Urban One Inc (UONE) 2008 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Radio One's second-quarter conference call. I have been asked to begin the call with the following Safe Harbor statement. During this call, Radio One may share with you certain projections or forward-looking statements regarding future events or its future performance. The Company cautions you that certain factors including risks and uncertainties referred to in the 10-Ks and 10-Qs and other reports periodically filed at the Securities and Exchange Commission, could cause the Company's actual results to differ materially from those indicated by its projections or forward-looking statements.

This call will present information as of August 5, 2008. Please note that Radio One disclaims any duties to update any forward-looking statements made in the presentation. In this call, Radio One may also discuss some non-GAAP financial measures in talking about its performance; its measures will be reconciled to GAAP either during the course of this call or in the company's press release, which can be found on its website at www.radio-one.com.

An audio replay of the conference call will also be available on Radio One's corporate website at www.radio-one.com under the investor relations section of the web page. The replay will be made available on the website for seven days after the call. No other recordings or copies of this call are authorized or may be relied upon.

I will now turn the call over to Alfred C. Liggins, Chief Executive Officer of Radio One, who is joined by Peter D. Thompson, the Company's Chief Financial Officer. Mr. Liggins, please go ahead.

Thank you very much, operator, and thank you everyone for joining us for our Q2 conference call. Also here with me today is Barry Mayo, who is the President of the radio division; Linda Vilardo, who is our Chief Administrative Officer; and Deborah Cowan, who is our VP of Finance.

As I stated in the press release, it was a very busy quarter with asset sales, the acquisition of Community Connect, some debt deleveraging and also some stock buybacks. Although the economy is challenging, we feel good about our positions and our management team and their ability to continue to grow our market share and most importantly, contain our core costs.

Peter is going to go into the numbers and into the specifics of those numbers and our performance and then I'm going to follow up with some conversation and some color on Interactive One and our diversification strategy.

Thanks, Alfred. On a consolidated basis, net revenue was $83.4 million, up 1% year to year. Of this increase, 440 basis points was attributable to Community Connect which was acquired on April 10. Our core radio division excluding Reach Media, produced net revenues of $68.9 million, down 3.2% from the same period last year. Reach Media had net revenue of $11.4 million in the quarter which was down 2.7% year-to-year mainly as a result of the lack of TV licensing revenue. GIANT Magazine produced revenues of $0.4 million, an increase of 39% year to year.

Consistent with the first quarter, we outperformed the radio markets in which we operate which were down by 7.3%. Our performance in local revenue was particularly strong declining 0.7% against a 6% decline for our markets. However, we continued to experience substantial declines in national revenues where we were down by 20% against our markets being down 15%.

Two of our largest markets were significantly down. Atlanta was down 6.8% and Houston was down 12.1%. Although this was offset by some strong performance in other markets, notably Indianapolis which was up 25%, Raleigh which was up 5%, and Philadelphia which was up 3.8%, we were helped by political advertising revenues of $1.2 million against $173,000 last year.

Year-to-date, our core radio net revenues are down by 0.7% which we believe compares favorably with our competitors. However, I believe it will be increasingly difficult to hold radio revenues near flat in the face of a mounting advertising recession. The numbers we are seeing in Q3 indicate to us that the market is softening not rebounding. Currently, our third-quarter radio revenue is pacing down 4% in local, 25% in national, and 11% on a combined basis. So we anticipate a high single-digit decline for Q3.

While our number of spots was comparable to prior year, the average unit price fell by 5% year-to-year reflecting continued pricing softness. Looking by advertising category, auto continued to decline and was down 12.7% year-to-year, as did retail which was down 18%, healthcare was down 10%, and telecom was down 14%. This was partially offset by the political dollars I mentioned earlier and also financial which was up 5%; travel and tourism which was up 24%; and food and beverage which was up 4.6%.

Turning to expenses, there was some noise in the Q2 numbers for which I will normalize, but our headlined core expenses rose by only 0.5% overall and by 2.4% for radio. The new employment agreement for Alfred Liggins resulted in one-time charges up $10.4 million. And also in Q2 2007, we had net one-time costs of $1.1 million relating primarily to the stock option investigation.

In addition to these two one-time items, we had incremental costs of $6 million relating to our online division, of which $3.5 million related to Community Connect. Adjusting for these items, the core consolidated expenses rose by only 0.5% reflecting the fact that we continued to be very aggressive in reducing discretionary expenses.

For the second quarter, station operating income was $35.2 million, a decrease of 11% on a same station basis from 2007. Adjusted consolidated EBITDA was $17.6 million, a decrease of 56% versus 2007. After normalizing for the two one-time items mentioned above, the decline was 32%. And for our core radio business excluding Reach Media, the normalized adjusted EBITDA decline was 8.9%.

