UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) |
For the transition period from to
Commission File No.
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(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
(Address of principal executive offices)
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: |
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ☐ No ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ ☒ Non-accelerated filer ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes
The number of shares outstanding of each of the issuer’s classes of common stock is as follows:
Class |
| Outstanding at March 4, 2022 |
Class A Common Stock, $.001 par value |
| |
Class B Common Stock, $.001 par value |
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Class C Common Stock, $.001 par value |
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Class D Common Stock, $.001 par value |
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The aggregate market value of common stock held by non-affiliates of the Registrant, based upon the closing price of the Registrant’s Class A and Class D common stock on June 30, 2021, was approximately $
URBAN ONE, INC. AND SUBSIDIARIES
Form 10-K
For the Year Ended December 31, 2021
TABLE OF CONTENTS
CERTAIN DEFINITIONS
Unless otherwise noted, throughout this report, the terms “Urban One,” “the Company,” “we,” “our,” and “us” refer to Urban One, Inc. together with all of its subsidiaries.
We use the terms “local marketing agreement” (“LMA”) or time brokerage agreement (“TBA”) in various places in this report. An LMA or a TBA is an agreement under which a Federal Communications Commission (“FCC”) licensee of a radio station makes available, for a fee, air time on its station to another party. The other party provides programming to be broadcast during the airtime and collects revenues from advertising it sells for broadcast during that programming. In addition to entering into LMAs or TBAs, we will, from time to time, enter into management or consulting agreements that provide us with the ability, as contractually specified, to assist current owners in the management of radio station assets that we have contracted to purchase, subject to FCC approval. In such arrangements, we generally receive a contractually specified management fee or consulting fee in exchange for the services provided.
The term “broadcast and digital operating income” is used throughout this report. Net income (loss) before depreciation and amortization, income taxes, interest expense, interest income, noncontrolling interests in income of subsidiaries, other (income) expense, corporate selling, general and administrative, expenses, stock-based compensation, impairment of long-lived assets, (gain) loss on retirement of debt and gain on sale-leaseback, is commonly referred to in the radio broadcasting industry as “station operating income.” However, given the diverse nature of our business, station operating income is not truly reflective of our multi-media operation and, therefore, we now use the term broadcast and digital operating income. Broadcast and digital operating income is not a measure of financial performance under accounting principles generally accepted in the United States (“GAAP”). Nevertheless, broadcast and digital operating income is a significant basis used by our management to evaluate the operating performance of our core operating segments. Broadcast and digital operating income provides helpful information about our results of operations, apart from expenses associated with our fixed and long-lived intangible assets, income taxes, investments, impairment charges, debt financings and retirements, corporate overhead and stock-based compensation. Our measure of broadcast and digital operating income is similar to our historic use of station operating income; however, it reflects our more diverse business, and therefore, may not be similar to “station operating income” or other similarly titled measures as used by other companies. Broadcast and digital operating income does not represent operating loss or cash flow from operating activities, as those terms are defined under GAAP, and should not be considered as an alternative to those measurements as an indicator of our performance.
The term “broadcast and digital operating income margin” is also used throughout this report. Broadcast and digital operating income margin represents broadcast and digital operating income as a percentage of net revenue. Broadcast and digital operating income margin is not a measure of financial performance under GAAP. Nevertheless, we believe that broadcast and digital operating income margin is a useful measure of our performance because it provides helpful information about our profitability as a percentage of our net revenue. Broadcast and digital operating margin includes results from all four segments (radio broadcasting, Reach Media, digital and cable television).
Unless otherwise indicated:
● | we obtained total radio industry revenue levels from the Radio Advertising Bureau (the “RAB”); |
● | we obtained audience share and ranking information from Nielsen Audio, Inc. (“Nielsen”); and |
● | we derived historical market statistics and market revenue share percentages from data published by Miller, Kaplan, Arase & Co., LLP (“Miller Kaplan”), a public accounting firm that specializes in serving the broadcasting industry and BIA/Kelsey (“BIA”), a media and telecommunications advisory services firm. |
3
Cautionary Note Regarding Forward-Looking Statements
Our disclosure and analysis in this annual report on Form 10-K concerning our operations, cash flows and financial position, contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements do not relay historical facts, but rather reflect our current expectations concerning future operations, results and events. All statements other than statements of historical fact are “forward-looking statements” including any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new activities, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. You can identify some of these forward-looking statements by our use of words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “likely,” “may,” “estimates” and similar expressions. You can also identify a forward-looking statement in that such statements discuss matters in a way that anticipates operations, results or events that have not already occurred but rather will or may occur in future periods. We cannot guarantee that we will achieve any forward-looking plans, intentions, results, operations or expectations. Because these statements apply to future events, they are subject to risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially from those forecasted or anticipated in the forward-looking statements. These risks, uncertainties and factors include (in no particular order), but are not limited to:
● | public health crises, epidemics and pandemics such as the ongoing COVID-19 pandemic and their impact on our business and the businesses of our advertisers, including disruptions and inefficiencies in the supply chain; |
● | economic volatility, financial market unpredictability and fluctuations in the United States and other world economies that may affect our business and financial condition, and the business and financial conditions of our advertisers, including as a result of the ongoing COVID-19 pandemic and any similar future occurrences; |
● | our high degree of leverage, certain cash commitments related thereto and potential inability to finance strategic transactions given fluctuations in market conditions; |
● | fluctuations in the local economies of the markets in which we operate (particularly our largest markets, Atlanta; Baltimore; Houston; and Washington, DC) could negatively impact our ability to meet our cash needs; |
● | The extent of the impact of the COVID-19 pandemic (particularly in our largest markets, Atlanta; Baltimore; Houston; and Washington, DC), including the duration, spread, severity, and the impact of any variants, the duration and scope of related government orders and restrictions, the impact on our employees, and the extent of the impact of the COVID-19 pandemic on overall demand for advertising across our various media; |
● | local, regional, national, and international economic conditions that have fluctuated and/or deteriorated as a result of the COVID-19 pandemic, including the risks of a global recession or a recession in one or more of our key markets, the impact that these economic conditions may have on us and our customers, and our assessment of that impact; |
● | risks associated with the implementation and execution of our business diversification strategy, including our strategic actions with respect to expansion into gaming; |
● | risks associated with our investments in gaming businesses that are managed or operated by persons not affiliated with us and over which we have little or no control; |
● | regulation by the Federal Communications Commission (“FCC”) relative to maintaining our broadcasting licenses, enacting media ownership rules and enforcing of indecency rules; |
4
● | regulation by certain gaming commissions relative to maintaining our interests, or our creditors ability to foreclose on collateral that includes our interests in, in any gaming licenses, joint ventures or other gaming and casino investments; |
● | changes in our key personnel and on-air talent; |
● | increases in competition for and in the costs of our programming and content, including on-air talent and content production or acquisitions costs; |
● | financial losses that may be incurred due to impairment charges against our broadcasting licenses, goodwill, and other intangible assets; |
● | increased competition for advertising revenues with other radio stations, broadcast and cable television, newspapers and magazines, outdoor advertising, direct mail, internet radio, satellite radio, smart phones, tablets, and other wireless media, the internet, social media, and other forms of advertising; |
● | the impact of our acquisitions, dispositions and similar transactions, as well as consolidation in industries in which we and our advertisers operate; |
● | developments and/or changes in laws and regulations, such as the California Consumer Privacy Act or other similar federal or state regulation through legislative action and revised rules and standards; |
● | disruptions to our technology network including computer systems and software, whether by man-made or other disruptions of our operating systems, structures or equipment as well as natural events such as pandemic, severe weather, fires, floods and earthquakes; |
● | other factors mentioned in our filings with the Securities and Exchange Commission (“SEC”) including the factors discussed in detail in Item 1A, “Risk Factors,” contained in this report. |
You should not place undue reliance on these forward-looking statements, which reflect our views based only on information currently available to us as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements because of new information, future events, or otherwise.
5
PART I
ITEM 1. BUSINESS
Overview
Urban One, Inc. (a Delaware corporation originally formed in 1980 and hereinafter referred to as “Urban One”) and its subsidiaries (collectively, the “Company”) is an urban-oriented, multi-media company that primarily targets African-American and urban consumers. Our core business is our radio broadcasting franchise which is the largest radio broadcasting operation that primarily targets African-American and urban listeners. As of December 31, 2021, we owned and/or operated 64 independently formatted, revenue producing broadcast stations (including 54 FM or AM stations, 8 HD stations, and the 2 low power television stations we operate) located in 13 of the most populous African-American markets in the United States. While a core source of our revenue has historically been and remains the sale of local and national advertising for broadcast on our radio stations, our strategy is to operate the premier multi-media entertainment and information content platform targeting African-American and urban consumers. Thus, we have diversified our revenue streams by making acquisitions and investments in other complementary media properties. Our diverse media and entertainment interests include TV One, LLC (“TV One”), which operates two cable television networks targeting African-American and urban viewers, TV One and CLEO TV; our 80.0% ownership interest in Reach Media, Inc. (“Reach Media”), which operates the Rickey Smiley Morning Show and our other syndicated programming assets, including the Get Up! Mornings with Erica Campbell Show, Russ Parr Morning Show and the DL Hughley Show; and Interactive One, LLC (“Interactive One”), our wholly owned digital platform serving the African-American community through social content, news, information, and entertainment websites, including its Cassius and Bossip, HipHopWired and MadameNoire digital platforms and brands. We also hold a minority ownership interest in MGM National Harbor Casino, a gaming resort located in Prince George’s County, Maryland. Through our national multi-media operations, we provide advertisers with a unique and powerful delivery mechanism to communicated with African-American and urban audiences.
Our core radio broadcasting franchise operates under the brand “Radio One.” We also operate other media brands, such as TV One, CLEO TV, Reach Media and Interactive One, while developing additional branding reflective of our diverse media operations and our targeting of African-American and urban audiences.
