Friday’s Memo – EBITDA – WTF is it?

The economic roller coaster is appropriately demonstrated in predictions and reports by pundits. It seems as if one of the acronyms they prefer when reporting on broadcast groups is EBITDA or earnings before interest, taxes, depreciation and amortization. It’s the kind of jargon that pisses off the average person trying to understand what the hell is happening to their money and life.

Let me try to blow off the BS. I cite reports read this week. Price Colman, on Wednesday, published the best article I’ve read recently. Colman reports on tvnewsday.com. He writes the “the underlying issues — strained liquidity and excessive leverage — threaten …TV station groups.”

Colman goes on to explain he believes EBITDA contributes to debt-rating downgrades analysts are giving media businesses. Colman predicts groups are in jeopardy of breaking loan covenants. On the upside, Colman says groups are making enough money to pay interest and working on fixing broken covenants.

We have to consider the ripple effect reaching tsunami levels in the economy. 651-thousand workers/consumers laid off in February in the United States according to the Labor Department. What a human cost from the blind eye turned by watchdogs in the past few years, IMHO.

Consumers drive at least a third of the U.S. economy and every time someone loses work a viewer or listener’s ability to buy the products broadcasters advertise deteriorates. Definitely time for innovation and a change in the way we do business.

I know some intelligent and creative professionals are working on ways to reduce debt for television groups. April promises some interesting revelations.

Bankruptcy is often most considered when faced with today’s circumstances. Young Broadcasting was the latest to join the pack filing for protection. The pack so far includes Tribune, Pappas, Equity Media, Multicultural and Johnson Broadcasting.

Not all group’s debt ratings were downgraded and even one, of those whom Wall Street has lost faith in, reported growth in revenues for the last quarter of 2008. Nexstar this week brags of more than a 12-per cent jump in revenues for the last quarter. Listen to the web cast where Nexstar executives tout earnings and plans.

The Street places some television groups in penny stock category. Check out three cases:

Financial analysts ditch broadcasting at this time. However, after listening to the Nexstar conference call I can hear there is some maneuvering. There are groups weathering hard times and avoiding negative reports in industry trade publications.

This is a time to examine business practices, processes, expenses and consider innovating ways we conduct business. The business of broadcasting will change from the past.

Next week Broadcast Newsroom Computing tackles the long journey to examine social media.

James Rowe

Rowe and Company, LLC

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