Layoffs

[djdan]

Remember when at the end of the year on radio boards across the country the conversation was about which station would change format and who deserved to be fired? As this year winds down the main topic is who is lucky enough to have a job. Stations arent changing formats they are just turning off and simulcasting. Our business is not alone in cutting, but we seem to be making cuts without clear thought.

I just returned from an East Coast sales trip to NY, Boston and Chicago. Every group is like the CBS Group here. The main criteria for letting an employee go is their salary. John Lander is on of the legends in Boston and in radio. His contract is up and he is gone. Same for almost every major talent with the bad luck of having 2009 as their contract renewal date. Any talent with a high salary is doomed, like Slaton here. The sad truth is this: ratings don't matter when there is no demand.

All industries are cutting back, but radio seems to be doing it without careful thought. Most companies are trying to keep best assets in talent, sales and support and ask them to do more. Eliminate secondary talent, support and yes live without promotion dollars this year. NOT RADIO. I do find it ironic that CBS, Clear Channel and Entercom have eliminated advertising budgets for 2009. What message does that send to our advertisers when we decide not to promote?

In Seattle the stations that haven't cut back on talent or promotion seem to be WARM, KCMS, KQMV, KPLZ, KWJZ and some others I may have missed. All are private or smaller companies. I am sure these stations are hurting too, but when you are smaller you seem to be able to adjust. You corporate officers at least know the local talent by name. I get the sense that for CBS, Clear Channel, Citadel, Entercom, Cumulus and others the cuts are from NY and no real thought is made about how it affects the local operation. it is a salary on a piece of paper.

Sorry to ramble, it was a late flight home. If you think 2009 will be better, think again. 33% of national/regional dollars will not be back next year in radio. Gone.

 

[LITTLEBOYBLUE]

CBS/SEA also cut their NSM ... who only recently took that job because they were cutting the LSM for KISS. I am told CBS game plan is to maybe centralize the National Sales functions ... maybe keeping coordinator positions at the station to implement & manage promotions (less expensive than a sales manager at each cluster).

We may be witnessing the days when RADIO "jumped the shark".

 

[djdan]

I come from the sales side and I can tell you centralizing sales in another market won't work. It's been tried. CBS is making a dollars decision. If they are handling Seattle national/regional out of Portland or SF they WILL lose business. It is one thing to handle Moses Lake national/regional out of Seattle. Very poor decision to handle national, especially for the cluster that bills the most national business in town. Cutting Slaton, Cutting the national sales manager? Even the dollars saved don't make sense.

A question I asked on another thread: what is your new p-1, P-2, P-3 station as talent disappears for automation of simulcast. In afternoons KZOK just went from my primary station to a fourth button. KMTT, KJR, KPLZ moved up and maybe KISW. (A quick traffic news hit on KIRO or KOMO as needed)

 

[TVradioguru]

Someone pointed out it's difficult times for most, but it's hard to see tenured and talented people working in a already shrinking industry lose their jobs. I don't envy the GM or PD that had no choice but make cuts only because of salary size. From a mean-ol' corporate level, I believe the decision and commitment should be given to the local station GM to either cut expenses as they see fit, or come up with a way to make more revenue to compensate for the losses. The GM is considered captain of the ship, then let them take the responsibility to make the hard decisions in their organization too.

In my view, the fair way is to give talent and workers in the station options before just making cuts. As an example, I believe the option of temporary cutting hours or salary was given to some of the staff at KJR, before requiring RIF. Certainly cuts may still be necessary if things get even worse, but at least give the employees the respect and courtesy they deserve, by allowing them to participate in the process, albeit painful.

I went through an example of good leadership back in a previous recession many years ago, granted nowhere as deep as this, where an all-staff meeting was called and a vote taken; Everyone was told that either all in management and higher paid air talent would need to take a 30% temporary cut in pay, while others would need to take a 15% pay-cut until things got better. During the meeting, the GM showed on a white board how the number was determined, and how the participation would eliminate the chances of a deep RIF. Certainly there were many in the room angry, and a few chose to quit, (which in my view was stupid), but most were grateful to the GM in about six months when their salaries returned, for not taking the easy way out by just making quick cuts.

