Clear Channel & Others Headed for Disaster?

[RoddyFreeman]

Noted radio observer Jerry Del Colliano predicts Clear Channel, Entercom, Cumulus, Univision and other consolidated radio groups could be headed to bankruptcy within 6-12 months. They all have massive debt and would need to restructure to stay afloat. But banks aren't lending right now.

The bad economy might turn out to be a friend to those who wish for the kind of radio we had before deregulation by forcing major station groups to shed properties.

Here's the link to Mr. Del Colliano's blog: http://insidemusicmedia.blogspot.com/2009/01/radio-bankrupt-in-6-to-12-months.html

 

[troone]

Another post suggested the same thing a few weeks ago -- that radio will eventually get back to something closer to local ownership and programming.

The irony is rich: good times and no-holds-barred deregulation is the enemy of radio excellence, yet it may take a recession and a credit freeze to get us back to the good old days: 27 owners for 27 signals.

 

[Chancethegardner]

Sadly, half or better of the 27 might go dark (including a lot of move ins). There just isn't enough ad revenue to feed all those mouths. One local station per medium to small market has a chance to make it. Even it will have to depend on the same bare bones operation model introduced by consolidation.

 

[taylorengineer]

I have opined here before that one of the most far reaching mistakes made congressionally was the deregulation of radio and television. The consolidation of media and it's inherent power into so few hands is dangerous - especially when you examine the character and quality of these individuals who are running these companies.
It is time for breaking up the monopolies - return us to the 7/7/7 limit. ClearChannel CAN profitably run 7 AM,s,7 FM's, and 7 TV's.....so can all the rest. Media companies were making tons of money before the 90's.....let's go back to a workable paradigm.
And Obama can bail out the Mays Boyz, Lew and Sumner with some good 'ol taxpayer money to make it all happen. All the corporate weenies keep their gazillion dollars and we get the media back........

 

[2ez]

I have opined here before that one of the most far reaching mistakes made congressionally was the deregulation of radio and television. The consolidation of media and it's inherent power into so few hands is dangerous - especially when you examine the character and quality of these individuals who are running these companies.
It is time for breaking up the monopolies - return us to the 7/7/7 limit. ClearChannel CAN profitably run 7 AM,s,7 FM's, and 7 TV's.....so can all the rest. Media companies were making tons of money before the 90's.....let's go back to a workable paradigm.
And Obama can bail out the Mays Boyz, Lew and Sumner with some good 'ol taxpayer money to make it all happen. All the corporate weenies keep their gazillion dollars and we get the media back........

While the number of stations owned by one company is certainly problematic, it's really secondary to individual market concentrations. I had no real issue with a single company owning 2 fms in a market. I'm also not fond of the idea of one company controlling more than 1 50kw clear or even a good class a in a single market.

THough it would cetrtainly be a best case scenario and a dream come true, 7-7-7 isn't a realistic expectation. I propose a comapny be limited to a 50 station cap, and no more than 2 fms and one blowtorch am per market, or 2 lessor am's. Or, up to 3 daytime only am's.

There are various formulas we could play with which would produce desirable results. Ending individual market concentration is the bigger problem.

 

[TheBigA]

There are various formulas we could play with which would produce desirable results. Ending individual market concentration is the bigger problem.

You realize there are provisions in the 96 Act meant to control that? In other words, the size of the market determines the number of stations you can own. And there is a cap on the percentage of revenue you can control within a market. Also in 2002, the FCC changed the way they determined market size, in such a way that CC had to sell off a bunch of radio stations.

The point is that even with the number of stations companies own in markets, they are unable to make enough money to run them. Which should give you an idea how tough it would be if ownership rules were returned to where they were 15 years ago. It's nice to say that they were making tons of money in the 90s, but that was before a lot of new technology came in. I'm all for returning ownership rules to 7-7-7, but only if the media marketplace is returned to where it was in 1992, and people are forced to throw away their computers, cell phones, iPods, and other devices.

 

[TheBigA]

One local station per medium to small market has a chance to make it. Even it will have to depend on the same bare bones operation model introduced by consolidation.

I agree with that. When I started in radio, the one AM station I worked at covered a county of about 100,000 people. Now there are six stations for the same area. And that one AM station is no longer #1. The loss of audience has led to them firing most of the staff.

The reason Congress voted for deregulation was because most of the radio stations in this country in the 90s were losing money. The reason they were losing money was because the FCC quadrupled the number of radio stations. So if you owned an AM & FM station in a market, and used to get a 20 share combined, those two stations only got an 8 share. And the AM was getting a 2. So while it's nice to think back to how great things were before deregulation, the fact is that they were not that great. Deregulation helped the situation for a while, but radio is now competing with a lot of unregulated media. So there is need for new approaches to deal with the changes. But going back to old ownership rules, especially with all the new media that has further diluted radio shares, won't help.

