Synergies

[SirRoxalot]

Lew Dickey is talking about $50-million in "synergies". Let's see what that adds up to...

If an employee is earning $40K, they're really costing the company about $60K. So, we take $50-million, and divide by $60K. The result? Over 800 jobs. They'll have about 550 radio stations when all is said and done, so you're looking at about $90K in cuts per station.

Let's remember that a lot of those cuts are at stations that already had been cut to the marrow in the run-up to the Citadel bankruptcy.

 

[Element9]

You must be a stock analyst, Rox. Your math looks good, but you also might have added the costs of bonuses, incentives and rights fees. When these are included, the cuts may get spread further out and deeper. It's likely that the non-unionized medium and small markets will bear more cuts than the ABC stations, many of which have union representation and talent with sturdier contracts. This doesn't mean a guy who makes $500k a year in LA won't be cut, but he'll have to be paid, whereas an employee in Binghamton, Buffalo, Erie or Syracuse can get sliced with nothing more than four weeks of severance, if that, and only if Lew's Crew is feeling generous that week. Entercom and Town Square might be able to pick up a few top players, but at what cost? Will E'com and TS take accounts from their star performers and hand them to the incoming Citadel sellers? Not likely. Are the Citadel sellers going to walk away from their established accounts that they've worked from the very beginning? Probably not. It's likely the Citadel AEs will sit tight and hope they can endure the possible Cumulus commission cuts, evil eye sales meetings and Atlanta-based super-service-selling. Helluva choice: Tsunami or Earthquake... or worse, nuclear meltdown.

 

[Bob1370]

Cumulus "synergies", if they indeed turn out to be more cuts in program content and quality, sound like opportunities for Entercom and Townsquare. The Cumulus people know a lot about budget slashing; their record when it comes to investing in and growing properties is a lot more mixed.

The Dickey family which controls Cumulus has actually been in western NY before, though most don't remember them. They bought WSAY from Gordon Brown's estate with the announced intent of taking on WHAM. The Dickeys ultimately bailed out of Rochester after an abortive attempt to turn WSAY into a competitive rival, losing interest after seeing how much money it would cost to make it work. They then turned it into a wheel-of-formats property, and finally turned the property over to the WXXI Public Broadcasting Council at a break-even price compared to what the Brown estate originally collected. WXXI then made a go of it and built a substantial audience.

Rochester got lucky, it worked out for the station's and the lisneners' benefit.

I wonder if New York, Chicago, LA, San Francisco, or Buffalo will be so lucky...

 

[SSSKub]

I wonder if New York, Chicago, LA, San Francisco, or Buffalo will be so lucky...

Yah, because Buffalo is closer in size to New York, Chicago, LA and San Francisco than it is to Rochester............. :

 

[yugoidar]

Lew Dickey is talking about $50-million in "synergies". Let's see what that adds up to...

If an employee is earning $40K, they're really costing the company about $60K. So, we take $50-million, and divide by $60K. The result? Over 800 jobs. They'll have about 550 radio stations when all is said and done, so you're looking at about $90K in cuts per station.

Let's remember that a lot of those cuts are at stations that already had been cut to the marrow in the run-up to the Citadel bankruptcy.

Noted program consultant, George Johns on "cuts"...

"It seems to me that even though it takes almost twice the gross billing to put an equal amount of money to the bottom line of radio it still makes a lot more sense to go after the billing than the cuts. I would think you eventually run out of things to cut but you never run out of potential billing. Making cuts takes no brain power but getting billing does so maybe therein lies the problem … I’m just sayin’".

If George can figure it out, what is it that clowns like Lew Dickey, Farid Suleman and the boys at Clear Channel don't understand?

 

[JustPastBuffalo]

It's an interesting question, Yugo. I think the answer is two fold and has a lot to do with (1) how little time these monoliths have to turn their investment around and (2) the amount of money that's in play. The banks and investors get their money first, therefore it's easier for Lew, Farid and their ilk to come up with that money by making staff cuts (synergies) rather than "expanding the billing" as George Johns puts it.

Furthermore, where's the money coming from in shrinking markets like Buffalo? ("Grab a phone book and make some calls.") I don't disagree with Johns that cutting to the bone is a foolish proposition in the long run, but there are only so many car dealers to sustain the local revenue, if you know what I'm saying. Seems all this trickles down to the air talent and content creators, which are usually (as was described by a well-respected morning guy) "on the bottom of the totem pole." I don't have any problem understanding this reality, just don't wheetle on my leg and try to convince me it's raining.