 

[TakeItFromMe]

I agree ;D
Corporate dudes need to let the local GM do their thing but that ain't what's happening at the bigger companies which is why the Sandusky, Fisher, Crista, Bonneville cuts are not as deep :-\
I'll give ya another idea. Several years ago the high paid morning talent and management were approached with taking a 15% pay cut to save the rest of the staff's jobs. Voluntary deal and all but one did it One of our staffers here said a local morning show in Seattle did the same thing a few years ago to save the rest of the staff's jobs. Couldn't CBS ask their managers, morning hosts to take a cut and keep good peeps in the building til things got better. Maybe extend contracts in exchange for lower salaries now ??? I saw it happen in Dallas and sounds like a show here in Seattle did the same thing. Come dudes let local managers decide and let;'s get creativeeeeee 8)

 

[jupiter2]

The "corporate dudes" at the bigger companies are operating in the only way they can. Here's how it works:

Radio is still very profitable, but much of that profit goes to servicing debt. As in the stock market, when debt payments become due and cash flow drops, assets have to be dumped. In this case, the assets are people. Sadly. I second everyone here who points out that local management knows how to do a good job, and would if they could.

It is wishful thinking that "volunteering" to chip in together and help these corporate dudes pay their debt that was used to make them all rich will result in a return to the way it was after things "get better".

It would be a kind of corporate "bail out". Do you really trust these corporations to remember that they owe you?

 

[Bongwater]

The "corporate dudes" at the bigger companies are operating in the only way they can. Here's how it works:

Radio is still very profitable, but much of that profit goes to servicing debt. As in the stock market, when debt payments become due and cash flow drops, assets have to be dumped. In this case, the assets are people. Sadly. I second everyone here who points out that local management knows how to do a good job, and would if they could.

It is wishful thinking that "volunteering" to chip in together and help these corporate dudes pay their debt that was used to make them all rich will result in a return to the way it was after things "get better".

It would be a kind of corporate "bail out". Do you really trust these corporations to remember that they owe you?

You hit the nail. But in the same breath, many of the same people directly responsible for the bad debt and bad management from the top are still calling the shots.

It's their asses that need to be booted out, not our best LOCAL talent....

 

[fremont]

Hmmmm.......

Why don't one of you radio greybeards buy a station, get Slaton, Mike West, Norm Gregory, Maynard, etc etc and do what is essentially an ESOP (employee ownership)? I hear a lot of complaining about the Corporate Man keeping you down.....well, then, put your money where your mouth is and tell "The Talent" that they get paid proportionally when the ad revenue rolls in. If ratings, great voices and their legends don't amount to ad revenues, then tough.

If the radio biz is as bad as what you seem to be saying, I can't imagine that a few of the biggies not wanting to lay off a channel or two.

PS I'd listen to this station!

 

[FMSteve]

Oh my god, this is a top 13 market and you're proposing employees and ex-jocks buy a station? What planet do you come from? Where do you come up with 10's of millions of dollars without the access of private equity from Wall Street? Sure there's somebody out there, but the LTV (loan-to-value) is going to be 40% and no more. Sellers' may carry back equity for the remainder, in the form of a promissory note and deed of trust, but the problem with that idea is that the sellers' owe too much and have no equity of their own!

Yes, leverage was the name of the game the last 5 years and now everybody is getting spanked. I've now heard two stories of payroll checks bouncing (non-radio) and now we're in a depression. Enjoy your Top Ramen tonight.

 

[fremont]

Sure there's somebody out there, but the LTV (loan-to-value) is going to be 40% and no more. Sellers' may carry back equity for the remainder, in the form of a promissory note and deed of trust, but the problem with that idea is that the sellers' owe too much and have no equity of their own!

