Bob Pittman

[SaltyDog]

Clear Channel is getting vilified online for eliminating more jobs. But really, the die was cast when Clear Channel took on more debt. To satisfy the investors, he either has to grow revenues, cut expenses or both. Growing revenues is a tall order in a lousy economy, especially for a company that is still largely comprised of old media assets. So, whether or not his RIF's were to (cough) improve the product or cut expenses (he denies this) the expense have in fact been cut.

What else can you expect from Bob Pittman? Here's an interesting article from 9 years ago that might yield some clues.

"I'll only take jobs where the brand is already built and there's plenty of room for growth ahead," Pittman said in an interview with CNET News.com in April 1997. "I went through building brands with MTV and Nickelodeon...I swore to God I'd never build another brand as long as I live. It's the most miserable, time-consuming, awful, nerve-wracking experience that you could possibly imagine because you never know until the end of the day whether you will succeed."

http://news.cnet.com/2100-1023-944761.html

It occurs to me that a smart guy like Pittman hasn't signed on to be CEO of Clear Channel in perpetuity. He was hired by investors and investors will want 1) A return on investment and 2) An exit strategy to liquidate the return on investment.

The Seven Habits of Highly Effective People says, among other things that we should, "Begin With The End In Mind". So what is his end?

1) Sale. Reform the company in such a way that is an attractive takeover target.
2) Go public again.

The chances of a radio company going public as a stand alone strikes me as extremely unlikely, notwithstanding their "New Media" efforts. I'm betting on his shaping the company so as to make it an attractive acquisition within three years. What do you think?

 

[TheBigA]

It occurs to me that a smart guy like Pittman hasn't signed on to be CEO of Clear Channel in perpetuity. He was hired by investors and investors will want 1) A return on investment and 2) An exit strategy to liquidate the return on investment.

Your post ignores a few facts about Bob:

1) He in fact is an investor in Clear Channel. It's his money he's playing with. He wants to get it back with a profit. The other guys will benefit with him.

2) He is a radio geek. He knows radio inside and out. You can't doublespeak him like you can other radio CEOs. And he cut his teeth in programming. So he knows talent when he hears it. He personally hired the original MTV VJs.

Radio's best years were when stations were owned by companies that made most of their money elsewhere. The problem with today's radio companies is they have no other source of revenue. That's not good when radio takes a hit. What Bob wants to do is build some additional revenue streams for CC without adding more cost to the bottom line. That means redirecting resources. That's what this is all about.

 

[SaltyDog]

Your post ignores a few facts about Bob:

1) He in fact is an investor in Clear Channel. It's his money he's playing with. He wants to get it back with a profit. The other guys will benefit with him.

2) He is a radio geek. He knows radio inside and out. You can't doublespeak him like you can other radio CEOs. And he cut his teeth in programming. So he knows talent when he hears it. He personally hired the original MTV VJs.

I fully admit I don't know a lot about Bob. Just making observations about what I do know. Good post. Thanks. Still, I'm not sure where this is all going. Since some of the money is his own, I assume he too is interested in some future end game. I'm just trying to guess what it is.

 

[TheBigA]

I assume he too is interested in some future end game. I'm just trying to guess what it is.

It seems to be directed at the internet.

 

[SirRoxalot]

Anybody who watched Citadel knows the game plan.

1. Go private, so you can do what you want without stockholder interference and with a lot less government scrutiny.

2. Cut expenses and pump up short-term profits so you can build an attractive balance sheet. Overpay for stations to build an apparent "monopoly".

3. Take the company public so you can get your money out, and put the value of the company in the hands of the stockholders. Promise unsustainable growth.

4. Step back and watch the company collapse under its own weight because you cut too much of the real value of the company - people and programming that gave the company value in the first place. Shareholders take it in the shorts, and company goes into bankruptcy.

5. As one of the "secured creditors", reclaim the company under bankrupcty, and start out as a private company again.

6. Wash, rinse, repeat.

In this case, part of the "unsustainable growth" is investing in the Internet. Pump up "iHeart radio" and convince people you can actually make money with on-line. Pay no attention to the fact that nobody's done it yet.

 

[SaltyDog]

It seems to be directed at the internet.

That's a fairly obvious component of anyone's strategy, not an end game.

 

[SaltyDog]

3. Take the company public so you can get your money out, and put the value of the company in the hands of the stockholders. Promise unsustainable growth.

I can understand your cynicism but I'm an outsider and trying not to go there. I'll put you down for a round-trip back to a public company. I'm betting on spiffing it up as an acquisition target. It will take a few years though.

 

[SirRoxalot]

The only one arrogant enough to take on that overleveraged behemoth would be Lew Dickey. He's already got his hands full.

