Diane Wade Exits WSEN

[DaveBullard]

BigA:

Unreasonable debt is, indeed, the problem. (And it's what I should have said.) But the amount of debt was unreasonable, relative to the profit margins needed to service it, even in the good times.

When a cluster of stations is returning 20-30% to the mothership in a good year and cannot reinvest some of that profit or draw down the margin a bit in order to achieve/protect a particular objective, then the debt burden is unreasonable, regardless of the strength of the outside economy.

But we're essentially saying the same thing. Massive debt burdens accelerated the downturn of the industry when the economy began to turn because station groups could not fall back on their unreasonably high profit margins to get them through the hard times. Those margins were essential to pay back unbelievable amounts of debt, and remain so.

 

[doctorcomputer3]

Dave Bullard is another one that sounds great on the air. He sounded great on WSYR recently and is that his offspring? She is fantastic. Anyway, Sorry Diane, If everyone would wise up, maybe they would collect on my station, sell they're own ads and not have to worry about being this crap.
Another loss in this business is the ability, friendliness and patience for the airstaff to set the sales up. Lots of head cases out there.

 

[TheBigA]

Those margins were essential to pay back unbelievable amounts of debt, and remain so.

But I'm seeing companies that don't have "unreasonable debt" facing the same situation as Sirius and Citadel. Emmis hasn't made the kinds of purchases other groups made, and they're on Moody's list.

That's why I say that ANY debt right now is the same as having unreasonable debt.

As for profit margins, all stations, regardless of ownership, will have to adjust their costs to fit with the changing realities of revenue. That means downsizing. Ad rates will NOT be going up regardless of ratings or audience size. Why? Because the audience has been diluted across multiple platforms. And for radio to spread its content across those platforms will require investment. And investment means going into debt.

 

[Element9]

Bullard and Roxalot hit the nail squarely on the head. Sorry Big A. You are knowledgeable and well-versed, but just about everything you've written regarding the economic state of the radio busines makes you appear to be an apologist for those corporate officers who've had a major hand in creating all that's wrong. It's the Gordon Gekko "Greed Is Good" mantra that's created this mess. Forstmann and Suleman had no intent to buy and hold. Their intent was buy, sell, get out, take their winnings and buy a country in Central America.

Radio as nothing more than a casino.

Yes, it is the amount of unresonable debt that has created this problem, combined with the terms of debt payment and the banks' desires to lend money to fringe borrowers that ten years ago would never have been able to secure the insane amounts of money, combined with a tanking economy fueled by the sub-prime mortage mess made worse by unsecured and zero down loans. I've seen actual algorhythms that projected this mess.

Cumulus, Clear Channel and Citadel are now a toxic assets, just like bundled mortgages. Please read today's Radio & Records and Taylor On Radio to get a thumbnail sketch of the toxicity. The medium markets (read, former Citadel stations) are generating the same amount of revenue as the major market (read, ABC) stations.

Add this sad thought: Had not Citadel purchased ABC two years ago, it's quite likely Citadel would be in a far more secure position to weather the current economic storm and be in a better position to make well-funded acquisitions at reasonable multiples that wouldn't break the company.

More important, it's quite likely the hundreds of good, hard working Citadel employees, passionate broadcasters who've been laid off, might still be productively employed by the company and contributing to its success.

 

[DaveBullard]

Owner: Thanks for the kind words. I grew up on radio and love it still. However, Andrea B. is not my offspring. She's the daughter of a second or third cousin. Besides, she's way too pretty to be part of MY genetic soup! (Okay, not totally true -- I have a couple of handsome sons, but that's their mother's doing. I have a radio face, happily so.)

BigA: You're right that not every station group carries massive debt, though they all carry debt of some sort. However, they all carry the same desire for the same obscene profit margins as in the "good ol' days", and debt of any size is a reason why. And Element9 is right that the debt was irrelevant when these groups took over and consolidated the business to hell-and-gone, as they never intended to stay in the business. The horrible aftereffects would be the problem of some schlub foolish enough to buy the properties and subsidize the ridiculous amounts of go-go-economics debt.

And the inability of banks to lend money is not really an issue here. These groups are saddled with enough debt that, even if banks were lending, they wouldn't lend to most of these folks. That's why the CC buyout took so doggone long. The lenders appeared to get very cold feet and had to be pushed into the deal.

I will disagree with you, respectfully, on the issue of "any debt" being a problem. All businesses carry debt of some sort, as do all governments, as do most individuals. Longterm debt fuels the kind of longterm growth projects that you can't fund out-of-pocket. Debt, like rent, heat, water and payroll, is just one more everyday obligation when it's at a normal level. "Any debt" is a problem in the same way that "any heat" is a problem. I couldn't put my son through SUNY Oswego without debt.

