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If we knew then what we know now...
- Thread starter jerry367
- Start date
SirRoxalot said:
None. Why would anyone invest in a station, and then lose money on purpose? It's better to make money, pay some of the profits as taxes, and stay ahead on the investment.
Not many. While many sole proprietorships might pay any profits to the owner as salary (since in those cases the owner runs the place anyway) that is to avoid double taxation... and the pay sucks. A car, some restaurant trade, a plumbing trade, but wages commensurate with being in a market of 12,000. That kind of station is guaranteed employment, not a way to be rich.
None.
Even I did that when I owned a cluster of 4 AM and 5 FM back in the 60's. But the cluster made money.
Even the FCC financial reports, printed every year in Broadcasting Magazine, showed around half of all stations to be not profitable back to the late 50's.
David: I have great respect for you and your knowledge of the industry. But you have dug your heels in on this topic and have become just plain bone-headed in rewriting the history and finances of the last 50 years of broadcasting.
I get amused at the political scene today where my Republican friends sing this one-note song: taxes are too high, taxes are too high. I remember the days when income taxes were 70% of income and worked in accounting during some of those years. I have first hand knowledge of decisions made to move income and expenses around so that business entities would show little or no profit, or even loses. I have seen the situation where someone would purchase a station that was renting the property from another owner. The new owner would buy the station. His children or the children's trust fund would buy the real estate from the person that owned that. For tax purposes that made it an arm's length deal. I can assure you that station, for tax purposes, showed no profit. The children in a low tax bracket made really good money. So when the reports went to the FCC and then ended up in the Broadcasting Yearbook, a very lucrative station ended up as one of those "not making a profit." I have been involved the accounting for car dealerships and medical facilities that play the same tax game.
We used to have a lot of proprietorships, a lot of partnerships and a lot of Sub-chapter S corporations and you can NEVER trust the "books" at face value on those kinds of enterprises. Now that we have standard corporations (for tax purposes), and publicly traded companies subject to Sarbanes-Oxley Federal rules, those accounting figures are a bit more trustworthy.
You know it hasn't been too many years ago there was a nasty lawsuit where a number of Walmart stockholders filed a lawsuit claiming the Walton family interests owned a lot of the real estate and buildings which were rented to the Walmart Corporation to operate stores. The basis of the lawsuit was that the leases were enriching the Walton family at the expense of rank and file stockholders.
There's a lot of ways to skin the cat..... but any way you do it..... the cat ain't gonna like it.
David: you are trying to get us to buy into your see no evil, hear no evil, do no evil world. Some of us have lived in the world where from time to time we went and consulted a personal lawyer to make sure what we were helping do was NOT going to possibly put us in Federal prison for tax evasion.
I get amused at the political scene today where my Republican friends sing this one-note song: taxes are too high, taxes are too high. I remember the days when income taxes were 70% of income and worked in accounting during some of those years. I have first hand knowledge of decisions made to move income and expenses around so that business entities would show little or no profit, or even loses. I have seen the situation where someone would purchase a station that was renting the property from another owner. The new owner would buy the station. His children or the children's trust fund would buy the real estate from the person that owned that. For tax purposes that made it an arm's length deal. I can assure you that station, for tax purposes, showed no profit. The children in a low tax bracket made really good money. So when the reports went to the FCC and then ended up in the Broadcasting Yearbook, a very lucrative station ended up as one of those "not making a profit." I have been involved the accounting for car dealerships and medical facilities that play the same tax game.
We used to have a lot of proprietorships, a lot of partnerships and a lot of Sub-chapter S corporations and you can NEVER trust the "books" at face value on those kinds of enterprises. Now that we have standard corporations (for tax purposes), and publicly traded companies subject to Sarbanes-Oxley Federal rules, those accounting figures are a bit more trustworthy.
You know it hasn't been too many years ago there was a nasty lawsuit where a number of Walmart stockholders filed a lawsuit claiming the Walton family interests owned a lot of the real estate and buildings which were rented to the Walmart Corporation to operate stores. The basis of the lawsuit was that the leases were enriching the Walton family at the expense of rank and file stockholders.
