A great article RE Cumulus and Rush!

[RadioNerd1978]

Just had to post this and get the reactions of folks here. It's a very detailed analysis of how the Dickey Bros seem intent on destroying the legacies of some great stations. Any Cumulus employees want to weigh in?

http://spectator.org/archives/2013/05/14/cumulus-media-suicide-of-a-com/print

 

[radiophiler]

The article has a lot right, but paints only part of the picture.

Cumulus has a huge debt load due to its purchase of the former Citadel stations. True. Has Cumulus been looked upon as a less than great radio owner, compared to other companies like CBS and Bonneville? True.

But THIS is also true: it's not easy to be a large market Rush affiliate when the price to pay for the big buy is in six figures per year plus the usual number of minutes of national commercials per hour, at the expense of selling your own commercial time instead.

So, while it's true that Cumulus got itself into the mess it's in, this is also true: If Premiere continues to charge stations the huge price it does to air Rush, it has to expect that, when stations fall on tough times (for whatever reason), it's going to be difficult for those stations to continue paying the price for Rush.

If the Cumulus stations, rightly or wrongly, decide it's no longer in their financial best interests to air Rush in 2014, it will be interesting to see who picks him up in the various Cumulus markets. That will show the perception of a larger part of radio owners of how valuable Rush is today to a talk station, either as a revenue generator, or, at least, as a loss-leader -- a program that attracts people to your station even if you don't make money off of it. If a station with a great signal snaps him up, it shows he's still valuable. If he's forced to go onto a 1,000 watt station or if Clear Channel has to do what it did in New York City, buy a station (WOR) for Rush to land safely on, it shows he's not as valuable as he once was to stations ... at least at the high price Premiere charges for him.

 

[del_griffith]

Interesting article. But I imagine you could probably go point by point through Clear Channel/Premiere in the same manner and cite many of the same things brought out in the article. Also I think the Clear Channel debt load is more onerous than the Cumulus, although both are walking on financial banana peels as I understand it. The only difference, is Clear Channel/Premiere hasn't discussed the impact of Rush's statements as they are no longer a publicly traded company. If they were and if they had experienced a downturn, then likely it would have been something cited or brought out in the quarterly call. Also remember, chances are likely that Cumulus will lose the affiliation of the Clear Channel/Premiere talent when the contracts are up anyhow. Why would you praise the talent that is leaving your stable?

And this was really a circle the wagons around Rush and talk radio in general piece.

 

[TheBigA]

This article assumes radio can still operate in 2013 like it's 1990. It's not. A lot has changed. Radio was one thing then, it's another thing now. A lot of the people who are mentioned in that article are holdovers from the last era. The Dickeys aren't the only ones who "overpaid." A lot of the long-established talent, the people mentioned in that article, were also overpaid, at least in today's economy. A lot of employees were being paid as though their work attracted the same advertising it did 20 years ago. It doesn't. So everybody in the business has to bite the bullet, not just the owners.

The other reality is that no one else was willing to pick up the pieces from the Citadel bankruptcy. The choice was those stations either stayed under the same team that bankrupted the company, or sell to Cumulus. No one else was offering to buy those stations. And going back to the Citadel purchase of ABC, if THEY overpaid, what was the alternative? ABC wasn't going to stay in the radio business. Had Entercom or some other company paid less for ABC, then we'd be talking about Entercom as the evil company that destroyed radio.

So the real story here isn't Cumulus or Rush. The real story is the downsizing of an industry. The reason for it has nothing to do with the industry, but the marketplace. Basically it's not 1990 anymore. Radio stations can't charge the premium rates they once charged. So they can't pay the premium salaries they once paid. Basic economics. Radio stations aren't as valuable because there are thousands, even millions of other ways to reach people. There was nothing radio could have done that would have prevented the explosion of PCs and cell phones. And there's nothing radio can do that will reverse that. So you play the cards you're dealt. And a big part of that is adapting all of the people who came into the industry 25 years ago to the realities that exist today.

 

[MC]

Interesting article. J.C Penny tried to bring Apple slick marketing to Penny's. Like Porsche, or Bang and Olufsen Electronics (something Jobs emulated to the computer world) "non-price competition" is what is at work. The coupon clippers at Penny's were not going to buy the Apple marketing mode. They cared about what it cost, they did not just want to have that brand regardless of the cost.

There is a percentage of die hard fans for Beck, Savage, Limbaugh, but if one can not get one right wing talk show, they will settle for another, 80% of the time.

Limbaugh has always bought into uncontrolled capitalism. Nafta, Gatt, etc. So the speculation that leveraged the radio industry is something he would defend, even though it is something impacting him. The older demographic is going on the web and social media and Limbaugh is back in the old days of AM radio.

 

[TheBigA]

The older demographic is going on the web and social media and Limbaugh is back in the old days of AM radio.

I agree. His next contract negotiation will be interesting. I predict he will be asked to take a cut. Or something like that.

 

[FredLeonard]

For the record, the American Spectator is a conservative publication and a long time advertiser on the Rush Limbaugh Show.

 

[umfan]

no one else was willing to pick up the pieces from the Citadel bankruptcy.

Not at the prices Citadel wanted. Had the bankruptcy process been engaged and allowed to proceed those assets would've been allocated to more than one buyer at a far more reasonable price allowing the new owner to invest more in content than debt service.

ABC wasn't going to stay in the radio business.

They didn't want to, that was true, but it was profitable for them as they didn't acquire these at the ridiculous prices paid after 1996. They would've stayed had a buyer not emerged to pay their asking price. Citadel overpaid for the ABC assets and Cumulus overpaid for Citadel. These crazy deals are only delaying the financial restructuring that's going to come for radio.

