It is hard to sit here and read this speculation that is unfounded. It is simple economics. The company was built when the window opened for multi-station, multi-market ownership. The problem was those on the sidelines that made up most of the smaller owners allowed large groups to bid for their stations at 12, 13, or 14 times the cash flow, when in reality, after it all shakes down, the value of these very stations is somewhere in the 7 or 8 times cash flow range. They delayed the inevitable because the market grew and increases of 5%, 6%, and more of ad revenue sustained that radio was a 'growth medium.' It is not a straight growth medium--it is a medium that grows some, has flat years and sometimes has a down year. Wall Street HATES that. They dont care about the ability of a strongly run radio operation to deliver a 40 margin (or better) on ad revenue.
What you don't understand here is that this isn't about 'making payroll.' This is about keeping the platform viable while leveraged debt is called in by lenders. Just as there was 'over value' in the housing market, leaving families (borrowers) 'underwater,' the same has happened in radio.
The root problem is radio is NOT A commodity for Wall Street. Radio is entertainment and news and a friend to each community.
The solution--while still leveraged like they are, big groups have to cut expenses, even when they are appeared to have alreadt been cut to the bone--why? Because the revenue market isn't growing and the lenders are at the door wondering where this 'growth medium' is going. So the QC cluster could have the best profit margin in Cumulus, or the one in Rockford could, but the overall platform collapses without some stop gap. Is it a good stop gap? NO! Does it hurt radio? HELL YES! Is there an alternative to this plan? Unfortunately, no.
Put it in perspective--the newspaper business with all their 'brick and mortar' costs, printing presses, large staffs and fixed costs, is in much WORSE shape than radio. Because newspaper is in decline--readership is falling, ad costs rising and there is no long-term answer. Television is fragmented by cable, satellite, DVR, DVD, computer, video games.
When the dust clears, radio will still be there. The most talented will survive and those talented that are displaced by this situation, will live to fight another day. If you want to worry about something, worry about the Democrat push to censor radio by bringing back the 'fairness doctrine.' It will kill AM Radio...regardless of your political view, the fairness doctrine is the most horrible thing looming on the horizon. The reason I say regardless of your political view, is that without the fairness doctrine, right now, you can vote against programming by tuning the dial elsewhere. This is not something we need back in play again.
I know some of these people who are out at Cumulus...they will be back in this business if they want to be. My thoughts and hopes go to them because it sucks to be unemployed in this (or any other business), but good talent and good people win out eventually.
