MORE CUTS AT CLEAR CHANNEL?

[Tom Wells]

DallasBoyz: You may see radio as a business. I see it as a technological ART.

If no one had figured out how to make the damn thing work, you'd have NOTHING to base a business on.

Inasmuch the whole point of corporations seems to be the managed devaluation,
a focus on radio as a business ONLY is a prescription for managed extinction.

If you can put together some kind of radio station all by yourself, and make it run with NO money, then I
would think you might have a reason to make a business out of it.

If you expect that the "art" is forever going to allow business exploitation then enjoy your contribution to
the downward spiral.

 

[fredcantu]

you guys act like radio is a charity.

ITS A FREAKING BUSINESS. Just like Wal-Mart, or Sony, or (insert other major company here).

stop holding your inability to succeed in the industry against a corporation that is doing what corporations do... make the most money, while spending the least.

Interesting. Every station's license renewal announcement says-- "(station's call letters) was granted a license by the Federal Communications Commission to serve the public interest as a public trustee." I don't think Wal-Mart, or Sony, or (insert other major company here) make such a pledge.

that pledge isn't worth the paper its printed on. Its time to get with the times. Radio is simply a business.

Just to be honest with the listeners, you should add that disclaimer to your license renewal announcements. :'(

 

[grantchester]

stop holding your inability to succeed in the industry against a corporation that is doing what corporations do... make the most money, while spending the least.

What I object to is the way our 401k's and pension funds were used to finance this 'roll-up' of stations. The financial boys believed that with fewer options, they could pay lower salaries, provide less value and charge more for commercials. Their debt bet is losing.

There are three expenses for radio: the electric bill, the payroll and the debt. They can't cut the electric bill, and can't cut their debt...

The change will come with content. It is migrating to newer, less leveraged delivery systems. Once we learn how to effectively market it, those legacy distribution systems will be devalued. Quality and service; value to the listener will in the end win out.

 

[daypart]

In my undergrad college's very first broadcasting class, one of the first things the class learns is the answer to the question "What is the business of broadcasting?"

The answer is "Selling audiences to advertisers."

When you understand that, everything you see when you work in broadcasting makes sense.

It explains why the station's sales people have the best offices and drive the most expensive cars.

It explains why talent whose audiences get smaller get sacked.

It explains why there are never enough resources to do program production, but plenty for commercial production.

Some of the folks in the thread haven't learned this yet.

 

[Tom Wells]

Hmm. I started out with electronic control devices and Maxwell's equations.

No aspect of business matters was taught in my school, only the art of electronics, with
rf engineering as the main focus.

There weren't any "broadcasting" classes to be had, and schools that did teach
"broadcasting" were derided along with "production line" engineering schools, which I will not name,
because these also produced good engineers.

 

[mmnassour]

In my undergrad college's very first broadcasting class, one of the first things the class learns is the answer to the question "What is the business of broadcasting?"

The answer is "Selling audiences to advertisers."

When you understand that, everything you see when you work in broadcasting makes sense.

It explains why the station's sales people have the best offices and drive the most expensive cars.

It explains why talent whose audiences get smaller get sacked.

It explains why there are never enough resources to do program production, but plenty for commercial production.

Some of the folks in the thread haven't learned this yet.

No disagreement with this sir, believe it or not I understand the concept of capitalism. ;D

But the issue here is that ever since the great expansion, each and every move made by the owners of Clear Corridors has been to cut service to the communities involved and to deny the talent the facilities needed to grow their audiences.

Why would a businessman deliberately sabotage his or her own product?

If the programming is crap, I'm certainly not sticking around for the commercials.

Clear Corridors has been caught in a programming death spiral, one where weaker ratings leads for cheaper programming, which leads for weaker ratings, etc.

Like the General Motors of the 70s and 80s, cost cutting was king, at the expense of a quality product.

Hopefully the government will not bail out CC when its end comes.

 

[TheBigA]

But the issue here is that ever since the great expansion, each and every move made by the owners of Clear Corridors has been to cut service to the communities involved and to deny the talent the facilities needed to grow their audiences.

