The CC Debate

[Talk_Dude]

Contradiction? Or are you saying radio is what those still listening want? That universe keep shrinking.

Bingo! That is what I read into his post.

You are correct. I could have said it in reverse as, "The people who like what terrestrial radio broadcasters are putting out listen to it. The rest don't."

The observation that railroads thought they were in the train business, not the transportation business comes from Theodore Levitt, a professor of marketing in the Harvard Business School

I know. Who said it doesn't change the fact that it's wrong. The fact is that some of them DID expand into trucks, planes, and ships, once they became available. They are the ones still in business today.

Except that the companies that did diversify only did so after their original owners and managers drove them to the brink of disaster by continuing to think of themselves as being in the train business, not the transportation business. It took a long period of mergers, bouts of bankruptcies, government intervention, and a total replacement of the management of the old railroad companies to turn them into new transportation companies. The best metaphor to describe the current transportation companies with the same names as old railroad companies is the Phoenix, the mythical bird that arises from the ashes of its dead predecessor.

Lots of companies have gone out of business by insisting on "selling what they own."

You can't sell what you don't own. That is the basic rule of business. If you try to, you will get sued.

You can sell what you don't own if what you are selling is a service, not a product. The broadcast industry doesn't own the songs it "sells". It simply plays them as a service.

Some of the posts here suggest that some of the radio people here are focused on their industry's or company's own needs, not on needs of the listener or the advertiser.

It depends on what they do in the food chain. You sound like someone focused only on the programming. That's fine, but I imagine you also want to get paid. From my seat, everyone in the process needs to understand the bigger picture of how the programming they do affected the pay check they receive. Radio is in trouble because the people at the stations don't work together. Sales doesn't think about programming, and programming doesn't think about sales. That needs to change.

That's a small step in the right direction. Working together only helps if the team is all working together to move towards the correct goal. When a team works together towards the wrong goal, using the wrong strategy and tactics, it still eventually fails.

 

[TheBigA]

Except that the companies that did diversify only did so after their original owners and managers drove them to the brink of disaster by continuing to think of themselves as being in the train business, not the transportation business. It took a long period of mergers, bouts of bankruptcies, government intervention,

It was the government that almost single-handedly destroyed the railroad industry and the system of rail transportantion in this country. That is a documented fact, and you can compare the American system to those in other countries as proof. The US government did nothing to help railroads, and instead did everything it could to fund alternatives, such as interstate highways and federal airports.

It's an oversimplification to say that railroads could have diversified into other forms of transportation. It ignores the fact that other forms of transportation didn't begin to exist until the 1930s, and weren't practical until later. Plus government regulations forced the railroads into businesses that weren't profitable.

You can sell what you don't own if what you are selling is a service, not a product. The broadcast industry doesn't own the songs it "sells". It simply plays them as a service.

The RIAA, which represents the companies that own the recordings, doesn't agree.

 

[gr8oldies]

Stations programming the sales rather than selling the programming isn't something that started in 1996. It goes way back.
I don't believe anyone has the definitive answer as to where radio goes from here, and how it will include the digital revolution. I'm not convinced doing radio in 1975 is the answer. Nor should all efforts be focused on the 10% who won't be satisfied with anything other than their own downloads. You'll never be able to play enough obscure music to get them back (and they've always existed from the time people carried cases full of 8tracks in their car.)

 

[Talk_Dude]

You can sell what you don't own if what you are selling is a service, not a product. The broadcast industry doesn't own the songs it "sells". It simply plays them as a service.

The RIAA, which represents the companies that own the recordings, doesn't agree.

The RIAA is full of sheep dip. But then, most people already know that.

 

[TheBigA]

The RIAA is full of sheep dip. But then, most people already know that.

That's OK. They say the same thing about radio.

 

[Talk_Dude]

The RIAA is full of sheep dip. But then, most people already know that.

That's OK. They say the same thing about radio.

Well, there ya go.

 

[Preacherdude]

This is a fantastic discussion. As an old radio guy, I must confess this overall discussion has made me think a bit. The good old days were not always so good. But the present days are far short of perfection as well.

I have no CC experience, but I worked for a Christian radio group that brought in a very impersonal, bottom-line based management team that seemed to center on money first, people second. These individuals, (one man in particular, I guess the hatchet guy,) hurt a lot of people, firing good people right and left and doing so with little care or compassion.

As the PD and morning drive guy who had a pretty good following, the hatchet man had a tougher time getting rid of me. I had old friends on the board who fought for me, and I survived many a battle for about a year. But the stress was too much, and it was evident as the old guys on the board naturally rolled out of the way, I was dead meat, so I cut the best deal I could and got out.

I have been out of radio for nine years. And except for cutting a commercial here and there, or a little play-by-play, I haven't touched the industry. I am now a happy pastor.