Then again, there's Randy Michaels. But he's smart enough to wait for the collapse, and "Dickey" the receivers after bankruptcy.

 

[TheBigA]

That's a fairly obvious component of anyone's strategy, not an end game.

I'm just speculating, but what kinds of companies tend to be the target of multi-billion dollar takeovers? His only chance is to reinvent his towers & transmitters company into something else, the way Steve Jobs reinvented a dying computer company. No one outside of radio companies are buying radio stations. Even TV companies like Fox, NBC, or Time Warner don't want radio. That should tell you something. He is not going to get anywhere with a radio-only company.

 

[SaltyDog]

The only one arrogant enough to take on that overleveraged behemoth would be Lew Dickey. He's already got his hands full.

I wasn't thinking radio consolidators. If Pittman can remake the company, he could position it as a takeover target to any media company. Actually, a traditional radio company would be an unlikely suitor in my opinion.

 

[SaltyDog]

That's a fairly obvious component of anyone's strategy, not an end game.

I'm just speculating, but what kinds of companies tend to be the target of multi-billion dollar takeovers? His only chance is to reinvent his towers & transmitters company into something else, the way Steve Jobs reinvented a dying computer company. No one outside of radio companies are buying radio stations. Even TV companies like Fox, NBC, or Time Warner don't want radio. That should tell you something. He is not going to get anywhere with a radio-only company.

Your mind and mine are on the same track.

 

[SirRoxalot]

Or, maybe nobody wants overleveraged radio companies with a ton of debt when they simply have to wait for them to shed the debt in bankruptcy. I believe that's part of what's called a "market correction". Simply put, Clear Channel and other created a broadcasting bubble. The bubble burst, and now radio station prices are returning to more sustainable values.

 

[SaltyDog]

Or, maybe nobody wants overleveraged radio companies with a ton of debt when they simply have to wait for them to shed the debt in bankruptcy.

Pittman just shed a bunch of air personalities, especially in small markets. Not to be cruel but much of the talent was not very good. If he thinks he can get through this merely by cutting expenses, he's dead. But if he then concentrates on improving content, without regard to FCC licenses and transmitters, he has a chance. It's a small chance, but it is a chance. Future distribution can't possibly rely on FCC licenses and transmitters. Satellite is not the answer either. It continues to be the Internet.

 

[TheBigA]

Or, maybe nobody wants overleveraged radio companies with a ton of debt when they simply have to wait for them to shed the debt in bankruptcy.

People will pay whatever it costs to get something they think is more valuable. They prove it every day. If they followed your model, there should have been lots of bidders for Citadel. There weren't.

 

[SirRoxalot]

There weren't bidders for Citadel because they weren't for sale. Farid didn't want to sell, but he got too greedy, and the bankers who own the company opted for someone else to manage it. Whether the current company is sustainable is still an open question.

 

[TheBigA]

There weren't bidders for Citadel because they weren't for sale.

There are lots of radio companies that went bankrupt. Not just Citadel. None were bought by anyone but other radio companies. It's just broadcasting cannibalism. It will not improve as long as radio sticks with this worn out model. The bigger dogs will eat the weaker dogs, and the FCC doesn't care.

 

[SirRoxalot]

Perhaps RADIO companies are the people best prepared to run RADIO stations. In every bankruptcy, debt was reduced significantly, and the cost of operation was reduced significantly. The big company that didn't go bankrupt, Clear Channel, is the one at a disadvantage right now, and is reacting by cutting the costs that they can control - which is also reducing the very assets that gave them value. BTW, their talented people were their biggest asset. In many cases, they performed in spite of corporate, not because of corporate.

 

[TheBigA]

Perhaps RADIO companies are the people best prepared to run RADIO stations.

That hasn't proven itself to be true. The most successful radio companies were those owned by other companies, like insurance companies, newspaper companies, electronics manufacturers, and department stores.

BTW, their talented people were their biggest asset. In many cases, they performed in spite of corporate, not because of corporate.

They're banking on the idea that the real talented people are the ones who are still there.

 

[SirRoxalot]

Sheesh. You're invoking the '50s AGAIN?

Some pure-play radio companies are doing just fine. In other cases, radio is a significant and valuable component of companies that have other interests, and those divisions are doing just fine. Sometimes those other interests are in broadcasting, sometimes they're in other media. Probably a few are completely unrelated to radio.

What works is that the radio stations are valued properly, the debt load is reasonable, and the companies are well-managed. We don't hear a lot about those companies because they're not making headlines. They're simply going about their business and making money.

 

[SaltyDog]

What works is that the radio stations are valued properly, the debt load is reasonable, and the companies are well-managed.

I remember when people used to talk about "stick value". In an era of infinite channels, I wonder what that would be or if there even is an assignable value to that anymore.