EDWARD G. ATSINGER III HAD HIS lightbulb go on 25 years ago, when he was running a country-and-western radio station outside Raleigh, N.C. A committed Christian who had studied radio at the evangelical Bob Jones University, Atsinger wanted to stay in the broadcasting business but contribute something more than songs about prison and bourbon to the airwaves. So he teamed up with Stuart Epperson (a college friend who later became his brother-in-law) to form Salem Communications Corp. They bought a middle-of-the-road station in Bakersfield, Calif. and an FM station in nearby Oxnard, with the idea of giving preachers a pulpit and making a profit.
"It was a bit of a risky venture," says Atsinger, now 60. "FM was not the king of the road in 1973 when we went on the air. And Oxnard was not the center of the world."
But preachers needed Salem. Stations constantly changed formats, which left religious groups little hope of building an audience large enough to pay for airtime. Religious radio was relegated to small towns and the far reaches of the AM dial. Atsinger and Epperson realized that by buying stations in large markets they could provide ministers with an outlet and earn a steady income less affected than advertising-supported radio by fluctuations in the economy. Not only were preachers in it for the long haul--the really long haul, you might say--they could also be steady paying customers. So, unlike traditional radio stations, which get 95% of their revenue from advertisers, Salem gets less than half from this source. The rest comes from the 100-odd religious organizations that create radio programming, pay Salem to broadcast it and ask listeners for donations. For a 26-minute show, fees run from $30 in Salem's smallest market, Oxnard, to $800 in Los Angeles or New York.
Today, with 57 stations, the Camarillo, Calif.-based Salem is the nation's largest broadcaster of religious programming and the country's eighth-largest broadcasting chain overall. In the past 12 months Salem has reported an operating income (net before depreciation, interest and taxes) of $26.6 million on revenues of $86 million. Wall Street values the enterprise at $514 million--representing the sum of debt and the market value of its common stock, recently trading at $18.
No hosannas yet from people looking at the bottom line, though. For the third quarter, which ended September 30, Salem ran a net loss of $3.7 million on revenue of $23.1 million. Contributing to the loss: repayment of $50 million in debt, at interest rates of up to 9.5%, that funded the acquisition of several stations and OnePlace.com, an Internet portal that sells Christian music and provides access to religious news, products and Salem radio broadcasts.
Atsinger, whose approximately 30% of the company is worth $124 million, is looking for a long-term lift. Christian radio is the third most popular format in the nation (behind country and talk), with an estimated 28 million weekly listeners. Salem's weekly listener count is about 5 million, so it has room to grow--along with a means to do so, since it owns at least 1 station in 19 of the top 25 markets.