During Q2, our Interactive One division lost $3.2 million at the adjusted EBITDA level on revenues of $4.2 million which is in line with our expectation and forms part of the $30 million investment carve out that we have in our bank facility. We are pleased with the integration of Community Connect which showed strong year-to-year growth in advertising revenues, up 21% driven in equal parts by direct advertising sales and by our recruitment diversity deal with Monster.com. This more than compensated for the discontinued dating subscription revenues that CCI moved to free dating in order to get more audience. Overall, net revenues were up by 7% for the quarter.

Moving down the P&L, we continue to provide a full valuation allowance for NOLs arising in the quarter, which resulted in a non-cash tax charge of $8.5 million out of the $9.8 million provision. For the quarter, CapEx was approximately $2.3 million, a slight increase of $0.2 million versus prior year driven primarily by studio build outs and Interactive One.

As of June 30, 2008, we had debt net of cash balances of approximately $733.5 million, and our total leverage ratio for bank covenant purposes was approximately 6.59 times against a limit of 7.50 times. Our interest cover was approximately 1.85 times against a limit of 1.60. The sale of LA was completed as planned on May 30 and resulted in a pay down of $122 million on our revolver.

TV One continued to perform well with Q2 revenues up 52% year-to-year at $18.3 million, and cash usage improved by $4.7 million against the same quarter last year of plus $1.3 million. This was also TV One's first profitable quarter.

I hope this has helped in providing some additional detail on the numbers contained in the press release, and I would like to hand over to Barry Mayo, who will provide some additional information on our current performance.

Thank you, Peter. I'd like to reinforce some of the information Peter just gave you. The second quarter was a tough one for the radio industry and especially tough for Radio One's core group of stations. However, our stations were able to outperform our markets in total revenue. Of our Miller, Kaplan total revenue rated markets were down 7.3% while our [pluses] were only down 5.2.

Our biggest challenge like that of the industry is in the area of national revenue. Not only were our markets down by a collective 14.8%, but unfortunately our stations were down by 23.2%. Now the basic causes of this underperformance are centered around a couple of issues. One, the entertainment category which happens to be Radio One's largest category nationally, continued to suffer in the second quarter. In 2007, it was our largest category nationally. As a matter of fact, it represented 20% of our total national business.

In addition to the extremely soft national environment, there are a few large national advertisers that moved out of the national arena into local, led by AT&T which was the third largest national advertiser in America. So this hurt us.

On the other hand, our customers did perform well, as Peter mentioned in Q2 in the local arena. Our markets collectively declined by 6% in Q2 but our stations were down a little less than 1% locally outperforming our markets by [530] basis points.

Drilling down a bit, Houston had the toughest go of it in Q2 along with Atlanta. The Atlanta market, not our stations, but the market was down by over 14% in Q2. And while we outperformed locally, it's hard to recover from a market decline that tough. Houston's performance again, was adversely affected by national. We underperformed the national market by 14 points which outweighed our over performance locally. Our Q2 positive growth was fueled by group performance in Raleigh, DC and Indianapolis. Particularly proud of the Indianapolis station's performance; they had a 25% growth in net revenues and a 37% growth in profit for the quarter.

The second quarter also saw Radio One release our largest, the largest segmentation study of African Americans ever done. We commissioned a well respected research firm Yankelovich to do this study to not only get a full picture of the entire black community but to help both our current and future advertisers best crafted messages targeted to the black audience. To date, we've gotten extremely positive national press coverage from the Black American study and the response from both our advertisers and the agency community has been overwhelmingly good. And we are already seeing positive revenue results as a result of it.

We plan to use this study to bolster not only our revenues, but to help our advertisers more effectively target the black consumer market which continues to grow.

Finally, we debuted the Mo'Nique afternoon show at the end of June. I think most people know that Mo'Nique is a television and movie star who continues to be one of the hottest black female entertainers in the country. While we do not have ratings results yet, the early reaction from our markets has been extremely positive. Her show is currently airing in seven Radio One markets including Philly, Washington, Houston, Columbus, Charlotte, Cincinnati and Detroit and is scheduled to start in Los Angeles in about two weeks. Thank you.

Thanks, Barry. I talked a lot about our online strategy actually for a number of years and I kept getting pressed about what your online strategy -- what are you guys going to do online? I spent a lot of time trying to craft what I thought was the right strategy to build a business and not just some great radio websites. Now to that end, our radio station websites probably -- not probably, definitely are behind the curve in terms of how much revenue they are doing today versus how much revenue they should be doing as compared to other radio companies.

But Interactive One, which we created last year, I believe is a strategy that is going to allow us to create a whole new business. In that process, we will create really good, probably sector-leading radio websites because it's all part of a company that is going to be dedicated to serving African-Americans online.

