Benchmark Buying 2 Alabama FM Stations

Benchmark Communications of Baltimore will announce today that it has agreed to buy two radio stations in Alabama’s capital city, bringing to 34 the number of stations the fast-growing local group either owns or has a contract to buy. The local company will buy WZHT-FM and WMCZ-FM, both in Montgomery, Ala., from a group of Mississippi-based investors, Benchmark general partner Bruce Spector said. Both stations use an urban music format, performed mostly by black artists and targeted to a mostly black audience.

The price, based on an undisclosed formula in the contract, is expected to be $17.75 million, Spector said. The deal follows Benchmark’s deals in the past two months to buy stations in Jackson, Miss., and in Columbia, S.C., both of which are state capitals.

“State capitals are very stable markets because of the state governments,” Spector said. “If you pick up a map, Montgomery and Jackson are close together, they both have the same format. I’m excited by the idea of having the No. 1 station in three markets, all of which are urban.”

The deal continues Benchmark’s push to take advantage of the federal telecommunications law passed in February, which increases the number of stations a single owner can control in a single metropolitan market. The deal will give Benchmark a 28 percent share of radio advertising in Montgomery, the nation’s 109th-biggest radio market ranked by revenue, Spector said.

The company’s consolidation strategy reflects an industry trend that has taken off this year. BIA Publications Inc., a Virginia firm that gathers and sells data on the radio industry, said 1,836 U.S. stations have been sold for a total of $13.1 billion since the law was signed by President Clinton on Feb. 8.

By controlling several stations in one place, new owners can cut costs by merging sales and administrative staffs, and can also use stations with higher ratings to promote weaker performers. Both strategies help the buyers make bigger profits than the previous owners when they work, and Benchmark is betting they can work even across metropolitan lines when stations in different cities use the same programming format.

“You can share a lot of programming and consulting advice, and sales-wise you can do a lot,” Spector said. “You can go to an advertiser and offer them the same demographics in one market and in a neighboring market. Very few major businesses serve only one market anymore.”

Benchmark will own stations in 10 markets, almost all in the southern United States, when the Montgomery deal closes, which is expected around February. The firm has focused on small markets both to avoid direct competition with much larger players that are consolidating the ownership of big-city radio stations and because it thinks most southern markets will grow faster in coming years than mature markets around major cities.

Spector has said the company would like to go public soon, but it wants first to acquire or merge with another company.