This column was originally published on RealMoney on Aug. 7 at 8:43 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.
You want pain, own a radio stock.
A little more than a year ago, I did a segment on my "Mad Money" TV show that put up a series of tombstones with radio companies' names on them saying they should all rest in peace. The industry, which I am actively involved with because of my "Real Money" radio show (how much do you love that these days you have to disclose that you are hurting yourself in an article!) was up in arms about the piece.
Execs from three companies told me I was dead wrong. Some of them even put their money where their mouths were and either bought back a huge amount of stock or actually decided to take their company private, as was the case with Jeff Smulyan and
Emmis deal has fallen apart. It's an appropriate metaphor for the industry's woes. Few had been more dogged in their insistence that radio was undervalued than Jeff Smulyan. The CEO even sold TV properties to make a bigger bet on radio. He kept telling people that they were misjudging radio.
Looks like the misjudgment was Smulyan's although I will bet that he is too proud to admit that's the case. That wouldn't be his style.
Radio's afflicted with a number of problems: satellite radio competition, iPod competition -- new cars might come standard with I-pod plug-ins, something my kids love -- and Internet competition.
But mostly the dirty little secret about radio is that people hate the intrusive commercials. Try as much as radio can, people would rather listen commercial-free and that's the reason why the iPod and satellite radio are thriving.
Now it is true that these companies still make a lot of money. But their consolidation is largely complete and they seem to be doing little to expand beyond radio, with both
and Smulyan divesting nonradio assets to show the primacy of radio.
I wish I had an answer for shareholders of these companies. I don't. I had thought that Emmis might be the template to take them all private until the market rewarded their fairly consistent cash flows but Emmis blows a big hole in that theory.
Bottom line: avoid these stocks; they remain hazardous to your health.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider Emmis to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
At the time of publication, Cramer had no postions in stocks mentioned.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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