Salem Communications, a Christian publishing and radio giant that owns nearly 100 radio stations nationwide and calls itself the No. 1 Internet provider of Christian content, has been branded a “bottom rung” company by Moody’s Investors Service for struggling under the weight of $320 million in debt.
“People tend to reach out more to God and to Christian media during these times,” commented Tom Scott, president of fellow Christian radio provider Sky Angel, to the Pacific Coast Business Times. “But economically, they just don’t have their pocket book behind it. Not because they don’t want to, but because it’s just not feasible.”
Salem, which operates well-known websites OnePlace.com, Crosswalk.com and Christianity.com, boasts 3 million unique users hitting their websites with 40 million page views per month.
But neither the company’s strong web presence nor its publishing branch could overcome heavy losses affecting the radio industry nationwide.
According to the Radio Advertising Bureau, broadcast revenue was down about 10 percent across the board in 2008. And even though Salem was able to hold its drop to only about 6 percent, its balance sheet plunged from an $8.2 million profit in 2007 to a $30 million net loss in 2008, reports the Business Times. Salem’s stock dropped from trading above $4 to around 50 cents per share.
Now, according to the Radio Business Report, Salem may have difficulty paying off $320 million of debt that matures in 2010, prompting a downgrade in the company’s credit rating and a “negative outlook” assessment from Moody’s.
“The negative outlook reflects uncertainty regarding the company’s ability to address its looming debt maturities,” Moody’s said. “It also continues to incorporate concerns that Salem could face challenge complying with its financial covenants.”
The California-based Salem was founded in 1986 and branched out into several media arenas, including publishing CCM, a top magazine covering the booming Christian music industry, and acquiring Xulon Press, a popular self-publishing company for Christian authors.
Salem also owns and operates nearly 100 radio stations in 23 of the nation’s top 25 markets and syndicates talk, news and music programming to approximately 2,000 affiliates in more than 300 markets in the U.S.
The company’s nearly 1,500 employees nationwide have been among the first to feel the company’s financial woes.
Salem has responded to projections of additional losses in the first quarter of 2009 by cutting expenses 10-12 percent. The company is laying off 13 percent of its workforce, has stopped matching payments to 401(k) funds, and is adopting a 5 percent pay cut for all employees and a 10 percent salary cut for most management level employees.
Salem has also tried to counter the earnings slide by opening up new revenue streams, expanding into Spanish language radio and conservative talk radio, which some believe may experience a boon with a new, Democrat president in office.
“It’s a little bit early to say whether it’s going to move the needle in terms of listeners or revenue,” Evan Masyr, Salem’s chief financial officer, told the Business Times. “But I can tell you that Rush Limbaugh has been quoted saying he does better when there’s a Democrat in office. We are doing events around the country in response to the change in administration.”
Masyr told the Business Times, however, that despite optimism for the future, the company is focusing on cutting costs to balance the radio industry’s loss in revenues.
“It’s a challenging time for broadcasters,” Masyr said. “We’re doing everything we can to confront the challenges of radio and our capital structure.”
WND attempted to contact Masyr for comment but received no response.