| SALEM COMMUNICATIONS CORP /DE/ ITEM 1A RISK FACTORS CERTAIN FACTORS AFFECTING SALEM We may choose not to pursue potentially more profitable business opportunities outside of our Christian and family-themed formats, or not to broadcast programming that violates our programming standards, either of which may have a material adverse effect on our business |
| We are fundamentally committed to broadcasting formats and programming emphasizing Christian and family themes |
| We may choose not to switch to other formats or pursue potentially more profitable business opportunities in response to changing audience preferences |
| We do not intend to pursue business opportunities or air programming that would conflict with our core commitment to Christian and family themes formats or that would violate our programming standards, even if such opportunities or programming would be more profitable |
| Our decision not to pursue other formats or air programming inconsistent with our programming standards might result in lower operating revenues and profits than we might otherwise achieve |
| We Must Respond To The Rapid Changes In Technology, Services And Standards Of Our Industry In Order To Remain Competitive The radio broadcasting industries are subject to rapid technological change, evolving industry standards and the emergence of competition from new media technologies and services |
| We cannot assure you that we will have the resources to acquire new technologies or to introduce new services that could compete with these new technologies |
| Various new media technologies and services are being developed or introduced, including: ? |
| satellite-delivered digital audio radio service, which has resulted in the introduction of new subscriber-based satellite radio services with numerous niche formats; ? |
| in-band on-channel digital radio, which provides multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services; ? |
| low-power FM radio, which could result in additional FM radio broadcast outlets; and ? |
| iPod music players |
| We currently program one channel on XM Satellite Radio |
| However, we cannot assure you that this arrangement will continue, will be successful or enable us to adapt effectively to these new media technologies |
| We cannot predict the effect, if any, that competition arising from new technologies or regulatory change may have on the radio broadcasting industry or on our financial condition and results of operations |
| If We Are Unable To Execute Our Acquisition Strategy Successfully, Our Business May Not Continue To Grow We intend to continue to acquire radio stations as well as other complementary media businesses |
| Our acquisition strategy has been, and will continue to focus primarily on, the acquisition of radio stations in the top 50 markets |
| However, we may not be able to identify and consummate future acquisitions successfully, and stations that we do acquire may not increase our station operating income or yield other anticipated benefits |
| Acquisitions in markets in which we already own stations may not increase our station operating income due to saturation of audience demand |
| Acquisitions in smaller markets may have less potential to increase operating revenues |
| Our failure to execute our acquisition strategy successfully in the future could limit our ability to continue to grow in terms of number of stations or profitability |
| We May Be Unable To Integrate The Operations And Management Of Acquired Stations Or Businesses, Which Could Have A Material Adverse Effect On Our Business And Operating Results Since January 1, 2005, we have acquired the assets of 17 radio stations, three Internet businesses and one publishing business, and we expect to make acquisitions of other stations and related businesses in the future |
| We cannot assure you that we will be able to successfully integrate the operations or management of acquired stations and businesses and realize anticipated revenue synergies, or the operations or management of stations and businesses that might be acquired in the future |
| Continued acquisitions of stations will require us to manage a larger and likely more geographically diverse radio station portfolio than historically has been the case |
| Our inability to integrate and manage newly acquired stations or businesses successfully could have a material adverse effect on our business and operating results |
| If We Are Unable To Implement Our Cluster Strategy, We May Not Realize Anticipated Operating Efficiencies As part of our operating strategy, we attempt to realize efficiencies in operating costs and cross-selling of advertising by clustering the operations of two or more radio stations in a single market |
| However, there can be no assurance that this operating strategy will be successful |
| Furthermore, we cannot assure you that the clustering of radio stations in one market will not result in downward pressure on advertising rates at one or more of the existing or new radio stations within the cluster |
| There can be no assurance that any of our stations will be able to maintain or increase its current listening audiences and operating revenue in circumstances where we implement our clustering strategy |
| Additionally, FCC rules and policies allow a broadcaster to own a number of radio stations in a given market and permit, within limits, joint arrangements with other stations in a market relating to programming, advertising sales and station operations |
| We believe that radio stations that elect to take advantage of these clustering opportunities may, in certain circumstances, have lower operating costs and may be able to offer advertisers more attractive rates and services |
