank Williams Jr. and Ronnie Dunn. But will NASH be able to hold up their end of the bargain? The same question has to be asked about Country Weekly, and the scores of Cumulus-owned country radio stations across the United States.
Over the last 18 months, Cumulus and mainstream country music have become tied at the hip. If Cumulus goes down, it could cause some serious ripples and turmoil for country music as well.