Recent Developments
Impact of Public Health Crisis
Throughout each of 2020 and 2021, the COVID-19 pandemic had an impact on certain of our revenue and alternative revenue sources. Most notably, a number of advertisers across a variety of significant advertising categories have ceased business or reduced advertising spend due to the pandemic. This has been particularly true within our radio segment which derives substantial revenue from local advertisers, including in areas such as Texas, Ohio and Georgia. The economies in these areas were hit particularly hard due to social distancing and other government interventions. Further, the COVID-19 pandemic has caused a shift in the way people work and commute, which in some instances has altered demand for our broadcast radio advertising. Finally, the COVID-19 outbreak caused the postponement or cancellation of certain of our tent pole special events or otherwise impaired or limited ticket sales for such events. We do not carry business interruption insurance to compensate us for losses that occurred as a result of the pandemic and such losses may continue to occur as a result of the ongoing and fluctuating nature of the COVID-19 pandemic. Outbreaks in the markets in which we operate could have material impacts on our liquidity, operations including potential impairment of assets, and our financial results. Likewise, our income from our investment in MGM National Harbor Casino has at times been negatively affected by closures and limitations on occupancy imposed by state and local governmental authorities.
We anticipate continued fluctuations in revenues due to ongoing nature of the COVID-19 pandemic. The extent to which our results continue to be affected by the COVID-19 pandemic will largely depend on future developments, which cannot be accurately predicted and are uncertain. These developments include, but are not limited to, the duration, scope and severity of the COVID-19 pandemic, any additional resurgences, variants or new viruses; the ability to effectively and widely manufacture and distribute vaccines/boosters; the public’s perception of the safety of the vaccines/boosters and the public’s willingness to take the vaccines/boosters; the effect of the COVID-19 pandemic on our customers and the ability
6
of our clients to meet their payment terms; the public’s willingness to attend live events; and the pace of recovery when the pandemic subsides.
Other Recent Developments
On November 6, 2020, the Company entered into a definitive asset exchange agreement with Audacy, Inc. (formerly Entercom Communications Corp.) whereby the Company would receive Charlotte stations: WLNK-FM (Adult Contemporary); WBT-AM & FM (News Talk Radio); and WFNZ-AM & 102.5 FM Translator (Sports Radio). In exchange, Urban One would transfer three radio stations to Audacy: St. Louis, WHHL-FM (Urban Contemporary); Philadelphia, WPHI-FM (Urban Contemporary); and Washington, DC, WTEM-AM (Sports); as well as the intellectual property to its St. Louis radio station, WFUN-FM (Adult Urban Contemporary). The Company and Audacy began operation of the exchanged stations on or about November 23, 2020 under LMAs until Federal Communications Commission (“FCC”) approval was obtained. The deal was subject to FCC approval and other customary closing conditions and, after obtaining the approvals, closed on April 20, 2021. In addition, the Company entered into an asset purchase agreement with Gateway Creative Broadcasting, Inc. (“Gateway”) for the remaining assets of our WFUN station in a separate transaction which also closed on April 20, 2021. The Company received approximately $8.0 million and exchanged approximately $8.0 million in tangible and intangible assets as part of the transaction with Gateway.
PPP Loans
On December 27, 2020, the Consolidated Appropriations Act of 2021 was signed into law. The legislation creates a second round of Paycheck Protection Program (“PPP”) loans of up to $2 million available to businesses with 300 or fewer employees that have sustained a 25% revenue loss in any quarter of 2020. Certain of the new PPP provisions may benefit broadcasters such as the Company. The provisions (i) allow individual TV and radio stations to apply for PPP loans as long as the individual TV or radio station employs not more than 300 employees per physical location; (ii) permit the Small Business Administration (“SBA”) to make loans up to $10 million total across TV and radio stations owned by a station group; (iii) require newly eligible individual TV and radio stations to make a good faith certification that proceeds of the loan will be used to support expenses for the production or distribution of locally-focused or emergency information; and (iv) waive any prohibition on loans to broadcast stations owned by publicly traded entities. On January 29, 2021, the Company submitted an application for participation in the PPP loan program. On June 1, 2021, the Company received proceeds of approximately $7.5 million. The loan bears interest at a fixed rate of 1% per year and will not be changed during the life of the loan. The loan matures June 1, 2026. The Company is in the process of applying for loan forgiveness. While certain of the PPP loans may be forgivable, until they are repaid or forgiven, the loan amount may constitute debt under the 2028 Notes (as defined below) and increase the Company’s leverage.
2028 Notes Offering
On January 25, 2021, the Company closed on an offering (the “2028 Notes Offering”) of $825 million in aggregate principal amount of senior secured notes due 2028 (the “2028 Notes”) in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The 2028 Notes are general senior secured obligations of the Company and are guaranteed on a senior secured basis by certain of the Company’s direct and indirect restricted subsidiaries. The 2028 Notes mature on February 1, 2028 and interest on the Notes accrues and is payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2021 at the rate of 7.375% per annum.
The Company used the net proceeds from the 2028 Notes Offering, together with cash on hand, to repay or redeem (1) the loans outstanding under that certain Credit Agreement, dated as of April 18, 2017, by and among the Company, various lenders party thereto, Guggenheim Securities Credit Partners, LLC, as administrative agent, and The Bank of New York Mellon, as collateral agent (the “2017 Credit Facility”); (2) our 2018 credit agreement (“2018 Credit Facility”), among the Company, the lenders party thereto from time to time, Wilmington Trust, National Association, as administrative agent, and TCG Senior Funding L.L.C., as sole lead arranger and sole book runner; (3) the 2018 credit agreement entered into by Urban One Entertainment SPV, LLC and its immediate parent, Radio One Entertainment Holdings, LLC, each of which is a wholly owned subsidiary of the Company, providing $50.0 million in term loan borrowings (the “MGM National Harbor Loan”); (4) the remaining amounts of our 7.375% Senior Secured Notes due 2022 (the “7.375% Notes”); and (5) our 8.75% Senior Secured Notes due December 2022 (the “8.75% Notes”). Upon
7
settlement of the 2028 Notes Offering, the 2017 Credit Facility, the 2018 Credit Facility and the MGM National Harbor Loan were terminated and the indentures governing the 7.375% Notes and the 8.75% Notes were satisfied and discharged.
Segments
As part of our consolidated financial statements, consistent with our financial reporting structure and how the Company currently manages its businesses, we have provided selected financial information on the Company’s four reportable segments: (i) radio broadcasting; (ii) cable television; (iii) Reach Media; and (iv) digital.
Our Radio Station Portfolio, Strategy and Markets
As noted above, our core business is our radio broadcasting franchise which is the largest radio broadcasting operation in the country primarily targeting African-American and urban listeners. Within the markets in which we operate, we strive to build clusters of radio stations with each radio station targeting different demographic segments of the African-American population. This clustering and programming segmentation strategy allows us to achieve greater penetration within the distinct segments of our overall target market. In addition, we have been able to achieve operating efficiencies by consolidating office and studio space where possible to minimize duplicative management positions and reduce overhead expenses. Depending on market conditions, changes in ratings methodologies and economic and demographic shifts, from time to time, we may reprogram some of our stations in underperforming segments of certain markets.
As of December 31, 2021, we owned and/or operated 64 independently formatted, revenue producing broadcast stations (including 54 FM or AM stations, 8 HD stations, and the 2 low power television stations we operate but excluding translators) located in 13 of the most populous African-American markets in the United States. The following tables set forth further selected information about our portfolio of radio stations as of December 31, 2021.
Urban One | Market Data | |||||||||||||||
Entire Audience | Ranking by Size of | Estimated Fall 2021 | ||||||||||||||
Four Book | African-American | Metro | ||||||||||||||
Average Audience | Population Persons | Population Persons | ||||||||||||||
Market | Number of Stations* | Share(1) | 12+(2) | 12+ | ||||||||||||
African- | ||||||||||||||||
Total | American | |||||||||||||||
| FM |
| AM |
| HD |
| LP/TV** |
|
|
| (millions) |
| % | |||
Atlanta |
| 4 |
|
|
| 1 |
|
|
| 12.3 |
| 2 |
| 5.1 |
| 36 |
Washington, DC |
| 4 |
| 2 |
|
|
|
|
| 10.8 |
| 3 |
| 5.1 |
| 27 |
Houston |
| 3 |
|
| 1 |
|
|
| 9.5 |
| 6 |
| 6.1 |
| 18 | |
Dallas |
| 2 |
|
|
|
|
|
|
| 4.2 |
| 5 |
| 6.5 |
| 17 |
Philadelphia |
| 2 |
|
| 2 |
|
|
| 3.5 |
| 7 |
| 4.8 |
| 21 | |
Baltimore |
| 2 |
| 2 |
| 1 |
|
|
| 14.9 |
| 11 |
| 2.5 |
| 30 |
Charlotte |
| 6 |
| 1 |
|
|
|
|
| 18.6 |
| 12 |
| 2.4 |
| 23 |
Raleigh-Durham |
| 4 |
|
|
|
|
|
|
| 16.0 |
| 18 |
| 1.7 |
| 22 |
Cleveland |
| 2 |
| 2 |
| 1 |
|
|
| 11.7 |
| 20 |
| 1.8 |
| 20 |
Richmond(3) |
| 4 |
| 2 |
|
|
|
|
| 18.1 |
| 23 |
| 1.1 |
| 30 |
Columbus |
| 5 |
|
|
|
| 1 |
| 6.3 |
| 25 |
| 1.7 |
| 18 | |
Indianapolis |
| 3 |
| 1 |
| 1 |
| 1 |
| 12.2 |
| 30 |
| 1.6 |
| 17 |
Cincinnati |
| 2 |
| 1 |
| 1 |
|
|
| 6.4 |
| 36 |
| 1.9 |
| 13 |
Total |
| 43 |
| 11 |
| 8 |
| 2 |
|
|
|
|
|
|
|
|
(1) | Audience share data are for the 12+ demographic and derived from the Nielsen Survey ending with the Fall 2021 Nielsen Survey. |
(2) | Population estimates are from the Nielsen Radio Market Survey Population, Rankings and Information, Fall 2021. |
(3) | Richmond is the only market in which we operate using the diary methodology of audience measurement. |