| The future development of our business in new markets, as well as the maintenance of our business growth in those markets in which we do not currently have radio station clusters, may be negatively impacted by competitors who are taking advantage of these clustering opportunities by operating multiple radio stations within markets |
| The restrictions on ownership of multiple stations in each market may prevent us from implementing our cluster strategy |
| As part of our growth strategy, we seek to acquire additional radio stations in markets in which we already have existing stations |
| However, our ability to acquire, operate and integrate any such future acquisitions as part of a cluster is limited by antitrust laws, the Federal Communications Act of 1934 (the “Communications Act”), FCC regulations and other applicable laws and regulations |
| Changes to any of these laws or regulations may affect our ability to acquire additional stations in radio markets where we already own one or more radio stations |
| The FCC’s local radio multiple ownership rules limit the number of radio stations in a market which an entity may own and with which the entity may have joint arrangements relating to programming, advertising sales and station operations |
| The number of radio stations an entity may own or have such arrangements with in a given market varies depending on the total number of radio stations located in the market |
| In 2003, the FCC modified its definition of the term “market” and its method of determining the number of radio stations located in a “market” for all but smaller radio markets |
| Specifically, the FCC replaced its “signal contour method” of defining a market and determining the number of radio stations located in the market with the use of “geographic markets” delineated by The Arbitron Company (“Arbitron”), which is a commercial ratings service |
| For smaller radio markets for which Arbit ron has not delineated a geographic market, the FCC is conducting a rulemaking to determine whether the “signal contour method” should be replaced with another method of defining the market and determining the number of radio stations in the market |
| The method the FCC uses in such smaller markets affects the number of radio stations an entity may own or have joint arrangements with relating to programming, advertising sales and station operations in areas adjacent to a delineated Arbitron market |
| We cannot predict the outcome of the FCC’s rulemaking regarding smaller markets or whether it will include modifications to the Arbitron geographic markets method used in markets delineated by Arbitron |
| The maximum numbers of radio stations an entity may own or have joint arrangements with relating to programming, advertising sales and station operations in different size markets (the “Ownership Limits”) under the FCC’s local radio multiple ownership rules were mandated by Congress in 1996 |
| In 2003, an order of the FCC retaining the 1996 Ownership Limits was remanded to the FCC by the 3^rd Circuit Court of Appeals for further consideration |
| In addition, interest has been expressed by members of Congress to reduce the Ownership Limits |
| We cannot predict whether or how the FCC will modify the Ownership Limits on remand or whether Congress will mandate a modification of the Ownership Limits |
| We cannot predict the impact of pending modifications to the FCC’s local radio multiple ownership rules on our business operations |
| Likewise, we cannot predict whether there will be a change in the antitrust laws, Communications Act or other law governing the ownership or operation of radio stations, or whether the FCC , Department of Justice (“DOJ”) or Federal Trade Commission (“FTC”) will modify their regulations and policies governing the acquisition of additional radio stations in a market |
| In addition, we cannot predict whether a private party will challenge acquisitions we propose in the future |
| These events could adversely affect our ability to implement our cluster acquisition strategy |
| Government Regulation Of The Broadcasting Industry By The FTC, DOJ And FCC May Limit Our Ability To Acquire Or Dispose Of Radio Stations And Enter Into Certain Agreements The Communications Act and FCC rules and policies require prior FCC approval for transfers of control of, and assignments of, FCC licenses |
| The FTC and the DOJ evaluate transactions to determine whether those transactions should be challenged under federal antitrust laws |
| Over the past eight years, the FTC and the DOJ have been increasingly active in their review of radio station acquisitions |
| This is particularly the case when a radio broadcast company proposes to acquire an additional station in an existing market |
| As we have gained a presence in a greater number of markets and percentage of the top 50 markets, our future proposed transactions may be subject to more frequent and aggressive review by the FTC or the DOJ due to market concentration concerns |
| This increased level of review may be accentuated in instances where we propose to engage in a transaction with parties who themselves have multiple stations in the relevan t market |
| The FCC might not approve a proposed radio station acquisition or disposition when the DOJ has expressed market concentration concerns with respect to the buy or sell side of a given transaction, even if the proposed transaction would otherwise comply with the FCC’s numerical limits on in-market ownership |
| We cannot be sure that the DOJ or the FTC will not seek to prohibit or require the restructuring of our future acquisitions or dispositions on these or other bases |
| Were a complaint to be filed against us or other FCC licenses involved in a transaction with us, the FCC could delay the grant of, or refuse to grant, its consent to an assignment or transfer of control of licenses and effectively prohibit a proposed acquisition or disposition |