And essentially Interactive One is two businesses, one business -- one side of the business is a group of proprietary original content websites that are focused on the genres of entertainment, news, women's lifestyle and soon to come faith and family. I think a press release went out recently that talked about newsone.com, the urbandaily.com, hellobeautiful.com, three of the websites that are out there in beta now. And the idea is to offer more content for African-Americans where there have been a dearth of content.

The Black America study that Barry talked about which we commissioned so we would know more about this audience than anybody else, one of the things that came out of it was that the digital divide has closed. About 71% of all Americans are on line, and actually about 68% of African Americans are online. And there's just not enough content out there for them.

So we are creating this content. We are going to be using this content to fuel our own individual websites but also people can go directly to these sites and consume the content or they can take this content and they can move it around to any other sites whether it is a MySpace page, a Facebook page or a Yahoo! page. That is one side of the Interactive One business.

The other side is a vertical ad network where we're taking all of our own and operated and associated websites, the radio station websites, TV One's website, Tom Joyner's website will be included in the sales effort as well when they have inventory they generally stay in a sold out position. But we are creating, or have created a national ad sales force that will represent those websites but also will represent other third-party publishers like we formed an affiliate relationship with a website called AllHipHop.com which is the number one hip-hop website out there.

The idea is to link all of these websites and to create a solution of scale to reach African Americans for US advertisers. That was also the impetus behind us purchasing Community Connect which owns BlackPlanet.com which Peter said to you is going well. BlackPlanet/Community -- Community Connect/BlackPlanet had been around. They were the original social network before MySpace, before Facebook. They've been around since 1999. They've got a very large audience as defined by ComScore, got a couple million usually somewhere between 2 million to 2.5 million monthly users according to ComScore.

And the idea of matching up a social network with content sites is very similar to what obviously News Corp. did with MySpace and we just did it from an African American perspective. Anyway, long story short, if you put BlackPlanet and CCI together with what the other assets of Interactive One already have and has created, you instantaneously have the number one entity offering online audience at scale on the Internet. And that is an incredible position to have.

Today, the Interactive One sales staff is out there selling 4.5 million monthly users with about 600 million pages because BlackPlanet has a large amount of engagement due to the fact that it is a social network and also a job site through its relationship with Monster.com. And it is the only solution for African-Americans of its type and advertisers are really warm to it, which is why you are seeing us having traction from an advertising standpoint at CCI and we really just started the effort. The effort kicked off at the beginning of July meaning the combined effort because we had to integrate CCI's salesforce into the Interactive One sales force.

So, I'm excited about it and the reason I'm excited about it is because the Internet is -- it's just a distribution system just like newspapers were and television and radio and the ethnic verticals will also develop one line. They just haven't thus far. There historically have been four players in this space all of small to medium sized; that was AOL, Black Voices, Radio One, BET would be BET.com and Community Connect with BlackPlanet. And we essentially have consolidated two of the four players. And online is obviously the fastest-growing ad category right now.

And I said this a lot and I believe it, even though we in radio, I believe the Internet is going to be a real opportunity for radio to level the playing field between us and other mediums like television or local cable, I believe today's radio digital revenues are really just retrading dollars. I think it is advertisers, ad agencies, buyers sort of just reclassifying what had been radio dollars and putting some of that money against interactive.

Our Interactive One effort combined with CCI actually allows us to play for dollars at the interactive agency level and to really go after the same dollars that Yahoo! or MSN or AOL do. And that is not something that I think you can do with just with a collection of radio sites.

So Interactive One is a very important initiative for the company. I believe it will be a growth initiative, growth driver into the future. It is also part of our diversification strategy because I believe ultimately our future is in being a black media and content company and not just a radio company although we are doing some significant things in radio to grow our share and to grow our brands.

We believe in radio. We still make a lot, a lot, a lot of money in radio. It's a great business where you can run some pretty healthy margins and the question is is how do you jumpstart it and get it growing again? We decided to refocus our efforts on markets where we knew that we wanted to play long-term. So sold nonstrategic assets like LA and Louisville and Dayton, Ohio and Minneapolis. We reinvested in places where we were going to be long-term like Washington, D.C. We closed WPRS. We bought a second station in Cincinnati to protect our franchise there.

And we've also launched a bunch of syndicated shows like Barry just mentioned, the Mo'Nique show and Rickey Smiley, and one of the things that I don't think Peter necessarily really highlighted but I think he did mention it, is we are starting to see revenues come from those syndicated shows because we are getting those shows cleared on radio stations that we don't own. Like we lost -- we left Los Angeles but the Mo'Nique show will be cleared in Los Angeles, California. We left Miami but Rickey Smiley's show is cleared in Miami. We've never been in New York, and the Yolanda Adams morning show is cleared in New York.

