Originally published on November 11, 2006

Bishop Cheen

Wachovia Securities
Director Fixed Income

There is much debate today over whether radio cares more about Wall Street than Main Street. One of the financial analysts watching our business closely is former broadcaster Bishop Cheen.

 

Cheen is Director/Fixed Income for Wachovia Securities. He specializes in analysis of and investment in debt and the various income securities of media and entertainment companies.

 

Beginning his career: "In high school I was an intern at WLIB/New York, a leading black music station at that time. Then I worked at various college stations at George Washington University and the University of Florida. My first commercial gig was in Gainesville. We put a station on the air. I was in Miami for years, and Kansas City.

 

"By that time I was charged with closing down a group for a private owner, so I was running a group and watching over investments in television. Parallel to that I was a reporter and field producer for ABC Radio Networks and ABC News & Special Events. So I was doing television, radio and films and PSA campaigns for the White House on drug abuse. It was the ’70s, and the White House was committed to funding drug-abuse media. Then I got involved in road managing, marketing and promoting major pop music tours."

 

Joining Wachovia: "I came here from Paul Kagan Associates in California. I was a senior guy at Kagan for 10 years. Paul gave me an opportunity to do everything I loved, which was analyzing broadcast companies, appraising them and conducting seminars. What started off in broadcasting went into cable programming, wireless cable, the Internet, video games and consumer electronics. I would call it a liberal arts background in media economics and finances."

 

His job responsibilities: "I am a published public-research analyst for media and entertainment companies that have bonds and a fixed-income — be it high-grade or high-yield — component in their capital structure, such as preferred stocks or convertible stocks, but I do not do straight equities.

 

"I can’t help myself from having an opinion about stocks because the only way to play the bonds is to figure out what the companies are going to do for their stocks. Companies live with their bondholders, but they live for their stockholders."

 

What he looks for: "Fundamental value. In this order, this is what I look for: great assets, great management that will make the assets achieve to their full potential, and the inherent arbitrage of situations.

 

"If the market is undervaluing a particular security because of post-Katrina fears or some other kind of macro event, that’s when you come in and bang the drum with a buy. If you think something is fully valued and the market is too much in love with it and there is not much upside to it, that’s when you find a way to exit.

 

"This has to be balanced against many other considerations. Are you overweighted in that name? Are you overweighted in a sector? How long have you held that particular piece of paper? Are there other opportunities for you to make a better investment? An investor can go in and out of a name numerous times — hopefully, at opportunistic times."

 

State of radio: "Radio is at a very exciting and challenging crossroads. This industry is nine decades young. It’s been pronounced dead many times. I like to call it a cockroach because it keeps surviving and often thrives despite all the radiation you throw at it. It is a business that understands the concept of audience fragmentation and, therefore, economic fragmentation.

 

"I think we’re on the threshold of yet another rebirth of terrestrial radio: digital evolution. With the fragmented challenge of MP3s, Internet and cable radio, there are fabulous choices out there. Radio once again needs to redefine what it is and how it connects. The digital retrofit is very important. The less-is-more, clean-up-the-clutter initiatives are very important.

 

"I’ve seen many cycles of radio as a PD, a disc jockey and an analyst looking for that next creative breakthrough in formats and programming. People say that everything sounds the same and that there’s no creativity. I’ve heard that many times, and yet, compared to 25 years ago, we have so many more formats and tools. I think radio’s more creative today than it’s ever been."

 

Why the financial market is so negative: "The financial market can’t help itself. This is a business that is being analyzed and invested in by people who often have a perspective that is

 

5 years old. Many money managers came to radio during the go-go days of the back half of the ’90s, so not only is their history short, it’s also distorted. There seems to be a divine right for the top line to grow 20% a quarter and for the profits, EBITDA and cash flow to grow 30% and 40% a quarter.

 

"Weak expectations have always bred big disappointments. Radio is now on the other side of the coin. It’s also in a distortion. It is in an abnormal, very low-growth era. A more normalized era for radio is to outperform inflation by 100 or 200 basis points of top-line growth. Because of the fixed-cost nature of radio, if you can get 2% or 3% top-line growth, you can get 5%, 6% or 7% profit growth and generate lots of free cash flow.

 

"This is a good business, but there are some challenges. The disconnect is that the market thinks radio is so yesterday, and it has a tendency to straight-line everything up or down to make everything a zero-sum game. The average person has an insatiable appetite to consume media. We’ll pay for access to it — we just want to have it. It’s a bottomless pit."