* | 19 non-independently formatted HD stations and 12 non-independently formatted translators owned and operated by the Company are not included in the above station count. Changes in the programming of our HD stations or translators may alter our station count from time to time. |
** | Low power television station |
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| Market Rank Metro |
|
| |||
---|---|---|---|---|---|---|
Market | Population 2021 | Format | Target Demo | |||
Atlanta |
| 7 |
|
|
|
|
WAMJ/WUMJ |
|
|
| Urban AC |
| 25-54 |
WHTA |
|
|
| Urban Contemporary |
| 18-34 |
WPZE |
|
|
| Contemporary Inspirational |
| 25-54 |
WAMJ-HD-2 |
|
|
| Urban Contemporary |
| 25-54 |
Baltimore |
| 21 |
|
|
|
|
WERQ |
|
|
| Urban Contemporary |
| 18-34 |
WOLB |
|
|
| News/Talk |
| 35-64 |
WWIN-FM |
|
|
| Urban AC |
| 25-54 |
WWIN-AM |
|
|
| Gospel |
| 35-64 |
WLIF-HD-2 |
|
|
| Contemporary Inspirational |
| 25-54 |
Charlotte |
| 23 |
|
|
|
|
WPZS |
|
|
| Contemporary Inspirational |
| 25-54 |
WOSF |
|
|
| Urban AC / Old School |
| 25-54 |
WQNC |
|
|
| Urban Contemporary |
| 18-34 |
WBT-AM |
|
|
| News Talk |
| 25-54 |
WBT-FM |
|
|
| News Talk |
| 25-54 |
WFNZ |
|
|
| Sports Talk |
| 25-54 |
WLNK |
|
|
| Hot Adult Contemporary |
| 25-54 |
Cincinnati |
| 33 |
|
|
|
|
WIZF |
|
|
| Urban Contemporary |
| 18-34 |
WOSL |
|
|
| Urban AC / Old School |
| 25-54 |
WDBZ-AM |
|
|
| Talk |
| 35-64 |
WIZF-HD2 | Hispanic | 25-54 | ||||
Cleveland |
| 35 |
|
|
|
|
WENZ |
|
|
| Urban Contemporary |
| 18-34 |
WERE-AM |
|
|
| News/Talk |
| 35-64 |
WJMO-AM |
|
|
| Contemporary Inspirational |
| 35-64 |
WZAK |
|
|
| Urban AC |
| 25-54 |
WENZ-HD-2 |
|
|
| Contemporary Inspirational |
| 35-64 |
Columbus |
| 36 |
|
|
|
|
WCKX |
|
|
| Urban Contemporary |
| 18-34 |
WXMG |
|
|
| Urban AC |
| 25-54 |
WBMO |
|
|
| Urban Contemporary |
| 18-34 |
WJYD |
|
|
| Contemporary Inspirational |
| 25-54 |
WWLG |
|
|
| Hispanic |
| 25-54 |
WQMC-TV |
|
|
| Television |
| 25-54 |
Dallas |
| 5 |
|
|
|
|
KBFB |
|
|
| Urban Contemporary |
| 18-34 |
KZJM |
|
|
| Urban Contemporary |
| 25-54 |
9
| Market Rank Metro |
|
| |||
---|---|---|---|---|---|---|
Market | Population 2021 | Format | Target Demo | |||
Houston |
| 6 |
|
|
|
|
KBXX |
|
|
| Urban Contemporary |
| 18-34 |
KMJQ |
|
|
| Urban AC |
| 25-54 |
KROI |
|
|
| Contemporary Inspirational |
| 18-34 |
KMJQ-HD2 |
|
|
| Contemporary Inspirational |
| 25-54 |
Indianapolis |
| 39 |
|
|
|
|
WTLC-FM |
|
|
| Urban AC |
| 25-54 |
WHHH |
|
|
| Urban Contemporary |
| 18-34 |
WNOW |
|
|
| Pop/CHR |
| 18-34 |
WTLC-AM |
|
|
| Contemporary Inspirational |
| 35-64 |
WNOW-HD2, HD3 |
|
|
| Regional Mexican |
| 25-54 |
WDNI-TV |
|
|
| Television |
| 25-54 |
Philadelphia |
| 9 |
|
|
|
|
WPPZ |
|
|
| Adult Contemporary |
| 25-54 |
WRNB |
|
|
| Mainstream Urban |
| 25-54 |
WPPZ-HD2 |
|
|
| Contemporary Inspirational |
| 25-54 |
WRNB-HD2 |
|
|
| Urban AC |
| 25-54 |
Raleigh |
| 37 |
|
|
|
|
WFXC/WFXK |
|
|
| Urban AC |
| 25-54 |
WQOK |
|
|
| Urban Contemporary |
| 18-34 |
WNNL |
|
|
| Contemporary Inspirational |
| 25-54 |
Richmond (1) |
| 53 |
|
|
|
|
WKJS/WKJM |
|
|
| Urban AC |
| 25-54 |
WCDX |
|
|
| Urban Contemporary |
| 18-34 |
WPZZ |
|
|
| Contemporary Inspirational |
| 25-54 |
WXGI-AM/WTPS-AM |
|
|
| Classic Hip Hop |
| 25-54 |
Washington DC |
| 8 |
|
|
|
|
WKYS |
|
|
| Urban Contemporary |
| 18-34 |
WMMJ/WDCJ |
|
|
| Urban AC |
| 25-54 |
WPRS |
|
|
| Contemporary Inspirational |
| 25-54 |
WOL-AM |
|
|
| News/Talk |
| 35-64 |
WYCB-AM |
|
|
| Gospel |
| 35-64 |
AC-refers to Adult Contemporary
CHR-refers to Contemporary Hit Radio
Pop-refers to Popular Music
Old School - refers to Old School Hip/Hop
(1) | Richmond is the only market in which we operate using the diary methodology of audience measurement. |
10
For the year ended December 31, 2021, approximately 31.8% of our net revenue was generated from the sale of advertising in our core radio business, excluding Reach Media. Within our core radio business, four (Houston, Washington, DC, Atlanta and Baltimore) of the 13 markets in which we operated radio stations throughout 2021 or a portion thereof accounted for approximately 53.8% of our radio station net revenue for the year ended December 31, 2021. Revenue from the operations of Reach Media, along with revenue from both the Houston and Washington, DC markets accounted for approximately 19.3% of our total consolidated net revenue for the year ended December 31, 2021. Revenue from the operations of Reach Media, along with revenue from the four significant contributing radio markets, accounted for approximately 27.5% of our total consolidated net revenue for the year ended December 31, 2021. Adverse events or conditions (economic, including government cutbacks or otherwise) could lead to declines in the contribution of Reach Media or declines in one or more of the four significant contributing radio markets, which could have a material adverse effect on our overall financial performance and results of operations.
Radio Advertising Revenue
Substantially all net revenue generated from our radio franchise is generated from the sale of local, national and network advertising. Local sales are made by the sales staff located in our markets. National sales are made primarily by Katz Communications, Inc. (“Katz”), a firm specializing in radio advertising sales on the national level. Katz is paid agency commissions on the advertising sold. Approximately 59.2% of our net revenue from our core radio business for the year ended December 31, 2021, was generated from the sale of local advertising and 36.3% from sales to national advertisers, including network/syndication advertising. The balance of net revenue from our radio segment is primarily derived from tower rental income, ticket sales, and revenue related to sponsored events, management fees and other alternative revenue.
Advertising rates charged by radio stations are based primarily on:
● | a radio station’s audience share within the demographic groups targeted by the advertisers; |
● | the number of radio stations in the market competing for the same demographic groups; and |
● | the supply and demand for radio advertising time. |
A radio station’s listenership is measured by the Portable People MeterTM (the “PPMTM”) system or diary ratings surveys, both of which estimate the number of listeners tuned to a radio station and the time they spend listening to that radio station. Ratings are used by advertisers to evaluate whether to advertise on our radio stations, and are used by us to chart audience size, set advertising rates and adjust programming. Advertising rates are generally highest during the morning and afternoon commuting hours.
Cable Television, Reach Media and Digital Segments, Strategy and Sources of Revenue and Income
We have expanded our operations to include other media forms that are complementary to our core radio business. In a strategy similar to our radio market segmentation, we have multiple complementary media and online brands. Each of these brands focuses upon a different segment of African-American consumers. With our multiple brands, we are able to direct advertisers to specific audiences within the urban communities in which we are located or to bundle the brands for advertising sales purposes when advantageous.
TV One, our primary cable television franchise targeting the African-American and urban communities, derives its revenue from advertising and affiliate revenue. Advertising revenue is derived from the sale of television air time to advertisers and is recognized when the advertisements are run. TV One also derives revenue from affiliate fees under the terms of various affiliation agreements based upon a per subscriber fee multiplied by the most recent subscriber counts reported by the applicable affiliate. In January 2019, we launched a second cable television franchise called CLEO TV, a lifestyle and entertainment network targeting Millennial and Gen X women of color also operated by TV One, LLC. CLEO TV derives its revenue principally from advertising.
11
Reach Media, our syndicated radio unit, primarily derives its revenue from the sale of advertising in connection with its syndicated radio shows, including the Rickey Smiley Morning Show, Get Up! Mornings with Erica Campbell, the Russ Parr Morning Show, and the DL Hughley Show. In addition to being broadcast on 49 Urban One stations, our syndicated radio programming also was available on 209 non-Urban One stations throughout the United States as of December 31, 2021.
We have launched websites that simultaneously stream radio station content for each of our radio stations, and we derive revenue from the sale of advertisements on those websites. We generally encourage our web advertisers to run simultaneous radio campaigns and use mentions in our radio airtime to promote our websites. By providing streaming, we have been able to broaden our listener reach, particularly to “office hour” listeners, including at home “office hour” listeners. We believe streaming has had a positive impact on our radio stations’ reach to listeners. In addition, our station websites link to our other online properties operated by our primary digital unit, Interactive One. Interactive One operates the largest social networking site primarily targeting African-Americans and other branded websites, including Bossip, HipHopWired and MadameNoire. Interactive One derives revenue from advertising services on non-radio station branded websites, and studio services where Interactive One provides services to other publishers. Advertising services include the sale of banner and sponsorship advertisements. Advertising revenue is recognized either as impressions (the number of times advertisements appear in viewed pages) are delivered or when “click through” purchases are made, where applicable. In addition, Interactive One derives revenue from its studio operations which provide third-party clients with digital platforms and expertise. In the case of the studio operations, revenue is recognized primarily through fixed contractual monthly fees and/or as a share of the third party’s reported revenue.
Finally, our MGM National Harbor investment entitles us to an annual cash distribution based on net gaming revenue from gaming activities conducted on the site of the facility. Future opportunities could include investments in, acquisitions of, or the development of companies in diverse media businesses, gaming and entertainment, music production and distribution, movie distribution, internet-based services, and distribution of our content through emerging distribution systems such as the Internet, smartphones, cellular phones, tablets, and the home entertainment market.