| As noted in the immediately preceding risk factor, the FCC’s local radio multiple ownership rules limit the number of stations we may own or operate in a market |
| This limits our ability to make future radio station acquisitions |
| Additionally, this limits our ability to enter into agreements whereby we provide programming to or sell advertising on radio stations that we do not own |
| Capital Requirements Necessary to Implement Acquisitions Could Pose Risks We face stiff competition from other broadcasting companies for acquisition opportunities |
| If the prices sought by sellers of these companies were to rise, we may find fewer acceptable acquisition opportunities |
| In addition, the purchase price of possible acquisitions could require additional debt or equity financing on our part |
| Since the terms and availability of this financing depend to a large degree upon general economic conditions and third parties over which we have no control, we can give no assurance that we will obtain the needed financing or that we will obtain such financing on attractive terms |
| In addition, our ability to obtain financing depends on a number of other factors, many of which are also beyond our control, such as interest rates and national and local business conditions |
| If the cost of obtaining needed financing is too high or the terms of such financing are otherwise unacceptable in relation to the a cquisition opportunity we are presented with, we may decide to forego that opportunity |
| Additional indebtedness could increase our leverage and make us more vulnerable to economic downturns and may limit our ability to withstand competitive pressures |
| Additional equity financing could result in dilution to our shareholders |
| The Accounting Treatment Of Goodwill And FCC Licenses Could Cause Future Losses Due To Asset Impairment Under Statement of Financial Accounting Standards (“SFAS”) 142, goodwill and some indefinite-lived intangibles, including FCC licenses, are not amortized into results of operations, but instead are tested for impairment at least annually, with impairment being measured as the excess of the carrying value of the goodwill or intangible over its fair value |
| In addition, goodwill and intangible assets are tested more often for impairment as circumstances warrant |
| Intangible assets that have finite useful lives continue to be amortized over their useful lives and are measured for impairment in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets |
| ” Any impairment losses under SFAS Nodtta 142 or SFAS Nodtta 144 will be recorded as operating expenses |
| Our future impairment reviews could result in asset write-downs |
| All of our radio stations are currently owned and operated by our subsidiaries |
| Salem Holding, our wholly owned subsidiary, is the borrower under our credit facilities and our senior subordinated debt |
| All of our station-operating subsidiaries are subsidiaries of Salem Communications Corporation |
| Further, we guaranteed Salem Holding’s obligations under the credit facilities and under the senior subordinated notes |
| As a holding company, our only source of cash to pay our obligations, including corporate overhead and other trade payables, are distributions from our subsidiaries of their net earnings and cash flow |
| We currently expect that the net earnings and cash flow of our subsidiaries will be retained and used by them in their operations, including servicing their debt obligations, before distributions are made to us |
| Even if our subsidiaries elect to make distributions to us, we cannot assure you that applicable state law and contractual restrictions, including the dividend covenants contained in our credit facilities and senior subordinated notes, would permit such dividends or distributions |
| 11 _________________________________________________________________ Our Business is Dependent Upon the Performance of Key Employees, On-Air Talent and Program Hosts Our business is dependent upon the performance and continued efforts of certain key individuals, particularly Edward G Atsinger III, our President and Chief Executive Officer, and Stuart W Epperson, our Chairman of the Board |
| Atsinger or Epperson could have a material adverse effect upon us |
| We have entered into employment agreements with each of Messrs |
| Atsinger and Epperson |
| Both agreements expire in June 2007 |
| Epperson has radio interests unrelated to Salem’s operations that will continue to impose demands on his time |
| Atsinger has an interest in an aviation business unrelated to Salem’s operations that will continue to impose demands on his time |
| We also employ or independently contract with several on-air personalities and hosts of syndicated radio programs with significant loyal audiences both on a national level and in their respective markets |
| Although we have entered into long-term agreements with some of our executive officers, key on-air talent and program hosts to protect our interests in those relationships, we can give no assurance that all or any of these key employees will remain with us or will retain their audiences |
| Competition for these individuals is intense and many of our key employees are at-will employees who are under no legal obligation to remain with us |
| Our competitors may choose to extend offers to any of these individuals on terms, which we may be unwilling to meet |
| In addition, any or all of our key employees may decide to leave for a variety of personal or other reasons beyond our control |
| Furthermore, the popularity and audience loyalty of our key on-air talent and program hosts is highly sensitive to rapidly changing public tastes |
| A loss of such popularity or audience loyalty is beyond our control and could limit our ability to generate revenues |
