The news of course is that Cumulus Media plans not to renew the contracts of conservative talk radio hosts Rush Limbaugh and Sean Hannity at the end of the year. Most media attribute this development to the controversies attributed to their inflammatory political commentaries during the 2012 election year.
Limbaugh and Hannity are the supermen of talk radio.
Limbaugh is the No. 1 talk host who reportedly airs on 600 radio stations and reaches an average of 15 million listeners per week. Hannity is No. 2, airs on 500 stations and reaches 13 million listeners per week.
Cumulus carries them on 40 stations in markets in its network.
Dropping them probably is no big deal for Limbaugh and Hannity because they probably can pick up stations on other networks in those markets.
But, dropping them probably is a big deal for Cumulus’ bottom line.
This is the key financial data from Cumulus’s Annual Report:
Year Ended December 31, 2012 compared to Year Ended December 31, 2011
Net Revenues. Net revenues for the year ended December 31, 2012 increased $556.6 million, or 107.0%, to $1,076.6 million compared to $520.0 million for the year ended December 31, 2011. This increase is primarily attributable to the impact of a full year of net revenues attributable to [acquisitions], as well as a $26.4 million increase in political advertising due to the presidential and local government elections.
Direct Operating Expenses, . . . Direct operating expenses for the year ended December 31, 2012 increased $345.2 million, or 109.2%, to $661.5 million compared to $316.3 million for the year ended December 31, 2011. This increase reflects the impact of a full year of direct operating expenses attributable to [acquisitions].
The numbers are easy to understand.
Cumulus doubled its revenues, but it also doubled its expenses because of acquisitions. While there was an increase in political ad dollars, because of the billion dollar campaigns of President Barack Obama and his challenger Governor Mitt Romney, that increase was but 4% of the increase from other sources.
Paying top dollar to air Limbaugh’s and Hannity’s shows on a small universe of 40 stations makes little business sense. Limbaugh reportedly earns $50 million per year, and for his radio shows, Hannity reportedly earns $20 million per year. Using the simple math of costs of the shows per station, Cumulus could have been paying as much as $3.5 million to air Limbaugh’s show, and $1.6 million for Hannity’s show.
Why pay that kind of money for two well-worn talk hosts when their shows can be replaced by the shows of other conservative or progressive talk hosts, who also large followings, at fewer costs, without much of a decrease in the ad rates charged by the stations? Makes little business sense.
Whatever the future may hold for Limbaugh, Hannity and the velocity of their political commentaries, they are not likely to expand their respective listener base by any significant measure.
But the future is bright for Cumulus’ bottom line by dropping them, cutting expenses, growing revenues and increasing value for its shareholders.
- Cumulus will drop Rush Limbaugh and Sean Hannity (pullingtotheleft.wordpress.com)
- Rush Responds to Reports of Split With Radio Stations (theblaze.com)
- Cumulus, the second-biggest operator of radio stations, drops Rush Limbaugh and Sean Hannity, holla! (freakoutnation.com)
- More Than 40 Radio Stations Might Drop Limbaugh and Hannity (theatlanticwire.com)
- Limbaugh and Hannity to be dropped by major radio network: report (rawstory.com)