 

How radio can enhance its image with the financial community: "Nothing substitutes for growth. Radio is going to have to earn its way back into the hearts of the financial community. For the most part, it should keep doing what it does best. Be transparent; don’t play spin games. This is not the Washington Beltway, so just answer straight-up, and ‘I don’t know’ is an OK answer.

 

"Clean up the airwaves, get less clutter, make the digital retrofit exciting as it rolls out, and don’t oversaturate the land with too many channels chasing too few dollars. Madison Avenue is not going to support all these new digital spinoff channels. Let’s come up with exciting new models. Maybe it’s subscription, maybe it’s public service, maybe it’s the high-niche, hybrid-advertising-and-donation models that religious broadcasting has been successful with.

 

"Radio has always been good at trying new things, at experimenting. Radio should get high marks for embracing podcasts. I read that Clear Channel is doing free downloading of podcasts. That’s the right way for old media to embrace new media.

 

"Satellite radio is very much a viable medium. Some people act as if satellite is going to put terrestrial out of business. Of course it isn’t. Nor is terrestrial radio going to put satellite radio out of business."

 

Biggest challenge: "Staying objective. Not going gaga one way or the other. Because I came from radio, I have to guard against falling in love with a company or falling in love with a situation. My challenge is trying to stay as objective as I can and not lose money."

 

Something about what he does that would surprise our readers: "Analysts have an incredibly high profile. They have this kind of aura where people think they have the answers. The most surprising thing is, we often don’t have a clue. We’re trying to figure it out just like everybody else. It’s our job to comment on the management of companies — what they’re doing right, what they’re doing wrong, was it a good quarter, was it a bad quarter — and it’s a heck of a lot easier to comment on these companies than to run them."

 

Career highlight: "Having longevity, surviving. Often I’m just trying to get back to the line of scrimmage, but if you survive, that’s another day that you might thrive. Also, trying to be honest in the work I did."

 

Career disappointment: "I wish I had figured out how to have a Grammy-winning crossover hit so I could have lived off the residuals and toured the country in a retro rock R&B band."

 

Most influential individual: "Paul Kagan. He has always had an incredible ability to take very complex situations and boil them down to simple, actionable decisions and be very evenhanded about it. I’ve never met anybody who had that incredible ability, and I’ve known lots of great and fascinating people, many of whom have worked with Paul."

 

Favorite radio format: "If I could find a format that would feature the top 10 of every chart in R&R mixed together, I’d be very happy."

 

Favorite television show: "I haven’t had one since they took off both WKRPs. I like music and media shows. I sample the new Saturday-morning cartoons because I think they’re the bleeding edge of what’s coming."

 

Favorite song: "‘You Can’t Always Get What You Want,’ by The Rolling Stones."

 

Favorite movie: "Day for Night, Blow-Up and Jerry Maguire."

 

Favorite book: "Anything by Richard Brautigan."

 

Favorite restaurant: "I just I like to eat."

 

Beverage of choice: "Water."

 

Hobbies: "Basketball with my son, who takes incredible delight in destroying me every weekend. I like to download and keep up on music. Between my job, those things and reading fiction when I can, I’m pretty busy."

 

E-mail address: "bishop.cheen@wachovia.com."

 

The story behind his name: "It’s a heck of a name for a Jewish kid. I stole it fair and square. I grew up in New York City, and in my apartment building we had Fulton J. Sheen, the real bishop. When television started in the ’50s you could only get three things: Ding-Dong School, wrestling and Bishop Sheen. I didn’t know he was a star, but he was a nice guy. We got his mail and he got ours. We became friendly with him, and when I started writing for the school newspaper in elementary school, my relatives would kid me and call me Bishop. I figured that was a pretty cool nom de plume, so I stole it and kept it. My real first name is Bruce."

 

Advice for broadcasters: "Don’t worry about something new. Something new is something that hasn’t been tried in 30 days, so there’s always going to be something new and challenging in radio. Don’t get complacent. Don’t just sit back and not look for the new and exciting things happening in radio or in media. Don’t ever think that this is as good as it gets. Don’t ever think that it’s not going to get any better. Don’t ever think that it can’t get any worse. It’s a changing business. It can change in a New York minute, and it’s all exciting."