And so we are starting to see revenue uptake from that and we suspect that it will continue into the future. So radio is the driver for all of this. It's a great driver for interactive audience. TV One is doing extraordinarily well. We are starting to break out those numbers and give you more color on that GIANT Magazine which is competing against the likes of Vibe Magazine, if you will, and it is taking significant revenue share because it is more than just a print publication. It is armed with Interactive One assets and radio assets. And so we are able to grab share in the magazine industry, which ironically is not quite as down as radio. It has essentially been flat over the last five to six years.

But when you combine all of these assets together, Interactive One, Radio One, TV One, GIANT Magazine, our print entity, this platform is something we call One Solution because again, we have actually a sales effort and a sales team that goes out and pitches One Solution because this platform allows us to reach 82% of the US black population in America. And that is a gigantic number.

And it's a conversation that you can have with chief marketing officers and presidents and not just with media buyers because the African-American community is still growing in prosperity, growing in number and people really want to understand this marketplace and take advantage of it. They would just like to do it in a simplified form and they would like to do it in a form that allows them to reach it at scale but also they'd like to have the ability to reach it over multiple mediums. And that is what One Solution is about. And we are going to continue to build on this platform in all areas to ultimately hopefully replicate what Univision has done with the Hispanic marketplace.

And this is probably the first time I have articulated the grand strategy but I wanted to get all of the pieces in place that would allow us to actually execute on that grand strategy. And one thing to talk about something it's another thing to actually have the pieces in place where you can actually go and offer it to advertisers and actually start to talk about revenues that are generated from each part of the platform. And that is where we are at today.

And so we are at this inflection point where we've got all of these things in place. We are going into the mouth of the trough of the economic decline here. But I feel good about how we have positioned the business and I think when we come out on the other side of this, we will be much stronger and I think that we will flourish as much as one can in terms of grabbing market share during the downturn. So that is our strategy.

With that, I think it is time to turn it over for questions from the audience. Operator?

(OPERATOR INSTRUCTIONS) Bishop Cheen, Wachovia.

Thank you for taking the questions. Hi Alfred, hi Peter. Let me focus on the balance sheet as you go through these rough quarters. The covenant by your definition I think you said you were 6.9 times [LTM]. And I think you have a covenant step down of 7.25 times. Given how weak Q3 is and that you have already pulled all of the obvious levers of capital coming in from LA, etc., how do you expect to clear the covenant that is stepping down to 7.25 times? That is in the context of your priority for Internet spending to develop that platform. And also, any more color on choppy one-time charges that we might see Q3 and Q4?

Do you want to --

The Q2 LTM figure was 6.59 --

6.59 by definition?

Yes. So we are forecasting to be under or around 7 times and that is allowing for the downturn in the market that we can foresee. So I think we have some room to maneuver even in a down market although obviously it is tighter than we would like it to be. Obviously our Internet expenditure is carved out of that which I mentioned earlier. We have a $30 million carve out. We are about roughly $12 million through that. So we still have a good amount of headroom there. Any expenditure on that asset is not included in those ratios, so we are not adversely impacting our covenants by investing in the Internet business.

And in terms of one-time charges, I think we should get to smoother waters in Q4. The only thing I can foresee in Q4 is we booked in large impairment charges last year but they are well down the P&L so I think in terms of the key numbers in the P&L, I don't think we will see that many --

How about smoothing Q3, Peter? Do you think it will be -- do you expect some choppy one-time charges in the current Q3?

We have a couple in Q3 relating to some prior-year severance and reversal of accrual. So there will be some noise in the Q3 numbers but again, I will do my best to highlight those and normalize for them. And then I think when we move into Q4, we shouldn't have a lot, if any.

I mean, Bishop, look, it is number one -- it is the number one priority around here is to navigate our balance sheet leverage covenants, etc. That is priority number one. So at the end of the day, if you had told me that Q3 was going to be pacing down, if you had told me at the beginning of the year and we just finished budgets, hey, Q3 you are going to be pacing down sort of double digits and expecting high singles, we wouldn't have been able to plan for that. But it happens, or it is happening. And we recognized that it was happening -- I don't know, a month and a half ago. And so we are doing the kinds of things that we need to do to work through that.

The wildcard that we don't have a handle on is is it going to be down high singles, is it going to stay down low doubles, is it going to improve to mid-singles? We don't know. But at the end of the day, I think that we have been pretty good at navigating this whole thing. We got out in front early, sold assets, etc.

Now the other thing is that we've got -- we've got covenants that we have been tight on but let's think about what the covenant is. Our covenant for interest coverage is what, 1.65 times and it's going to --?

It's 1.6 and it's going to go to 1.7.

So our covenant for interest leverage is 1.75 times. That just in and of itself is a lot of room. It's not as if this company is anywhere near not being able to service its debt. In fact, it's almost being able to service its debt at two times. And we are really only leveraged at 2.5 times to the banks. The rest of our debt is in the bonds and doesn't come due -- the first tranche doesn't come due for three years.