So the real story here isn't Cumulus or Rush. The real story is the downsizing of an industry.

I agree. I think the article explains well, that it's not Rush, but Cumulus mismanagement as well as a changing media landscape.

Rush did himself, and the industry, no favors with his unfortunate remarks last year. However, he's not responsible for all, or even most, of the issues faced by Cumulus. He may have to take less money in his next contract. So he'll only make $15M a year instead of $20M to spend three hours a day in front of a microphone.

What suffering!

This is a good article. Thanks for sharing it.

 

[TheBigA]

Not at the prices Citadel wanted. Had the bankruptcy process been engaged and allowed to proceed those assets would've been allocated to more than one buyer at a far more reasonable price allowing the new owner to invest more in content than debt service.

Cumulus had access to $5 billion dollars. They've barely scratched the surface of the money they're able to borrow. If they want to spend money on content, they do. But right now, white male conservative talk isn't attracting the audience or advertising it once was. So Cumulus is putting its content money in sports and country music. Not talk.

They didn't want to, that was true, but it was profitable for them as they didn't acquire these at the ridiculous prices paid after 1996. .

They were also able to combine costs of their radio stations with TV. Once the TV stations were removed, the radio stations weren't as profitable. And the ABC Radio Network was a huge black hole. It still had not recovered from the death of Paul Harvey. That was a multi-million dollar show that simply could not be replaced. They had a few of those at ABC. Then you add to it the 2008 depression, and it's no wonder they went belly up.

I agree. I think the article explains well, that it's not Rush, but Cumulus mismanagement as well as a changing media landscape.

I think Cumulus has done a much better job with these stations than Citadel. They seem to have a strategy, and it seems to be working. It may not be Rush's cup of tea, but he's going to have to take a haircut from someone if he intends to remain on the air.

 

[ProducerGuy]

I agree. His next contract negotiation will be interesting. I predict he will be asked to take a cut. Or something like that.

I have a feeling that's what a lot of this scuttlebutt is all about in the first place. Contract negotiations.

 

[del_griffith]

but is that payment to Rush or to Premiere?

 

[umfan]

went belly up

Really? ABC sold these assets at a gain.

And if Cumulus doesn't see a future in talk, why invest in Huckabee, Rivera and others?

While Cumulus could've borrowed the funds to pay more, overpaying for assets and dealing with the small returns they produce, is a ticket to financial failure.

Finally, if talk is such a minor part of Cumulus portfolio, why does Dickey claim each subpar earnings period is due to issues with Talk?

 

[TheBigA]

went belly up

Really? ABC sold these assets at a gain.

Context, context, context. If you read the entire sentence, you'll see I was talking about Citadel, not ABC.

Finally, if talk is such a minor part of Cumulus portfolio, why does Dickey claim each subpar earnings period is due to issues with Talk?

The "if" part of your sentence is wrong. Talk is a big part of the Cumulus portfolio, thanks to the former ABC AM stations. It's just an underperforming part of the portfolio, and it's dragging down the growth in other formats.

 

[RadioTalker101]

Nice to see the peanut gallery weigh in.

Time for some real talk: Cumulus will make less with Rush than without. They know it and so does he. Dickey thought he could nudge Rush out or towards irrelevancy and Huckabee would catch on. He was to tear Rush, not lose him to other stations. He failed. Anything else is noise. You think Dickey will be upped about losing Rush n WABC, WLS and all the other sticks?

The only happy people will be the media and the protestors they will praise Dickey for taking a stand. But that is garbage, if Rush will have Cumulus he will be welcomed to stay, my guess is Rush knows he can tell Dickey to eat it and Rush will be fine.

The real victims in this will be Cumulus' hosts and salespeople.

Good job, idiots.

 

[TheBigA]

Dickey thought he could nudge Rush out or towards irrelevancy and Huckabee would catch on.

Hmm. Everything was fine until February 2012. Huckabee was hired after that.

Rush made his own bed, and now he has to lie in it. Same with Cumulus. As I said earlier, when his contract with Premiere comes up, it will be for a lot less. Regardless of what happens with Cumulus.

 

[RadioTalker101]

Maybe you aren't understanding, in fact I know you aren't.

This isn't about Rush's payday, this is about Cumulus and whether they want to lose 2 million this year or 10 next year.

Talk radio is one format, Rush did not bring down the extremely profitable Cumulus empire. He is a money maker. He made them less money, no doubt. But him leaving will leave them a hole.

Again, Talk radio is not radio's or Cumulus' main problem. Rush is not Cumulus' or talk radio's main problem.

Riddle me this:

You are John Dickey, do you want Rush and ratings and revenue or do you want to compete against him with Mike Huckabee?

Read the question again, it does not mention local talent, regional syndication or liberal talk. No e of that is happening.

You are John Dickey, if money is your goal, do you choose:

A. Rush
b. Huckabee

 

[TheBigA]

You are John Dickey, do you want Rush and ratings and revenue or do you want to compete against him with Mike Huckabee?

Let me answer that question with aquestion: When has John Dickey ever said that he wants to drop Rush? Maybe you can showme a quote.

 

[RadioTalker101]

He hasn't directly said it, but you don't have to be a genius to read between the lines. He thought Huckabee would rid, he was dead wrong.

Back to my question please, it's pretty simple.

 

[TheBigA]

He hasn't directly said it

Then there's no point answering your questions.

In the world of negotiations, there are many many steps before you completely drop a show. I think John Dickey and Rush know that.

 

[RadioTalker101]

The non-answer says plenty.