The largest Christian radio company in the United States suffered a major financial blow as ongoing industry challenges collided with the economic impact of COVID-19.
Salem Media Group reaches an estimated 298 million weekly listeners on 3,100 stations branded as The Fish, The Answer, Faith Talk, and more. The megabroadcaster rose to dominance with a revenue model that protected it from some of the ad volatility suffered by its secular counterparts, but that hasn’t been enough in this recent downturn.
Salem’s share price has dropped from a high of about $30 in 2004 to about $6 in 2018 and to 80 cents on Monday. The company’s investment value has been downgraded to “poor quality” and “high risk” by Moody’s, a top credit ratings agency.
On Tuesday the board of directors announced that it would temporarily suspend quarterly payments of dividends to shareholders. The top executives’ salaries were cut by 10 percent.
Financial analyst Michael Kupinski, who specializes in media and entertainment companies, wrote that he expects Salem to “weather the storm,” but not without taking drastic measures. According to Kupinski, that could include “asset sales and aggressive cost cutting,” such as selling off some of the 100 stations owned by Salem or laying off some of its more than 1,400 employees.
Salem did not respond to Christianity Today’s requests for comment. In its most recent financial filing, vice president and chief financial officer Evan Masyr wrote that “it is impossible to predict the total impact that the pandemic will have on our business.”
Salem airs religious programing from teachers such as Chuck Swindoll, John MacArthur, Tony Evans, Eric Metaxas, and the late J. Vernon McGee, as well as contemporary Christian music and conservative political commentary from Sean Hannity, Hugh Hewitt, Mike Gallagher, and Sebastian Gorka.
The business of ‘block programming’
Christian radio has long been seen as more financially stable because of its intimate relationship with listeners and a business model pioneered by Salem to sell airtime to churches and ministries to broadcast their own recordings.
Traditional radio stations make about 95 percent of their income from advertising. Christian radio companies sell spots to advertisers, but also make money from selling “block programming” to preachers who want reliable access to the airwaves.
In 2019, Salem netted $48.5 million from sales of block programing to David Jeremiah, Charles Stanley, Focus on the Family, and other major Christian ministries. The company made an additional $30.5 million from block programming sales to local churches and ministries. The same year, Salem made $16.4 million from national advertising and $51.8 million from local advertising, financial records show.
But with the economic impact of the pandemic, the company saw declines in both advertising and block programming sales. Experts expect a 40-percent decline in radio ad revenue and a drop in charitable giving that puts pressure on churches and ministries to cut back on their spending.
Salem notified shareholders that COVID-19 was going to impact profits at the end of March.
More listeners in crisis
Though revenue is down, the size of the audience has grown since the start of the pandemic. More than a quarter of Americans say they are listening to more radio because of COVID-19, according to market research from the Nielsen Corporation. In the same survey, 60 percent said they trusted radio to give them reliable information and connect them to their communities.
That’s especially true for Christian outlets, according to Jennifer Epperson, a member of the National Religious Broadcasters board of directors and chair of its radio committee.
“People need facts, but they can get fact fatigue, so they want comfort,” said Epperson, a 30-year veteran in the industry. “With the Christian radio station, you can do both.”
Salem was founded by Edward Atsinger III and Stuart Epperson (distantly and indirectly related to Jennifer Epperson). The two met at Bob Jones University and then moved to California and bought a radio station in Oxnard. The station gave them access to the Los Angeles market, the second-largest radio audience in the country.
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Source: Christianity Today