Beasley Family Values

Forty-one years ago, doubting that he could earn enough as a

high school principal to put his kids through college, George G. Beasley

started his first radio station in a small northwest North Carolina town with

the unabashed hope of making money.

The sideline has become a wild success, turning first into a

full-time job for Beasley and now a publicly traded, Naples-based corporation

of which he is chairman and chief executive officer. Now approaching 70 but looking younger, Beasley has come a long

way from selling advertising on Saturdays for WPYB-AM, that first station he

built in Benson, N.C. Making an investment of about $25,000, he sold it a few

years later for $125,000 and invested the proceeds in a bigger but still

undeveloped radio station in Goldsboro, N.C.

That’s been pretty much the Beasley pattern ever since: Buy

or build value, work hard to keep costs in check, booststyle="mso-spacerun: yes"> audience appeal, and bring in advertisers,

the lifeblood of commercial radio. Then leverage the profits into the next—and

larger—purchase. Though Beasley loves the fun of radio, he yields to market

rather than personal tastes in programming. The 42 stations Beasley Broadcast

Group now owns air pretty much everything you’ll hear on radio these days, from

alternative rock to religious programming.

Beasley leads the 17th largest radio broadcasting company in

the United States (in revenue and number of stations), with units spread from

Miami to Las Vegas, revenue of more than $110 million last year and nearly 630

employees (including 84 locally). Despite its growth, the company remains a

family entity—four of Beasley’s five children work for him, including Bruce

(president and co-chief operating officer); Caroline (vice president and chief

financial officer); Brian (vice president of operations); and Brad (market

manager for Fort Myers/Naples). The fifth and oldest child, Robert, works as a

doctor in Miami and helped convince his parents to move from North Carolina to

Naples in the 1980s and buy their first station here.

Following an initial public offering in February 2000,

Beasley Broadcast Group stock began trading on the Nasdaq under the symbol

BBGI. Beasley still thinks of the company as a family operation, albeit a much

larger one. Given the growing number of mergers and acquisitions in the radio

industry, he hopes to make his company even bigger, and he says that going

public was the only way to reach beyond bank loans to larger amounts of

capital.

“It’s been a great experience,” he says of going public.

“Instead of thinking about just our family, we think about a much larger family

of investors. It changes one’s thinking.”

Yet the ipo could hardly have come at a worse time. During a

three-week road show in Europe and across the United States to introduce the

company to investors, Beasley figured that the stock would fetch $22 to $23 a

share. But the stock came public at about $15 as the Nasdaq began its historic

swoon. It’s since drifted between

about $8 and $17, hovering close to its offering price recently.

Nevertheless, the IPO gave Beasley what he wanted: more than

$100 million in new capital for making acquisitions, and the ability to put

stock options in the hands of managers to give them a higher stake in

profitability.

Advertising, including radio advertising, has been in one of

its worst declines in history in the past couple of years; and Beasley hasn’t

turned a profit since it came public. Just as conditions appeared to brighten,

the 9-11 attacks snuffed out hopes for a recovery. “Prior to 9-11 we were

starting to feel good about ourselves and thought we might be turning the

corner,” Beasley says. Like other broadcasters, Beasley’s stations endured

widespread cancellations from advertisers leery of having their names

associated with the bad news. For the first time ever, in 2001 the company made

layoffs, letting go 44 employees.

Though profits have suffered, Beasley says he’s seen signs

of a turnaround lately. Some analysts also are predicting an advertising

recovery—UBS Warburg, for instance, recently predicted a 1 percent uptick in

media advertising for 2002, revising a previous prediction for a 2 percent

slump and much better than 2001’s decline of nearly 10 percent. The improvement

should show up on Beasley’s bottom line. Recently, investment research firm

Morningstar had a consensus of analysts predicting a profit of 22 cents per

share for Beasley this year.

Only time can tell the profit picture, of course, but

Beasley will stick to the strategy he’s adopted in the past decade: Focus on

the country’s top 100 radio markets and work them as efficiently as possible.