Truthfully, real services to the community were cut long before CC. News departments at most stations were cut in the 80s. So all you had were a bunch of local DJs playing the same music, using the same prep sheets, commenting on the same movies and TV shows, coast to coast. I had a chance to judge DJs for an awards show a few years ago, and I was shocked at all the sameness in local DJs. I had to ask myself what's the difference between a guy or team in one city vs another. OTHER than weather and traffic. But there WERE a couple that stood out among the pack. Who really were funny, who incorporated clever elements in their show, who prepared for interviews, and who clearly had a personal relationship with their audience. Those were the people who won the awards. They weren't all in major markets either. If everyone has the same access to "facilities to grow their audiences," and I think you'll agree that's the case, then all that's left is the creativity of the talent to work with what he has and do some great work. And there ARE a few who are able to overcome their meager facilities and do great work. I think those few will be heard in more markets, and thus will get access to "facilities to grow their audience," namely more signals outside their home market.

 

[Gumboots]

Hopefully the government will not bail out CC when its end comes.

Who knows what will happen? But since starting in radio in 1998 I have heard many times over the years, "It's never been this bad." Radio industry has employed Americans for over 100 years, created huge stars, and helped many others on their path to greater things. Yeah, it is disheartening to walk down a freshly cleared corridor. You feel the trauma of your laid off friends. Because people don't really work in radio. They have fun. That's why they never want to leave. Listen to George Harrison's "All Things Must Pass." The end of one road leads to the beginning of another.

 

[bturner]

I certainly must agree. The decline of radio began long before Clear Channel and other financially strapped group owners. Funny how Clear Channel is always the scapegoat.

The decline in radio began when, in my opinion, satellite delivered formats came about. In reality, they were simply an extension of automated stations except you didn't have to have somebody there to rewind the reels. I remember when the mailing hit my desk: For the cost of one salary, your station can have consistent programming and top air talent around the clock, every day, in any of these formats...with generous commercial avails, strategically designed to allow you to insert network and local news and weather. Give your station the professional, quality sound of America's top stations for the price of one employee's salary.

As you can imagine, so many mom and pop stations couldn't get a satellite dish up fast enough. They were tired of jocks calling in sick, the night jock having a party in the studio and being obviously drunk or stoned by the end of the shift, the clients asking you to have your jocks quit hitting on their 16 year old daughters, the jocks that wouldn't follow format or played the same songs over and over, plus all the other headaches like collecting enough to make the paychecks clear the bank. It seemed a dream come true.

The reality was it was bland. It was vanilla ice cream with no vanilla, just imitation vanilla. The stations lost their personalities, their localism and their emotional connection to the community. That was a small price to pay for the owner. Sure billing dropped but costs were very low so the owner made more money and has minimal stress. The owners, husband and wife, tended the station; one selling and one manning the office, doing logs and the billing. This was repeated in little towns all across the country.

Then the big companies got the green light to become huge. In many respects, it gave underperforming stations a great opportunity to be all they could be but there was a big flaw in the plan. The need for an attractive portfolio to lure more stockholders created a frenzy of sales in major markets, driving up prices to the point the multiples just wouldn't work, or would they? If the station is running 12 minutes of commercials, we can increase to 16 minutes and make it work. It didn't. Listening suffered. Goals were not met. Meanwhile technology was running at break-neck speed.

We woke up one day and found our beloved radio a totally different animal. Susie in Columbus tries to sound local in Dallas but its hard to do when she has to get that San Diego break sent and that Milwaukee break down the line, etc. Can the listeners tell? Yes. We key in on emotions as a human being. We can pick up on stress and so many other things we are unaware of. It is now hard for us to 'love' our station. We're feeling like the guy that tries to impress the girl and gets a handshake at her front door at the end of the evening. We wanted so much more but it just wasn't happening.

Radio has been evolving for a long time. We started with what seemed like a good shortcut only to wind up lost and wondering what road might bring us back. I hope we choose wisely. Today's innovations are not a bad thing. They're like credit cards. If you use them right, they can be wonderful but if we use them the wrong way, boy, do we have a price to pay.

Radio needs pioneers at the moment...the sort of folks not scared (including investors) that will go across country, not the well traveled roads to forge the new trail for radio. We need thinkers such as those financing the drilling of oil wells. They know it's a numbers game. They know each dry hole brings them closer to the big payout. Radio certainly has the talent to lead us out of the doldrums but I wonder if the long term thinking investor will step up to the plate to revive radio in these economic times. As investors it seems like they want the microwave meal versus the made from scratch homemade meal that uses Grandma's well protected recipe. We know which is better in the long run, but the fast payout hypnotizes us.