There's a lot of ways to skin the cat..... but any way you do it..... the cat ain't gonna like it.
David: you are trying to get us to buy into your see no evil, hear no evil, do no evil world. Some of us have lived in the world where from time to time we went and consulted a personal lawyer to make sure what we were helping do was NOT going to possibly put us in Federal prison for tax evasion.
Goat Rodeo Cowboy said:
I may perhaps be less cynical than you are on this subject. Yes, there are tax cheats. But in the last I-don't-know-how-many-decades the cross checks of Social Security numbers, Federal emplyeer numbers and company taxpayer numbers have made tax cheating by all but underground economy workers highly subject to discovery. Are there crooks, drug dealers and tax cheats? Yep. Are there some licensees who are perverts and undesirables? Sure... but the immense and almost total majority are not.
And never have been. Americans, in general, understand the rule of law and are fundamentally decent. Same goes for most American radio stations.
For a while in the 80's and early 90's, the company I helped manage could buy no more stations in its home jurisdiction, so we looked at perhaps a hundred or so properties in markets from Lake CIty, FL, to Mobile, Albany, Orlando, Pensacola, Dothan, etc. We bought in Lake City (AM and FM) and Tallahassee (AM & FM) and not one of the stations we looked at was making any money and some, in fact, were exaggerating receivables and minimizing write-offs to seem to be closer to profitability. Yes, we audited the ones we had the most interest in, too.
The bad guys from Don Burden to the Reverend Norris who violate laws have "gotten theirs" eventually.
amfmxm said:
First of all, I don't know that anyone is "defending" it. It's a fact of life, and it's the law. Attacking it or complaining about it won't change the fact. Second of all, as I said, there are several other decisions that were far worse. The industry was consolidating in the 80s. The only time I was ever fired was in the 80s, and it was because of consolidation.
amfmxm said:
I'm still in radio...never worked in any other field. My take is that I never take my job for granted. Every day is an audition. Nothing is permanent, nothing is guaranteed. I can't save the world for everyone else. They have to fight their battle their own way. What "I want," doesn't matter. We work in a field that is regulated by the government, as a service to the audience, and provide a value to advertisers. Then you have to consider the boss. What I want doesn't factor into the mix. I work for a lot of other people. What THEY want is important.
amfmxm said:
I don't know about that. Once again, it's a fact of life. Unless you're self employed, you probably work for some kind of company. That company provides a lot more services related to your non-work life (such as health and life insurance) than was ever available before the depression. If you study what this country was life then, we were all on our own. If you lost your job, there was no unemployment compensation. If you got old, there was no social security. If you got sick, there was no medical insurance. No safety net.
During the same hundred years you talk about with increasing expansion of big business, we also have an expansion of big government. You shouldn't talk about one without talking about the other. And no matter how big a business gets, the government will always be bigger. If you think Clear Channel is big and bureaucratic, imagine if radio was government-owned. We're at a point where that is really the only choice.
It's not about millionaires or billionaires, unless you aspire to be part of that rarified air. It's about basic survival. If you're on your own, without the support of some larger entity, you're going to get runned over. That's just how it is. in the early 90s, radio was getting runned over. It had been runned over by bad regulation. It had been hurt by new music outlets like MTV. Record labels had already begun cutting back on radio promotion. The increased number of radio stations had really hurt market share. And AM radio had been declared dead. Something needed to be done.
Regarding concentration of media, if there really was an oligopoly or monopoly taking place, why didn't the government do anything about it? Why hasn't the government, under either Democratic or Republican leadership, even considered it? Why haven't watchdog groups taken media companies to court for anti-trust? I'm just asking? If you're going to make accusations, why hasn't anyone done anything besides ranted or complained on computer message boards?
TheBigA said:
Yes, we're all thankful for those "socialist" government programs like unemployment insurance & social security--and Medicare--that provide a safety net. Prior to FDR, the unlucky were either forced to rely on extended family or die in the streets. Really.