So the reality about our bank deal is our bank group is about as secure as they could possibly be in this credit, it just so happens we are living with a credit agreement that has parameters on it that give them a lot of leverage should we become a little less attractive credit. But even if we did bust a covenant and they are sitting there looking at this, they are going to go, all right, the company can service its debt, it can amortize its principal and they only owe us 2.5 times on leverage.

Now, so what does that mean? At the end of the day, does that mean that they are going to cause a huge, huge, huge problem for the company? I don't think it is in anybody's best interest for them to put the company in distress. What we are really worried about is some sort of repricing of our interest rate grid. That is really what we are trying to avoid because it is a pretty -- if you look at those credit metrics, it's a pretty good credit for the banks.

That is very helpful color. Thank you all for (technical difficulty)

Marci Ryvicker, Wachovia.

Thank you, good morning. Just diving into radio a little bit for the third quarter, Peter, you said that you guys are pacing down 11%. Can you just talk about the different months -- how July finished and is August substantially worse than July finished and where September is pacing?

And then separately, what are your expectations for political? Can you just remind us what you did end of '04 and '06? And lastly, how should we think about the seasonality of each of your non radio businesses? Do you have a sense for that at this point?

This is Alfred. I would tell you that August and September are worse than July. I'm not going to give you exact numbers because again -- put it this way -- if we give you a number now we don't know that we can count on it because there's no predictability but just know that August and September are worse than July. Seasonality for the other businesses, I don't know enough -- I don't want to say don't. We probably have the information if we go and actually analyze it. We just haven't done that yet for these other businesses. We are newly into the Internet business and we've actually just started to talk about the cable business on these calls.

And then Peter has got the political information. Although again, political is in the air we have some political budgeted. I think that we have made some modest budget projections. But there is -- it is great that Barack Obama is an African-American candidate and one would think that that would bode well for a company like ours. But depending on their strategy, they also could take the opposite tactic and say we've got that vote locked up so we're not going to spend a ton of money against this demographic.

We won't know what our political is going to be until it comes in. Net net, it's not going to be a gigantic number for us. It will help us -- you know what I mean? And in an environment like this, particularly when you are trying to navigate covenants, $1 million makes a difference. But it's not going to be something that is going to be a big enough lift like in the television industry where I think it will make a meaningful difference to equity holders.

Looking at the political and the history of it, we saw a decent uplift from '04 to '06, 25% in terms of our net revenues, higher in '06 than '04. And we are forecasting for broadly similar numbers in '08 that we saw in '06. So we think there's a chance we might do a bit better than the forecast. But at the moment, the forecast we're saying is roughly the same as '06. We are not forecasting for a big uplift which ties back to Alfred's points that he just made.

Thank you.

Jim Boyle, C.L. King.

Good morning. Barry, new business development this year. Are you doing anything different? And if so, could you quantify whether it is increased number of sales calls or higher commission levels or specifically targeting certain other media outside of radio?

Got a bifurcated strategy there. One, we are actually focusing on getting incremental revenue from existing key and secondary clients. That is people who we are already doing business with. I think that strategically it is easier to increase revenue with people you already have a relationship with and people you are already doing business with than new customers. And I am not saying that we don't have a new business strategy, most companies do. I'm just saying right now we are hyper focused on that and have recently by account had each of our markets give me a Q3 -- remainder of Q3 and a Q4 revenue lift plan by account.

I'm also meeting next Monday with our friends at Katz, and we are going to have a strategy session and how best to use this Black America Study with their new business development group, and again end up -- the plan is to end up that meeting with a list of target accounts who obviously we can help. So that is our new business strategy.

What would be the average cost per point these days compared to six months ago?

I cannot answer that question because it varies.

Can you give me a ballpark range? Is it down 10%, 20%, 30%?

Peter gave you that our rate has declined by 5%. Is that year-to-year?

That is quarter two this year quarter two last year. Our pricing is up by 5%.

So pricing off by 5%, I think that there's probably a correlation between pricing being up 5% and cost per points being off.

Okay, thank you. Alfred, final question, somewhat hypothetical. If you actually ran the entire radio industry, is there any two big practical ways that you could improve or fix what has been going on for the last several years?

Absolutely. I would dramatically shrink the network business, dramatically shrink it. There is way too much inventory on the market. And the problem with there being too much inventory on the market and the problem with the companies being as big as they are now is that the companies are hard to manage, the inventory is individually managed in each market, which gives an advantage to the buyer. I think the network business, in particularly the network business on the urban side because it's heavily networked right now with all the personalities being in morning/afternoon drive.

But long story short, there is not a call letter -- there is not a premium call letter, a heritage premium top-tier radio station call letter almost that you cannot get on a network buy, and that is not the way it used to be. If you wanted to buy WMZQ in Washington, DC, number one country station, you had to pay a premium.

