Clear Channel Making Cuts. Is LA Next?

[Shoot From Hip]

Amen! Lost count of how many times I spent all night in a production room while the sales guys were off having fun...

On the other hand, those same sellers who are out partying can just as easily spend those same nights losing sleep because they are paid on commission basis instead of a guaranteed salary...knowing that if they don't get the sale, they don't get paid. Or experiencing a commission chargeback because a client they spent months nurturing decides not to pay the bill for some reason. Sales people live and die by a different report card...one that can be tracked daily/weekly/monthly. No...they're not all gems, and we can all name plenty who were carried along by sales managers that played favorites. But like what they do or not, they play a critical role in the success of a radio station...and without them doing their job, most other positions in the station can become expendable in a hurry (as do sellers when they don't hit their numbers). The current wave of layoffs is testimony to what happens when sales are off.

 

[justareporter]

You can't sell dead air. The most important thing is good product. Having worked both sides (management and talent) I can tell you that management will continually tell you that without sales you would not have a job. True but absolute rubbish at the same time. If talent didn't produce something they could sell then they couldn't sell anything.

 

[Shoot From Hip]

You can't sell dead air. The most important thing is good product. Having worked both sides (management and talent) I can tell you that management will continually tell you that without sales you would not have a job. True but absolute rubbish at the same time. If talent didn't produce something they could sell then they couldn't sell anything.

No arguments on the importance of the product. Ask the people now tasked with selling V100 or Movin' 93.9 how much different it is now versus when those stations had ratings. Sellers don't have the luxury of being able to control that. Yet no matter the product, they still have budgets to achieve.

 

[calguy]

Amen! Lost count of how many times I spent all night in a production room while the sales guys were off having fun...

On the other hand, those same sellers who are out partying can just as easily spend those same nights losing sleep because they are paid on commission basis instead of a guaranteed salary...knowing that if they don't get the sale, they don't get paid. Or experiencing a commission chargeback because a client they spent months nurturing decides not to pay the bill for some reason. Sales people live and die by a different report card...one that can be tracked daily/weekly/monthly. No...they're not all gems, and we can all name plenty who were carried along by sales managers that played favorites. But like what they do or not, they play a critical role in the success of a radio station...and without them doing their job, most other positions in the station can become expendable in a hurry (as do sellers when they don't hit their numbers). The current wave of layoffs is testimony to what happens when sales are off.

Look we could go back and forth on this forever and I can agree that there are many in sales that work their behinds off, but they reap huge rewards compared to most on the programming side. As I mentioned earlier it is a cut-throat business, always has been and there is always a GM or GSM demanding more from the sales team. You can't have one without the other, the argument that without sales the programming people have no job can easily be reversed as they would have no sales jobs without the product and ratings programming provides for them to sell. It would just be nice if the wealth was spread around. Just because jocks & producers wear jeans & sneakers instead of a suit doesn't make them any less of a professional, just a lower paid one in most instances. For every Seacrest there are a thousand equally talented but shall we say un-lucky air talent out there.

 

[Shoot From Hip]

I think you're missing my point. I'm not demeaning anyone inside the station...everyone's got a role to play. But salespeople are the only ones whose income is solely dependent on how well they do their job (or how well they are protected by their manager, in some cases). Jocks and producers know exactly what each paycheck will look like. Sellers (once they've past a break-in period) have no guarantee at all...they get paid 100% on commission...and even then might end up having some of it charged back if the client doesn't pay, or the schedule doesn't run correctly. I've seen veteran sellers receive checks that don't cover the mortgage because of chargebacks and ratings declines...it's a scary sight. With greater risk comes greater rewards. I suppose there could be a paradigm shift where jocks and producers got paid on how well they did their jobs...but I don't see that coming. Personally, I prefer the paycheck that looks the same every week...that's why I've never been a seller. But I appreciate what they do, perhaps a little differently than others who are posting.