Regarding Jerry Del Coliano, he had a long and very bitter legal battle with Clear Channel. He is not an unbiased source for information.

 

[Dixie Jock]

Clear Channel Atlanta is, has been a disaster for years.

 

[jabba17]

This is why I thought that Lincoln was foolish for turning down the early lowball offers (from Cumulus?) for Star and WQXI, and possibly other stations in other markets.

Once one of these biggies goes broke and starts unloading stations in BK court, the value of those stations will plummet and the number of potential buyers will drop.

I know bashing deregulation in general is in vogue right now, but I can't see why that's a factor here, unless it's to avoid giving companies so much rope with which to hang themselves, or avoiding a "too big to fail" situation, which I don't think is the case here.

In other words, it's not the government's job to keep companies from overleveraging themselves through reckless borrowing, paying too much for assets, or biting off more than they can chew management-wise. You don't see, say, Cox or CBS going through these kinds of problems...

Someone will make out like a bandit once one of these overleveraged biggies goes bust, buying successful, well-positioned stations on the cheap and running them properly, and leaving the dregs to someone else.

 

[RoddyFreeman]

The Big A is correct that all of this (consolidation) started because around 1990, something like 70% of all stations were losing money. The first solution to that was LMA's. Then came deregulation.

But, I think Congress went too far. I have no problem with a company owning 2 AM's and 2 FM's in a major market. But owning 4 or 5 FM's is where I have a problem. I was speaking with a friend in Baltimore, where CBS owns every station with any semblance of AC programming. I'm not sure what that does to healthy competition and putting the very best product on, but I'm guessing it doesn't help.

Keep in mind, however, that technology has come a long way since deregulation. If lots of small companies end up owning stations again, there's no guarantee most of them won't be voicetracked or carry syndicated programming in weekday dayparts.

My radio blog: www.atlairwaves.blogspot.com

 

[MRFLASHPORT]

I think the time has passed to bail out radio. So even if Obama writes a check to keep the fat cats happy, how long will it last? The bottom line is radio under the current business model is not profitable. And unless we want the government to start writing subsidy checks, the future for corporate radio is limited. The Internet, Satellite, and now wireless providers are all direct competition to radio. People are willing to pay for on-demand content and have no problem doing so. Verizon charges me 44.95 for unlimited EV-DO on my Windows Mobile Smartphone- I can listen to all kinds of streaming stations with deep cuts I'll never hear on terrestrial radio. How long will it be before EVDO/3G comes standard in your dashboard? The simple formula on ad-supported media is that enough people listen to respond to the ads. The bottom line is there aren't enough listeners anymore to justify the bill rates. The cost of running a terrestrial station is a mammoth compared to to an Internet or satellite gig. No FCC to deal with, no transmitter or real facility to maintain to run a quality Internet stream these days. I've heard stations run by 16 year olds that have better imaging, sound and content than anything Cheap Channel or the Cloud Company can offer.

The Telecom Act of 96 was but one part of the equation of the failure of radio. The other part was the industry not being an early adopter of the web and alternative methods of content delivery. The only advantage going for radio (and broadcast TV) is that it is free to access the content- but once the content is gone (which the corporate folks have done a jam up job of doing over the last 15 years), there is no appeal or reason to tune in. I pay for premium digital cable for the content (Starz, Encore, HBO, etc) and I don't have ads every 15 minutes. The same is happening for radio with Sirius/XM and Internet streams. People are becoming accustomed to paying for the content they want, ITunes is a prime example. Cellular companies such as Verizon, Sprint and at&t all have 3G networks with expansive coverage- Verizon's acquisition of Alltel will create one of the largest CDMA EV-DO networks and this puts the big red V in many rural areas. This means more VCast subscriptions and content for 80 million customers. Makes perfect sense to me if I am an advertiser, I can target my demo down to the zip code and street with technology on most cellphones that provide value added content. I know I get a response when the customer clicks a hot key right then and there. No waiting on ratings, or PPM's to come in.

How much time before radio under the current business model runs out of gas? I say 3-5 years. The government will probably throw a few hundred mill at it, but this is literally buying time. (they might as well broker it!) The fire is burning and there is only so much water in the tanker, you can keep the flames away but for how long?

I think the local folks and listener supported will be all that is left when the fire is out. It will be like radio at it's genesis. But I don't think stations in major markets will ever be pulling 50 million or 100 million...they'll be good to make 1 or 2mil and keep the lights on and pay a modest staff a modest salary.

 

[TheBigA]

Someone will make out like a bandit once one of these overleveraged biggies goes bust, buying successful, well-positioned stations on the cheap and running them properly, and leaving the dregs to someone else.

