Unsold AMs Don't Mean Band Is Dead, Broadcast Officials Say

A recent FCC auction of construction permits for radio stations in which none of the four AM permits that are up for grabs sold isn’t a positive sign for AM but doesn’t mean there’s no interest in the band, radio brokers and broadcasters told us (see 2108130049). “We have some folks looking into buying us right now,” said Christine Wood, program director and part owner of WFLO(AM) Farmville, Virginia. “It’s a reflection on the overall challenges of AM,” said radio broker Mark Jorgenson.

All four AM station permits in Auction 109 were in the relatively large St. Louis market. “The prices were apparently deemed too high to justify for companies looking for a business return,” said Wilkinson Barker broadcast attorney David Oxenford in a blog post. Each AM station had a minimum opening bid of $50,000. He said sales of FM stations in the auction were also low, and suggested ownership rules could be the reason (see 2108130049). “We were pleased with the outcome of Auction 109 -- we received bids for the majority of the allotments that were available and that will mean important new services for the public,” emailed an FCC spokesperson.

“The result is surprising, not shocking,” said Patrick Communications media broker Gregory Guy. “It’s not indicative of AM being valueless.” One reason for a lack of interest in the stations is that construction permits require a substantial investment to turn into a station, an investment hard to get a return from with AM’s lower levels of listenership, said Jorgenson. Only 30% of listeners are checking the AM dial, making competition for their ears more fierce, he said.

Buyers of construction permits are “up against established stations,” starting with no format, facilities or established listener base, Jorgenson said. Wood, who has been in the industry for 65 years, said modern AM owners face special challenges in sound quality and in finding listeners and advertisers.

The Auction 109 AM frequencies previously belonged to established stations in the St. Louis market that surrendered their licenses. They were owned by Entertainment Media Trust. EMT turned them in after a hearing proceeding (see 2002050015) triggered by the FCC’s discovery that the stations were under the control of convicted felon and self-titled “Grim Reaper of Radio” Bob Romanik rather than the listed license holder.

The stations might have been a more attractive purchase if the FCC had included their existing facilities in the sale, said National Association of Black Owned Broadcasters President James Winston, conceding there’s no procedure for the agency to do that. The Multicultural Media, Telecom and Internet Council pushed for the same thing at the time of EMT’s hearing (see 2003020063). “The FCC needs to have found a way,” Winston said.

There's a market for existing AM stations, paired with FM stations or FM translators, all the broadcast officials interviewed said, many noting there's almost no market for stand-alone AM stations. “This was too unique a situation to draw conclusions,” said Winston. It's possible for AM stations in “ethnically and linguistically diverse” markets to find a niche, such as a local, underserved ethnic population, and become profitable, Jorgenson said. St. Louis isn’t a diverse enough market for that to be viable, he said.

Buyers have little reason to invest in the construction of new AM stations when a substantial number of built-out ones are available, said Jorgenson. “If you got money, take a look around, there’s plenty of inventory,” he said. Building new AM facilities is more demanding than building new FM stations because AM stations require in-ground systems that affect where they can be built, Oxenford said.

COVID-19 may also have been a contributing factor in the way the auction played out, brokers said. Uncertainty about the pace of the recovery and the future of the disease can make it difficult to determine the value of a station for both buyers and sellers, Jorgenson said. That has led to a general slowdown in broadcast mergers and acquisitions in the past few months, said both Guy and Jorgenson. “Almost zero institutional financing” is available to would-be AM buyers, Jorgenson said.

Unsold construction permits from past FCC auctions have been held and re-auctioned later, an FCC spokesperson said. If an allotment doesn’t receive bids in two auctions, it generally isn’t retained, the spokesperson said.