Good News, Bad News

[SirRoxalot]

The good news: Clear Channel will be staffing all markets with a live body 24/7/365.

The bad news: Clear Channel will be staffing many markets with A live body 24/7/365.

 

[amfmxm]

And the kicker is today's NYT article suggesting CC may be the "biggest loser."

Hard not to look back on this 13-year crock of shit they've built and laugh at the way they're hanging on by their fingernails, and hope like hell they crash and burn.

Seeing the idiot Mays Boys tossed out on their smug asses would put a big smile on a lot of radio faces.

Hasn't happened yet, but the clock's tickin'...

 

[TheBigA]

I really don't see any benefit to such an attitude, hoping they'll fail. It sounds like the Republicans who hope Obama fails. Not very patriotic, if you ask me. No one in radio benefits from CC failing. Including their competitors. If the biggest can't succeed, it makes it difficult for everyone below them, including the mom & pops. And consider that even if the Mays family is "tossed out," as you suggest, it's not like they will face any personal financial consequences. Certainly not to the degree that anyone else will. So if you're seeking justice, the failure of CC is not going to get you any. Regardless of your relationship with them.

 

[PTBoardOp94]

I'm curious what this live body will be doing in these markets. If WLW is doing news for Boston (!) and someone from Washington DC tracks overnights, is this live body just going to be a "monitor" to ensure the automation keeps working? If so, that seems like a great waste of a live body.

 

[cm454]

If the biggest can't succeed, it makes it difficult for everyone below them, including the mom & pops.

If the biggest fails because they were reckless in their greed and so stupid with their "regional synergy" BS, HOW does THAT reflect upon the moms and pops?

The biggest is failing because they routinely put maximizing profit waaaay ahead of quality. Classic example of the proverbial dog with a bone looking over the side of the bridge, seeing it's own reflection and dropping it's bone while trying to grab the other bone.

Clear Channel tried to gobble up as much of the pie as they could. They've now gotten a bellyache and vomited all over themselves.

Poor them. Cry me a river.

This business was in for a MAJOR correction. And it's getting it in spades.

 

[TheBigA]

If the biggest fails because they were reckless in their greed and so stupid with their "regional synergy" BS, HOW does THAT reflect upon the moms and pops?

Because the mom & pops wrote the book on cheap radio. They're the ones who've been running satellite formats 24/7 for years, long before CC.

 

[cm454]

Because the mom & pops wrote the book on cheap radio. They're the ones who've been running satellite formats 24/7 for years, long before CC.

We apparently have 2 different definitions of mom & pop.

You're obviously referring to those crapholes run by some guy and his wife.

I'm talking about legit radio companies that had 10 or 15 solid properties in medium to major markets. Companies that invested and reinvested in their product and their people. Companies that believed in profit AND quality and strived for both.

Clear Channel is not that compnay. They wanted profit without enhancing product quality.

Mom & pops (your definition), on the other hand, have always mostly sucked.

 

[amfmxm]

I really don't see any benefit to such an attitude, hoping they'll fail. It sounds like the Republicans who hope Obama fails. Not very patriotic, if you ask me. No one in radio benefits from CC failing. Including their competitors. If the biggest can't succeed, it makes it difficult for everyone below them, including the mom & pops. And consider that even if the Mays family is "tossed out," as you suggest, it's not like they will face any personal financial consequences. Certainly not to the degree that anyone else will. So if you're seeking justice, the failure of CC is not going to get you any. Regardless of your relationship with them.

My only relationship with Clear Channel is kicking their asses from across the street--years before their ascent to notoriety.

But that perspective, knowing the players from the early days, allowed me to watch them game the system from much closer range than most in the industry. And it was the worst of inside politics, radio's version of Enron--rewriting laws and regulations for self-benefit.

Seeing these crooks get their comeuppance is not a reflection on small radio companies. It merely rids this industry of its worst human beings.

It's a worthy goal.

 

[gr8oldies]

Many of those regional companies were owned by insurance and tire companies. I don't see insurance and tire companies buying them back, let alone hiring DJs by the truckload. A CC bankruptcy will make things a hell of a lot worse before they can ever get better.

 

[TheBigA]

We apparently have 2 different definitions of mom & pop.

You're obviously referring to those crapholes run by some guy and his wife.

Umm, isn't that what mom & pop means? A guy and his wife.

I've told this story before. I worked for one of those, and the wife was cheating on the GM with the chief engineer. One day the engineer came in and shot the GM. I bet that never happened at a CC station.

 

[TheBigA]

Seeing these crooks get their comeuppance is not a reflection on small radio companies. It merely rids this industry of its worst human beings.

It's a worthy goal.

That depends. The enemy you know is better than the enemy you don't.

I've already had experiences with the next generation of station owners...the guys CC sold their stations to. And I can tell you from personal experience that a day will come when people will wish for the Mays types to return. The fact that people were actually happy about Zell's return two years ago (before he went bankrupt) is proof that it's all relative.