But what's this about radio being at a point where government-owned radio is the only choice? That's a little dramatic, don't you think? (At various times over the past several years, you may recall, I've cracked out the flares to remind everyone that--no--radio is not dead... or even close). I certainly don't see anything even as tame as the BBC on the American radio horizon.
Without making any political accusations, can we all agree that deregulation of all American industry took off in the Reagan administration? President Reagan and the GOP of that era were champions of de-reg and made it a policy priority. Reagan and the first President Bush steered the de-reg ship from '81 through '92... followed by a business-friendly Democrat (Clinton) from '93 through 2000... followed by the second President Bush--until just last year. So from '81 through '08--27 years--we've been in a political atmosphere driven by folks who believed in not regulating--and therefore not inclined toward any kind of anti-trust action. Now? Hard to say. The current president is a policy centrist--not that much different from Clinton in that way. I'd be shocked to see any sort of anti-trust activity under the current administration.
More later... got work to do.
BTW, as testy as we sometimes get, these are good, provocative conversations. I appreciate everyone's input.
DavidEduardo said:
Pardon me, David. I must have written poorly again. The major thrust of what I wrote was that during the years aggregate profit and loss statistics for stations were published by the FCC, the tax rates in this country where quite high and many broadcasters engaged LEGAL AND ETHICAL tax avoidance techniques. Some business people were so obsessed with tax avoidance that we who implemented some of the techniques and kept the books had to worry whether we could trust to moral compass of our boss.
You latched onto that last part and totally ignored the first part. PRE CONSOLIDATION radio had much more of a mom-and-pop atmosphere.... even in some of the big name radio empires. Post consolidation radio has much more regimentation and efforts to accomplish decision making in a more scientific way. Isn't it interesting that while we are having this debate on whether we would have a different kind of radio today IF OUR LEADERS had recognized earlier where we were heading..... Toyota, the GOLD STANDARD for modern scientific management technology apparently has become so self-centered it has lost the ability to do what it is famous for: recognize problems on the production line and correct them before the product rolls out the door.
May I sum up the radio dilemma in a rather blunt and crude way? Maybe American radio management and ownership has an out-of-control accelerator device lodged somewhere in their lower intestine, and radio is in denial that any problem exists. Thus there is no logical energy being expended to solve the problem... since the problem doesn't exist!
You know what, instead of arguing, let’s just agree the ’96 bill was a wonderful, well promoted piece of legislation. And agree that the way it came down is as follows. . .
As the ’96 Bill was being formulated the Senators, on their own, decided that because so many radio stations were losing money that the best course of action would be to have a hand full people buy up most of the stations.
With plan in hand, government wisely turned to the NAB for their opinion and the NAB thought that the best course of action was to ask the broadcasters for their view. “No, need to do that,” the government said, “it’s all there in the congressional records, and if that’s not enough we’ll send Al over to the Letterman show and mention it.” How could the NAB argue with that? That is why the ’95 NAB convention went on without hardly a reference of the ’96 bill.
Shortly afterward the ’96 Bill passed, but there was one big problem. No buyers! Well gosh darn it, there was only one thing to do. . . go knock on Lowery Mays’ door and beg him to start buying up stations. Lowery was totally surprised by this request, and reluctant, but eventually agreed. To make sure the owners would sell, especially those that had been making money for years, Lowery thought that greatly overpaying for the stations would be a great idea. In the spirit of helping out, a few others joined Lowery in his effort to serve the industry. A happy ending followed, the ma n’ pa operators are now retired on Cape Cod.
That’s exactly what happened, I know it to be true, because that what the radio pros are saying right here on this board.
As the ’96 Bill was being formulated the Senators, on their own, decided that because so many radio stations were losing money that the best course of action would be to have a hand full people buy up most of the stations.
With plan in hand, government wisely turned to the NAB for their opinion and the NAB thought that the best course of action was to ask the broadcasters for their view. “No, need to do that,” the government said, “it’s all there in the congressional records, and if that’s not enough we’ll send Al over to the Letterman show and mention it.” How could the NAB argue with that? That is why the ’95 NAB convention went on without hardly a reference of the ’96 bill.