And I just think that there hasn't been enough strategy brought to bear in terms of how we get the most value for our inventory. I think that we have spent a lot of time competing with each other. I mean it really sucks that and we have to sit here and say, hey, we are down 5, but the industry is down 7, and we count that as a win. I just pulled those numbers out of the air. I don't know -- I don't think those are the numbers that we just reported.

But I think somehow we have to we've got to reverse that trend. We've got to be strategic about how much inventory is out there, what we sell it for, who we sell it to, out how we compete in the marketplace. Because right now, the buyers, the advertisers, they've got better information than we do. So, yes, there is a lot of things that I would change.

Finally, actually, Barry, let me ask you a quick question. Has the average campaign compared to let's say a year ago, is it the same length in weeks and is it the same number of spots, or is it getting smaller?

I think it is fair to say it is getting smaller. The length is shorter and the buys are coming in much, much, much later which makes it more challenging to forecast. I would say a year ago and then a year before that when you looked at the annuals and people were placing business for that year, you are now finding this year that people are placing business by quarter, sometimes even less than that. It has made it tremendously challenging for everybody in the radio industry to forecast.

Jim, I'm sitting here thinking that one more thing that I would have if I was running the radio business because I have said this to people is I would have put together a consortium of companies and we have would have bought Arbitron, because Arbitron is the only winner right now in the radio business. And at the end of the day, if we had all collectively bought it and ran it -- I think in Canada it's a consortium -- we could have provided better research, okay, kept our costs down because they are a monopoly and their revenues are growing at a tremendous clip, the management at Arbitron makes more than most of the radio guys who are running a smaller business. And at the end of the day if you just take the profit motive out of it, you can provide a better research. They've struggled with getting PPM right, continue to struggle.

I think the electronic measurement is going to be great for radio. It's real-time, it takes the sort of the halo that brands get because of recall, if you will, whether a brand is a personality like Rush Limbaugh or what have you or a heritage radio station, it actually tells you what people are listening to because people listen to six and seven radio stations and in my 30-minute drive to work, I may punch 25 times in between radio stations.

So I think electronic measurement is absolutely the way to go but in the meantime while we are getting electronic measurement right, diary is suffering and they are running two parallel systems. But long story short, if there was a pressure on them to make more and more money which comes out of us in the middle of our revenues being challenged, then we could provide better research and the radio business could control its costs. That is what I would have done.

Do you think the ad community would accept it if a radio consortium owned Arbitron?

You know what, I think in a consortium there would be no reason why they shouldn't because we are all competitors, okay. It would be run by a separate management team so it's not like Clear Channel can favor themselves over Radio One or Cox or CBS because we are all owners in the business, if you will, okay. And maybe you even set it up where it is in a trust, okay. And the sole job of the management of the ratings company, Arbitron or whatever you want to call it, is to create the best research for advertisers. So ultimately their customer is the advertiser. We just pay for it. We are paying for it now.

But it is a weird situation because we are the customer, we are paying for it, you know what I mean? And the advertiser gets all the benefits. But ultimately, it is becoming an extraordinarily cost burdensome relationship. And quite frankly, we need to be getting the best research that we can irrespective of the profit motive and that is tough for them as a public company. They are there to make money. So I don't necessarily fault them, they are doing what they are supposed to do. I think that we should have changed the structure.

And yes, I think advertisers would have been fine with it. Let's put it this way, they are not the first consortium -- it wouldn't be the first consortium to ever get broad support from an industry like that.

Insiders own at less than 4%, they have very little debt historically. They have over 30% EBITDA margins. No reason why you guys couldn't do a consortium offer if you guys decide to do it. But much thanks.

But I don't run the radio industry. And I think it would be a little odd if Radio One bought Arbitron.

Well, you know most of the other players but that is up to you guys and gals. Thank you.

Thanks.

[Michael Levin], private investor.

Good morning, everybody. I have a question about the status of the Class A shares. I know there was a notice a little while ago about a potential delisting and some other things. I just didn't know if you wanted to comment about what was going on with that?

You know what, the A shares continue -- obviously all the liquidity is in the D shares and so over a period of four years, there has been conversions each year that people convert out of the As into the Ds. Whenever we've done stock buybacks we've always bought Ds and As so that continues to shrink it. When the stock dropped to its current level and there's only 3.5 million A shares outstanding, essentially you drop below the $5 million market cap threshold level to be listed.

So it was below that and it was an issue. And we get noticed but the other thing that happens as the shares outstanding on the As shrink, there is fewer and fewer sellers. So if somebody happens to be short the As for whatever reason, then they ultimately have to buy them. I think that is what happened when the stock -- the two classes of stock diverged is -- because I watched it on a daily basis. If somebody was short and had to have it in order to get shares they had to run the stock up above $1.50. I don't know what ultimately happens, but there is really ultimately no reason for there to be a divergence in those two classes.

My sense is that at some point in time they will start to meet either the As -- what are more likely to happen is the As will come down and the Ds will go up.

