Industry Update Broadcast Industry June 2015

Industry Update

Broadcast Industry

June 2015

Table of Contents

*

Industry Overview ... 3

Key Indicators ... 4

M&A Overview ... 5

Public Market Data

1

_{... 8}

About MPI... 10

Industry Overview

This publication focuses on major events, developments and trends within three segments of the

Broadcast Industry: radio broadcasting, television broadcasting and cable programming. Each of the

Broadcast Industry segments is dominated by a few sizable players, and most firms operating in the

Broadcast Industry are in the mature stage of their business lifecycle. The Broadcast Industry faces the

primary challenge of limited advertising dollars, which is a key driver to revenues, and has resulted in

significant consolidation among industry participants in recent periods. Other important trends and

challenges are discussed below:

•

Radio Broadcasting: This segment includes broadcasting stations, networks and syndicates that

broadcast audio programming through AM, FM and satellite radio channels. Radio suffered greatly

following the 2009 recession as advertising budgets were slashed and the remaining advertising dollars

were largely allocated to television and internet-related marketing efforts. Overall, Radio is struggling to

remain relevant in the face of competition from digital media (such as online radio) and satellite radio.

•

Television Broadcasting: This segment consists of companies operating studios and facilities that

program and deliver over-the-air transmission of audiovisual content to the public. TV broadcasting has

contended with increased competition for viewing audiences and advertising dollars from online channels

and a shift in consumer preferences to cable services. TV broadcasters have begun to demand

retransmission fees from cable companies for the right to retransmit television broadcast programming.

Retransmission fees will continue to represent an important revenue source going forward.

•

Cable Programming: This segment consists of studios and facilities that distribute television programs

through cable systems on a subscription or fee basis. This segment has experienced a widened selection

of channel offerings, which resulted in an increase in the number of consumers willing to pay for

upgrades to existing cable subscriptions in recent years. Despite the recent growth experienced by cable

programmers, the industry faces an evolving source of competition from the Internet.

As the stock price performance graph below suggests, the Broadcast Industry as a whole has outpaced

the S&P 500 over the last two years. In particular, the television broadcasting segment has led the

charge and continues to outpace other subsectors and the S&P, despite significant volatility during 2014.

0% 100% 200% 300% 400% 500% Quarterly Benchmark Performance*

Key Indicators

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20.00

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120.00

2.85

2.90

2.95

3.00

3.05

3.10

3.15

2004

2005

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2011

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2014

2015

Pr

ice

 of

 Cr

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d

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Oi

l

To

ta

l Veh

icl

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Mil

es

US Travel Statistics

Total Vehicle Miles (Trillions of Miles) World Price of Crude Oil ($ per barrel)

220.00

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270.00

280.00

290.00

300.00

310.00

2004

2005

2006

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2012

2013

2014

2015

Advertising Expenditures

Total Avertising Expenditures ($Billion)

80.00

85.00

90.00

95.00

100.00

105.00

110.00

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

2004

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2014

2015

Ca

b

le

 TV

 Su

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scrip

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 Co

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Broadband Connections vs. Cable TV Subscriptions

Broadband Connections (Millions)

Cable TV Subscriptions (Millions)

M&A Overview

Highlighted Transactions

Alpha Media Acquires Morris Radio

 Morris Communications sold its radio division to Alpha Media

LLC. The Morris radio division owned thirty six radio stations in

eight markets. The deal will bring Alpha’s radio holdings to a total

of 135.

 Alpha Media will be paying $38,250,000 for Morris

Communications radio holdings. The purchase will consist of

$18,250,000 in cash and the issuance of 8,196,722 shares in Alpha

Holdings valued at $20 million and 8,196,722 shares in Alpha

Holdings II valued at $6,585.

Charter Communications To Buy Time Warner Cable for $55, Billion, Creating Cable Powerhouse

 Charter Communications will buy Time Warner Cable for $100 a

share in cash and 0.5409 of its shares, in a merger that will create

the second largest cable and broadband operator in the United

States. The cash and stock deal values Time Warner Cable at

$195.71 a share based on May 20 closing stock prices, or over $55

billion, and comes a months after Comcast dropped a $45 billion

bid for Time Warner Cable amid regulatory scrutiny.

 Communication industry operations are looking at mergers as a

way of increasing scale and efficiency, while also serving new

consumer habits such as the growing adoption of streaming video.

Charter will transform into an industry powerhouse with a

significant presence in the Northeast, Southeast and western U.S.