Competition
The media industry is highly competitive and we face intense competition across our core radio franchise and all of our complementary media properties. Our media properties compete for audiences and advertising revenue with other radio stations and with other media such as broadcast and cable television, the Internet, satellite radio, newspapers, magazines, direct mail and outdoor advertising, some of which may be owned or controlled by horizontally-integrated companies. Audience ratings and advertising revenue are subject to change and any adverse change in a market could adversely affect our net revenue in that market. If a competing radio station converts to a format similar to that of one of our radio stations, or if one of our competitors strengthens its signal or operations, our stations could suffer a reduction in ratings and advertising revenue. Other media companies which are larger and have more resources may also enter or increase their presence in markets or segments in which we operate. Although we believe our media properties are well positioned to compete, we cannot assure that our properties will maintain or increase their current ratings, market share or advertising revenue.
Providing content across various distribution platforms is a highly competitive business. Our digital and cable television segments compete for the time and attention of internet users and viewers and, thus, advertisers and advertising revenues with a wide range of internet companies such as AmazonTM, NetflixTM, Yahoo!TM, GoogleTM, and MicrosoftTM, with social networking sites such as FacebookTM and with traditional media companies, which are increasingly offering their own digital products and services both organically and through acquisition. We experience competition for the development and acquisition of content, distribution of content, sale of commercial time on our digital and cable television networks and viewership. There is competition from other digital companies, production studios and other television networks for the acquisition of content and creative talent such as writers, producers and directors. Our ability to produce and acquire popular content is an important competitive factor for the distribution of our content, attracting viewers and the sale of advertising. Our success in securing popular content and creative talent depends on various factors such as the number of competitors providing content that targets the same genre and audience, the distribution of our content, viewership, and the production, marketing and advertising support we provide.
12
Our TV One and CLEO TV cable television networks compete with other networks and platforms for the acquisition and distribution of content and for fees charged to cable television operators, DTH satellite service providers, and other distributors that carry our content. Our ability to secure distribution agreements is necessary to ensure the retention of our audiences. Our contractual agreements with distributors are renewed or renegotiated from time to time in the ordinary course of business. Growth in the number of networks distributed, consolidation and other market conditions in the cable and satellite distribution industry, and increased popularity of other platforms may adversely affect our ability to obtain and maintain contractual terms for the distribution of our content that are as favorable as those currently in place. The ability to secure distribution agreements is dependent upon the production, acquisition and packaging of original content, viewership, the marketing and advertising support and incentives provided to distributors, the product offering across a series of networks within a region, and the prices charged for carriage.
Our networks and digital products compete with other television networks, including broadcast, cable, local networks and other content distribution outlets for their target audiences and the sale of advertising. Our success in selling advertising is a function of the size and demographics of our audiences, quantitative and qualitative characteristics of the audience of each network, the perceived quality of the network and of the particular content, the brand appeal of the network and ratings/algorithms as determined by third-party research companies or search engines, prices charged for advertising and overall advertiser demand in the marketplace.
Federal Antitrust Laws
The agencies responsible for enforcing the federal antitrust laws, the Federal Trade Commission or the Department of Justice, may investigate certain acquisitions. We cannot predict the outcome of any specific FTC or Department of Justice investigation. Any decision by the FTC or the Department of Justice to challenge a proposed acquisition could affect our ability to consummate the acquisition or to consummate it on the proposed terms. For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires the parties to file Notification and Report Forms concerning antitrust issues with the FTC and the Department of Justice and to observe specified waiting period requirements before consummating the acquisition.
Federal Regulation of Radio Broadcasting
The radio broadcasting industry is subject to extensive and changing regulation by the FCC and other federal agencies of ownership, programming, technical operations, employment and other business practices. The FCC regulates radio broadcast stations pursuant to the Communications Act of 1934, as amended (the “Communications Act”). The Communications Act permits the operation of radio broadcast stations only in accordance with a license issued by the FCC upon a finding that the grant of a license would serve the public interest, convenience and necessity. Among other things, the FCC:
● | assigns frequency bands for radio broadcasting; |
● | determines the particular frequencies, locations, operating power, interference standards, and other technical parameters for radio broadcast stations; |
● | issues, renews, revokes and modifies radio broadcast station licenses; |
● | imposes annual regulatory fees and application processing fees to recover its administrative costs; |
● | establishes technical requirements for certain transmitting equipment to restrict harmful emissions; |
● | adopts and implements regulations and policies that affect the ownership, operation, program content, employment, and business practices of radio broadcast stations; and |
● | has the power to impose penalties, including monetary forfeitures, for violations of its rules and the Communications Act. |
13
The Communications Act prohibits the assignment of an FCC license, or the transfer of control of an FCC licensee, without the prior approval of the FCC. In determining whether to grant or renew a radio broadcast license or consent to the assignment or transfer of control of a license, the FCC considers a number of factors, including restrictions on foreign ownership, compliance with FCC media ownership limits and other FCC rules, the character and other qualifications of the licensee (or proposed licensee) and compliance with the Anti-Drug Abuse Act of 1988. A licensee’s failure to comply with the requirements of the Communications Act or FCC rules and policies may result in the imposition of sanctions, including admonishment, fines, the grant of a license renewal for less than a full eight-year term or with conditions, denial of a license renewal application, the revocation of an FCC license, and/or the denial of FCC consent to acquire additional broadcast properties.
Congress, the FCC and, in some cases, other federal agencies and local jurisdictions are considering or may in the future consider and adopt new laws, regulations and policies that could affect the operation, ownership and profitability of our radio stations, result in the loss of audience share and advertising revenue for our radio broadcast stations or affect our ability to acquire additional radio broadcast stations or finance such acquisitions. Such matters include or may include:
● | changes to the license authorization and renewal process; |
● | proposals to increase record keeping, including enhanced disclosure of stations’ efforts to serve the public interest; |
● | proposals to impose spectrum use or other fees on FCC licensees; |
● | changes to rules relating to political broadcasting, including proposals to grant free air time to candidates, and other changes regarding political and non-political program content, political advertising rates and sponsorship disclosures; |
● | revised rules and policies regarding the regulation of the broadcast of indecent content; |
● | proposals to increase the actions stations must take to demonstrate service to their local communities; |
● | technical and frequency allocation matters; |
● | changes in broadcast multiple ownership, foreign ownership, cross-ownership and ownership attribution rules and policies; |
● | service and technical rules for digital radio, including possible additional public interest requirements for terrestrial digital audio broadcasters; |
● | legislation that would provide for the payment of sound recording royalties to artists, musicians or record companies whose music is played on terrestrial radio stations; and |
● | changes to tax laws affecting broadcast operations and acquisitions. |
The FCC also has adopted procedures for the auction of broadcast spectrum in circumstances where two or more parties have filed mutually exclusive applications for authority to construct new stations or certain major changes in existing stations. Such procedures may limit our efforts to modify or expand the broadcast signals of our stations.
We cannot predict what changes, if any, might be adopted or considered in the future, or what impact, if any, the implementation of any particular proposals or changes might have on our business.
FCC License Grants and Renewals. In making licensing determinations, the FCC considers an applicant’s legal, technical, character and other qualifications. The FCC grants radio broadcast station licenses for specific periods of time
14
and, upon application, may renew them for additional terms. A station may continue to operate beyond the expiration date of its license if a timely filed license renewal application is pending. Under the Communications Act, radio broadcast station licenses may be granted for a maximum term of eight years.
Generally, the FCC renews radio broadcast licenses without a hearing upon a finding that:
● | the radio station has served the public interest, convenience and necessity; |
● | there have been no serious violations by the licensee of the Communications Act or FCC rules and regulations; and |
● | there have been no other violations by the licensee of the Communications Act or FCC rules and regulations which, taken together, indicate a pattern of abuse. |
After considering these factors and any petitions to deny or informal objections against a license renewal application (which may lead to a hearing), the FCC may grant the license renewal application with or without conditions, including renewal for a term less than the maximum otherwise permitted. Historically, our licenses have been renewed for full eight-year terms without any conditions or sanctions; however, there can be no assurance that the licenses of each of our stations will be renewed for a full term without conditions or sanctions.
Types of FCC Broadcast Licenses. The FCC classifies each AM and FM radio station. An AM radio station operates on either a clear channel, regional channel or local channel. A clear channel serves wide areas, particularly at night. A regional channel serves primarily a principal population center and the contiguous rural areas. A local channel serves primarily a community and the suburban and rural areas immediately contiguous to it. AM radio stations are designated as Class A, Class B, Class C or Class D. Class A, B and C stations each operate unlimited time. Class A radio stations render primary and secondary service over an extended area. Class B stations render service only over a primary service area. Class C stations render service only over a primary service area that may be reduced as a consequence of interference. Class D stations operate either during daytime hours only, during limited times only, or unlimited time with low nighttime power.
FM class designations depend upon the geographic zone in which the transmitter of the FM radio station is located. The minimum and maximum facilities requirements for an FM radio station are determined by its class. In general, commercial FM radio stations are classified as follows, in order of increasing power and antenna height: Class A, B1, C3, B, C2, C1, C0 and C. The FCC has adopted a rule subjecting Class C FM stations that do not satisfy a certain antenna height requirement to an involuntary downgrade in class to Class C0 under certain circumstances.
