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SPECIAL PRE-NAB SHOW EDITION
WHAT IS YOUR LPTV LICENSE, OR NEW CONSTRUCTION PERMIT WORTH?
IMPORTANT QUESTION FOR 100's OF LPTV OWNERS AS THEY HEAD TO THE NAB SHOW NEXT WEEK, AND FOR THE MANY 1000's WHICH WILL NOT BE GOING...
YOU FIRST HAVE TO FIGURE OUT WHICH METHOD IS BEST SUITED FOR YOUR UNIQUE SITUATION AND CIRCUMSTANCES
ASSET BASED
Let's face it folks, hard assets only have a value if they are in working order, have a lot of useful life left, and are what the buyer needs for the plan they have. Otherwise, the buyer and seller will not agree on value. However, if you have a new CP and become eligible for relocation funding from that $150 million Congress has allocated, that will be a huge plus to any deal. But no one knows for sure yet if they qualify for those funds, although, meeting both Congressional tests gets you 99% of the way there. However, you will not know a definitive answer for quite a while going forward, especially how much. Those not eligible for relo funds, well, time to take a hard look at the transmission chain from top to bottom to see what today's value is for those assets. The asset based model is best suited for a well established, built, and operating station, not a raw CP.
EARNING VALUE
For many of you this is not the way to value your license, as you are not making all that much profit, although you may be paying staff and yourself, and running a real business. You may have one or more paid channel leases, revenues from ad insertions, and or time barter revenues. But if you are not posting a real profit which a buyer can measure, and comfortably project into the future for quite a while, this model will not get you enough in a real world valuation. Revenues and profits are not the same.
MARKET VALUE, IE SPECTRUM VALUE
For most Class A's and LPTV, whether a station, license, or raw new permit, using the market value approach will almost
certainly
be the best method for you. It is hard to beat the valuation the 2017 Incentive Auction gave to your spectrum licenses and permits. With more than 50% of the spectrum sold in the auction coming from displacing LPTV stations and permits, the cold hard fact is that the 6 MHz of spectrum many of you are moving from was sold on a nationally averaged based to the mobile carriers for just short of $15.00 per TV pop. Now this price was based on the FCC sprinkling magic fairy dust on your spectrum to make it mobile spectrum, so the $7.50 per TV pop paid to the eligible broadcasters is the comp. Neither of the other valuation methods come close to the "spectrum value" method, not even close.
DESPERATION VALUATIONS
There is a 4th method, and one which almost always seems to be utilized by what I would describe as "economic predators", or "economic saviors", depending on the situation. They will take whatever are the industry norms in pricing, irregardless of current market comp's, and focus on the desperate, and then strike a deal at far less than the norm. Think lioness hunting down the hurt gazelle in the wild, just the law of the jungle, right? They then will use this transaction to say there is a new norm. Spend some serious money and do enough of these deals based on desperation, and you can drag down the value of an entire industry. Keep repeating this for a while and you get a new pricing floor. And that is where we are today, a new pricing floor based on almost 800 transactions during the past two years since the Incentive Auction ended.
Here is the National Class A and LPTV Valuation Methodology Charts
which Airwaves USA is now using in its negotiations with buyers
THE BIG TAKE AWAY IS...
THE PRICE IS WHAT EVER THE BUYER AND SELLER AGREE ON!
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