Look Out Below: Salem Media Stock Plunges as Right Wing Movies & Books Falter

By David Lieberman, November 6, 2022

Salem Media Group’s stock plummeted 27 percent on Friday touching a 52-week low of $1.31 after it disclosed that its hard right content failed to deliver for its bottom line in the quarter ending in September – and will continue to be weak through the year end.

CEO David Santrella told Wall Street analysts that several one-time problems contributed to what he called the “disappointing” third quarter which ended with a net loss of $11.9 million, down from a $22.1 million profit in the same period last year, on revenues of $66.9 million, up 1.3 percent.

Sales for a film Salem distributed, Uncle Tom II: An American Odyssey, were “much less than expected,” the company chief said. In August he vowed to “market the movie to make it as successful as possible” from digital streams and downloads, DVD sales, and one-time screenings. The release from director Justin Malone claimed to show a “Marxist strategy of creating false racial tension between Americans, with its ultimate goal of obtaining power, destroying capitalism and replacing God with government.”

A Ponzi Scheme Conviction and Other Problems

The disparity in Salem’s year-over-year results was exaggerated by an $11.2 million one-time benefit the company recorded in July 2021 after the Small Business Administration forgave all but $20,000 of its Paycheck Protection Program loan. The Trump administration created the controversial program in the early days of the COVID pandemic to help businesses hold on to their employees.

The most recent quarter also included previously disclosed problems: The company paid $5.3 million to settle a suit involving its former radio host William Neil Gallagher, who last year pleaded guilty to a Ponzi scheme that cheated more than 190 mostly elderly and Christian listeners out of at least $23 million. He was sentenced to three life terms.

Santrella says “we adamantly deny the allegations that were made” in the suit, but deemed a settlement “preferable to uncertain and costly litigation.”

Book Biz Blues

Also, Salem’s Regnery Publishing recalled a book version of 2,000 Mules – Dinesh D’Souza’s widely criticized film that alleged there was widespread voter fraud in the 2020 presidential election – due to what it called a “publishing error.” The book release was postponed from August to Oct. 25. Regnery President Thomas Spence did not tell The New York Times what the problem was when it asked him about it in August, although he noted that it “does not affect the argument of the book.” NPR found a copy of the recalled book and said it “does not appear to suffer from an obvious production error which might explain the delay; a misaligned photo, incorrect page numbers or blank pages.”

But Mules and Sen. Ted Cruz’s Justice Corrupted: How the Left Weaponized Our Legal System – released the same day – won’t be strong enough to lift Regney’s overall year-over-year performance in the last three months of 2022. Cruz’s book sold more than 13,000 copies in the week that ended Oct. 30, Publisher’s Weekly reported. It was the eighth best selling book on Amazon in its first week. The company told analysts that it only expects to have one book with 55 million unit sales in the quarter vs. three titles hitting that mark in the period last year.

That’s one of the main reasons Salem projects its total revenues for the fourth quarter will drop “between 3 and 5 percent” from the $69.1 million it reported last year.

Ad Sales Question

Salem offered a mixed report about ad sales. Political candidates and organizations have been spending heavily. In the year so far, sales have outpaced the last two election cycles — but it’s unclear whether the company’s fourth quarter numbers will match the $3.5 million it collected in the period in 2020.

Meanwhile national digital sales are down, which Salem attributes to a change in Facebook’s algorithm that resulted in a “significant decline in traffic” to its right wing web sites. Salem sales of home mortgage ads also is down as rising interest rates cooled the market. 

David Lieberman covered the media business full time for 30 years at USA Today and other publications before joining The New School as an Associate Professor in its  graduate Media Management program. His newsletter focusing on management-related issues, Media Office Hours, will launch this fall.

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