Urban One’s Licenses. The following table sets forth information with respect to each of our radio stations for which we hold the license as of December 31, 2021. Stations which we do not own as of December 31, 2021, but operate under an LMA, are not reflected on this table. A broadcast station’s market may be different from its community of license. The coverage of an AM radio station is chiefly a function of the power of the radio station’s transmitter, less dissipative power losses and any directional antenna adjustments. For FM radio stations, signal coverage area is chiefly a function of the
15
ERP of the radio station’s antenna and the HAAT of the radio station’s antenna. “ERP” refers to the effective radiated power of an FM radio station. “HAAT” refers to the antenna height above average terrain of an FM radio station.
|
|
|
| Antenna |
|
| ||||||||
ERP (FM) | Height | |||||||||||||
Power | (AM) | Expiration | ||||||||||||
Year of |
| FCC | (AM) in | HAAT in | Operating | Date of FCC | ||||||||
Market | Station Call Letters | Acquisition | Class | Kilowatts | Meters | Frequency | License | |||||||
Atlanta |
| WUMJ-FM |
| 1999 |
| C3 |
| 8.5 |
| 165.0 |
| 97.5 MHz |
| 4/1/2028 |
| WAMJ-FM |
| 1999 |
| C2 |
| 33.0 |
| 185.0 |
| 107.5 MHz |
| 4/1/2028 | |
| WHTA-FM |
| 2002 |
| C2 |
| 35.0 |
| 177.0 |
| 107.9 MHz |
| 4/1/2028 | |
| WPZE-FM |
| 1999 |
| A |
| 3.0 |
| 143.0 |
| 102.5 MHz |
| 4/1/2028 | |
Washington, DC |
| WOL-AM |
| 1980 |
| C |
| 0.4 |
| N/A |
| 1450 kHz |
| 10/1/2027 |
| WMMJ-FM |
| 1987 |
| A |
| 2.9 |
| 146.0 |
| 102.3 MHz |
| 10/1/2027 | |
| WKYS-FM |
| 1995 |
| B |
| 24.5 |
| 215.0 |
| 93.9 MHz |
| 10/1/2027 | |
| WPRS-FM |
| 2008 |
| B |
| 20.0 |
| 244.0 |
| 104.1 MHz |
| 10/1/2027 | |
| WYCB-AM |
| 1998 |
| C |
| 1.0 |
| N/A |
| 1340 kHz |
| 10/1/2027 | |
| WDCJ-FM |
| 2017 |
| A |
| 2.9 |
| 145.0 |
| 92.7 MHz |
| 10/1/2027 | |
Philadelphia |
| WPHI-FM |
| 1997 |
| A |
| 0.3 |
| 338.0 |
| 103.9 MHz |
| 8/1/2022 |
| WRNB-FM |
| 2000 |
| B |
| 17.0 |
| 263.0 |
| 100.3 MHz |
| 8/1/2022 | |
| WPPZ-FM |
| 2004 |
| A |
| 0.8 |
| 276.0 |
| 107.9 MHz |
| 6/1/2022 | |
Houston |
| KMJQ-FM |
| 2000 |
| C |
| 100.0 |
| 524.0 |
| 102.1 MHz |
| 8/1/20211 |
| KBXX-FM |
| 2000 |
| C |
| 100.0 |
| 585.0 |
| 97.9 MHz |
| 8/1/20211 | |
| KROI-FM |
| 2004 |
| C1 |
| 40.0 |
| 421.0 |
| 92.1 MHz |
| 8/1/20211 | |
Dallas |
| KBFB-FM |
| 2000 |
| C |
| 100.0 |
| 574.0 |
| 97.9 MHz |
| 8/1/2029 |
| KZMJ-FM |
| 2001 |
| C |
| 100.0 |
| 591.0 |
| 94.5 MHz |
| 8/1/2029 | |
Baltimore |
| WWIN-AM |
| 1992 |
| C |
| 0.5 |
| N/A |
| 1400 kHz |
| 10/1/2027 |
| WWIN-FM |
| 1992 |
| A |
| 3.0 |
| 91.0 |
| 95.9 MHz |
| 10/1/2027 | |
| WOLB-AM |
| 1993 |
| D |
| 0.3 |
| N/A |
| 1010 kHz |
| 10/1/2027 | |
| WERQ-FM |
| 1993 |
| B |
| 37.0 |
| 173.0 |
| 92.3 MHz |
| 10/1/2027 | |
Charlotte |
| WQNC-FM |
| 2000 |
| C3 |
| 10.5 |
| 154.0 |
| 92.7 MHz |
| 12/1/2027 |
| WPZS-FM |
| 2004 |
| A |
| 6.0 |
| 94.0 |
| 100.9 MHz |
| 12/1/2027 | |
| WOSF-FM |
| 2014 |
| C1 |
| 51.0 |
| 395.0 |
| 105.3 MHz |
| 12/1/2027 | |
WBT-FM | 2021 | C3 | 7.7 | 182.2 | 99.3 MHz | 12/1/2027 | ||||||||
WBT-AM | 2021 | A | 50.0 | N/A | 1110 MHz | 12/1/2027 | ||||||||
WFNZ-AM | 2021 | B | 5.0 | N/A | 610 MHz | 12/1/2027 | ||||||||
WLNK-FM | 2021 | C | 100.0 | 576.0 | 107.9 MHz | 12/1/2027 | ||||||||
Cleveland |
| WJMO-AM |
| 1999 |
| B |
| 5.0 |
| N/A |
| 1300 kHz |
| 10/1/2028 |
| WENZ-FM |
| 1999 |
| B |
| 16.0 |
| 272.0 |
| 107.9 MHz |
| 10/1/2028 | |
| WZAK-FM |
| 2000 |
| B |
| 27.5 |
| 189.0 |
| 93.1 MHz |
| 10/1/2028 | |
| WERE-AM |
| 2000 |
| C |
| 1.0 |
| N/A |
| 1490 kHz |
| 10/1/2028 | |
Raleigh-Durham |
| WQOK-FM |
| 2000 |
| C2 |
| 50.0 |
| 146.0 |
| 97.5 MHz |
| 12/1/2027 |
| WFXK-FM |
| 2000 |
| C1 |
| 100.0 |
| 299.0 |
| 104.3 MHz |
| 12/1/2027 | |
| WFXC-FM |
| 2000 |
| C3 |
| 13.0 |
| 141.0 |
| 107.1 MHz |
| 12/1/2027 | |
| WNNL-FM |
| 2000 |
| C3 |
| 7.9 |
| 176.0 |
| 103.9 MHz |
| 12/1/2027 | |
Richmond |
| WPZZ-FM |
| 1999 |
| C1 |
| 100.0 |
| 299.0 |
| 104.7 MHz |
| 10/1/2027 |
| WCDX-FM |
| 2001 |
| B1 |
| 4.5 |
| 235.0 |
| 92.1 MHz |
| 10/1/2027 | |
| WKJM-FM |
| 2001 |
| A |
| 6.0 |
| 100.0 |
| 99.3 MHz |
| 10/1/2027 | |
| WKJS-FM |
| 2001 |
| A |
| 2.3 |
| 162.0 |
| 105.7 MHz |
| 10/1/2027 | |
| WTPS-AM |
| 2001 |
| C |
| 1.0 |
| N/A |
| 1240 kHz |
| 10/1/2027 | |
| WXGI-AM |
| 2017 |
| D |
| 3.9 |
| N/A |
| 950 kHz |
| 10/1/2027 | |
Columbus |
| WCKX-FM |
| 2001 |
| A |
| 1.9 |
| 126.0 |
| 107.5 MHz |
| 10/1/2028 |
| WBMO-FM |
| 2001 |
| A |
| 6.0 |
| 99.0 |
| 106.3 MHz |
| 10/1/2028 | |
| WXMG-FM |
| 2016 |
| B |
| 21.0 |
| 232.0 |
| 95.5 MHz |
| 10/1/2028 | |
| WJYD-FM |
| 2016 |
| A |
| 6.0 |
| 100.0 |
| 107.1 MHz |
| 10/1/2028 | |
Indianapolis |
| WHHH-FM |
| 2000 |
| A |
| 3.3 |
| 87.0 |
| 96.3 MHz |
| 8/1/2028 |
| WTLC-FM |
| 2000 |
| A |
| 6.0 |
| 99.0 |
| 106.7 MHz |
| 8/1/2028 | |
| WNOW-FM |
| 2000 |
| A |
| 6.0 |
| 100.0 |
| 100.9 MHz |
| 8/1/2028 | |
| WTLC-AM |
| 2001 |
| B |
| 5.0 |
| N/A |
| 1310 kHz |
| 8/1/2028 | |
Cincinnati |
| WIZF-FM |
| 2001 |
| A |
| 2.5 |
| 155.0 |
| 101.1 MHz |
| 8/1/2028 |
| WDBZ-AM |
| 2007 |
| C |
| 1.0 |
| N/A |
| 1230 kHz |
| 10/1/2028 | |
| WOSL-FM |
| 2006 |
| A |
| 3.1 |
| 141.0 |
| 100.3 MHz |
| 10/1/2028 |
1 A station may continue to operate beyond the expiration date of its license if a timely filed license renewal application was filed and is pending, as is the case with respect to each of our stations with licenses that have expired.
16
To obtain the FCC’s prior consent to assign or transfer control of a broadcast license, an appropriate application must be filed with the FCC. If the assignment or transfer involves a substantial change in ownership or control of the licensee, for example, the transfer of more than 50% of the voting stock, the applicant must give public notice and the application is subject to a 30-day period for public comment. During this time, interested parties may file petitions with the FCC to deny the application. Informal objections may be filed at any time until the FCC acts upon the application. If the FCC grants an assignment or transfer application, administrative procedures provide for petitions seeking reconsideration or full FCC review of the grant. The Communications Act also permits the appeal of a contested grant to a federal court.
Under the Communications Act, a broadcast license may not be granted to or held by any person who is not a U.S. citizen or by any entity that has more than 20% of its capital stock owned or voted by non-U.S. citizens or entities or their representatives, or by foreign governments or their representatives. The Communications Act prohibits more than 25% indirect foreign ownership or control of a licensee through a parent company if the FCC determines the public interest will be served by such prohibition. The FCC has interpreted this provision of the Communications Act to require an affirmative public interest finding before this 25% limit may be exceeded. Since we serve as a holding company for subsidiaries that serve as licensees for our stations, we are effectively restricted from having more than one-fourth of our stock owned or voted directly or indirectly by non-U.S. citizens or their representatives, foreign governments, representatives of foreign governments, or foreign business entities unless we seek and obtain FCC authority to exceed that level. The FCC will entertain and authorize, on a case-by-case basis and upon a sufficient public interest showing and favorable executive branch review, proposals to exceed the 25% indirect foreign ownership limit in broadcast licensees.
The FCC applies its media ownership limits to “attributable” interests. The interests of officers, directors and those who directly or indirectly hold five percent or more of the total outstanding voting stock of a corporation that holds a broadcast license (or a corporate parent) are generally deemed attributable interests, as are any limited partnership or limited liability company interests that are not properly “insulated” from management activities. Certain passive investors that hold stock for investment purposes only are deemed attributable with the ownership of 20% or more of the voting stock of a licensee or parent corporation. An entity with one or more radio stations in a market that enters into a local marketing agreement or a time brokerage agreement with another radio station in the same market obtains an attributable interest in the brokered radio station if the brokering station supplies programming for more than 15% of the brokered radio station’s weekly broadcast hours. Similarly, a radio station licensee’s right under a joint sales agreement (“JSA”) to sell more than 15% per week of the advertising time on another radio station in the same market constitutes an attributable ownership interest in such station for purposes of the FCC’s ownership rules. Debt instruments, non-voting stock, unexercised options and warrants, minority voting interests in corporations having a single majority shareholder, and limited partnership or limited liability company membership interests where the interest holder is not “materially involved” in the media-related activities of the partnership or limited liability company pursuant to FCC-prescribed “insulation” provisions, generally do not subject their holders to attribution unless such interests implicate the FCC’s equity-debt-plus (or “EDP”) rule. Under the EDP rule, a major programming supplier or the holder of an attributable interest in a same-market radio station, will have an attributable interest in a station if the supplier or same-market media entity also holds debt or equity, or both, in the station that is greater than 33% of the value of the station’s total debt plus equity. For purposes of the EDP rule, equity includes all stock, whether voting or nonvoting, and interests held by limited partners or limited liability company members that are “insulated” from material involvement in the company’s media activities. A major programming supplier is any supplier that provides more than 15% of the station’s weekly programming hours.
