WHAT DOES THE SALE OF WKCP MEAN FOR THE CLASSICAL MUSIC FORMAT?

Late last week news leaked that American Public Media Group (“APMG”) is selling Classical South Florida to the Educational Media Foundation (“EMF”) for $21,700,000 in cash.  According to press reports, the deal will be formally announced on Tuesday 7/15 and classical music will end Wednesday 7/16 when EMF begins to operate WKCP and related stations via a Local Management Agreement (“LMA”).

The reason for the sale appears to be that Classical South Florida couldn’t pay the mortgage.  As we reported recently [link] EMF is flush with cash and is the most active noncommercial station buyer and seller in the past three years.

This is a business deal. But it also conveys the message that even APMG couldn’t make the classical music format work in one of largest markets in the country. I am not saying this is good or bad – it is reality.

INSIDE THE SALE

APMG bought the license for WKCP in 2007 for $20,000,000 and created Classical South Florida (“CSF”) to operate it. APMG/CSF also acquired WPBI (formerly WXEL), West Palm Beach, WNPS, Fort Myers to repeat WKCP. WPBI’s HD2 channel – repeated on an FM translator – aired NPR News 24/7.  (We reported on WPBI's News FM earlier this year link.)

APMG loaned CSF $10,000,000 in 2007 and $1,250,000 in 2014. APMG/CSF also received over $9,000,000 in development bonds making the total debt load around $30,000,000.

According to CSF’s internal financial report, in 2014 CSF received $4,120,000 in revenue including $2,182,000 from pledging and $1,340,000 from underwriting sales.  Operating expenses in 2014 were over $3,000,000 and debt service – The Mortgage – was almost $1,900,000.  This meant a deficit of around $1,500,000.

Apparently APMG saw CSF was never going to be able pay the debt. So they cashed in their chips and cut their losses.  APMG and CSF had the best of intentions but revenue from classical music broadcasting wasn’t going to rise to the level of sustainability.

BOTTOM LINE DECISIONS

The folks at APMG are terrific public service broadcasters with a healthy respect for the bottom line.  You have to make your budget goals at APMG. In fact, part of the compensation for APMG executives is determined by performance compared to goals.

Classical South Florida couldn’t meet their goals now they are toast. Could this happen with other APMG ventures? Yes, of course it could.

WATCHING THE TREND LINES

We all know that the classical music audience is quite older. I’ve heard that half of the listeners are age 65 or older.  Not enough younger listeners are coming to the format to replace the folks who exit.  Check out this comparison of KSJN, APMG’s classical flagship station in the Twin Cities, in May 2015 and Fall 2000:

KSJN	AQH SHARE	WEEKLY CUME	WEEKLY CUME RATING	NOTE
Fall 2000	3.3	226,600	6.7	Arbitron Diary Methodology
May 2015	1.7	168,700	5.4	Nielsen Audio PPM Methodology

Note: The data above reflects two different survey methodologies.

KSJN lost a substantial portion of its listening in the past 15 years.  Project this trend for the next 15 years and you see a road to oblivion.

Add the fact that KSJN is at 99.5 FM, a commercial frequency, worth somewhere north of $60,000,000. When the day comes, APMG will make a bottom line decision.