 

[amfmxm]

That depends. The enemy you know is better than the enemy you don't.

I've already had experiences with the next generation of station owners...the guys CC sold their stations to. And I can tell you from personal experience that a day will come when people will wish for the Mays types to return. The fact that people were actually happy about Zell's return two years ago (before he went bankrupt) is proof that it's all relative.

Oh, jeez. Yes, there are terrible people all through society--including the radio industry. And there are good people. With luck, we work for the good ones.

But the Clear Channel story is one of a handful of bad guys--greedy, unethical people--who, like Enron's Ken Lay, used their position & influence (and probably cash, too) to change laws intended to protect the public (that's us, including other broadcasters) to gain competitive advantage and pillage an entire industry.

I've been part of a number of several very good, ethical, successful radio companies--including the present--and can attest that all successors of CC are not destined to be assholes.

 

[TheBigA]

But the Clear Channel story is one of a handful of bad guys--greedy, unethical people--who, like Enron's Ken Lay, used their position & influence (and probably cash, too) to change laws intended to protect the public (that's us, including other broadcasters) to gain competitive advantage and pillage an entire industry.

I think you're believing what you read, rather than what actually happened. I was on Cap Hill during the mid-90s, and most of what I read in the books about CC's efforts regarding the law is pure fiction.

 

[amfmxm]

But the Clear Channel story is one of a handful of bad guys--greedy, unethical people--who, like Enron's Ken Lay, used their position & influence (and probably cash, too) to change laws intended to protect the public (that's us, including other broadcasters) to gain competitive advantage and pillage an entire industry.

I think you're believing what you read, rather than what actually happened. I was on Cap Hill during the mid-90s, and most of what I read in the books about CC's efforts regarding the law is pure fiction.

Although I did not personally see the legislation being written, I do have more than "book" knowledge of the situation. Lowry & Tom (Hicks) were both instrumental in this ploy.

If you are suggesting that they were merely the fortunate beneficiaries of incredible coincidence, you are being extraordinarily naive.

BTW, I also understand that one of the reasons (among many) that these guys have avoided legal action for their roles in the trashing of the radio industry is that anyone accusing them of illegal activities will be taking on the best lawyers money can buy. I'm certainly not prepared to do so. And within the ranks of corporate shenanigans, the rape of radio isn't even near the top--so don't expect federal prosecutors to line up in San Antonio anytime soon.

So, if "justice" is to be served, it will probably be at the hands of their investors, instead. Should be fun to watch.

 

[TheBigA]

Although I did not personally see the legislation being written, I do have more than "book" knowledge of the situation. Lowry & Tom (Hicks) were both instrumental in this ploy.

No one did anything they didn't want to do. That includes the Congress and the FCC. If you remember the context of the time, AM radio was dying, and a lot of the biggest and traditional founding owners of radio, such as NBC, GE, and Westinghouse, were getting out of radio. The FCC had already increased the maximum number of stations a company could own twice, and was ready to do it again. It was obvious to anyone that the FCC had over-expanded the number of licenses, and they needed to change the ownership limits to adjust for that. Those are the facts.

If you are suggesting that they were merely the fortunate beneficiaries of incredible coincidence, you are being extraordinarily naive.

Of course not, but as I said, no one was forced into doing what they did. They all were very willing participants. Someone needed to buy all the failing AMs, someone needed to invest in older radio infrastructure, and someone needed to replace the large owners who were getting out of radio. It could have been ABC, but they were also in trouble. Capital Cities had over-expanded. They were looking to sell. Sillerman could have been king if his goal was to hold on to stations. But he was just a trader. The story is far more complicated than a handful of greedy Texans bribed everyone to get what they wanted, and then fired everyone.

The bigger picture is that the government is famous for hiring convenient people to clean a mess, like Saddam Hussein, and then throw him under a bus when his value is done. I'm watching to see who the white knight will be in radio. I promise you that someone will pop up when the opportunity presents itself. And the motivation will be very similar to what it was in 1994.

 

[SirRoxalot]

Congress didn't hold a gun to Lowry Mays' head and force him to overpay for radio stations.

The idea that "there are too many radio stations" is a fallacy. Any radio station can be profitable IF it's purchased at a price that reflects its ability to serve an audience. The reality is that the buying frenzy of the consolidators pushed the value of radio stations well beyond what they could reasonably repay. The consolidators aren't in trouble because of the lack of production by most of their radio stations. The consolidators are in trouble because of their debt load.

Radio remains extraordinarily profitable compared to many, many other businesses. It's not at all unusual for stations to net 35% profit or more. Compare that to the profit margin of a major retailer, which hovers around 2%. You've got stations making 40% profit being raped by consolidators because they're over their head on theier later acquisitions who can't make their nut because they're "only" cranking out 30% profit.