Shortly afterward the ’96 Bill passed, but there was one big problem. No buyers! Well gosh darn it, there was only one thing to do. . . go knock on Lowery Mays’ door and beg him to start buying up stations. Lowery was totally surprised by this request, and reluctant, but eventually agreed. To make sure the owners would sell, especially those that had been making money for years, Lowery thought that greatly overpaying for the stations would be a great idea. In the spirit of helping out, a few others joined Lowery in his effort to serve the industry. A happy ending followed, the ma n’ pa operators are now retired on Cape Cod.
That’s exactly what happened, I know it to be true, because that what the radio pros are saying right here on this board.
Fran said:
LOL!!! Hilarious. Yeah, Mays & Hicks came in on white stallions and saved the radio biz!
Couple more things.
We tend to look at radio as though it is isolated from the rest of American business--and from the rest of our economy and our society--but that is not the case.
Except during rare periods of time when economic factors are stacked in the favor of particular industries, most business categories have both good performers and bad performers.
Even in radio's best times there were licensees who were complete and total screw-ups. In the seventies I personally knew a gentleman who owned two FM licenses purchased with a fortune he had made in another industry (as a civil engineer) who drank daily from dawn til passing-out time. In the eighties I personally knew a gentleman who purchased a group of stations with money from his family's fortune (bankers) who always spent more to run his stations than they brought in--always. Money was no object--he was in it for the game. And in the nineties I personally knew a couple of guys--a renowned programmer and a renowned sales star--who bought a group of stations but who had never learned the intricacies of balancing a checkbook--and thus were always in financial chaos.
All of us have watched car dealers (often, sons of smart car dealers) piss away their dealerships. All of us have watched hundreds/thousands of "restauranteurs" (everyone thinks they can run a restaurant) come and go and come and go.
When the NAB ran to the FCC wailing about all the radio licensees losing money it was a negotiating tactic. And it worked.
Is radio in trouble, now? Well, my cluster finished 2009 with a 40 percent profit margin on sales that have held steady during the recession--after growing about 30 percent through the decade. And through the end of February we're up 15 percent in sales over '09. Our entire company--which has stations in both healthy markets and not-so-healthy markets--finished down a few percent in sales and just slightly below our 40 percent margin in cash flow. Nobody is going to need to throw us a benefit. And we're hardly alone. But companies like ours never hit the headlines.
There are good operators in radio today, and there are poor operators in radio today. Just like always.
amfmxm said:
Bravo! And may your tribe increase.
I know this person. I know the market where he/she toils. I have looked up the markets where the company operates.
All of us who are hung-up on radio should have the good fortune to walk where amfmxm walks.
Well, thanks, GRC! Though I do appreciate your honoring my anonymity in this forum.
For the record, we're deep in the woods in small towns and small cities--mostly with high unemployment and too many competitors. We work hard, provide full-service radio, and try to spend wisely. Oddly enough, it works.
Unless someone comes up with some other new and different ideas on this subject, I'll probably move on to the next interesting thread. But before bowing out, let me share a final thought on "If we knew then what we know now..."
Through the sixties, seventies and eighties in radio, I was aware that the competitiveness between radio stations necessitated by the federal ownership limitations forced everyone to be the best that they could be. It made us all better. One of my early mentors had forced me to memorize this gem:
"A competitor is someone who spends time, effort and money thinking up better, more efficient and more effective ways to do what I do. A strong competitor is more valuable than a friend. A friend may be too nice to tell us how to improve, but a great competitor will force us to improve."
Yeah, I still remember it, 35 years later.
Consolidation took away radio's intra-industry competitiveness. We lost many, many great radio competitors. It has not made us better.
Last word: laws were changed to allow consolidation, and they can be changed to reverse it. It needs to be done.
For the record, we're deep in the woods in small towns and small cities--mostly with high unemployment and too many competitors. We work hard, provide full-service radio, and try to spend wisely. Oddly enough, it works.
Unless someone comes up with some other new and different ideas on this subject, I'll probably move on to the next interesting thread. But before bowing out, let me share a final thought on "If we knew then what we know now..."
