As broadcasting companies expand they increasingly will tap the public rather than private markets for financing, says Michael Jordan, chairman and chief executive of Westinghouse/CBS Broadcasting Inc.
Mr. Jordan spoke about the "third revolution of broadcasting"-and its impact on financing-at a recent high-yield conference sponsored by J.P. Morgan & Co.
"The demands of that revolution will be great," Mr. Jordan told junk- bond investors. Costs are rising at 10% to 15% a year, and "it's difficult to see how total revenues would increase that fast," he added.
A former partner of the buyout firm Clayton, Dublier & Rice, Mr. Jordan is no stranger to financing-both public and private. Under his leadership, Westinghouse shelled out $5 billion for CBS Broadcasting in 1995, helped by a portion of a $7.5 billion bank loan.
Mr. Jordan said the first broadcasting revolution began in 1920, when Westinghouse emerged as the first commercially licensed radio station. The second revolution came with the development of television, and the third- and current-revolution involves the multiplicity of distribution media and the explosion of choices for advertisers, viewers, and licensers.
The implication of this revolution: Companies that know the markets and have successful track records will tap the mass markets for capital.
He added that "companies that have economies of scale will thrive," whereas in the past, when costs were not accelerating as fast, they were able to function and expand on industry revenues and growth.
Successful companies will target the baby boomers, but niche marketers will be at risk, Mr. Jordan said.
"This is a fragmented market, and the only way to get to the mass audience is by using the mass media," he said.
As the large companies prevail, they will have to tap the public markets for financial support, giving the investment community an opportunity to get in on megadeals.
Mr. Jordan mentioned that sometimes the financial markets and publications that focus on media have focused on niche media companies, but in the diffuse and fragmented market of broadcasting, he said, advertisers are seeking broad access to the mass audiences, and those companies in a position to deliver the advertisers ultimately will succeed.