Universal Media Access Business Model and Financial Model
Mercury Capital Partners ("Mercury") made five successful investments (San Francisco/San Jose Bay Area, Seattle, Los Angeles) via its portfolio company Universal Media Access ("Universal") using the following strategies:
1. "Ethnic Brokered Time" Business Model: Even though Universal is acquiring radio stations as part of its business plan, it is not in the radio business. It is in the leasing business. Universal uses an "ethnic brokered time" business model. It is in the leasing business, where it brokers out large blocks of time to various ethnic groups who have traditionally been disenfranchised from gaining access to the kinds of mainstream media broadcast properties which Universal owns. Mercury oftentimes analogizes Universal's ethnic brokered time business to managing an apartment building. Universal is simply leasing out the space.
Because the brokers rather than Universal bear the majority of the costs of operating the radio station, operating profit margins, referred to as Broadcast Cash Flow ("BCF") in the broadcasting business, are extremely high. Some Universal stations run BCF margins into the 65% - 70% range.
These businesses require very low "cap ex" costs. So, Universal has a very simple, high margin, high free cash flow business model.
This business model is also well suited to withstand the pressures of an inflationary economic environment. It is not labor intensive (only a handful of employees are required to run each station). It is not affected by raw material costs or commodity costs. There are no variable production costs. There are no significant distribution costs, hence no exposure to rising gasoline prices. Meanwhile, clients tend to accept rate increases for their brokered time in an inflationary economy.
2. "Current Pay/Current Return" Financial Model: Universal uses a "current pay/current return" financial model. The acquisitions are financed with 100% equity, allowing the stations to generate immediate and significant LP distributions. Virtually 100% of the return for most private equity investments occurs at exit. The objective of Mercury's "current pay/current return" model is to return 100% or more of invested equity before exit.
3. Distressed Prices: Because prices for traditional radio properties have fallen in recent years due to competitive pressures from the Internet and cellular, Mercury is able to acquire powerful market wide radio signals for historically low prices.
West Coast Network
Over the past 10 years Mercury has negotiated for the acquisition of 5 powerful radio signals in the biggest markets on the West Coast:
|Total Population Rank- 4||Station- KLOK-AM||Market- San Francisco/ San Jose/ Oakland||Power (Watts)- 50,000||Date of Acquisition- 2009||Acquired From- Univision|
|Total Population Rank- 4||Station- KCNL-FM||Market- San Francisco/ San Jose/ Oakland||Power (Watts)- 6,000||Date of Acquisition- 2010||Acquired From- Clear Channel (2)|
|Total Population Rank- 4||Station- KSJO-FM||Market- San Francisco/ San Jose/ Oakland||Power (Watts)- 50,000||Date of Acquisition- 2011||Acquired From- Clear Channel (2)|
|Total Population Rank- 13||Station- KKDZ-AM||Market- Seattle/ Tacoma||Power (Watts)- 5,000||Date of Acquisition- 2016||Acquired From- Disney|
|Total Population Rank- 2||Station- KFWB-AM||Market- Los Angeles/ San Diego||Power (Watts)- 5,000||Date of Acquisition- 2016||Acquired From- CBS|
KCNL-FM was sold for a profit in 2012.
(1) Nielson. (2) Clear Channel is now iHeartRadio.
The remaining 4 properties are all targeted to the Asian Indian and Asian audiences. They now form a powerful West Coast Network reaching a total population of 41m and an Asian population of 6.5m:
|Station- KLOK-AM||Market- San Francisco/ San Jose/ Oakland||2010 Population- 11,663,083||Total Population Rank- 4||2010 Asian Population- 2,085,721||Asian Market Rank- 1|
|Station- KSJO-FM||Market- San Francisco/ San Jose/ Oakland||2010 Population- 6,912,381||Total Population Rank- 4||2010 Asian Population- 1,629,508||Asian Market Rank- 1|
|Station- KKDZ-AM||Market- Seattle/Tacoma||2010 Population- 3,746,882||Total Population Rank- 13||2010 Asian Population- 405,724||Asian Market Rank- 6|
|Station- KFWB-AM||Market- Los Angeles/ San Diego||2010 Population- 18,657,197||Total Population Rank- 2||2010 Asian Population- 2,373,007||Asian Market Rank- 2|
Tuesday, March 1st, 2016Mercury Capital Partners aquires KFWB-AM (Los Angeles/San Diego, CA market) from CBS on March 1, 2016.
Thursday, September 17th, 2015Mercury Capital Partners aquires KKDZ-AM (Seattle/Tacoma, WA market) from Disney on September 17, 2015.
Wednesday, December 31st, 2014Mercury Capital Partners Exits Investment in Million Dollar Media