The Communications Act and FCC rules generally restrict ownership, operation or control of, or the common holding of attributable interests in, radio broadcast stations serving the same local market in excess of specified numerical limits.
The numerical limits on radio stations that one entity may own in a local market are as follows:
● | in a radio market with 45 or more commercial radio stations, a party may hold an attributable interest in up to eight commercial radio stations, not more than five of which are in the same service (AM or FM); |
● | in a radio market with 30 to 44 commercial radio stations, a party may hold an attributable interest in up to seven commercial radio stations, not more than four of which are in the same service (AM or FM); |
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● | in a radio market with 15 to 29 commercial radio stations, a party may hold an attributable interest in up to six commercial radio stations, not more than four of which are in the same service (AM or FM); and |
● | in a radio market with 14 or fewer commercial radio stations, a party may hold an attributable interest in up to five commercial radio stations, not more than three of which are in the same service (AM or FM), except that a party may not hold an attributable interest in more than 50% of the radio stations in such market. |
To apply these tiers, the FCC currently relies on Nielsen Metro Survey Areas, where they exist. In other areas, the FCC relies on a contour-overlap methodology. The FCC has initiated a rulemaking to determine how to define local radio markets in areas located outside Nielsen Metro Survey Areas. The market definition used by the FCC in applying its ownership rules may not be the same as that used for purposes of the Hart-Scott-Rodino Act. In 2003, when the FCC changed its methodology for defining local radio markets, it grandfathered existing combinations of radio stations that would not comply with the modified rules. The FCC’s rules provide that these grandfathered combinations may not be sold intact except to certain “eligible entities,” which the FCC defines as entities qualifying as a small business consistent with Small Business Administration standards.
The media ownership rules are subject to review by the FCC every four years. In August 2016, the FCC issued an order concluding its 2010 and 2014 quadrennial reviews. The August 2016 decision retained the local radio ownership rule, the radio-television cross-ownership rule and the prohibition on newspaper-broadcast cross-ownership without significant changes. In November 2017, the FCC adopted an order reconsidering the August 2016 decision and modifying it in a number of respects. The November 2017 order on reconsideration did not significantly modify the August 2016 decision with respect to the local radio ownership limits. It did, however, eliminate the FCC’s previous limits on radio/television cross-ownership and newspaper/broadcast cross-ownership effective February 7, 2018. In September 2019, a federal appeals court vacated the FCC’s November 2017 order on reconsideration, as a result of which the radio/television and newspaper/broadcast cross-ownership rules were reinstated. On April 1, 2021, however, the U.S. Supreme Court reversed the September 2019 appeals court ruling, resulting in the elimination of the radio/television and newspaper/broadcast cross-ownership rules effective June 30, 2021. The FCC’s 2018 quadrennial review of its media ownership rules, which commenced in December 2018, is currently pending.
The attribution and media ownership rules limit the number of radio stations we may acquire or own in any particular market and may limit the prospective buyers of any stations we want to sell. The FCC’s rules could affect our business in a number of ways, including, but not limited to, the following:
● | the FCC’s radio ownership limits could have an adverse effect on our ability to accumulate stations in a given area or to sell a group of stations in a local market to a single entity; |
● | restricting the assignment and transfer of control of “grandfathered” radio combinations that exceed the ownership limits as a result of the FCC’s 2003 change in local market definition could adversely affect our ability to buy or sell a group of stations in a local market from or to a single entity; and |
● | in general terms, future changes in the way the FCC defines radio markets or in the numerical station caps could limit our ability to acquire new stations in certain markets, our ability to operate stations pursuant to certain agreements, and our ability to improve the coverage contours of our existing stations. |
Programming and Operations. The Communications Act requires broadcasters to serve the “public interest” by presenting programming that responds to community problems, needs and interests and by maintaining records demonstrating such responsiveness. The FCC considers complaints from viewers or listeners about a broadcast station’s programming. All radio stations are now required to maintain their public inspection files on a publicly accessible FCC-hosted online database. Moreover, the FCC has from time to time proposed rules designed to increase local programming content and diversity, including renewal application processing guidelines for locally-oriented programming and a requirement that broadcasters establish advisory boards in the communities where they own stations. Stations also must follow FCC rules and policies regulating political advertising, obscene or indecent programming, sponsorship
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identification, contests and lotteries and technical operation, including limits on human exposure to radio frequency radiation.
The FCC requires that licensees not discriminate in hiring practices on the basis of race, color, religion, national origin or gender. It also requires stations with at least five full-time employees to broadly disseminate information about all full-time job openings and undertake outreach initiatives from an FCC list of activities such as participation in job fairs, internships, or scholarship programs. The FCC is considering whether to apply these recruitment requirements to part-time employment positions. Stations must retain records of their outreach efforts and keep an annual Equal Employment Opportunity (“EEO”) report in their public inspection files and post an electronic version on their websites.
From time to time, complaints may be filed against any of our radio stations alleging violations of these or other rules. In addition, the FCC may conduct audits or inspections to ensure and verify licensee compliance with FCC rules and regulations. Failure to observe these or other rules and regulations can result in the imposition of various sanctions, including fines or conditions, the grant of “short” (less than the maximum eight year) renewal terms or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license.
Human Capital
As of December 31, 2021, we employed 825 full-time employees and 330 part-time employees. Our employees are not unionized.
We believe that our success largely depends upon our continued ability to attract and retain highly skilled employees. We provide our employees with competitive salaries and bonuses, development programs that enable continued learning and growth, and offer an employment package that promotes well-being across all aspects of their lives, including health care, retirement planning and paid time off.
As a business founded by an African-American woman, diversity and inclusion is engrained in our corporate history. Our Board of Directors is diverse; Catherine L. Hughes, our Founder and Chairperson, is an African-American woman, and four of our six directors are minorities. Our President and Chief Executive Officer, who is also a director, Alfred C. Liggins, III is an African-American male, as is our Senior Vice President and General Counsel, Kristopher Simpson. Further, Karen Wishart, our Executive Vice President and Chief Administrative Officer, is an African-American woman, as is Michelle Rice, President of TV ONE. As of December 31, 2021, 79% of our employees were racially diverse, and 47% of our employees were women. We are proud that our organization is governed and propelled by such a diverse group of individuals, which we believe contributes to our Company’s success now, and in the long-term.
Our senior leadership team has introduced various initiatives to ensure that our Company remains inclusive and supportive for all, including: (i) conducting workplace training, which includes focuses on unconscious bias, discrimination and harassment; (ii) leveraging a diverse slate of candidates for all job vacancies, including senior leadership; and (iii) developing content across our multi-media platform that elevates the voice of minority communities to foster equality and inclusion in both the entertainment industry and across the nation.
Environmental
As the owner, lessee or operator of various real properties and facilities, we are subject to federal, state and local environmental laws and regulations. Historically, compliance with these laws and regulations has not had a material adverse effect on our business. There can be no assurance, however, that compliance with existing or new environmental laws and regulations will not require us to make significant expenditures in the future.
Corporate Governance
Code of Ethics. We have adopted a code of ethics that applies to all of our directors, officers (including our principal financial officer and principal accounting officer) and employees and meets the requirements of the SEC and the NASDAQ Stock Market Rules. Our code of ethics can be found on our website, www.urban1.com. We will provide a paper copy of the code of ethics, free of charge, upon request.
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Audit Committee Charter. Our audit committee has adopted a charter as required by the NASDAQ Stock Market Rules. This committee charter can be found on our website, www.urban1.com. We will provide a paper copy of the audit committee charter, free of charge, upon request.
Compensation Committee Charter. Our Board of Directors has adopted a compensation committee charter. We will provide a paper copy of the compensation committee charter, free of charge, upon request.
Internet Address and Internet Access to SEC Reports
Our internet address is www.urban1.com. You may obtain through our internet website, free of charge, copies of our proxies, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These reports are available as soon as reasonably practicable after we electronically file them with or furnish them to the SEC. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this Form 10-K.
ITEM 1A. RISK FACTORS
Risks Related to Our Business and Industry
In an enterprise as large and complex as ours, a wide range of factors could affect our business and financial results. The factors described below are considered to be the most significant, but are not listed in any particular order. There may be other currently unknown or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse effects on our future results. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. The following discussion of risk factors should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
Risks Related to the Nature and Operations of Our Business
Impact of Ongoing Public Health Crisis
An epidemic or pandemic disease outbreak, such as the ongoing COVID-19 pandemic, has caused, and is causing, significant disruption to our business operations. Measures taken by governmental authorities and private actors to limit the spread of the virus have interfered and continue to interfere with the ability our employees, suppliers, and customers to conduct their functions and business in a normal manner. Further, the demand for advertising across our various segments/platforms is linked to the level of economic activity and employment in the U.S. Specifically, our business is heavily dependent on the demand for advertising from consumer-focused companies. Dislocation of consumer demand due to social distancing and government interventions (such as lockdowns or shelter in place policies) has caused, and could further cause, advertisers to reduce, postpone or eliminate their marketing spending generally, and on our platforms in particular. Continued or future social distancing, government interventions and/or recessions could have a material adverse effect on our business and financial condition. Moreover, continued or future declines or disruptions due to the COVID-19 pandemic and new variants of COVID-19, could adversely affect our business and financial performance.
The extent to which our results continue to be affected by COVID-19 will largely depend on future developments, which are not within our control and cannot be accurately predicted and are uncertain. These developments include, but are not limited to, the duration, scope and severity of the pandemic, any additional resurgences, variants or new viruses; the ability to effectively and widely manufacture and distribute vaccines; the public’s perception of the safety of the vaccines and their willingness to take the vaccines; the effect of the COVID-19 pandemic on our customers and the ability of our clients to meet their payment terms; the public’s willingness to attend live events; and the pace of recovery when the pandemic subsides.
