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Four analysts and top management from seven sector firms examine the broadcasting sector in this special 57-page Broadcasting Industry issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info531.htm

TWST: James, how would you assess the performance of the broadcasting stocks over the past 12 months? Have there been any outstanding performers in the group?

Mr. Marsh: That’s a good question. Clearly, over the last 12 months, Cumulus Media (Nasdaq:CMLS) has been one of the best performers in my space. And, in general, the group has outperformed the S&P 500. Radio was up 3.1% over the last year vs. down –1.1% for the S&P, and up 4.9% compared to down –2.2% YTD, respectively. TV was up 16.9% over the last 52-week period and — 1.0% YTD, exceeding the S&P numbers as well. I would say that that’s pretty typical at this stage in the cycle. These stocks tend to be, like the publishing stocks that Lee follows, early cycle stocks, and they typically get bid up early in the economic recovery.

TWST: James, Lee touched on a recent decision by a federal court that ordered the FCC to reconsider the rules that would affect TV stations in small or medium-sized markets. If this rule is struck down, would you expect to see a wave of consolidation in the secondary markets?

Mr. Marsh: I would expect to see some consolidation following changes in the duopoly rules. We think that most action will be related to companies attempting to achieve duopolies rather than for cross-ownership or national caps being lifted. I think mid-sized and smaller markets need a duopoly to be more viable. I think with TV/newspaper cross-ownership, you’re generally going to see one deal per market. But I would expect to see a lot of swaps. I tend to think that typically one newspaper in the market would end up buying one of the local news leaders, probably a big four affiliate, and two of the other big four affiliates will team up as a duopoly and be the other local news leader in that market. I don’t think national TV ownership caps being lifted will impact the mid-sized market players and smaller market players that much. I tend to think that the networks and some of the bigger media players that have the capacity to go out and buy additional stations will generally move down in market from where they are currently with their owned and operated stations. If they’re, for example, in market 1 to 15, maybe they move down to market 16-25. But I would not expect them to move into market, say, 50-75. So I think they’ll move into adjacent markets first. The other thing I would point out, and we’ve been a little bit cautious about what all this consolidation means for broadcast stocks, is that I would be a little apprehensive about deregulation being a panacea for the entire TV group. I wouldn’t be surprised to see private market values below the historical range. Typically, we’ve seen TV stations selling for, say, 13 to 16 times BCF. I think one of the reasons why that has occurred is because there has typically been a supply/demand imbalance, a very high demand to buy stations and a low supply of stations available. But this time around I think deregulation could result in a flood of stations available for sale. Everyone seems to have the same strategy. They all want to unlock the value of the other stations at the same time. A lot of the commercial banks are going to be forcing TV broadcasters to sell stations, once we get better visibility on dereg. So I would be selective in buying TV stocks, simply because of dereg.

TWST: Would you say a few words about Cumulus, Emmis and Salem?

Mr. Marsh: Cumulus is another mid-sized radio consolidator. This is a company that had a senior management shakeup and some other issues to deal with. So it’s a management team that’s fairly new to the company. They had some major credibility issues with investors after some earnings misses. I think the new management team performed very well in a difficult environment. So I think that the sentiment on the Street is improving. Their cash flow growth rates looked extremely strong last year, even in a tough ad environment. A lot of that came from cost cutting, but I think the management is earning a very strong reputation. The company does have some financial leverage, which we like at this stage in the cycle. They have recently done some smart acquisitions and station move-ins to really improve the overall look of their station portfolio. So that’s one that we like.

This special issue includes:

1) Broadcasting Industry - In an in-depth (11,400 words) Analyst Roundtable, Frank Bonechak, Founder of Edge Capital, James Marsh Jr., Managing Director at Robinson Stephens and Leland Westerfield, Director for the Communications Group at UBS Warburg, examine the outlook for the sector including regulatory outlook, cross-ownership rules and share specific stock recommendations.

2) TWST confidential Off-The-Record survey of management performance of seventeen sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Radio & Spanish Language Broadcasters - In an in-depth (3,900 words) Interview, Alissa Goldwasser, Research Analyst at William Blair & Company, examines the outlook for the sector and shares specific stock recommendations.

4) CEO interviews (average 2,500 words). Top management of seven sector firms examine the outlook for their firm and the sector.