All these radio companies are on Moody's list not because of debt, but because money is moving rapidly away from radio. (And from TV and newspapers and billboards and....) They are relatively poor long-term investments at the moment. The worst of them have the most debt, or have been judged to have the least ability to work their way out of trouble. Debt is just one factor. My point is that it has become, for the big consolidators, the driving factor in the rapid destruction of its product. And those changes will not make money come back to radio. Here, we agree -- radio is adjusting to economic reality. I just believe it is making all the wrong adjustments and is trading short-term profitability for long-term viability.

 

[TheBigA]

Sorry Big A. You are knowledgeable and well-versed, but just about everything you've written regarding the economic state of the radio busines makes you appear to be an apologist for those corporate officers who've had a major hand in creating all that's wrong.

Let me be frank: My point for posting on this board is NOT to win a popularity contest or preach to the choir. There are a lot of other people who post what others want to hear. Contrary to what some say, I have NO REASON to be an apologist for ANY corporate people or organizations.

All I seek to do is provide some context to the discussion. For example, there are lots of radio companies who are operating just like the big corporations. They are firing staff, replacing live and local people with syndication, and all the other things that people complain about. But these are not public companies, so the general public doesn't know their debt situation, or their stock price. So no one really knows what's going on at Greater Media or similar places. Even in Syracuse or upper new York State, there are local radio companies that are making programming decisions that are no different than Citadel or Cumulus. They probably are struggling uder similar debt burdens, and they're definitely struggling with revenues losses. THAT is my point.

Cumulus, Clear Channel and Citadel are now a toxic assets, just like bundled mortgages.

I don't know about that. A lot of vultures are circling around for an opportunity. Toxic dumps don't attract vultures.

As I've said, these are stations that were operating as though it's still the 1980s, the internet was never created, and as though people had no other media choices. Only in the last few months have they started to make the changes that they probably should have made years ago. THAT is where the mistake was made.

Add this sad thought: Had not Citadel purchased ABC two years ago, it's quite likely Citadel would be in a far more secure position to weather the current economic storm and be in a better position to make well-funded acquisitions at reasonable multiples that wouldn't break the company.

And yet you state that Farid was a short-timer, with no intent to hold. His purchase of ABC completely flies in the face of your statement. You don't by a big house and get a 30 year mortgage if you're only going to stay there for a year or two. It's illogical. The first ten or so years, you're just paying interest, not principle. So it's obvious that it's incorrect to state that Farid was going to get out quickly. That makes no sense, given the facts as we know them.

More important, it's quite likely the hundreds of good, hard working Citadel employees, passionate broadcasters who've been laid off, might still be productively employed by the company and contributing to its success.

Tell that to all the auto workers who're being laid off. I have a friend in state government who is being furloughed without pay for a month this year. So no, if ABC was still owned by Disney, a lot of those people would be getting laid off. And based on what I'm seeing at companies about the size of Citadel prior to the ABC merger, I'm pretty sure they'd be laying people off now regardless. You can't be down over 12% in revenue in a quarter and continue to maintain your staffing levels. I think a lot of radio people are living in a fantasy world with regard to the depths of this economic crisis, and how it will effect ALL business, not just radio.

 

[TheBigA]

And the inability of banks to lend money is not really an issue here.

You are the only person saying that. The government disagrees, every economist I've read disagrees, and everyday people looking for loans disagree. Fed Chairman Bernanke said it's the biggest issue during his 60 Minutes interview Sunday. With all due respect, I have to believe he knows more than you on this subject.

That's why the CC buyout took so doggone long. The lenders appeared to get very cold feet and had to be pushed into the deal.

The reason they got cold feet is because they knew this depression was about to hit. The warning signs were there more than 18 months ago.

I think the bigger companies with the larger debt are more likely to attract the financing in ways the smaller companies won't. Use the AIG example. The government couldn't allow AIG to fail. Same with the big radio companies, although the amount is much smaller. The banks, lenders, and corporate decision makers simply can't afford to let these companies default. The mess would be too huge. They're better off allowing them to miss their debt covenants, getting additional equity in these companies, and hope the companies improve their revenues soon.

My point is that it has become, for the big consolidators, the driving factor in the rapid destruction of its product. And those changes will not make money come back to radio. Here, we agree -- radio is adjusting to economic reality. I just believe it is making all the wrong adjustments and is trading short-term profitability for long-term viability.

To you, it's "destruction of the property." But if you study it in the 80 year history of the industry, these companies simply delayed the inevitable. If an industry isn't growing, it's dying. There is no standing still. Radio, for the most part, stood still while other technologies grew and started to replace radio. So the fact is that in order for radio to grow and change, it HAS to destroy what was there before. It's a form of urban renewal. You can't build the new office complex without knocking down what was there before. Downtown Syracuse wasn't possible without replacing the Erie Canal with Erie Boulevard. That change HAD to happen. It has nothing to do with consolidators, because these changes will happen to all radio, not just the big companies.