With the big boys in radio, you have the technology, resources and stations. Why not delegate a few dollars for some underperformers that can reinvent radio. I'm not saying to go back to the 'good old days', but to recapture the audience that once loved radio. There are lots of choices available for just about anything we want. The ones who win out are the ones that convince people they should choose you over the other options. What are we doing in radio to make people want radio to be their choice?

As a side note, some say the ipod is the future. Yes, the ipod has its place. Some say computer devices have taken over human interaction. Yes, that is true to an extent. The fact is, both options are more like icing on the cake versus the cake. An ipod needs new music. Radio is still a factor (could be much more of a factor). Texting and such is what the telephone was to the older generation. You always have to have someone to call (or text). You still have to have human (face to face, mostly) interaction to make use of that phone or texting, etc. I know radio will never be the ONLY source for either, but it can be a preferred choice if we build the right product.

 

[DMcCloy]

@bturner

Well said.

 

[TheBigA]

Radio needs pioneers at the moment...the sort of folks not scared (including investors) that will go across country, not the well traveled roads to forge the new trail for radio. We need thinkers such as those financing the drilling of oil wells.

I think that's what's going on. Investors are only interested in one thing: returns on their investment. I've dealt with investment companies and banks. Investment companies get inside the companies they buy and recognize you have to improve things in order to realize gains on your investment. It's like buying an old house and fixing it up. You make more money doing the fixing than simply selling the property. I think they know they need to clean up these radio stations. And they know it's more than just buying new equipment. They need to fix what's on the air. In some cases, that means losing the local talent. But if they bring in a better show, won't that attract more listeners? I don't know about you, but the only localism I see on TV is news and commercials, and that doesn't bother me one bit. If you travel around the world, you don't hear a lot of local small town radio. It's mainly an American thing. You may be witnessing the "forging of new trails in radio." It's not going to be great for some people. Then again, when the golden age of radio ended in the 1940s, a lot of old time radio actors lost their jobs. They got replaced by DJs. To me, this is simply the next wave.

 

[TheBigA]

Indeed, broadcasters (both on-air and in management) were replaced with bean-counters who understood nothing of the industry or the people who created and worked with it.

I predate deregulation, and I've always worked for bean counters. That includes my time in public radio. I like to get paid for what I do, and the bean counters make sure I do. The "broadcasters" deal with programming. They're still there. Lots of them work at CC right now. Bob Pittman knows more about broadcasting than a whole lot of people. He has seen it from within, and from the outside. And he seems to have a good idea where it's going.

I understand what you're saying, but the point is there is no next wave, if you're talking about jobs. Actors were replaced by jocks, yes. But when a dozen jocks in as many markets are replaced by a foreign signal, there is no wave.....only a dry shore where the water has receded.

The reality is that radio over-expanded in the 80s. Too many radio stations. Too many employees. As an industry, radio has to get back to where it was before Docket 80-90. Not everyone who is on the air has talent. So these companies need to focus on the REAL talent, and getting them in front of larger audiences.

 

[baseballnut]

I've had a front row seat for CC taking ratings winners and turn them into ratings mush with all their changes. No regard to how their cuts affect the on-air product. Just increase that bottom line so Hogan and all the bean counters in the holding company get their bonuses at the end of the year. John Hogan is not a leader, he's a blowhard intimidator. Any bad karma that can happen to all the upper management mucks and bean counters is deserved after all the upheaval they've created in people's lives. Cumulus is not much better.

 

[mmnassour]

The reality is that radio over-expanded in the 80s. Too many radio stations. Too many employees. As an industry, radio has to get back to where it was before Docket 80-90. Not everyone who is on the air has talent. So these companies need to focus on the REAL talent, and getting them in front of larger audiences.

Oh, yea, I'm all over that. I remember Austin with five AMs and five FMs. Now certainly this market can today support more than that , but the fact that all these small town stations were bought, then torn up from their local roots and sent (with varying degrees of success) to the Austin (and many other)market(s), well, that's just a damned crime. The small towns lose local, generally profitable stations and Austin is completely overpopulated.

 

[fredcantu]

It's hard to argue that the consolidators didn't build the very bed they're now forced to lie in.