| We May Be Adversely Affected By New Statutes Dealing With Indecency Congress currently has under consideration legislation that addresses the FCC’s enforcement of its rules concerning the broadcast of obscene, indecent, or profane material |
| Potential changes to enhance the FCC’s authority in this area include the ability to impose substantially higher monetary forfeiture penalties, consider violations to be “serious” offenses in the context of license renewal applications, and, under certain circumstances, designate a license for hearing to determine whether such license should be revoked |
| While we do not anticipate these regulations to impact us as significantly as some of our competitors given the nature of our programming, in the event that this or similar legislation is ultimately enacted into law, we could face increased costs in the form of fines and a greater risk that we could lose one or more of our broadcasting licenses |
| If We Are Not Able To Obtain Financing Or Generate Sufficient Cash Flows From Operations, We May Be Unable To Fund Future Acquisitions We may require significant financing to fund our acquisition strategy |
| This financing may not be available to us |
| The availability of funds under the credit facility at any time will be dependent upon, among other factors, our ability to satisfy financial covenants |
| Our future operating performance will be subject to financial, economic, business, competitive, regulatory and other factors, many of which are beyond our control |
| Accordingly, we cannot assure you that our future cash flows or borrowing capacity will be sufficient to allow us to complete future acquisitions or implement our business plan, which could have a material negative impact on our business and results of operations |
| We may require significant financing to fund our acquisition strategy |
| Accordingly, we cannot assure you that our future cash flows or borrowing capacity will be sufficient to allow us to complete future acquisitions or implement our business plan, which could result in the disposition of certain income-producing assets or otherwise have a material negative impact on our business and results of operations |
| Our Substantial Indebtedness And Our Ability To Incur More Indebtedness Could Adversely Affect Our Financial Condition We currently have a significant amount of indebtedness |
| At December 31, 2005, our total consolidated indebtedness was dlra327dtta5 million |
| Our substantial indebtedness could have important consequences, including: ? |
| making it more difficult for us to satisfy our obligations with respect to borrowings under the credit facility and the subordinated notes; ? |
| limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions and other general corporate requirements; ? |
| requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing our ability to use our cash flow to fund future working capital, capital expenditures, acquisitions and other general corporate requirements; ? |
| placing us at a competitive disadvantage relative to those of our competitors that have less indebtedness; ? |
| limiting our flexibility in planning for, or reacting to, changes in our business and the industry that could make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulations; ? |
| subjecting us to higher interest expense in the event of increases in interest rates because some of our indebtedness is at variable rates of interest; and ? |
| causing us to sell income-producing assets that have market value |
| We may incur additional indebtedness to fund future acquisitions and for other corporate purposes |
| If new indebtedness is added to our and our subsidiaries’ current indebtedness levels, the related risks that we and they now face could intensify |
| Our Ability To Generate Cash Depends On Many Factors Beyond Our Control Our ability to make payments on and to refinance our indebtedness, to pay dividends and to fund capital expenditures will depend on our ability to generate cash in the future |
| This ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control |
| Our businesses might not generate sufficient cash flow from operations |
| We might not be able to complete future offerings, and future borrowings might not be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs |
| We may need to refinance all or a portion of our indebtedness on or before maturity |
| We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all |
| If We Cannot Attract The Anticipated Listener, Programmer And Advertiser Base For Our Newly Acquired Radio Stations, We May Not Recoup Associated Operating Costs Or Achieve Profitability For These Radio Stations We frequently acquire new radio stations that previously broadcast in formats other than our primary formats |
| We continue to program some of these recently acquired stations in non-primary formats and we re-program others to one of our primary formats |
| During, and for a period after, the conversion of a radio station’s format, the radio station typically generates operating losses |
| The magnitude and duration of these losses depends on a number of factors, including the promotional and marketing costs associated with attracting listeners and advertisers to our radio station’s new format and the success of these efforts |
| There is no guarantee that the operation of these newly acquired stations or our operations in new formats will attract a sufficient listener and advertiser base |
| If we are not successful in attracting the listener and advertiser base we anticipate, we may not recoup associated operating costs or achie ve profitability for these radio stations |
| If We Do Not Maintain Or Increase Our Block Programming Revenues, Our Business And Operating Results May Be Adversely Affected The financial success of each of our radio stations that features Christian Teaching and Talk programming is dependent, to a significant degree, upon our ability to generate revenue from the sale of block programming time to national and local religious organizations, which accounted for 32dtta3prca and 32dtta9prca of our gross broadcasting revenue during the years ended December 31, 2004, and 2005, respectively |