 

[Element9]

They say it's all about the digital platform...

Digital Report Card: “Lackluster” growth. In what may best be described as a digital wake up call, Borrell Associates says the radio industry is “barely treading water” in the local digital space and is poised to see its share shrink — not grow — unless there’s a rethink in the coming years. It finds the average station billed $60,000 in local digital revenue in 2010. Get the full story in today's Inside Radio newsletter.

Really? How many people will listen to a grainy, choppy web stream that offers the same content available on the over-the-air signal with eight minute commercial breaks featuring PSAs, station and corporate promos or yawn-inducing features? On the web, radio is up against compelling content providers and distributors like YouTube, NPR, The Onion, Hulu, Comedy Central, at least a dozen go-to sites that offer real audio and video streaming content... and that thing called Facebook. Wouldn't radio best be served by concentrating on making its on-air content the best it can possibly be. Jerry Lee in Philly knows on what side his bread is buttered.

 

[Bob1370]

Jim Pastrick asks, "lwhere's the money coming from in shrinking markets like Buffalo?"

Point well taken, because in Buffalo (and a few other markets like Detroit) broadcast sales is a zero sum game in which, for one station to win, others must lose. You can win by grabbing audience, or you can win by poaching accounts from the other guy through predatory pricing of inventory. You figure out which is easier.

Not the same situation, IMHO, in markets with slow but positive growth like Rochester and Albany. There, you find opportunities for anyone programming effectively enough to grow their target audiences, which means you'll see some investment in programming and marketing as the economy continues to get its strength back. It won't be a boom, but decent stations in these markets will make a decent living and so should the people who work in them...

 

[SirRoxalot]

Sorry, Bob, but I think that your analysis is a bit flawed. Rochester may be more stable than Buffalo at the moment, but we're hardly in Detroit's boat. Radio's no more a "zero sum game" here than it is in Rochester. Growth will come because the economy is coming back, and advertising is coming back. That's not to say that desperate operators won't start discounting in order to poach clients, but that's a fools game that's independent of other economic conditions.

A more likely scenario is that advertisers are revaluing their advertising purchases as the public revises their media consumption. Newspapers are in trouble. Rochester's Gannett rag is dropping faster than the average according to Audit Bureau of Circulation. They're down to 177,466 at their Sunday peak. The Buffalo News is also down, but still at 240,293 on Sundays. With newspapers circulation trending down, advertising money will follow.

Where that money goes will depend on local sales departments. One troubling trend is that radio sales departments are shrinking, as are production departments. Fewer people are bringing money in the door, and the odds of a spot being memorable - and therefore effective - are shrinking. Those operators that invest in sales, production, and on-air product to bring in listeners (and keep them) have a better chance of getting a slice of that advertising pie.

Yes, there's the Internet, but has anybody really figured out to monetize that yet? The money going to on-line is more likely to go to website development and maintenance.

 

[Paul_Warren]

They say it's all about the digital platform...Really? How many people will listen to a grainy, choppy web stream that offers the same content available on the over-the-air signal with eight minute commercial breaks featuring PSAs, station and corporate promos or yawn-inducing features?

Nine, the revenue isn't coming from streaming audio, and if it was, it would get counted as incremental spot revenue on the on-air side anyway. It's coming from the fledgling attempts to compete against local directory sites.

That's a business I don't understand. When I want info on a local business, I Google it. I could go to one of the directory sites, but I find them a waste of time. They have limited or zero info on businesses which don't pay them, and often don't include the hours or the business's URL even if they're clients, which means I then have to call on the phone. If I can find the website of the business itself, I get way more useful information, way faster.

Even businesses with no search engine optimization skills show up near the top on Google if you search with very specific terms, such as "movies 14052" to see what's playing at the theater in East Aurora. And while I could miss discovering an option once in a while, if a company doesn't have at least a token website these days, it's like not having a telephone in 1970.

If I can't find complete info on a product category from the online directory of a company that publishes The Yellow Pages, what are the chances I'll find it on a radio station website? Exactly. Not worth the time.

Radio companies mortgage their souls to acquire licenses and maintain transmitters, then get distracted competing on the web, where the cost of entry is near zero. Wouldn't it be more productive to find creative ways to serve people in cars, or otherwise leverage your relatively exclusive capability to broadcast on the radio, before mobile broadband takes that away, too?

I guess I'm overthinking it, huh.

 

[SirRoxalot]

Pretty soon, radio will be advertising itself as "Free - no bandwidth required"...