Is there conversions still going on --on an ongoing basis?

There is generally conversions every quarter. So I mean, I haven't checked what the conversions were. We've been in the market buying shares as we reported. So I haven't looked at what has attributed to us and was attributed to conversion. We haven't been buying enough As to move the stock from $1.00 to $1.75.

I had seen that there was -- I'm going to go from memory something in the order of a couple hundred thousand shares that I think that you had purchased I think personally.

I did purchase As personally, that is correct.

And I didn't know what was going on there if there was an effort to try to create liquidity. Or I didn't know what was going on. I don't if you would care to comment about that?

Our associate general counsel thought it was a good idea because he thought it might get the shares back up over I think the crossover point was what $1.40 or something like that -- $1.37. But that is not -- that is not why I did it and ultimately I don't think there is anything that is going to stop the As from ultimately getting delisted. Because if anybody decides they want to sell -- heck if I need to sell the shares that I own, I'm going to have to convert because it will take me forever to sell them.

Right, no that is fair. You bought them pretty quickly but you're right if you needed to sell them --.

There is a difference.

I understand.

Yes.

That is my question, thanks very much.

You are welcome.

(inaudible), Redwood Capital.

Good morning, guys, thank you for taking the questions. I have two questions for Peter. Peter, I was hoping you could just give us a breakdown between what your revolver balance was and what your term loan balance was at the end of the quarter?

Our term loan off the top of my head was roughly $190 million and our revolver -- I can give you today's balance and just quickly mentally adjusting it back to the end of the quarter -- do we have that at hand? Sorry, I'm just doing a quick bit of mental arithmetic. Hang on a sec.

Thank you.

The term loan was roughly 190 and the revolver was roughly 65 at the end of the quarter.

Okay. So your understanding of the credit agreement is proceeds from asset sales can pay down the revolver as opposed to the term loan?

We have a 12-month window during which we can reinvest. So, yes, subject to that 12-month cap. At the end of the 12 months if we haven't reinvested in certain permitted investments, then we would have to make a term loan pay down.

So in the case of Los Angeles where you used the proceeds from the asset sale to pay down the revolver, that meant the paying down of the revolver meant a permitted investment basket?

Well, we obviously did our PRS reinvestment of $38 million so that was part of it. I think we are thinking that we will make a term a permanent reduction in the term loan A. We haven't yet agreed with the bank group what that number will be. And so it would probably be premature of me to talk about that. But that is in process and we are in dialogue with our lead bank about the magnitude of a permanent pay down on the term loan A.

There was also some talk during the last earnings call about financing WPRS off balance sheet. I'm taking it that that did not happen?

No, ultimately the way our -- the way we were going to have to account for the LMA payments and not -- and we wouldn't have been getting credit from the cash flow from the radio station that we were getting, it essentially restricted our capacity or reduced our capacity and not increased our capacity which was the reason we were thinking about doing it.

Great. And one last question, if you could just remind us of any time hurdles that come up between now and October 2009 with regards to TV One? I think that is when you basically can exercise your call. Is there anything that needs to happen between now and then that pushes your decision-making one way or the other?

No, I mean obviously we've got to figure out how we plan to finance it. And it ultimately -- there is a larger looming issue is that we've got this 8 7/8 tranche of bonds that comes due in -- what's the date?

It is 8 7/8 -- it's mid '11 isn't it?

Mid '11. And so we can actually end up calling the 8 7/8 for no premium in July of next year. So it begs the question do you do one big financing, all right, that brings more of the TV One in with the call and takes that bond issue out or do you stagger it, etc.? And so it is -- the financial markets are too choppy right now for us to come up with a definite solution. But somehow I believe that it probably makes sense to link the two.

Just not to put words in your mouth but somehow either increasing the size of your financing to refinance the bonds as well as to exercise a call option under TV One?

You know -- we are going to be outside the call premium window so it won't cost us anything. I don't know where interest rates are going to be at the time. But I sort of would love to put a -- I would love to do one financing that took care of all of our needs as opposed to doing one and then have to do another a year and a half later. You know? Because actually those bonds come due --

In July 2011 I believe.

But we've got to refinance them six months beforehand in order to satisfy our senior credit agreement. (multiple speakers) So the two events -- it's not really three years that we have to -- so the two events will be closely linked together within 12 to 18 months. And it just seems to me if you are going to do a big financing, you might as well do both of them at the same time.

Okay, very good. Thanks for taking the time.

[Avi Steiner], JPMorgan.

Thank you. I think most of them have been addressed but real quickly, Community Connect when you made that acquisition, I think it came with two other social networking sites, outside of a Black Planet. And I'm wondering if there is an opportunity to monetize those either sell or do something else? And then I've got a couple of follow-ups. Thank you.