| We compete for this program revenue with a number of commercial and non-commercial radio stations |
| Due to the significant competition for this block programming, we may not be able to maintain or increase our current block programming revenue |
| If We Are Unable To Maintain Or Grow Our Advertising Revenues, Our Business And Operating Results May Be Adversely Affected Our radio stations with our Christian Teaching and Talk, Contemporary Christian Music and News Talk formats are substantially dependent upon advertising for their revenues |
| In the advertising market, we compete for revenue with other commercial religious format and general format radio stations, as well as with other media, including broadcast and cable television, newspapers, magazines, direct mail, Internet and billboard advertising |
| Due to this significant competition, we may not be able to maintain or increase our current advertising revenue |
| A Sustained Economic Downturn In Key Salem Markets Could Negatively Impact Our Ability To Generate Broadcasting Revenues We derive a substantial part of our revenues from the sale of advertising on our radio stations |
| For the years ended December 31, 2003, 2004 and 2005, 52dtta3prca, 54dtta0prca, and 53dtta7prca of our broadcasting revenues, respectively, were generated from the sale of advertising |
| We are particularly dependent on revenue from stations in the Los Angeles and Dallas markets, which generated 8dtta4prca and 7dtta5prca, respectively, of our gross broadcasting revenues in 2005 |
| Because substantial portions of our revenues are derived from local advertisers in these key markets, our ability to generate revenues in those markets could be adversely affected by local or regional economic downturns |
| Environmental, Health, Safety and Land Use Laws and Regulations May Limit or Restrict Some of Our Operations We must comply with various federal, state and local environmental, health, safety and land use laws and regulations which have a tendency to affect broadcast facilities differently than other uses |
| We and our properties are subject to such laws and regulations relating to the use, storage, disposal, emission and release of hazardous and non-hazardous substances and employee health and safety, as well as zoning restrictions which may affect, among other things, the ability for us to improve or relocate our radio broadcasting facilities |
| Historically, we have not incurred significant expenditures to comply with these laws |
| However, existing laws, and those which may be applied in the future, or a finding of a violation of or liability, could require us to make significant expenditures and otherwise limit or restrict some of our operations |
| Acts Of War And Terrorism May Reduce Our Revenue And Have Other Negative Effects On Our Business In response to the September 11, 2001, terrorist attacks on New York City and Washington, DC, we increased our news and community service programming, which decreased the amount of broadcast time available for commercial advertising and block programming |
| In addition, these events caused advertisers to cancel advertisements on our stations |
| Continued acts of war and terrorism against the United States, and the country’s response thereto, including the current military actions in Iraq, may also cause a general slowdown in the US advertising market, which could cause our revenues to decline due to advertising and/or programming cancellations, delays or defaults in payment, and other factors |
| In addition, these events may have other negative effects on our business, the nature and duration of which we cannot predict |
| If these acts of war or terrorism or weak economic conditions continue or worsen, our financial condition and results of operations may be materially and adversely affected |
| Our Controlling Stockholders May Cause Us To Act, Or Refrain From Acting, In A Way That Minority Stockholders Do Not Believe Is In Their Best Interest As of March 10, 2006, Edward G Atsinger III, Stuart W Epperson, Nancy A Epperson and Edward C Atsinger controlled approximately 85dtta6prca of the voting power of our capital stock |
| These four stockholders thus have the ability to control fundamental corporate transactions requiring stockholder approval, including but not limited to, the election of all of our directors, except for two directors elected by holders of our Class A common stock, approval of merger transactions involving Salem and the sale of all or substantially all of Salem’s assets |
| The interests of any of these controlling stockholders may differ from the interests of our other stockholders and one or more of the controlling stockholders could take action or make decisions (or block action or decisions) that are not in the minority stockholders’ best interest |
| If We Fail To Maintain Our Licenses With The FCC, We Would Be Prevented From Operating Affected Radio Stations We operate each of our radio stations pursuant to one or more FCC broadcasting licenses |
| As each license expires, we apply for renewal of the license |
| However, we cannot be sure that any of our licenses will be renewed, and renewal is subject to challenge by third-parties or to denial by the FCC The Communications Act and FCC rules and policies require prior FCC approval for transfers of control of, and assignments of, FCC licenses |
| Were a complaint to be filed against us or other FCC licensees involved in a transaction with us, the FCC could delay the grant of, or refuse to grant, its consent to an assignment or transfer of control of licenses and effectively prohibit a proposed acquisition or disposition |
