Media Industry Valuation Overview
Media Industry Tax Group Conference
Miami, FL
May 4th-6th, 2011
Bond & Pecaro, Inc.
1920 N St., NW – Suite 350
Washington, DC 20036
(202) 775-8870
www.bondpecaro.com
Television Industry Revenues
$68.3
$70.0
$65.0
$61.9
Total Revenue ($B)
$65.0
$59.0
$60.0
$56.2
$53.5
$55.0
$50.0
$41.9
$45.0
$40.0
$33.4 $34.1
$30.0
$36.3 $37.3
$39.7 $39.5
$42.1
$44.3
$42.3 $42.6
$38.8
$36.7
$33.7
$30.2
1995
1996
1997
1998
1999
2000
2001
Actual Revenues
6/28/2016
$46.2
$50.9
$43.6
$41.9
$35.0
$25.0
$44.0
$48.5
2002
2003
2004
2005
2006
2007
2008
2009
2010
Expected Broadcast TV Revenues
2
Television Industry Cash Flow Margins
39.0%
36.6%
Cash Flow Margin
37.0%
34.8%
34.8%
34.7%
35.0%
32.8%
33.0%
31.7%
30.7%
30.2%
31.0%
29.0%
26.8%
27.0%
25.0%
2002
6/28/2016
2003
2004
2005
2006
2007
2008
2009
2010
3
Television Industry Cash Flow Multiples
13.6
14.0
Cash Flow Multiples
13.5
13.0
12.1
12.5
12.0
11.5
12.5
12.4
11.3
10.8
11.0
10.5
10.1
10.5
10.0
9.5
9.5
9.0
2002
6/28/2016
2003
2004
2005
2006
2007
2008
2009
2010
4
Television Industry implied Value ($B)
Television Industry Implied Value:
Revenues x Cash Flow Margin x Cash Flow Multiple
$209.7
$220.0
$187.8
$200.0
$167.8
$180.0
$156.1
$154.0
$160.0
$135.7
$140.0
$134.6
$122.6
$120.0
$95.8
$100.0
6/28/2016
$80.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
5
Radio Industry Revenues
$38.0
Total Revenue ($B)
$33.0
$28.0
$23.0
$19.8
$18.0
$19.8
$17.7
$13.0
$8.0
$20.8
$18.4
$23.0
$24.1
$26.6
$29.3
$11.6
$12.5
1996
$32.3
$19.4 $19.6 $20.0 $20.1 $20.1 $19.6 $19.5
$16.0
$15.4
1995
$17.1
$13.8
1997
1998
1999
2000
2001
Actual Revenues
6/28/2016
$21.9
$25.3
$27.9
$30.8
2002
2003
2004
2005
2006
2007
2008
2009
2010
Expected Broadcast TV Revenues
6
Radio Industry Cash Flow Margins
33.0%
Cash Flow Margin
31.0%
31.3%
30.1%
29.6%
29.6%
29.0%
27.1%
27.0%
25.5%
24.2%
25.0%
24.3%
22.0%
23.0%
21.0%
2002
6/28/2016
2003
2004
2005
2006
2007
2008
2009
2010
7
Radio Industry Cash Flow Multiples
17.0
16.4
Cash Flow Multiples
16.0
15.0
13.6
14.0
13.0
13.2
13.0
12.0
11.4
12.0
10.2
11.0
10.0
9.0
9.0
8.6
8.0
2002
6/28/2016
2003
2004
2005
2006
2007
2008
2009
2010
8
Radio Industry implied Value ($B)
Radio Industry Implied Value:
Revenues x Cash Flow Margin x Cash Flow Multiple
$108.0
6/28/2016
$95.8
$98.0
$85.2
$88.0
$78.3
$75.5
$78.0
$61.6
$68.0
$54.2
$58.0
$43.8
$48.0
$35.0
$39.8
$38.0
$28.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
9
Newspaper Industry Advertising Revenues
$88.6
$93
$84.4
Total Revenue ($B)
$83
$73
$63
$54.4
$57.1
$60.0
$63.0
$66.1
$69.4
$72.9
$76.6
$80.4
$53
$43
$33
$39.6
$42.0
$45.6
$48.6
$51.6
$54.4
$52.2 $53.0 $52.2
$49.5 $49.3 $50.2
$47.4
$39.5
$33.1 $31.5
$23
1995
1996
1997
1998
1999
2000
2001
Actual Revenues
6/28/2016
2002
2003
2004
2005
2006
2007
2008
2009
2010
Expected Broadcast TV Revenues
10
Newspaper Industry Cash Flow Margins
31.0%
28.7%
Cash Flow Margin
29.0%
27.8%
27.4%
25.9%
27.0%
24.5%
25.0%
23.2%
23.0%
23.0%
20.2%
21.0%
18.5%
19.0%
17.0%
2002
6/28/2016
2003
2004
2005
2006
2007
2008
2009
2010
11
Newspaper Industry Cash Flow Multiples
13.0
Cash Flow Multiples
12.0
11.8
11.7
11.1
11.0
10.5
11.0
10.0
9.0
8.0
6.8
6.6
7.0
5.5
6.0
5.4
5.0
2002
6/28/2016
2003
2004
2005
2006
2007
2008
2009
2010
12
Newspaper Industry implied Value
($B)
Newspaper Industry Implied Value:
Revenues x Cash Flow Margin x Cash Flow Multiple
6/28/2016
$172.0
$156.8
$163.6
$157.8 $162.3
$152.0
$134.6
$132.0
$112.0
$92.0
$74.9
$72.0
$52.0
$40.4
$44.0
$41.4
2008
2009
2010
$32.0
2002
2003
2004
2005
2006
2007
13
Cable Network Industry Revenues
$45.0
$39.7
Total Revenue ($B)
$40.0
$41.7
$36.4
$32.7
$35.0
$29.4
$30.0
$26.1
$23.0
$25.0
$19.5
$20.0
$16.2
$17.4
$13.9
$15.0
$10.0
$11.6
$6.7
$8.1
$9.6
$5.0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008 2009E
Actual Revenues
6/28/2016
14
Cable Network Industry Cash Flow Margins
Cash Flow Margin
42.0%
41.0%
41.0%
40.0%
39.5%
38.5%
39.0%
38.0%
36.5%
37.0%
36.0%
35.0%
34.0%
33.0%
35.7%
35.7%
35.5%
2004