All the owners are upside down on their investments but there's no opportunity to buy something?

Whatever.

 

[smedge2006]

All the owners are upside down on their investments but there's no opportunity to buy something? Whatever.

CBS reportedly had 50 stations on the bloc and decided not to sell them. That's apparently when the hatcheting began. CBS is apparently willing to empty out their radio stations in the vain hope that they might be worth more in a year or two.

 

[TVradioguru]

All the owners are upside down on their investments but there's no opportunity to buy something? Whatever.

CBS reportedly had 50 stations on the bloc and decided not to sell them. That's apparently when the hatcheting began. CBS is apparently willing to empty out their radio stations in the vain hope that they might be worth more in a year or two.

Those stations have been on the market for a while. The problem is with the bad economy, the stations have devalued well below their original purchase price. If you're a publicly traded company, you either aren't allowed to sell below the purchase value, or if you do the shareholders will rightfully sue. Unfortunately the only choice is to cut expenses to the bone, (and beyond), until things thaw out.

Obviously the other problem is major lending institutions that typically do broadcast deals, aren't lending at this time, if ever again, (Wachovia as an example). The banks aren't lending to Joe Citizen to buy a car, nor are they going to lend one hundred fifty million dollars to buy a radio station. Private equity won't do broadcast deals anymore because they're in the business of owning for two or three years then flipping the properties. As we've seen, stations aren't increasing in value anymore, so the PE model isn't valid.

The good news is... As more of these publicly traded broadcast companies go Chapter Eleven and are forced-to liquidate in the near future, timed when the banks start lending again, there will be some great deals out there for regional or local private companies to pick up broadcast properties.

 

[Grindlfan]

Hmmmm.......

Why don't one of you radio greybeards buy a station, get Slaton, Mike West, Norm Gregory, Maynard, etc etc and do what is essentially an ESOP (employee ownership)? I hear a lot of complaining about the Corporate Man keeping you down.....well, then, put your money where your mouth is and tell "The Talent" that they get paid proportionally when the ad revenue rolls in. If ratings, great voices and their legends don't amount to ad revenues, then tough.

If the radio biz is as bad as what you seem to be saying, I can't imagine that a few of the biggies not wanting to lay off a channel or two.

PS I'd listen to this station!

AMEN to that Fremont. I'd listen too. The local feel of radio is gone from this town and it has made it unlistenable. Damn Clear Channel, Bonneville et al.. all to hell.

 

[SeattleRadioPro]

Hmmmm.......

Why don't one of you radio greybeards buy a station, get Slaton, Mike West, Norm Gregory, Maynard, etc etc and do what is essentially an ESOP (employee ownership)? I hear a lot of complaining about the Corporate Man keeping you down.....well, then, put your money where your mouth is and tell "The Talent" that they get paid proportionally when the ad revenue rolls in. If ratings, great voices and their legends don't amount to ad revenues, then tough.

If the radio biz is as bad as what you seem to be saying, I can't imagine that a few of the biggies not wanting to lay off a channel or two.

PS I'd listen to this station!

AMEN to that Fremont. I'd listen too. The local feel of radio is gone from this town and it has made it unlistenable. Damn Clear Channel, Bonneville et al.. all to hell.

Nice thought but the "greybeards " probably couldn't get together enough $$$ to put a LPFM on the air - let alone buy a stick in market 13.

 

[fremont]

There seemed to be a guy who used to thumb his nose at the Corporate Radio Man in years past......Pat O'Day. Maybe one of you many former KJR alum could call him and ask whether it's possible? If he says "no way," then 'nuf said.

But, honestly, guys.....some of the comments around here about what isn't possible are simply not true. As a former colleague once told me: "Nothing motivates a man like a hanging at dawn." You'd be surprised what you'd sell assets for when you're in default on the debt and there's no prospect of refinancing it. The work-out groups from some of these lenders make The Sopranos look like choirboys.