| The failure to renew any of our licenses would prevent us from operating the affected station and generating revenue from it |
| If the FCC decides to include conditions or qualifications in any of our licenses, we may be lim ited in the manner in which we may operate the affected station |
| Covenant Restrictions Under Salem Holding’s Credit Facility And Its Indentures Governing Its Outstanding Senior Subordinated Notes May Limit Our Ability To Operate Our Business Salem Holding’s credit facility and the indentures governing its notes contain, among other things, covenants that restrict Salem’s, Salem Holding’s and their subsidiaries’ ability to finance future operations or capital needs or to engage in other business activities |
| The credit facility and each of such indentures restrict, among other things, our ability to: ? |
| incur additional debt; ? |
| pay dividends or make distributions; ? |
| purchase or redeem stock; ? |
| make investments and extend credit; ? |
| engage in transactions with affiliates; ? |
| create liens on assets; ? |
| transfer and sell assets; and ? |
| effect a consolidation or merger or sell, transfer, lease, or otherwise dispose of all or substantially all of their assets |
| These restrictions on management’s ability to operate Salem’s and Salem Holding’s business in accordance with their discretion could have a material adverse effect on our business |
| The covenants in each indenture of Salem Holding are subject to a number of important limitations and exceptions |
| These limitations and exceptions will, for example, allow Salem Holding to make certain restricted payments to, and investments in, Salem, subject to specified limitations |
| In addition, Salem Holding’s credit facility requires us to maintain specified financial ratios and satisfy certain financial condition tests which may require that we take action to reduce our debt or to act in a manner contrary to our business objectives |
| Events beyond our control, including changes in general economic and business conditions, may affect our ability to meet those financial ratios and financial condition tests |
| We cannot assure you that we will meet those tests or that the lenders will waive any failure to meet those tests |
| A breach of any of these covenants would result in a default under Salem Holding’s credit facility and its existing indentures |
| If an event of default occurs under any of these agreements, the lenders could, under the credit facility, elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable |
| If we are unable to pay our obligations to the lenders under the credit facility or other future senior debt instruments, the lenders could proceed against any or all of the collateral securing the indebtedness to them |
| The collateral under the credit facility consists of substantially all of our existing assets |
| In addition, a breach of certain of the restrictions or covenants in these agreements, or an acceleration by these lenders of the obligations to them, would cause a default under Salem Holding’s notes |
| We may not have, or be able to obtain, sufficient funds to make accelerated payments, including payments on the notes, or to repay the notes in full after we pay the senior secured lenders to the extent of their collateral |
| We May be Adversely Affected by a General Deterioration in Economic Conditions The risks associated with our businesses become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in advertising |
| A decline in the level of business activity of our advertisers could have an adverse effect on our revenues and profit margins |
| During the recent economic slowdown in the United States, many advertisers reduced their advertising expenditures |
| The impact of slowdowns on our business is difficult to predict, but they may result in reductions in purchases of advertising |
| Our Broadcasts Often Rely on Content Owned by Third Parties; Obtaining Such Content Could Be Costly And Require Us To Enter Into Disadvantageous License Or Royalty Arrangements We rely heavily upon content and software owned by third parties in order to provide programming for our broadcasts |
| The cost of obtaining all necessary licenses and permission to use this third party content and software continues to increase |
| Although we attempt to avoid infringing known proprietary rights of third parties in our broadcasting efforts, we expect that we may be subject to legal proceedings and claims for alleged infringement from time to time in the ordinary course of business |
| Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, divert management’s attention and resources, or require us to enter into royalty or license agreements which are not advantageous to us |
| In addition, parties making claims may be able to obtain an injunction, which could prevent us from broadcasting all or certain portions of individual radio broadc asts containing content owned by third parties |
| We also rely on software that we license from third parties, including software that is integrated with internally developed software and used to perform key broadcasting and accounting functions |
| We could lose the right to use this software or it could be made available to us only on commercially unreasonable terms |
| Although we believe that alternative software is available from other third-party suppliers or internal developments, the loss of or inability to maintain any of these software licenses or the inability of the third parties to enhance in a timely and cost-effective manner their products in response to changing customer needs, industry standards or technological developments could result in limitations or delays in broadcasting or accounting for programming by us until equivalent software could be developed internally or identified, licensed and integrated, which would harm our business |