Amid financial troubles, Radio One has announced a new financing plan. In an official statement, the Black-owned media company said it will refinance its debt. But in a surprising move, it also said it would increase its stake in TV One L.L.C.
Radio One obtained a new senior-secured credit facility with a $50 million revolving credit facility and a $350 million term loan. According to the company, it will exchange $1,000 worth of outstanding 8 7/8 percent senior-subordinated notes (senior loans, or debt that takes priority over other unsecured debt owed) due 2011 for $1,000 worth of newly issued 11 percent senior grid notes due 2017, among other new plans.
“Access to capital and cash reserves is critical. If additional financing will allow the company to better serve its core audience, then this is a good move,” notes Norm Bond, national president of the National Alliance of Market Developers, an organization focused on marketing, sales, sales promotion, advertising and public relations targeting the minority and urban consumer markets.
In order to boost its ownership in TV One, Radio One will offer holders of existing notes who participate in the exchange the chance to buy a total of $100 million of 8.5 to 9 percent second-priority, senior-secured grid notes due 2016. With the proceeds it raises from this move, Radio One will spend $82 million for 19 percent of TV One. Radio One currently owns 37 percent of TV One.
But with the shaky state of the media industry, especially media targeting African-Americans, some experts question if increasing its stake in TV One is a smart move for Radio One. But Bond says moving from radio to television could be key to saving Radio One. “Radio One, like all Black-owned and targeted media faces a challenging future. Some of the variables are outside of its control. Unfortunately, many advertisers continue to devalue the African-American consumer market. So, 1,000 listeners on an urban station receive a lower cost-per-thousand than 1,000 listeners on a ´rock´ station,” Bond says.
Also, because many advertisers incorrectly believe they can reach the African-American listener through general radio and media, Black radio suffers economically. Some marketers today will direct monies to the Latino audience, for example, because messages need to be put “in language”. But these marketers feel that African-Americans “speak English” and are not a distinct audience, so why bother when you can reallocate those monies to the Hispanic audience? They are not increasing the “minority budget” overall; instead, they are shifting around the same 2 to 5 percent of the budget, Bond points out. “But television receives the biggest share of the advertising budget from most of today’s largest advertisers. To be able to play in that space is a good thing for TV One,” Bond says. “TV One can leverage cross platform advertising opportunities including radio, interactive, events and mobile and bundle this into a compelling package for the advertisers that want to reach the African-American audience. Increasingly, African-American consumers are hearing that with $1.2 trillion in spending power, they are being taken for granted relative to other ethnic groups. If this message begins to translate into pressure on companies to demonstrate that they support Black-owned media, this could bode well for TV One.”
Despite the obstacles facing Black media, Bond does predict, however, that the future bodes well for the industry.
“My prediction is that TV One will grow. The African-American audience–TV One’s core demographic–is largely underserved in the U.S. and abroad,” he says. “For example, there is no 6 p.m. or 11 p.m. national news targeted to the African-American audience. There are also programs – relevant content – that could be developed that speaks to this audience in a respectful, engaging, and uplifting way that is also absent from today’s television offerings. TV One has developed a brand, strategic relationships and a multi-media platform strategy.
If it can increase the synergy across these various platforms and leverage that to increase audience size, the advertising revenue should grow.”
Radio One did not respond to requests for comment.