$41.0 $0.9 $3.9 $0.2 $2.8 $1.5 $0.6 $1.1 $0.5 $0.1  ‐  10  20  30  40  50  60  70  80 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 6/30/2015 Radio Subsector ‐ M&A Activity (Announced Transactions) Total Deal Value ($bn) # of Deals 16.7x 0.0x 0.0x 0.0x 11.6x 11.1x 0.0x 32.3x 0.0x 0.0x 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 2006 2007 2008 2009 2010 2011 2012 2013 2014 6/30/2015 Radio Subsector ‐ Median M&A EBITDA Multiples Median EBITDA Multiple Overall Median (14.1x) Announced Date 4/7/2015 Leighton Broadcasting Inc. Result Radio, Inc. And KAGE Inc. Result Radio, Inc. And KAGE Inc. represents the combined operations of Result Radio, Inc. And KAGE Inc. in their sale to Leighton Broadcasting Inc. Result Radio, Inc. owns and operates Radio stations in the United States.

4/8/2015 Saga Communications, Inc. M. Belmont Verstandig Inc. Access.1 Communications Corp.‐NY., Nine Radio Stations in Shreveport and Tyler‐ Longview comprises radio stations located in the United States. 4/29/2015 Alpha Media LLC Adelante Media Group LLC, KTUB‐AM, KDUT ‐FM and KBMG‐FM Adelante Media Group LLC, KTUB‐AM, KDUT ‐FM and KBMG‐FM comprises three radio stations. 5/15/2015 Alpha Media LLC Morris Communications Company, LLC, Thirty‐Six Radio Stations in Eight Markets Morris Communications Company, LLC, Thirty‐Six Radio Stations in Eight Markets comprises radio stations located in the United States. 5/22/2015 Inspiration Media of Texas LLC; Pennsylvania Media WMKI‐AM in Boston and KMKI‐AM in Dallas WMKI‐AM in Boston and KMKI‐AM in Dallas comprises two radio broadcasting stations.

Radio Subsector

Buyer Target Target Description

M&A Overview, cont’d

Industry Trends – Radio

Recent Transactions - Radio

Source: S&P Capital IQ

$17.5 $8.2 _$4.7 $37.5 $1.9 $1.4 $5.7 $69.9 $146.3 $87.4  ‐  5  10  15  20  25  30  35  40  45 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 6/30/2015 TV and Cable Subsector ‐ M&A Activity (Announced Transactions) Total Deal Value ($bn) Deal Count 12.5x 27.1x 0.0x 9.5x 7.9x 41.5x 15.4x 9.8x 8.9x 10.2x 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x 45.0x 2006 2007 2008 2009 2010 2011 2012 2013 2014 6/30/2015 TV and Cable Subsector ‐ Median M&A EBITDA Multiples Median EBITDA Multiple Overall Median (11.1x) Announced Date 2/18/2015 ODS Technologies, L.P. HRTV, LLC HRTV, LLC operates a television‐based multimedia network that provides news, information, and entertainment to horse fans worldwide. 3/24/2015 DTV America Corporation Adelante Media Group LLC, WBWT‐LP and KBTU‐LP WBWT‐LP and KBTU‐LP of Adelante Media Group LLC comprises two television broadcasting stations.

4/22/2015 Gray Television, Inc. WAGM‐TV, Inc. As of July 1, 2015, WAGM‐TV, Inc. was acquired by Gray Television, Inc. WAGM‐TV, Inc. owns and operates a television station for customers in Northern Maine and Western New 5/20/2015 Altice S.A. (nka:Altice N.V.) Cequel Communications

Holdings I, LLC LIN Media LLC, together with its subsidiaries, operates as a local multimedia company in the United States. This transaction closed on December 19, 2014. 5/23/2015 Charter Communications, Inc. Time Warner Cable Inc. Time Warner Cable Inc., together with its subsidiaries, provides video, high‐speed data,

and voice services in the United States.

Television and Cable Subsectors

Buyer Target Target Description

Note: value of 0.0x indicates no available data for that period.