We are exploring all of our options to that. I don't know what the opportunities to that are yet. But we are exploring whatever options are there. Now, it probably makes sense to match up like the Latino site with a network of other Latino sites. If in fact -- there may be somebody who can actually monetize the inventory at more of a premium than we can.

Perhaps Univision or someone?

Yes, or there is a bunch of Hispanic guys out there. And so we are talking to folks. But everybody is kind of in the same boat right now in terms of how aggressive they want to be. So we will see where it plays out. But look, we are a black media company so at the end of the day, everything that we have that is not black targeted is up for discussion.

Perfect. And then it looks like -- and if this has been addressed I apologize, but it looks like you bought back about 8 million of bonds in the quarter. I know you have -- I believe you have the ability to buy back more but if you could just clarify that for me? And then obviously, you just talked about step down to par on the call price. But we are trading somewhat below that now and so I'm just curious about your thoughts since it would be delevering from my point of view.

The thoughts are is that we are opportunistic and if in fact we are presented an opportunity that we think is attractive like we were on the $8 million, then we will execute. We've been in the market interested before and the bonds ran on us and we didn't do anything. So we are going to look and see how it goes and if there is an opportunity, attractive opportunity, then we will take advantage of it. And yes, we do have the ability to buy back more bonds.

Is it -- I assume it is materially more than 8 million? You don't have to put a number on it.

Well, it's in our credit agreement. We have the ability to buy up to $150 million with the bonds with our credit facility.

Perfect. And then on the credit facility, just a quick explanation for me on the carve out that you talked about earlier. Does that exclude the acquisition price for CCM or is the cost of running those acquisitions or how is that written?

Interactive One is actually the website that we are building and running in the back end and that salesforce at CCI is separate and is included in the Radio One asset so the revenue and cash flow from CCI is not included in the Internet carve out. It's the Interactive One business that we financed and founded a year ago.

Thank you for that clarification. And then lastly, and I'm assuming this is not an issue but obviously CBS has a bunch of stations on the market. I'm assuming hopefully safely that you may look but not touch. Just any thoughts would be great. Thank you.

There is nothing in that asset pool that fits with any part of our future strategy. We are more focused on markets where we are already operating and if somehow someway the competitive dynamic could change and there is nothing in the CBS asset base that they are selling there that fits that description.

Thank you very much.

Could I just clarify a point on the previous question because I was doing a bit of mental arithmetic. I gave a number of approximately 65 million for the revolver, balance at the end of the quarter. I've just checked in the Q and it is 67.5. So that is the actual number. So I was just trying to -- I didn't have it in front of me I was just trying to back into it. So I just wanted to clarify that.

We've got time for one last question, operator.

Okay, thank you. David Bank, RBC Capital Markets.

Thanks, guys, last but not least. Hopefully. Alfred, can you comment on given that you're kind of in the online display business, the cable business, the radio business, the print business, how do you see the tones of those businesses being different? And what do you think are driving those tones? And I realize the online business for you is still in a really growth place but the broader display market?

The broader display market obviously of what $27 billion, 26, 27 that will be spent online, half of that is search and the other half is display. I think that advertisers are still kind of chasing their tail trying to figure out what they think works and does not work online. The result is -- there was this big hoopla about okay great -- online is the truly -- it's truly a media where there is real accountability. But just because somebody clicks on your ad doesn't necessarily mean that they are actually going to buy your service and then what is the appropriate price to pay for a click. You know what I mean?

Display advertising lends itself to branding, what is the value of branding online? So I think advertisers are still trying to figure out how they ultimately quantify return on investment online. I think people are trying to figure out how to -- what they think about social networks. There's been articles in the paper about social networks being tougher to monetize now. For us, everybody is focused on MySpace and Fox Interactive like oh my God, they were supposed to hit $1 billion of revenue. And they are not going to get there and MySpace is only going to do $775 million.

Well for us at Community Connect, we are trying to go like from 20 to 30, you know what I mean, so our little leap is -- I don't worry about the ability to monetize social networking inventory because we've got so much headroom in order to I believe improve the sales of that operation. And Interactive One is not just the social network. It's a social network combined with the content side, it's combined with the radio sites, etc.

So I believe that online advertising growth is going to moderate but it's still going to be double digit. It's still going to be better than radio, it's still going to be better than broadcast television. I think you are seeing some softening in cable but cable generally is still pretty strong. The upfront for most of these companies is going to be somewhere between up 2 and up 7 which in an ad recession is pretty good.

And so at the end of the day, these are all advertising-based businesses, right, so they are all going to get hit to some degree. But online is going to grow the fastest, cable is going to grow the second fastest and I think that outdoor is going to start to slow. Magazines will probably be flat and radio will be down and broadcast TV ex political is going to be down.

Okay. Thanks for the color.

Yes. Thank you very much. We appreciate you guys tuning in and as usual, we are available for off-line conversations if there is any further follow-up. Operator?

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