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The state and condition of the global financial markets and fluctuations in the global and U.S. economies may have an unpredictable impact on our business and financial condition.
From time to time, including as a result of the current pandemic, the global equity and credit markets experience high levels of volatility and disruption. At various points in time, the markets have produced upward and/or downward pressure on stock prices and limited credit capacity for certain companies without regard to those companies’ underlying financial strength. In addition, advertising is a discretionary and variable business expense. Spending on advertising tends to decline disproportionately during an economic recession or downturn as compared to other types of business spending. Consequently, a downturn in the United States economy generally has an adverse effect on our advertising revenue and, therefore, our results of operations. A recession or downturn in the economy of any individual geographic market, particularly a major market in which we operate, also may have a significant effect on us. Radio revenues in the markets in which we operate may also face greater challenges than the U.S. economy generally and may remain so. Radio revenues in certain markets in which we operate have lagged the growth of the general United States economy. Radio revenues in markets in which we operate, as measured by the accounting firm Miller Kaplan Arase LLP (“Miller Kaplan”) were down in 2020 and, while they have recovered, they have yet to fully reach pre-pandemic levels. Even in the absence of a general recession or downturn in the economy, an individual business sector (such as the automotive industry or the hospitality industry) that tends to spend more on advertising than other sectors might be forced to reduce its advertising expenditures if that sector experiences a downturn. If any such sector’s spending represents a significant portion of our advertising revenues, any reduction in its advertising expenditures may affect our revenue.
Any deterioration in the economy could negatively impact our ability to meet our cash needs and our ability to maintain compliance with our debt covenants.
If economic conditions change, or other adverse factors outside our control arise, including continued disruptions due to the pandemic or other social factors, our operations could be negatively impacted, which could prevent us from maintaining liquidity or compliance with our debt covenants. If it appears that we could not meet our liquidity needs or that noncompliance with debt covenants is likely, we would implement remedial measures, which could include, but not be limited to, operating cost and capital expenditure reductions and deferrals. In addition, we could implement de-leveraging actions, which may include, but not be limited to, other debt repayments, subject to our available liquidity and contractual ability to make such repayments and/or debt refinancing and amendments.
The terms of our indebtedness and the indebtedness of our direct and indirect subsidiaries may restrict our current and future operations, particularly our ability to respond to changes in market conditions or to take some actions.
Our debt instruments impose operating and financial restrictions on us. These restrictions limit or prohibit, among other things, our ability and the ability of our subsidiaries to incur additional indebtedness, issue preferred stock, incur liens, pay dividends, enter into asset purchase or sale transactions, merge or consolidate with another company, dispose of all or substantially all of our assets or make certain other payments or investments. These restrictions could limit our ability to grow our business through acquisitions and could limit our ability to respond to market conditions or meet extraordinary capital needs.
We have historically incurred net losses which could continue into the future.
We have historically reported net losses in our consolidated statements of operations, due mostly in part to recording non-cash impairment charges for write-downs to radio broadcasting licenses and goodwill, interest expenses (both cash and non-cash), and revenue declines caused by weakened advertising demand resulting from the current economic environment. These results have had a negative impact on our financial condition and could be exacerbated in a poor economic climate. If these trends continue in the future, they could have a material adverse effect on our financial condition.
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Our revenue is substantially dependent on spending and allocation decisions by advertisers, and seasonality and/or weakening economic conditions may have an impact upon our business.
Substantially all of our revenue is derived from sales of advertisements and program sponsorships to local and national advertisers. Any reduction in advertising expenditures or changes in advertisers’ spending priorities and/or allocations across different types of media/platforms or programming could have an adverse effect on the Company’s revenues and results of operations. We do not obtain long-term commitments from our advertisers and advertisers may cancel, reduce, or postpone advertisements without penalty, which could adversely affect our revenue. Seasonal net revenue fluctuations are common in the media industries and are due primarily to fluctuations in advertising expenditures by local and national advertisers. In addition, advertising revenues in even-numbered years tend to benefit from advertising placed by candidates for political offices. The effects of such seasonality (including the weather), combined with the severe structural changes that have occurred in the U.S. economy, make it difficult to estimate future operating results based on the previous results of any specific quarter and may adversely affect operating results.
Advertising expenditures also tend to be cyclical and reflect general economic conditions, both nationally and locally. Because we derive a substantial portion of our revenues from the sale of advertising, a decline or delay in advertising expenditures could reduce our revenues or hinder our ability to increase these revenues. Advertising expenditures by companies in certain sectors of the economy, including the automotive, financial, entertainment, and retail industries, represent a significant portion of our advertising revenues. Structural changes (such as reduced footprints in retail and the movement of retailers online) and business failures in these industries have affected our revenues and continued structural changes or business failures in any of these industries could have significant further impact on our revenues. Any political, economic, social, or technological change resulting in a significant reduction in the advertising spending of these sectors could adversely affect our advertising revenues or our ability to increase such revenues. In addition, because many of the products and services offered by our advertisers are largely discretionary items, weakening economic conditions or changes in consumer spending patterns could reduce the consumption of such products and services and, thus, reduce advertising for such products and services. Changes in advertisers’ spending priorities during economic cycles may also affect our results. Pandemics, disasters (domestic or external to the United States), acts of terrorism, political uncertainty or hostilities could also lead to a reduction in advertising expenditures as a result of supply or demand issues, uninterrupted news coverage and economic uncertainty.
Our success is dependent upon audience acceptance of our content, particularly our television and radio programs, which is difficult to predict.
Radio, video, and digital content production and distribution are inherently risky businesses because the revenues derived from the production and distribution of media content or a radio program, and the licensing of rights to the intellectual property associated with the content or program, depend primarily upon their acceptance and perceptions by the public, which can change quickly and are difficult to predict. The commercial success of content or a program also depends upon the quality and acceptance of other competing programs released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions, and other tangible and intangible factors, all of which are difficult to predict. Our failure to obtain or retain rights to popular content on any part of our multi-media platform could adversely affect our revenues. Further, social distancing measures and governmental restrictions on gatherings can make the production of new content difficult (if not impossible) and this difficulty can translate in to difficulty in making sales to advertiser who prefer to advertise against new content.
Ratings for broadcast stations and traffic on a particular website are also factors that are weighed when advertisers determine which outlets to use and in determining the advertising rates that the outlet receives. Poor ratings or traffic levels can lead to a reduction in pricing and advertising revenues. For example, if there is an event causing a change of programming at one of our stations, there could be no assurance that any replacement programming would generate the same level of ratings, revenues, or profitability as the previous programming. In addition, changes in ratings methodology, search engine algorithms and technology could adversely impact our businesses and negatively affect our advertising revenues.
Television content production is inherently a risky business because the revenues derived from the production and distribution of a television program and the licensing of rights to the associated intellectual property depends primarily
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upon the public’s level of acceptance, which is difficult to predict. The commercial success of a television program also depends upon the quality and acceptance of other competing programs in the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions, and other tangible and intangible factors, all of which are difficult to predict. Rating points are also factors that are weighed when determining the advertising rates that TV One/CLEO TV receive. Poor ratings can lead to a reduction in pricing and advertising revenues. Consequently, low public acceptance of TV One/CLEO TV’s content may have an adverse effect on our cable television segment’s results of operations. Further, networks or programming launched by NetflixTM, Oprah Winfrey (OWNTM), Sean Combs (REVOLT TVTM), and Magic Johnson (ASPIRETM), could take away from our audience share and ratings and thus have an adverse effect on our cable television’s results of operations.
Increases in or new royalties, including through legislation, could adversely impact our business, financial condition and results of operations.
We currently pay royalties to song composers and publishers through BMI, ASCAP, SESAC and GMR but not to record labels or recording artists for exhibition or use of over the air broadcasts of music. We must also pay royalties to the copyright owners of sound recordings for the digital audio transmission of such sound recordings on the Internet. We pay such royalties under federal statutory licenses and pay applicable license fees to SoundExchange, the non-profit organization designated by the United States Copyright Royalty Board to collect such license fees. The royalty rates applicable to sound recordings under federal statutory licenses are subject to adjustment. The royalty rates we pay to copyright owners for the public performance of musical compositions on our radio stations and internet streams could increase as a result of private negotiations and the emergence of new performing rights organizations, which could adversely impact our businesses, financial condition, results of operations and cash flows. Further, from time to time, Congress considers legislation which could change the copyright fees and the procedures by which the fees are determined. The legislation historically has been the subject of considerable debate and activity by the broadcast industry and other parties affected by the proposed legislation. It cannot be predicted whether any proposed future legislation will become law or what impact it would have on our results from operations, cash flows or financial position.
A disproportionate share of our radio segment revenue comes from a small number of geographic markets and our syndicated radio business, Reach Media.
For the year ended December 31, 2021, approximately 31.8% of our net revenue was generated from the sale of advertising in our core radio business, excluding Reach Media. Within our core radio business, four (Houston, Washington, DC, Atlanta and Baltimore) of the 13 markets in which we operated radio stations throughout 2021 or a portion thereof accounted for approximately 53.8% of our radio station net revenue for the year ended December 31, 2021. Revenue from the operations of Reach Media, along with revenue from both the Houston and Washington, DC markets accounted for approximately 19.3% of our total consolidated net revenue for the year ended December 31, 2021. Revenue from the operations of Reach Media, along with revenue from the four significant contributing radio markets, accounted for approximately 27.5% of our total consolidated net revenue for the year ended December 31, 2021. Adverse events or conditions (economic, including government cutbacks or otherwise) could lead to declines in the contribution of Reach Media or declines in one or more of the four significant contributing radio markets, which could have a material adverse effect on our overall financial performance and results of operations.
We may lose audience share and advertising revenue to our competitors.
Our media properties compete for audiences and advertising revenue with other radio stations and station groups and other media such as broadcast television, newspapers, magazines, cable television, satellite television, satellite radio, outdoor advertising, “over the top providers” on the internet and direct mail. Adverse changes in audience ratings, internet traffic, and market shares could have a material adverse effect on our revenue. Larger media companies, with more financial resources than we have may target our core audiences or enter the segments or markets in which we operate, causing competitive pressure. Further, other media and broadcast companies may change their programming format or engage in aggressive promotional campaigns to compete directly with our media properties for our core audiences and advertisers. Competition for our core audiences in any of our segments or markets could result in lower ratings or traffic and, hence, lower advertising revenue for us, or cause us to increase promotion and other expenses and, consequently, lower our earnings and cash flow. Changes in population, demographics, audience tastes and other factors beyond our
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control, could also cause changes in audience ratings or market share. Failure by us to respond successfully to these changes could have an adverse effect on our business and financial performance. We cannot assure that we will be able to maintain or increase our current audience ratings and advertising revenue.