Much of that efficiency comes from establishing clusters—that

is, building a group of FM and AM stations with critical mass in astyle="mso-spacerun: yes"> particular market. Spurred by the

loosening of Federal Communications Commission limits on the number of stations

one company could own, culminating in the Telecommunications Act of 1996,

broadcast companies went on a buying binge in the 1990s. This led to the advent

of mid-sized broadcast groups like Beasley, and the industry leader, Clear

Channel, the No. 1 radio broadcasting corporation in the country by far with 1,200

stations and annual gross revenues of nearly $8 billion. Clear also is one of

Beasley’s competitors in the Fort Myers-Naples market.

Deregulation has allowed broadcasting companies not only to

increase their dominance of local markets, but to realize cost savings by

clustering stations under one roof, cutting labor and other costs. Beasley has

built four clusters—two in North Carolina, one in Georgia and one in Southwest

Florida. The local effort includes four FM stations—WJBX (99.3), WXKB (103.9),

WRXK (96.1) and WJPT (106.3)—and one AM sports-talk station, WWCN (770)—all

housed in a building in Estero a few miles north on U.S. 41 from Beasley’s

corporate headquarters. The company is working on completing more clusters—for

instance, it’s building one in Las Vegas, the fastest-growing metro area in the

United States, where Beasley established a foothold last year by purchasing

Centennial Broadcasting and its FM stations there with proceeds from the IPO.

Though he’s aggressively pursued high-growth markets, Beasley

has taken a conservative approach to high- tech. He tiptoed into Internet

radio, then retreated. He’s dabbled with satellite radio and has shown wary

interest in digital FM and other new technologies. No one can predict what the

future holds, he says, but he points out that his company’s stations have

succeeded by keeping their appeal local. “With AM and FM radio, we’ve got to

keep ourselves focused on the things that we do well,” he says. “And that is,

we’re localized. In Fort Myers and Naples, we’re concentrating on what’s going

on in Fort Myers and Naples, not in St. Louis or Milwaukee.”

At a few stations, Beasley has been moving into brokered

programming—selling blocks of time to advertisers, who in turn may sell

portions to other advertisers. It’s a method of laying off risk, somewhat along

the lines of what insurers do with reinsurance or farmers and miners do by

selling their products forward in futures markets. Beasley says that brokered

programming will even out the ups and downs of the advertising market.

What does the future hold? Continued em-phasis on expanding

Beasley’s presence in the top 100 markets, and on completing and perhaps adding

clusters, once the company has paid down debt and put profits back on track.

Beasley will continue to buy and sell stations. Recently, for instance, it sold

two in New Orleans for about $20 million, using most of the proceeds to pay

down long-term debt.

The future also likely holds a combination with another

broadcasting company in an industry that continues to consolidate. “We’re

keeping our options open,” Beasley says. “There may be an opportunity for

Beasley to merge with another company, whether it be us as the remainingstyle="mso-spacerun: yes"> entity or Beasley being gobbled up by

another company. I’d say that there’s a high probability that would happen in

less than two years.”

George Nichols, a media securities analyst at Morningstar in

Chicago, points to the rapid rate of consolidation in the radio broadcasting

industry but says that the Beasley family’s heavy involvement in the company

could complicate a buyout. “At a glance, Beasley makes for good takeover bait,”

he says. “I think that eventually there will be a buyout offer. It’s just a

matter of whether Beasley’s management is willing to accept it. Where a family controls

the stock, they tend to be reluctant to sell out, whereas the investing public

are willing to cash out for a gain.”

Given the company patriarch’s lifelong love of radio, and

that four of his children (all in their 30s or 40s) work for him, would Beasley

more likely be the acquirer rather than the acquired? “We may be the company

that is the surviving company,” Beasley says. “If we’re not, I’m sure that the

company that bought us would want to keep some of them [the Beasley children],

if not all, in key positions.”