 

[TVradioguru]

I could put something like that together! What's that? It would be a money loser, just as KYYX, and later KXRX was? Well then forget it!

 

[fremont]

I could put something like that together! What's that? It would be a money loser, just as KYYX, and later KXRX was? Well then forget it!

Please don't forget that I'm suggesting a new paradigm. Move as many expenses to a variable nature vs. a fixed cost. All main air personalities get paid based upon some metric like revenue or profit. Ratings mean nothing unless it transcends into higher ad revenues. Salespeople = pure commission. PD & GM....same as air personalities.

Create a meritocracy where low performers can be removed by their peers. Just like a law firm, etc. Committee structure. Create a limited partnership structure where nostalgic radio freaks like myself could buy in, leaving general partnership authority to you radio folks. Have a meet & greet where the air talent mingles with the commoners (i.e., limited partners). You don't think townies from Seattle would invest in a station with voiceovers from Pat O'Day & Beau Roberts? Get real. It'd be a smash, and the local advertisers would eat up the time.

 

[WKomm]

fremont - Pat O'Day? Are you serious? Without going into great detail and because I'm not prepared to post numbers and facts, many of us "graybeards" are well aware of how O'Day made his bones in Seattle radio. Let's just say much of what he did would get the immediate interest of a lot of governing authorities in today's world. Radio in the 60's & 70's was a whole different ballgame and Pat was a consumate player. He did not accomplished what he because he was a great DJ.

I'm sure there will be other opinions, of course. And I'm not judgin' - I'm just sayin' ...

 

[RockJazz]

Re: fremont's suggestion

I think an esop or another ownership setup strategy could be worth a look in this climate for a few folks.
It doesn't have to be 100% equity. It could start slow and increase when more talent joins and results are delivered. I would think Slaton might be able and wise to look into some of these angles and compare them against the conventional route at this point

 

[TVradioguru]

It doesn't work that way.. Let's say you wanted to put a group together to buy an existing Seattle FM station. For the sake of discussion, now let's say you were in negotiations with a broker working for CBS to buy 96.5. Since your group has nothing to swap in an arrangement, both the broker and CBS must have a cash deal to even consider it. Remember that because CBS is a publicly traded company, they can only sell the station for more than they paid, for this discussion that number is $35 million. That means CBS may entertain an offer for $70 million cash because they will be penalized with what amounts to capital gains tax rolled into that number, so 100% markup is reasonable.

Now to the ownership group.. Say "the dream team" according to this group consisted of Robin and Maynard, Pat Cashman, Steve Slayton, Gary Lockwood, Pat O'Day, or whomever else were going to be named in the ownership group. The group now needs to secure financing on the balance of $70M minus their minimum down payment of 25%, plus a 2.5-5% brokerage fee.

Keeping in mind that no broadcast lending deals are being done simply because the banks aren't lending, and the PE guys rightfully see radio as a loser, this whole point would in reality be mute. But let's assume for fantasy sake they found either a PE group or bank to finance this venture, you really believe that first; these folks have millions of their own money to invest in a station and they they individually would only get paid based on their individual performance?? What about their investment, and that their personal finances are on the line? As a relatively intelligent human being, would you put your home and life savings on the line with a diminishing medium and banking on your individual talent from years ago?

Okay... Let's say the whole group has completely lost their collective minds and are willing to take the risk and find a PE group to finance purchase of the station. Next the group needs to come up with an operating budget to hire a full back-office staff, pay the transmitter site leases, utilities, oh and don't forget that they'll have to come up with at least a million dollars of capital to relocate the studios and offices to another downtown building and pay for marketing.

Again for the sake of discussion, but my numbers aren't out of line really, the group is on the hook for $75+ million dollars to invest in a radio station with airstaff that for all practical matters, have a less than 50% chance of being successful. You can't be serious...