Entercom Communications Corporation

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Entercom Communications Corporation

401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
U.S.A.
Telephone: (610) 660-5610
Fax: (610) 660-5620
Web site: http://www.entercom.com

Public Company
Incorporated: 1968 as Entertainment Communications Inc.
Employees: 2,430
Sales: $391.3 million (2002)
Stock Exchanges: New York
Ticker Symbol: ETM
NAIC: 515112 Radio Stations

Entercom Communications Corporation, the fifth-largest radio conglomerate in the United States, owns 100 AM and FM radio stations in 19 markets throughout the country. The company’s programming covers the spectrum of radio content, including music, news, and talk formats. Entercom’s most important markets, in order of the revenue they generate for the company, are Seattle, Boston, Kansas City, Sacramento, Portland, New Orleans, and Denver. The company tends to dominate the markets in which it operates; in fact, more than 85 percent of the company’s revenues are derived from markets in which Entercom ranks either first or second in radio revenues. The company ranks among the top three in revenue market share in 18 of its 19 markets. Entercom also serves as the exclusive radio broadcaster of professional sports teams such as the Seattle Seahawks, the Boston Red Sox, the Kansas City Royals, and the New Orleans Saints, as well as several major college sports teams.

Origins

Entercom was founded during the early years of the FM broadcasting industry. The company’s founder, Joseph M. Field, practiced law in New York City and Philadelphia before entering the broadcast business. Convinced that FM radio had tremendous growth potential and would soon eclipse AM radio as the leader of the medium, Field gave up law to found Entercom, then known as Entertainment Communications Inc., beginning in 1968 with three radio stations.

From its base in suburban Philadelphia the company grew slowly, its expansion held in check by its own financial constraints and by ownership limits set by the Federal Communications Commission (FCC), which stipulated that radio station operators could own only one station in a market. As a result, Field had to enter a new market each time he wanted to expand. In 1973 he purchased KMTT-FM in Seattle, establishing Entercom’s first presence in what would become its most important market.

Field began to develop more ambitious plans during the 1980s. The FM broadcasting industry had matured by this point, realizing the potential foreseen by Field, and Entercom developed a long-term plan to expand its operations at both the corporate and station levels. The program formats of Entercom’s stations were redesigned to appeal to mainstream audiences. However, Field would have to wait for federal regulations to change before he could fully realize his ambitions for growth.

Industry Deregulation in the 1990s Spurs Expansion

During the 1990s the FCC’s regulations on the ownership of multiple stations were eased, beginning with the introduction of duopoly rules, which allowed a company to own two stations in each radio band. Entercom took the opportunity to expand its presence in the markets where it already operated. In April 1995, for example, Entercom paid $24.5 million for three radio stations in Portland, Oregon, acquiring KGON-FM, a classic rock station, KFXX-AM, an all-sports station, and KMUZ-FM, a modern rock station.

Entercom was poised for an exponential surge in growth, which was triggered by a landmark piece of legislation, the Telecommunications Act of 1996. Under the Telecom Act, ownership restrictions were greatly relaxed, enabling a single company to own as many as eight radio stations in a single market. In March 1996 Entercom traded stations with Viacom, swapping an FM station in New York City for Viacom’s Seattle stations KSBG-AM and -FM and KNDD-FM. The following year Entercom acquired three Seattle stations from Bonneville International Corp. (KIRO-AM and -FM and KNWX-AM), as well as Bonneville’s Kansas City stations KCMO-AM and -FM, KLTH-FM, and KMBZ-AM. At the close of the Bonneville deal Entercom had nearly doubled in size, to 22 stations.

The Bonneville transaction made the company the eighth-largest radio broadcaster in the country and the market leader in the Northwest, with three stations in Portland and eight stations in Seattle. The Seattle market itself quickly became Entercom’s most important area of operation, delivering nearly half of the company’s total revenues and more than half of its cash flow in 1997.

In August 1998, the company announced plans to acquire a cluster of stations in Boston. Entercom’s debt load had already reached more than $200 million when its intentions were announced, but Entercom officials felt that its long-term success depended on using leverage for rapid expansion. In Boston, the company acquired a sports-talk station, WEEI-AM, and another talk-oriented station, WRKO-AM, in 1998. The following year Entercom purchased three more Boston stations, WAAF-FM, WQSX-FM, and WVEI-AM. Additional acquisitions followed in Portland, Sacramento, and Kansas City.

1999 Sinclair Broadcasting Acquisition

In 1999 Entercom went public, netting roughly $236 million in its initial public offering (IPO). The company used the proceeds from the IPO to reduce its existing debt, then, in July 1999, announced its acquisition of the Sinclair Broadcasting Group, which was its largest purchase to date. Valued at a numbing $824.5 million, the deal included 46 radio stations in nine markets, the addition of which more than doubled the number of stations under Entercom’s control and more than doubled its number of markets. The acquisition was completed by the end of the year, making Entercom the fifth-largest radio broadcaster in the United States, with 88 radio stations in 17 markets.

Entercom had acquired more than 80 radio stations during the three-year period following deregulation. The expansion yielded considerable synergies, as the company performed in-depth analyses of each market’s demographics and tailored its formats and playlists to maximize advertising revenue. The company continued to expand through acquisition, and in 2001 generated $333 million in revenues from 101 stations in 19 markets. In all but one of those markets, Entercom ranked as one of the top three broadcasters in terms of market share. Seattle, Boston, Portland, Denver, and Sacramento provided a sturdy foundation for the company, complemented by markets including Milwaukee, Buffalo, Rochester, and Wichita.

As Entercom prepared for the future, it remained committed to expansion through acquisition. The company sought under-performing stations that it could transform with its operational expertise, and while it generally targeted radio stations inthe 50 largest markets in the country, it occasionally considered properties in smaller markets. In the years ahead, there was every expectation that Entercom would continue to add to its portfolio of radio properties and press forward with its march up the industry rankings. The industry leader, Clear Channel Communications, owned more than 1,200 radio stations. While catching Clear Channel represented a lofty goal, Field and his executive team were determined to make Entercom the preeminent radio conglomerate.

Principal Divisions

Entercom Seattle; Entercom Portland; Entercom Boston; Entercom Sacramento; Entercom Denver; Entercom New Orleans; Entercom Kansas City.

Principal Competitors

Clear Channel Communications, Inc.; Infinity Broadcasting Corporation; Saga Communications, Inc.

Company Perspectives

Entercom believes that radio station operators differentiate themselves from their peers primarily through their ability to recruit, develop, motivate, and retain superior management, programming, and sales talent. Accordingly, the company strives to establish a compelling corporate culture, which is attractive to high performers.

Key Dates

1968:: Entertainment Communications is founded by Joseph M. Field.
1973:: Company enters the Seattle market for the first time.
1996:: Telecommunications Act of 1996 fuels the rise of radio conglomerates.
1999:: Entercom goes public and acquires Sinclair Broadcasting Group.