2005
2006
33.7%
33.0%
32.0%
2002
6/28/2016
2003
2007
2008
2009
2010
15
Cable Network Industry Cash Flow Multiples
19.0
16.7
Cash Flow Multiples
17.0
15.1
14.3
15.0
12.7
13.0
11.0
11.4
10.3
10.5
10.1
9.8
2008
2009
2010
9.0
7.0
5.0
2002
6/28/2016
2003
2004
2005
2006
2007
16
Cable Network Industry implied Value
($B)
Cable Network Industry Implied Value:
Revenues x Cash Flow Margin x Cash Flow Multiple
6/28/2016
$190.1
$200.0
$180.0
$183.4
$160.5 $165.6
$158.8
$160.0
$132.3
$129.4
$140.0
$117.9
$120.0
$100.0
$80.0
$66.6
$60.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
17
Recent Media Company Stock Price Appreciation
6/28/2016
Company
Symbol
Industry
Stock Price
as of
03/31/2009
Stock Price
as of
4/29/2011
Nexstar Broadcasting
NXST
Television
$0.68
$8.34
1126.5%
LIN TV Corp
TVL
Television
1.12
5.35
377.7%
Gray Television
GTN
Television
0.32
2.79
771.9%
Beasley Broadcast Group
BBGI
Radio
1.95
6.74
245.6%
Entercom Communications
ETM
Radio
1.10
10.59
862.7%
Spanish Broadcasting
System
SBSA
Radio
0.15
0.77
413.3%
Gannet Co
GCI
Newspaper
2.20
15.06
584.5%
A.H. Belo
AHC
Newspaper
0.98
8.32
749.0%
The McClatchy Co
MNI
Newspaper
0.49
2.86
483.7%
Comcast Co
CMCSA
Cable
13.64
26.21
92.2%
% Change
18
Intangible Property
There are no like classes for intangible property.
Whether these assets are of a like-kind depends on the
nature of the rights involved and the character of the
underlying property to which those rights relate.
For example, the exchange of a copyright on a novel for
a copyright on another novel constitutes a like-kind
exchange. However, the exchange of a copyright on a
novel for a copyright on a song is not a like-kind
exchange.
Intangible Property
According to the Financial Accounting Standards Board
(FASB) ASC 805, an intangible asset is recognized as
separate from goodwill if:
 It arises from contractual or other legal rights;
 It is individually divisible from the acquired entity and
sold, transferred, licensed, rented, or exchanged; or
 It is divisible from the acquired entity and sold,
transferred, licensed, rented, or exchanged in
combination with a related contract, asset, or liability.
Examples of Assets That Meet the Criteria for
Recognition Apart from Goodwill:
•
Marketing-Related Intangible Assets
•
Customer-Related Intangible Assets
•
Artistic-Related Intangible Assets
•
Contract-Based Intangible Assets
•
Technology-Based Intangible Assets
• Marketing-Related Intangible Assets
i.
Trademarks and Tradenames
ii.
Service Marks, Collective Marks,
Certification Marks
iii. Trade Dress
iv. Newspaper Mastheads
v.
Internet Domain Names
vi. Non-competition Agreements
• Customer-Related Intangible Assets
i.
Customer Lists
ii. Order or Production Backlog
iii. Customer Contracts and Related Customer
Relationships
iv. Non-contractual Customer Relationships
• Artistic-Related Intangible Assets
i.
Plays, Operas, Ballets
ii. Books, Magazines, Newspapers, Other
Literary Works
iii. Musical Works ie. Compositions, Song
Lyrics, and Advertising Jingles
iv. Pictures and Photographs
v. Video and Audiovisual Material ie. Motion
Pictures and Television Programs
• Contract-Based Intangible Assets
i.
Licensing, Royalty, Standstill Agreements
ii.
Advertising, Construction, Management,
Service, Supply Contracts
iii. Lease Agreements
iv. Construction Permits
v.
Franchise Agreements
vi. Operating and Broadcast Rights
vii. Use Rights
viii. Servicing Contracts
ix. Employment Contracts
• Technology-Based Intangible Assets
i.
Patented Technology
ii. Computer Software and Mask Works
iii. Unpatented Technology
iv. Databases, including Title Plants
v. Trade Secrets i.e. Secret Formulas,
Processes, and Recipes
Goodwill and Going Concern
The excess of the cost of an acquired entity over the net
of the amount assigned to assets acquired and liabilities
assumed shall be recognized as an asset referred to as
goodwill.
The exchange of goodwill or going concern between
businesses is not a like-kind exchange.