 

[ajhenderson]

Shoot From Hip is right; greater risk = greater reward. I've had independent owners complain how much their sales people are making. They forget that the value of their station has increased by millions over many years and that will be theirs when they sell. As to jocks, they also have a risk/reward motivation; those who chase offers in bigger markets on better stations get paid better but lose some of the security of their last gig. If you don't like your pay, get another job. If you're doing nights in Chico getting minimum wage, it's because there are a lot of people who can do your job. The market has determined there aren't many people who can Rick Dees', Bill Handel's, Tom Leykis', et al jobs, so they get paid handsomely just as Alex Rodriguez would in baseball.

 

[calguy]

I don't disagree with you, I see some sales people just getting by, but where I work there are very few in that position. Most do very well and in some cases it boggles the mind. I suppose the point I'm trying to make is that they at least have the opportunity for greater reward while those in programming, even the very successful don't see much for their hard work. Then you have the sales types in charge who would rather voice track the whole thing. And if they did they would wonder after a period of time why the ratings are so poor. It takes talented people to create really good product for them to sell. I'm seeing very talented people who are responsible for great ratings that are being told that they can't even get a 2 percent cost of living increase and many haven't had one for 6 or 7 years now. The price of gas, food, rent and the like haven't stayed the same, but salaries have, and in many cases decreased while a few at the top make more. Comparing radio talent to sports figures is interesting. I believe the major league minimum is a million dollars now is it not?

We could go on, but hopefully I've made my point and I do understand yours...

 

[Lopaka]

I would like to see the 7 station ownership limit restored. Deregulation has been a disaster in every industry its been tried in--airlines, banking, electricity markets, and of course broadcasting. Some big shots get hurt. So what.

 

[Marv-L.A.]

Any company which is so obssessed with pleasing the beancounters to the point where they'd go so far as to have one of their PDs also doing voicetracking on over a dozen stations simultaneously is too beholden to the bottom line, IMHO.

That's Clear Channel for you.

Voice-tracking and syndication are two of the worst things to ever happen to radio, and particularly the explosion of both since 1996.

 

[justareporter]

I always find it beyond reason when owners or managers say they cannot "afford" a raise. Question: how much will it cost them to replace a good or great recognizable talent with a track record in the market with someone who barely knows who is on main street?

I have determined there should be an "idiot quiz" for anyone seeking a job in management. I've worked both sides of the fence so I know the quiz has to be simple. Simply: how valuable is talent? If they can't answer this is 10 words or less I'd run them out of town.

 

[ajhenderson]

Calguy, I don't disagree with you. I'm very much a capitalist but do think regulating certain industries is a good thing, and broadcasting is one of them. I wouldn't be opposed to a 5 or 6 station limit per major market and less in smaller ones.

As to the sales people, again, it's a market issue. If no one wanted to be on the air, people would get paid more. A lot of people grow up wanting to be a radio star just like some aspire to being a firefighter or such. I was an oddball for having a business career planned out at a very very young age... most people don't aspire to be an account executive for KRLA. Sales people don't get to date off the request line, sleep in until noon (PMD and evening jocks), take advantage of as many freebies and trades, or get any of the benefits of celebrity... like, well, being a celebrity. That's nothing against jocks, it's just the reality. I know a lot of on air talent who admittedly couldn't sell water in a desert, and most sales people who couldn't entertain an audience.

 

[calguy]

Calguy, I don't disagree with you. I'm very much a capitalist but do think regulating certain industries is a good thing, and broadcasting is one of them. I wouldn't be opposed to a 5 or 6 station limit per major market and less in smaller ones.

As to the sales people, again, it's a market issue. If no one wanted to be on the air, people would get paid more. A lot of people grow up wanting to be a radio star just like some aspire to being a firefighter or such. I was an oddball for having a business career planned out at a very very young age... most people don't aspire to be an account executive for KRLA. Sales people don't get to date off the request line, sleep in until noon (PMD and evening jocks), take advantage of as many freebies and trades, or get any of the benefits of celebrity... like, well, being a celebrity. That's nothing against jocks, it's just the reality. I know a lot of on air talent who admittedly couldn't sell water in a desert, and most sales people who couldn't entertain an audience.