 

[TheBigA]

It's hard to argue that the consolidators didn't build the very bed they're now forced to lie in.

Truthfully, they didn't. The bed was built by ideologues at the FCC who wanted more radio stations. That diluted the audience pool. They didn't understand that more stations meant less audience, thus less money, for all of them. That's what led to the 96 TCA, designed to correct that mistake. Now we ave even more media choices, further diluting the audience base.

 

[grantchester]

80-90, the '96 dereg, even the loosening of ownership rules in the early 80's all had an effect, but the biggest problem right now is leverage.
Profit margins at some of the radio clusters are past 50%. Radio is meeting and exceeding its operating expenses. The problem is debt. The lenders who issued the loans should be made to take a haircut. Instead, they are the only ones being served.

 

[bturner]

So true. It is the debt, not the operation that is the problem. I always said (and others shot it down here) that the big boys overpaid for the big market signals they needed in their portfolio. When you pay double what anybody would normally pay for a company, you overpaid in my book. I've seen companies sell for up to 2.5 times annual billing or around 10x cashflow but some stations, one I know of specifically, sold for about 11x annual billing and well over 20 times cash flow. If it was underperforming, I could see it, but in this case they were at the top of their game. I think this is why we are seeing these issues.

I understand the idea of increasing rates by having greater clout and even adding to the commercial load, but even increasing rates 25% and doubling the spot load wouldn't come close to making the numbers work.

I'm amazed at well at the little percentage of savings achieved by letting folks go. While payroll is a good chunk in the greater picture the percentage is pretty minimal. At my station payroll runs about 15%.

 

[fredcantu]

Just because you can doesn't mean you should. It's like people trying to blame the lenders for customers getting in over their heads in debt on second and third homes. The homeowners knew how much they could pay. They took a gamble. So did station owners when they bought yet another station on credit.

 

[asynja]

Just because you can doesn't mean you should. It's like people trying to blame the lenders for customers getting in over their heads in debt on second and third homes. The homeowners knew how much they could pay. They took a gamble. So did station owners when they bought yet another station on credit.

Agreed. There were certain to be consequences of the rapid consolidation and shopping sprees of the late 90s and early 2000s. There was also always going to be a fall and a price to pay. I think the irrational exuberance at the outset of the shopping spree set the ultimate fall to be much farther and harder.

Companies like CC are leveraged at 6 or 9 to one...which means that even small fluctuations in performance or the market translate to HUGE impacts on cash flow (or market cap). Changes this dramatic on such a compressed timeline are inevitably going to yield equally "harsh" responses to mitigate that gap. (It's worth noting that the changes lately have been universally bad and not at all "small" in scope...)

Also, if you look at the stock prices of ALL radio owners in the late 90s compared to now...it is just SAD.

Emmis was over $60 in 1999. Today, less than a buck an in danger of being de-listed.
Entercom was also over $60 in '99. Today, seven bucks.
Cumulus went over $50 in '99. Today, three bucks.

Ever since about 2003 or 2004, everyone has been taking a steady, dramatic hit as a response to that bubble/fluke. After 2008, the fate of public companies was pretty much sealed as the last of the delusions evaporated (because money suddenly became "real" again). That's why people's stock is in the crapper and CC went private.

Companies are doing what they do: trying to survive. It does suck, though, that it's all too often good people who take the fall. But, at the same time, let's be honest. If you were working in radio in the early 2000s (I was) and didn't seriously understand that all of this growth was fueled by major hype -- or, at the very least, unsustainable...then I would question your relationship with rationality and economic reality.

If we take the reigns off business folk with an effective message from Congress (and regulating agencies) that says "go absolutely nuts!"...what would you expect to happen? (Wall Street and banks got the same message and acted accordingly, regrettably.) That's what we do in this country. We learn hard lessons by taking absolutely EVERYTHING WE DO to its ultimate limit of excess. We get new toys and drive them over the cliff just as fast as we can. Then we sober up and deal with the consequences, hoping nobody else will ever be that stupid again. Sometimes we get lucky in that regard.

The system was set up (or torn down, depending on how you look at it) to encourage risk, centralization, and short term gains (disguised as "steady growth"). As a result, this outcome has been a foregone conclusion since January 3, 1996.

Radio: it was fun while it lasted!

Alternatively...

Radio: at least we aren't newspapers!