Radio stations values are falling into what many people consider to be the "reasonable" range - 3 to 6 time cash flow. That's a HUGE difference from the 12 to 15 times cash flow (NOT profit!) paid by the consolidators. The consolidators planned on unlimited growth in the medium. Citadel, for heavens sake, STILL followed that formula well after the challenges of the Internet and the economy were pretty well established.

A lot of owners sold to the consolidators because they didn't see any way that they could possibly make anywhere near as much profit from operating their facilities that they from banking the mountain of cash that they were being offered for their properties. Well, as it turned out, all the "synergies" in the world couldn't create enough "efficiencies of scale" to make the stations profitable at the price that the consolidators paid.

Those are the chickens that are coming home to roost now. There are plenty of good operators out there who are doing just fine in spite of the economy, and who are maintaining high levels of programming and service to the community. They're the guys who either didn't get caught up in the buying frenzy of the last 15 years, or bought stations with their own money instead of the bank's.

The government doesn't appear to be looking for a white knight. In this case, it looks like the market is going to be allowed to correct itself. There will be bankruptcies. There will be buyers for bankrupt properties. If we're lucky, reduced debt loads will allow broadcasters to actually compete for listeners - which will require TALENT. Right now, consolidator radio doesn't give a rat's ass about competition. All they care about is survival of the fat salaries and perks in the corporate office - and they don't care who they throw in front of the bus to hang onto their paycheck.

 

[davideduardo]

The idea that "there are too many radio stations" is a fallacy. Any radio station can be profitable IF it's purchased at a price that reflects its ability to serve an audience.

Then, if it is a fallacy that there are too many stations, why, from the 50's to the 80's, when the FCC mandated financial reports be filed annualy, were half of all US Radio stations unprofitable?

In many cases, stations were traded, and became profitable, while others, affected by improved competitors, went in the red.

Of coourse, some unprofitable stations were owner operator propositions where the profit became the owner's salary, but such situations indicate that the owner had guaranteed employment, but no return on the investment.

By the 90's, there was no FCC reporting, but various of the big auditing firms did blind surveys and found the same thing... and of course Docket 80-90 made many more markets unprofitable, with lots of them showing higher expenses as a market than total billings in the market.

Even stations built from scratch with original licenses were often unprofitable.

The reality is that the buying frenzy of the consolidators pushed the value of radio stations well beyond what they could reasonably repay.

Changes in the economy did this. Paying 10 to 12 times cash flow gives an ROI of 8% to 10%, better than any stock or savings account, and better than anything save junk bonds and REITs at the time. Even 14 to 15 time multiples looked good based on leading BCF. And for a consolidator, the cluster savings and synergy justified 16 to 18 time multiples at times. The ROI was good, until the economy cracked open.

The consolidators aren't in trouble because of the lack of production by most of their radio stations. The consolidators are in trouble because of their debt load.

No, they are in trouble because the market, the economy, advertising are all off by double digits.

 

[TheBigA]

Congress didn't hold a gun to Lowry Mays' head and force him to overpay for radio stations.

You and I have gone over this before. CC paid the going rate for these stations AT THE TIME. Prices for big market FMs were high, but they had been bid up year after year in the 1980s and into the early 90s. If you read the coverage of the sales in Broadcasting Magazine, no one quoted in the stories, from financial analysts to competing broadcasters, felt CC was overpaying. CC was selected as among the best-run companies in the US by Forbes and the Wall Street Journal. They don't give those awards to companies that overpay for things. If you were one of the owners who dealt with CC, you wouldn't feel they were overpaying for anything.

Congress forced CC to buy failing AM stations as part of the groups. They couldn't simply buy successful FM stations. The politicians needed someone to keep AM radio alive, and they required these companies to buy a number of AM stations, and they were also required to hold them for a period of time. Now you may consider that deal "overpaying," but that's what Congress mandated. Congress also controlled the amount of money a group could make in a market, and the percentage of audience they could attain. So it wasn't all in favor of the broadcasters.

 

[TheBigA]

The government doesn't appear to be looking for a white knight.

Watch what they're doing with the financial companies, the banks, and the auto companies. Those are the higher priorities right now. At some point, this situation will cross their desk. There won't be any baleouts. But these licenses are government property, and they are interested in what's going on.

 

[SirRoxalot]

So, the consolidators didn't overpay, "synergies" and "efficiencies of scale" worked, and nobody could anticipate that there might possibly be a recession sometime in the next 20 years. Have I got that right?

Economic voodoo brought them to this point. They're just mad that they didn't get out at the top of the market, and now it's too late. There ain't no sucker willing to buy their properties for what they owe on them - let alone at a profit. Their "economies of scale" are not standing up well to competition from other media, and the recession accelerated the process that was already established before the economy tanked. Their strong suit was market manipulation, not station operation, and their lack of expertise shows up more with every corporate decision shoved down local management's throat.

You two can keep drinking and dispensing the kool-aid, but there are fewer and fewer people drinking it - be they shareholders, investors, employees, or ex-employees. The results are not favorable to your view of the industry.