 

[Element9]

If nothing else, this has elevated the stature of the 'Cuse board. I'm doing my best to refrain from getting into a rehetorical wizzing match here, but I will rebut one point about which I feel strongly, that relating to Citadel's short term plans regarding spinning and flipping properties. Relative to the mortgage-home ownership scenario being played out, it's a fact that many of those who bought McMansions did indeed plan to hold them for two years and cash out or trade up. I'll stand by my statement regarding Citadel's intent to do the same.

My contention that had not Citadel purchased ABC two years there'd likely be fewer unemployed does not preclude the fact that they could have bought more for less today, held for two years and still cashed out. I suspect Mr. Suleman wishes he'd kept his powder dry and not purchased ABC. Well-placed sources inside Citadel say that Farid is telling his managers and RVPs that it was not his idea to buy ABC. Sorry, but that simply does not pass the laugh test.

Defending the executives at Citadel, Cumulus, et al, seems akin to defending the AIG crooks who helped lead the company down the drain only to be rewarded with million dollar bonuses. Makes no sense and it doesn't happen where I work.

That's it.

 

[SirRoxalot]

Let's Make One Thing Perfectly Clear

And yet you state that Farid was a short-timer, with no intent to hold. His purchase of ABC completely flies in the face of your statement. You don't by a big house and get a 30 year mortgage if you're only going to stay there for a year or two. It's illogical. The first ten or so years, you're just paying interest, not principle. So it's obvious that it's incorrect to state that Farid was going to get out quickly. That makes no sense, given the facts as we know them.

Nonsense. Farid got paid over $10-million dollars in bonuses to engineer the Disney deal. He also wanted to be the head of a group with major market stations. EGO was the primary motivation, money was second, and he figured that he could either cash out or sell off the ABC properties at a profit if things didn't work out. Farid has never demonstrated any ability as an operator. He's always been the "financial wizard" who focused on acquisition. Give the facts as we know them, Farid is incapable of managing a major broadcasting corporation as an operator. The Imus signing alone should tell you all you need to know about that.

 

[TheBigA]

Re: Let's Make One Thing Perfectly Clear

Nonsense. Farid got paid over $10-million dollars in bonuses to engineer the Disney deal. He also wanted to be the head of a group with major market stations.

You should study the man who hired Farid if you want to know the real story. He was hired to turn Citadel into a "market leader." That is how the Forstmann Little web page describes their company strategy. He was hired to do big deals, get the company into national syndication, and operate stations in major markets. That was not his idea. He already had those things where he was. He was lured to Citadel for a very specific purpose.

 

[SirRoxalot]

Re: Let's Make One Thing Perfectly Clear

You should study the man who hired Farid if you want to know the real story. He was hired to turn Citadel into a "market leader." That is how the Forstmann Little web page describes their company strategy. He was hired to do big deals, get the company into national syndication, and operate stations in major markets. That was not his idea. He already had those things where he was. He was lured to Citadel for a very specific purpose.

Farid was Mel Karmazin's beancounter at Infinity. He bailed when it looked like Sumner Redstone was going to jettison his patron - Karmazin - when Karmazin's contract ran out in 2003. It also look like Farid would be left out of a major management group being considered by Redstone, which bruised his ego.

Teddy Forstmann looked at his reputation as a "financial wizard", Farid pitched him on expanding Citadel, and the rest is history. Teddy was not exactly having a run of luck when he brought Farid on board. Forstmann had just been hammered by failure at two telecom companies - McLeodUSA and XO. Citadel was a bright spot until Farid got there. He sure turned that around, didn't he?

 

[Element9]

Three people who shall remain anonymous, having had business dealings with Farid: (1) "He does not endear himself to trustworthiness." (2) "He is uncompromising to a fault." (3) "He is smart, but as he thinks he can out-smart others, not as smart as he thinks." From Howard Stern, "He's a screw-up who overpaid me for weeks and I had to remind him to correct my check three times."

 

[doctorcomputer3]

Thanks Dave, I still wish I could have my Mullet. We always just thought of it as long hair.
So, if we're all agreed that the Company is taking on too much debt. Which is true today for more than radio, its true for me here at my little lake house, to Congel. Can we say the sales people have a perfect score?

Please remember Diane is a human and could be reading this. To her the company taking on too much debt means absolutely nothing. Keep your chin up and enjoy a few days in the summer. I would love to hire her but we sell our airtime ourselves.

I know there is a tv board somewhere but It's suprising no one has mentioned an entire staff at a local TV station or the Magna employees here. Lots of salesman on this board? Too many sales hands in the pot, another problem today with Broadcasting.