Through the sixties, seventies and eighties in radio, I was aware that the competitiveness between radio stations necessitated by the federal ownership limitations forced everyone to be the best that they could be. It made us all better. One of my early mentors had forced me to memorize this gem:
"A competitor is someone who spends time, effort and money thinking up better, more efficient and more effective ways to do what I do. A strong competitor is more valuable than a friend. A friend may be too nice to tell us how to improve, but a great competitor will force us to improve."
Yeah, I still remember it, 35 years later.
Consolidation took away radio's intra-industry competitiveness. We lost many, many great radio competitors. It has not made us better.
Last word: laws were changed to allow consolidation, and they can be changed to reverse it. It needs to be done.
The truth is probably somewhere between Mays and Co riding in on white stallions and Mays and co sitting in a dark, smoke-filled room buying off the FCC, the DOJ, the NAB, the RAB, the ASPCA, the President, Congress and the Supreme Court in a single minded pursuit to FIRE EVERY DJ IN AMERICA!
I can understand the sentiment to roll back the clock on consolodation but the practicalities of removing these licenses from the current owners and reassigning them to "more deserving" owners...well by the time the court cases are done we'll no longer care.
The consensus is that radio is better off being owned by a combination of sole proprietors and large companies that have radio as a tiny part of a large corporation whose main focus is in another line of work, such as insurance, banking or tires.
How you would interest Progressive Insurance to buy 7 radio stations in 7 different cities I don't know. Would we all still be jocking if '96 never happened? I'm thinking that if the 9 FM stations that have truly viable signals (ignoring AM and sending the low powered rimshots back to the hinterlands) were separately owned, and radio's share of ad revenue was divided by 9 companies instead of 3, would they all really have 24/7 live and local staffs? My guess is no. I'd also venture to guess that 3 or 4 stations would dominate, which would bring us to where we started. How many duplicate AC and Country stations would we have?
I can understand the sentiment to roll back the clock on consolodation but the practicalities of removing these licenses from the current owners and reassigning them to "more deserving" owners...well by the time the court cases are done we'll no longer care.
The consensus is that radio is better off being owned by a combination of sole proprietors and large companies that have radio as a tiny part of a large corporation whose main focus is in another line of work, such as insurance, banking or tires.
How you would interest Progressive Insurance to buy 7 radio stations in 7 different cities I don't know. Would we all still be jocking if '96 never happened? I'm thinking that if the 9 FM stations that have truly viable signals (ignoring AM and sending the low powered rimshots back to the hinterlands) were separately owned, and radio's share of ad revenue was divided by 9 companies instead of 3, would they all really have 24/7 live and local staffs? My guess is no. I'd also venture to guess that 3 or 4 stations would dominate, which would bring us to where we started. How many duplicate AC and Country stations would we have?
amfmxm said:
I don't think so. We're at a point where about 10% of the radio licenses in this country are on the block. Take the Clear Channel Aloha Trust stations, add a bunch that Citadel and CBS want to unload, and the hundreds of non-corporate stations available, and it's at least 1500. And no one is running to but at any price. Multiples of 3 and 4. The stations are still on the market. Hundreds of AM stations just going dark. The kinds of companies that once owned radio are completely out of it, with no interest of returning.
There are two proposals being discussed in regulatory circles. One is to allow foreign ownership of the airwaves. The other is to allow federal ownership. Current laws allow a small percentage of foreign ownership. They also allow state and local governments to own broadcasting. But the federal government is prevented. However, it wouldn't take much to change either.
amfmxm said:
All of that would have been fine, had the FCC not tripled the number of radio stations, and then stopped regulating.
amfmxm said:
There is no interest in the part of the government to do that. They don't have the money or the staff to regulate, and there aren't enough people willing to spend non-corporate dollars on radio. The easiest way to drive out investment is impose new regulations. You can't bring back the past with more regulations. You can't regulate radio to be better. That's not how it works. The government itself isn't doing a better job, so it's in no position to expect better out of profit-making companies. It doesn't understand competition, as demonstrated with the cable TV laws. You need to live with the laws as they are, because I have no reason to expect them to change for the better. Not with Congress the way it is.
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