We must respond to the rapid changes in technology, content offerings, services, and standards across our entire platform in order to remain competitive.
Technological standards across our media properties are evolving and new distribution technologies/platforms are emerging at a rapid pace. We cannot assure that we will have the resources to acquire new technologies or to introduce new features, content or services to compete with these new technologies. New media has resulted in fragmentation in the advertising market, and we cannot predict the effect, if any, that additional competition arising from new technologies or content offerings may have across any of our business segments or our financial condition and results of operations, which may be adversely affected if we are not able to adapt successfully to these new media technologies or distribution platforms. The continuing growth and evolution of channels and platforms has increased our challenges in differentiating ourselves from other media platforms. We continually seek to develop and enhance our content offerings and distribution platforms/methodologies. Failure to effectively execute in these efforts, actions by our competitors, or other failures to deliver content effectively could hurt our ability to differentiate ourselves from our competitors and, as a result, have adverse effects across our business.
The loss of key personnel, including certain on-air talent, could disrupt the management and operations of our business.
Our business depends upon the continued efforts, abilities and expertise of our executive officers and other key employees, including certain on-air personalities. We believe that the combination of skills and experience possessed by our executive officers and other key employees could be difficult to replace, and that the loss of one or more of them could have a material adverse effect on us, including the impairment of our ability to execute our business strategy. In addition, several of our on-air personalities and syndicated radio programs hosts have large loyal audiences in their respective broadcast areas and may be significantly responsible for the ratings of a station. The loss of such on-air personalities or any change in their popularity could impact the ability of the station to sell advertising and our ability to derive revenue from syndicating programs hosted by them. We cannot be assured that these individuals will remain with us or will retain their current audiences or ratings.
If our digital segment does not continue to develop and offer compelling and differentiated content, products and services, our advertising revenues could be adversely affected.
In order to attract consumers and generate increased activity on our digital properties, we believe that we must offer compelling and differentiated content, products and services. However, acquiring, developing, and offering such content, products and services may require significant costs and time to develop, while consumer tastes may be difficult to predict and are subject to rapid change. Further, social distancing and governmental restrictions on gatherings may inhibit our ability to produce content. If we are unable to provide content, products and services that are sufficiently attractive to our digital users, we may not be able to generate the increases in activity necessary to generate increased advertising revenues. In addition, although we have access to certain content provided by our other businesses, we may be required to make substantial payments to license such content. Many of our content arrangements with third parties are non-exclusive, so competitors may be able to offer similar or identical content. If we are not able to acquire or develop compelling content and do so at reasonable prices, or if other companies offer content that is similar to that provided by our digital segment, we may not be able to attract and increase the engagement of digital consumers on our digital properties.
Continued growth in our digital business also depends on our ability to continue offering a competitive and distinctive range of advertising products and services for advertisers and publishers and our ability to maintain or increase prices for our advertising products and services. Continuing to develop and improve these products and services may require significant time and costs. If we cannot continue to develop and improve our advertising products and services or if prices for our advertising products and services decrease, our digital advertising revenues could be adversely affected. Finally, recently, our digital business has seen significant growth in its business due to advertisers increased interest in minority
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controlled media given recent social justice/equality trends. Should these trends reverse or decline, revenues within our digital and other segments could be adversely impacted.
More individuals are using devices other than personal and laptop computers to access and use the internet, and, if we cannot make our products and services available and attractive to consumers via these alternative devices, our internet advertising revenues could be adversely affected.
Digital users are increasingly accessing and using the internet through mobile tablets, smartphones and wearable devices. In order for consumers to access and use our products and services via these devices, we must ensure that our products and services are technologically compatible with such devices. If we cannot effectively make our products and services available on these devices, fewer internet consumers may access and use our products and services and our advertising revenue may be negatively affected.
Unrelated third parties may claim that we infringe on their rights based on the nature and content of information posted on websites we maintain.
We host internet services that enable individuals to exchange information, generate content, comment on our content, and engage in various online activities. The law relating to the liability of providers of these online services for activities of their users is currently unsettled both within the United States and internationally. While we monitor postings to such websites, claims may be brought against us for defamation, negligence, copyright or trademark infringement, unlawful activity, tort, including personal injury, fraud, or other theories based on the nature and content of information that may be posted online or generated by our users. Our defense of such actions could be costly and involve significant time and attention of our management and other resources.
If we are unable to protect our domain names and/or content, our reputation and brands could be adversely affected.
We currently hold various domain name registrations relating to our brands, including urban1.com, radio-one.com and interactiveone.com. The registration and maintenance of domain names are generally regulated by governmental agencies and their designees. Governing bodies may establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, we may be unable to register or maintain relevant domain names. We may be unable, without significant cost or at all, to prevent third parties from registering domain names that are similar to, infringe upon, or otherwise decrease the value of our trademarks and other proprietary rights. Failure to protect our domain names could adversely affect our reputation and brands, and make it more difficult for users to find our websites and our services. In addition, piracy of the Company’s content, including digital piracy, may decrease revenue received from the exploitation of the Company’s programming and other content and adversely affect its businesses and profitability.
Future asset impairment to the carrying values of our FCC licenses and goodwill could adversely impact our results of operations and net worth.
As of December 31, 2021, we had approximately $505.2 million in broadcast licenses and $223.4 million in goodwill, which totaled $728.6 million, and represented approximately 57.8% of our total assets. Therefore, we believe estimating the fair value of goodwill and radio broadcasting licenses is a critical accounting estimate because of the significance of their carrying values in relation to our total assets.
We are required to test our goodwill and indefinite-lived intangible assets for impairment at least annually, which we have traditionally done in the fourth quarter, or on an interim basis when events or changes in circumstances suggest impairment may have occurred. Impairment is measured as the excess of the carrying value of the goodwill or indefinite-lived intangible asset over its fair value. Impairment may result from deterioration in our performance, changes in anticipated future cash flows, changes in business plans, adverse economic or market conditions, adverse changes in applicable laws and regulations, or other factors beyond our control. The amount of any impairment must be expensed as a charge to operations. Fair values of FCC licenses and goodwill have been estimated using the income approach, which involves a 10-year model that incorporates several judgmental assumptions about projected revenue growth, future operating margins, discount rates and terminal values. We also utilize a market-based approach to evaluate our fair value
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estimates. There are inherent uncertainties related to these assumptions and our judgment in applying them to the impairment analysis.
Changes in certain events or circumstances could result in changes to our estimated fair values, and may result in further write-downs to the carrying values of these assets. Additional impairment charges could adversely affect our financial results, financial ratios and could limit our ability to obtain financing in the future.
Our business depends on maintaining our licenses with the FCC. We could be prevented from operating a radio station if we fail to maintain its license.
Within our core radio business, we are required to maintain radio broadcasting licenses issued by the FCC. These licenses are ordinarily issued for a maximum term of eight years and are renewable. Currently, subject to renewal, our radio broadcasting licenses expire at various times beginning August 2021 through August 1, 2029. While we anticipate receiving renewals of all of our broadcasting licenses, interested third parties may challenge our renewal applications. A station may continue to operate beyond the expiration date of its license if a timely filed license renewal application was filed and is pending, as is the case with respect to each of our stations with licenses that have expired. During the periods when a renewal application is pending, informal objections and petitions to deny the renewal application can be filed by interested parties, including members of the public, on a variety of grounds. In addition, we are subject to extensive and changing regulation by the FCC with respect to such matters as programming, indecency standards, technical operations, employment and business practices. If we or any of our significant stockholders, officers, or directors violate the FCC’s rules and regulations or the Communications Act of 1934, as amended (the “Communications Act”), or is convicted of a felony or found to have engaged in certain other types of non-FCC related misconduct, the FCC may commence a proceeding to impose fines or other sanctions upon us. Examples of possible sanctions include the imposition of fines, the renewal of one or more of our broadcasting licenses for a term of fewer than eight years or the revocation of our broadcast licenses. If the FCC were to issue an order denying a license renewal application or revoking a license, we would be required to cease operating the radio station covered by the license only after we had exhausted administrative and judicial review without success.
Disruptions or security breaches of our information technology infrastructure could interfere with our operations, compromise client information and expose us to liability, possibly causing our business and reputation to suffer.
Our industry is prone to cyber-attacks by third parties seeking unauthorized access to our data or users’ data. Any failure to prevent or mitigate security breaches and improper access to or disclosure of our data or user data could result in the loss or misuse of such data, which could harm our business and reputation and diminish our competitive position. In addition, computer malware, viruses, social engineering (predominantly spear phishing attacks), and general hacking have become more prevalent in general. Our efforts to protect our company’s data or the information we receive may be unsuccessful due to software bugs or other technical malfunctions; employee, contractor, or vendor error or malfeasance; government surveillance; or other threats that evolve. In addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access to our data or our users’ data on a continual basis.
Any internal technology breach, error or failure impacting systems hosted internally or externally, or any large scale external interruption in technology infrastructure we depend on, such as power, telecommunications or the Internet, may disrupt our technology network. Any individual, sustained or repeated failure of technology could impact our customer service and result in increased costs or reduced revenues. Our technology systems and related data also may be vulnerable to a variety of sources of interruption due to events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues. Our technology security initiatives, disaster recovery plans and other measures may not be adequate or implemented properly to prevent a business disruption and its adverse financial consequences to our reputation.
In addition, as a part of our ordinary business operations, we may collect and store sensitive data, including personal information of our clients, listeners and employees. The secure operation of the networks and systems on which this type of information is stored, processed and maintained is critical to our business operations and strategy. Any compromise of our technology systems resulting from attacks by hackers or breaches due to employee error or malfeasance could result in the loss, disclosure, misappropriation of or access to clients’, listeners’, employees’ or business partners’ information.
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Any such loss, disclosure, misappropriation or access could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disruption of our operations and damage to our reputation, any or all of which could adversely affect our business. Although we have developed systems and processes that are designed to protect our data and user data, to prevent data loss, and to prevent or detect security breaches, we cannot assure you that such measures will provide absolute security.