Couldn't agree with you more, there was a reason why the government regulated radio and later television and as it's been pointed out almost every industry that has been deregulated has gone through tremendous turmoil. Radio is just the latest and for those of us who love radio it really is heartbreaking because we didn't see it so much as an industry as we did and art form and an entertainment that was a decent way to make money. Somewhere along the line in the early 90's it started to get weird with companies beginning to shift the way they thought as bonuses were removed from contracts and cuts were made and it only got worse with the Communications Act of 1996. That's when bankers and other businesses took over radio in much greater numbers than ever before and basically ruined it. There are many other reason that radio is in the state it is today such as over-research and an influx of programmers who have little experience before getting the job, but that’s for another topic, another thread… As for the differences between sales and programming, each has always had different motivations and that devide has only grown wider.

 

[michael hagerty]

David:
I didn't mean to ignore your post. And you're right...I had forgotten that by this stage of the game, a lot of these aren't cash or debt deals.

But the problem I'm having is this: The companies that are buying these stations through whatever means seem to end up saying they can't afford the basic costs of doing business. When stations billing tens of millions of dollars can't afford six live DJs, that's hard to believe. When those live DJs are replaced by voice-tracked talent from other stations or markets and the company tells them they can't afford to give them a raise to cover the added work (which would be a fraction of what they were paying the jocks they fired), that's even harder to believe.

I may be wrong, but it seems to me that a lot of station groups want to sell airtime but don't want to pay to create the product. Fine for retail...someone else makes the merchandise, you buy it wholesale and have it shipped to you...but a lousy model for entertainment.

---Michael Hagerty

You left out the big one: debt service. 40 years ago, most of the "big" radio chains had been in the business for a long, long time...long enough that the reasonable amounts of money they paid for those stations had long since been amortized. Even new acquisitions were bought and sold for money that would allow the new owner to be in the black within 3 to 7 years.

You forget that companies like Clear Channel obtained most big stations via stock and mergers, not through debt. In fact, Clear has a lower debt to equity ratio that General Electric. Debt is a way of using someone else's money to do something today at a cost that should be exceeded by the profits.

De-reg changed all that. Companies like CC and others spent like drunken sailors...item number one on the budget sheets is debt service....tens or even hundreds of millions of dollars per station times however many stations they bought.

Debt service is not an expense in calculating EBITDA. Debt is the cost of obtaining assets... hopefully, producing assets.

What's the math like to get that down to five years? Even 10 or 20? You'd have to cut out every possible expense and find every possible means of cramming in revenue...spot and non-traditional. And that's what they've been doing...all except Nationwide, who sold to Jacor in less than a year for....$38 million. Which is the other way of making a buck...finding the next sucker....who, of course, will go back to plan A...cutting every possible expense.

A decision to invest is based on the prudence of the investment. If $100,000,000 in corporate bonds produces 5%, can you make more than 5% after the interest? The asset value is fixed... you still have the "principal"... and not part of a business formula. This is analogous to buying a house. If, after the net interest cost after tax savings, you are acquiring an asset with a known value for less than renting, you have a viable proposition because, in the end, you will have the house and the costs will be lower than renting.

 

[michael hagerty]

David:
I didn't mean to ignore your post. And you're right...I had forgotten that by this stage of the game, a lot of these aren't cash or debt deals.

But the problem I'm having is this: The companies that are buying these stations through whatever means seem to end up saying they can't afford the basic costs of doing business. When stations billing tens of millions of dollars can't afford six live DJs, that's hard to believe. When those live DJs are replaced by voice-tracked talent from other stations or markets and the company tells them they can't afford to give them a raise to cover the added work (which would be a fraction of what they were paying the jocks they fired), that's even harder to believe.

I may be wrong, but it seems to me that a lot of station groups want to sell airtime but don't want to pay to create the product. Fine for retail...someone else makes the merchandise, you buy it wholesale and have it shipped to your store where you sell it at a markup...but a lousy model for entertainment.

---Michael Hagerty

You left out the big one: debt service. 40 years ago, most of the "big" radio chains had been in the business for a long, long time...long enough that the reasonable amounts of money they paid for those stations had long since been amortized. Even new acquisitions were bought and sold for money that would allow the new owner to be in the black within 3 to 7 years.