If you look at what happens when a company "goes bust," it's not a pretty picture. I've studied what happened to radio after 1948 and before the rise of rock & roll, and it was very ugly. You know what a foreclosed house looks like? That's what will happen. And "the dregs" will all just go dark. Actually, lots of them either already have, or have been turned into brokered religious stations, which is basically the same thing.

 

[2ez]

In other words, it's not the government's job to keep companies from overleveraging themselves through reckless borrowing, paying too much for assets, or biting off more than they can chew management-wise. You don't see, say, Cox or CBS going through these kinds of problems...

No, that should fall to the SEC, to police public companies and prevent them from making these horrific breaches of their fiduciary responsibility to shareholders.

 

[TheBigA]

I was speaking with a friend in Baltimore, where CBS owns every station with any semblance of AC programming. I'm not sure what that does to healthy competition and putting the very best product on, but I'm guessing it doesn't help.

I think you'd still end up with five versions of AC, because that's the demo advertisers want. It has nothing to do with ownership.

Keep in mind, however, that technology has come a long way since deregulation. If lots of small companies end up owning stations again, there's no guarantee most of them won't be voicetracked or carry syndicated programming in weekday dayparts.

And in fact, in those markets where CC sold out to smaller companies, that's exactly what has happened.

 

[TheBigA]

The Internet, Satellite, and now wireless providers are all direct competition to radio. People are willing to pay for on-demand content and have no problem doing so.

Not exactly true, and that's why Sirius is in so much trouble. People DON'T want to pay for anything. At some point, once they get sellable numbers, EVDO will start running commercials, and the ISPs will start charging you for bandwidth. Enjoy your cheap and easy access while you can. It will go away just as quick as commercial free cable.

The Telecom Act of 96 was but one part of the equation of the failure of radio. The other part was the industry not being an early adopter of the web and alternative methods of content delivery.

The reason was simple: They don't own it. They own towers and transmitters. They don't own the internet. The phone companies do. At some point the charges for the internet will increase, and the quality will go down. Meanwhile there will be changes at terrestrial radio that will level the playing field. They need to clean house a bit, and lower their cost structure, and they're doing that now.

How much time before radio under the current business model runs out of gas? I say 3-5 years. The government will probably throw a few hundred mill at it, but this is literally buying time.

The Democrats are not in the bail out business. They saw the reaction Bush got with bail outs, and they won't be doing it with any company. Not with the auto industry, not with banks, and not with radio. Everyone is on their own.

 

[RoddyFreeman]

I think you'd still end up with five versions of AC, because that's the demo advertisers want. It has nothing to do with ownership.

You missed the point. You would have 5 AC's, but they would all be going all out to defeat the competition, resulting in the best product. Under one owner, they're being careful not to step on each other, and they don't have to be all that good.

 

[TheBigA]

I think you'd still end up with five versions of AC, because that's the demo advertisers want. It has nothing to do with ownership.

You missed the point. You would have 5 AC's, but they would all be going all out to defeat the competition, resulting in the best product. Under one owner, they're being careful not to step on each other, and they don't have to be all that good.

But they are defeating the competition. That's the point. All three stations are in the Top 10.

If they had different owners, they wouldn't be niching the format, they'd instead all go for the big nut, and they'd all play the exact same songs. That's what happens in markets where you have three country stations with three different owners. How different is The Bull from Kicks?

Anyway, it's Adult Contemporary...the 21st century's version of Muzak. If you want good radio, you don't listen to AC, no matter who owns it.

 

[mariamore]

Verizon charges me 44.95 for unlimited EV-DO on my Windows Mobile Smartphone- I can listen to all kinds of streaming stations with deep cuts I'll never hear on terrestrial radio. How long will it be before EVDO/3G comes standard in your dashboard? The simple formula on ad-supported media is that enough people listen to respond to the ads. The bottom line is there aren't enough listeners anymore to justify the bill rates. The cost of running a terrestrial station is a mammoth compared to to an Internet or satellite gig.

Very great points here...the time will come when people will not have to pay for subscriptions and have even more access, from international stations. Once internet access is installed in cars and WiMax hits full scale, the game is really gonna change!

 

[Tibbs4]

"Anyway, it's Adult Contemporary...the 21st century's version of Muzak. If you want good radio, you don't listen to AC, no matter who owns it."

BigA is now telling us to only like and think like HE does? Sure, let's just turn all these stations off and see how revenues
go and how long the crumbling towers last after AC is trashed.

Define 21st Century "Good Radio" please...

 

[TheBigA]

Define 21st Century "Good Radio" please...

Anything but AC. Country is filled with great personalities. CHR has a lot of excitement. I like the character of Urban. And a lot of these NPR stations are doing some interesting things.

But if revenues are the main consideration, yes, you are right, a good AC will pay a lot of bills. That's why CBS has three types of AC stations in Baltimore.