M&A Overview, cont’d

Industry Trends – Television & Cable

Recent Transactions – Television & Cable

10.3x 10.4x 8.9x 8.2x 8.9x 10.0x 9.3x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 20.0x 2009 2010 2011 2012 2013 2014 6/30/2015

Median EBITDA Multiples ‐ Radio

Average of Medians (9.4x) 11.2x 8.1x _{7.5x 7.1x} 12.7x 13.4x _12.8x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

2009 2010 2011 2012 2013 2014 6/30/2015

Median EBITDA Multiples ‐ Television

Average of Medians (10.4x)

Public Market Data

1

Guideline 6/30/2015 Enterprise

Ticker Close (2)

High Low Value (EV)(3)

LTM NFY LTM NFY LTM NFY EBITDA EPS

Radio Broadcasting Beasley Broadcast Group Inc. BBGI 4.63 7.48 4.23 191 15.5x NA 17.7% NA 2.7x NA NA NA Cumulus Media Inc. CMLS 2.03 6.69 1.90 2,938 11.0x 10.3x 21.4% 26.8% 52.6x 29.9x (0.2%) 33.2% Emmis Communications Corp. EMMS 1.00 3.03 0.99 348 9.0x NA 16.2% NA ‐0.4x NA NA NA Entercom Communications Corp. ETM 11.42 13.33 7.86 867 9.3x 8.7x 24.5% 26.2% 17.1x 16.9x (2.8%) 1.5% Radio One Inc. ROIA.K 3.17 5.07 1.35 1,124 9.2x NA 27.9% NA ‐2.7x NA NA NA Saga Communications Inc. SGA 37.85 45.61 33.58 231 7.0x NA 24.6% NA 15.1x NA NA (14.0%) Salem Communications Corp. SALM 6.33 11.00 4.38 436 9.4x 8.7x 17.5% 18.8% NM 17.1x 1.5% 25.9% Spanish Broadcasting System Inc. SBSA 6.75 6.99 1.99 433 11.3x NA 26.3% NA ‐2.2x NA NA NA Median 9.3x 8.7x 23.0% 26.2% 2.7x NM ‐0.2% 13.7% TV Broadcasting Gray Television Inc. GTN 15.68 16.67 7.16 2,167 9.9x 11.5x 39.7% 38.1% 22.1x 28.7x 21.5% 18.9% Tribune Media Company TRCO 53.39 89.99 52.55 7,402 13.3x 15.2x 28.2% 32.6% 10.8x 43.5x (14.6%) NA Media General, Inc. MEG 16.52 23.75 12.45 4,526 17.3x 12.1x 31.6% 47.2% NM 67.2x NM NM Nexstar Broadcasting Group, Inc. NXST 56.00 60.21 36.41 3,258 12.8x 10.9x 36.3% 36.1% NM 21.7x 30.4% 61.2% Sinclair Broadcast Group, Inc. SBGI 27.91 36.14 23.88 6,492 9.1x 9.2x 34.4% 37.0% 12.7x 17.8x 24.8% 54.4% Median 12.8x 11.5x 34.4% 37.0% 12.7x 28.7x 23.2% 54.4% Consensus Growth(4) Company

Guideline 6/30/2015 Enterprise

Ticker Close (2) _{High Low Value (EV)}(3) _{LTM NFY LTM NFY LTM NFY EBITDA EPS}

Cable TV AMC Networks Inc. AMCX 81.85 83.78 52.73 8,763 11.5x 11.0x 32.9% 31.4% 19.1x 16.7x 16.3% 21.1% Corus Entertainment Inc. CJR.B 16.67 25.50 16.15 2,289 7.9x 8.3x 34.9% 33.8% ‐34.9x ‐88.2x (3.4%) (4.4%) Crown Media Holdings Inc. CRWN 4.52 4.67 2.93 1,931 5.9x NA 76.7% NA NM NA NA NA Discovery Communications, Inc. DISC.A 33.26 44.99 28.72 29,173 11.5x 11.9x 39.7% 37.8% 18.5x 19.5x 2.0% 10.3% Scripps Networks Interactive, Inc. SNI 65.37 86.48 64.47 10,433 8.9x 8.6x 43.9% 40.5% 15.5x 14.6x 7.3% 11.4% Viacom, Inc. VIAB 64.64 89.76 63.11 38,808 9.1x 9.4x 30.9% 30.8% NM 14.8x 1.1% 7.1% Median 9.0x 9.4x 37.3% 33.8% 17.0x 14.8x 2.0% 10.3% Consensus Growth(4) Company

52‐Week EV/EBITDA EBITDA Margin Market Cap/Earnings

Public Market Data, cont’d

Notes: (1) Source: As reported by S&P Capital IQ. (2) Reported in local currency. (3) In millions of local currency. (4) Represents two‐year analyst estimates. Definitions:

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