You forget that companies like Clear Channel obtained most big stations via stock and mergers, not through debt. In fact, Clear has a lower debt to equity ratio that General Electric. Debt is a way of using someone else's money to do something today at a cost that should be exceeded by the profits.

De-reg changed all that. Companies like CC and others spent like drunken sailors...item number one on the budget sheets is debt service....tens or even hundreds of millions of dollars per station times however many stations they bought.

Debt service is not an expense in calculating EBITDA. Debt is the cost of obtaining assets... hopefully, producing assets.

What's the math like to get that down to five years? Even 10 or 20? You'd have to cut out every possible expense and find every possible means of cramming in revenue...spot and non-traditional. And that's what they've been doing...all except Nationwide, who sold to Jacor in less than a year for....$38 million. Which is the other way of making a buck...finding the next sucker....who, of course, will go back to plan A...cutting every possible expense.

A decision to invest is based on the prudence of the investment. If $100,000,000 in corporate bonds produces 5%, can you make more than 5% after the interest? The asset value is fixed... you still have the "principal"... and not part of a business formula. This is analogous to buying a house. If, after the net interest cost after tax savings, you are acquiring an asset with a known value for less than renting, you have a viable proposition because, in the end, you will have the house and the costs will be lower than renting.

 

[Shoot From Hip]

The companies that are buying these stations through whatever means seem to end up saying they can't afford the basic costs of doing business. When stations billing tens of millions of dollars can't afford six live DJs, that's hard to believe. When those live DJs are replaced by voice-tracked talent from other stations or markets and the company tells them they can't afford to give them a raise to cover the added work (which would be a fraction of what they were paying the jocks they fired), that's even harder to believe.

Michael-- it may be that the big changes we're witnessing these days with format changes spawned by the impending changeover to PPM, mass layoffs and other forms of consolidation are simply choices the companies are making...not necessarily because they can't afford the basic costs, but because they may not see a quantum improvement on ROI by doing it the old way. JACK became a top-5 billing station with no air talent except an annoying pre-recorded voice. Keeping in mind that PPM measures station exposure...not station listening...it's very possible that management's thinking on how to maximize profits is in a state of flux.

 

[talkproducer]

Does anyone think KFI will make cuts?

 

[calguy]

Does anyone think KFI will make cuts?

The question is what do they have to cut? If it's on air they could delete local hosts in favor of syndicated shows.
I would think that John & Ken and Handel are safe, but John Ziegler could be on un-stable ground. From what I hear he has alienated his co-workers and now does his show from Premiere in Sherman Oaks, but I don't know if the latter is fact. As for off-air, with CC there's no guarantee of job security. Many of these stations already run very small staffs. KIIS has a larger staff than most but that's mostly promotions workers and street teamers. I could foresee them perhaps letting go of deejays that make over-scale in favor of bringing in new talent at scale for the union stations.

 

[jrplbg]

I could foresee them perhaps letting go of deejays that make over-scale in favor of bringing in new talent at scale for the union stations.

And how fortunate for the corporate fatcats that the union negotiates what amounts to PAY CUTS in new contracts, when they get around to negotiating new contracts, that is.

As far as cuts at KFI, I hear that Zigler's contract is about up anyway, and the general consensus is that he's out.

 

[vegasBABY]

Hey, Michael Haggerty.. excellent comments.... I've seen you posts many places here and you seem to have it together....and -no, I'm not looking for a job....

 

[calguy]

I could foresee them perhaps letting go of deejays that make over-scale in favor of bringing in new talent at scale for the union stations.

And how fortunate for the corporate fatcats that the union negotiates what amounts to PAY CUTS in new contracts, when they get around to negotiating new contracts, that is.

As far as cuts at KFI, I hear that Zigler's contract is about up anyway, and the general consensus is that he's out.

Ziegler blew it pretty early on talking about how much he hated LA and then going after John Kobelt on the air didn't help. That's what got him exiled to Sherman Oaks from what I heard. Yeah he wrote a book and got some TV play but his head got way too big too fast. He's probably doomed in LA.