But looking back, I must admit. While I truly believe our broadcasting was much more imaginative and heart-felt, we weren't anywhere close to perfect. I know I rambled sometimes while thinking I was articulating points perfectly. We needed some correction. But unfortunately, in Christian radio just as in secular, the bottom line means everything, and the falling ax always brings blood.

Good radio is in the ears of the beholder. Part-time beginner jobs on the local am's are gone, very little remains of "old-style" radio. It died about the time our small-town sidewalks rolled up. Either get used to the "everybody sounds the same" radio or find something unique on the internet. Times have changed, for good or bad. It is up to the individual to adapt to today.

 

[MikefromDelaware]

Preacherdude hits the nail on the head. Good radio is in the ear of the beholder. What draws my ear, may not draw your ear. I worked in both Christian and Secular radio and I'd agree with "Preach" that the bottomline is an unfortunate part of Christian radio too. At the CCM station I worked at back in the 1980's, we aired via cassette tape, a screamin' preacher, who apparently recorded his sermon on a $20.00 portable cassette recorder he must have thrown inside his pulpit. Each week, it was essentially 30 minutes of distortion. I could not understand a word he said, literally. One week it was so bad, after 10 minutes I cut the show and announced due to technical problems we're unable to complete this program and aired music for the remainder of his time, and made the appropriate entry into the log.

The owner called me in, the following week, and I explained to her that his tapes are not of broadcast quality and shouldn't God's radio stations be at least as good as the "worlds"? She said, she understood my point, but, if he pays he plays. So from then on I'd simple turn off the monitor for that 30 minutes and when the needle on the Vue Meter stopped moving, I knew that show was over.

I do understand there are costs to running a radio station, but there should be some higher standard other than if he pays he plays at work in a Christian radio station. Interestingly, a second CCM station started up in this market and within about a year and a half, the first CCM was sold and is now a secular Urban station. The new CCM station had higher standards for what went on the air, and the larger part of the CCM audience switched to that new station. They've done quite well and now have translators all over the place. Interesting, the original CCM was a commercial station (so listeners could listen for FREE), and the second is a non-comm, run from a local church that seems to do quite well in listener financial support (not just from members of their church). They built a better mouse trap and the public flocked to use it and were even willing to pay for the opportunity to use it, the original mouse trap builder didn't change and went out of business, so in some cases FREE isn't always better.

A similar analogy could be made about NPR. Listener supported, only gets 10% of its money from the government, but they offer programming that a large number of people want, and they are willing to pay for the opportunity to hear such programming as commercial radio says it doesn't want that audience and programs for a different set of listeners.

Good radio IS in the ear of the beholder.

 

[Goat Rodeo Cowboy]

We live in a world that rides off in two different directions.... and yet we think we are all riding together.

My dad was a classic "poor dirt farmer". But when he did have the money to buy something, he bought "the good stuff". There was this tool box full of socket wrenches. They are sold old I can remember the day they weren't there. When we gathered out at the farm after the funeral, the three of us looked at each other. My sister instructed: Before we start throwing away stuff and organizing the things that go into the auction.... is there anything here anyone wants?

That black box of tools sits on the shelf in my garage today.

Today we are driven by the discount store mentality. "Let's go across the street, Dear, they have it 20 cents cheaper."

"Yes, Dear, but it WILL fall apart two years sooner!"

The big problem we have in radio today is not just a radio problem. It is a consumer mentality problem. We are not willing to pay a little more to buy quality tools.... thus the old line names in shop tools are in some cases today selling us trash.

The old line names (call letters) in radio in some cases today are broadcasting junk sounds but through the surveys it appears we love it that way. We buy their trash. The shoulders of the road to a broadcasting career or ownership is lined with the rotting corpses of people who were raised by a father and mother who bought quality when they went to town on Saturday... and when the next generation tried to apply that mind-set to broadcasting, the industry, the audience, the advertisers punished them rather than reward them.

Yes, there are some well operated stations out there. How many of you can name 20 of them for me? Maybe ten? O.k> I'll settle for a list of five that you personally know about.

 

[MikefromDelaware]

Good post and a good question Goat Rodeo Cowboy. I can only name three such stations, that I know of, the first two are NPR stations in Philly that serves the Wilmington market. The third is a Wilmington AM news/talker. The first from Philly is WHYY-FM (NPR news/info/talk) is a rim shot station, that serves the Wilmington market. The second NPR station from Philly that has a city grade signal here as they have a translator in the Wilmington suburbs, WRTI from Temple Univ - Classical Music by day and Jazz at night. The third is Wilmington's WDEL, one of two news/talk stations here in Wilmington. WDEL is all live and local during the day parts until 7pm, then they go to the bird for the overnight unless they are carrying Phillies, Eagles, or local sports or carrying political debates both national or local. They are a CBS radio affiliate and they offer most, if not all the CBS news/info/commentary programming offered by CBS.They have the largest news staff between Philly and Washington (KYW in Philly and WTOP in Washington have larger news staffs).

The other news/talker (WILM) has great people who work hard, but have a far smaller staff now, as they are a CC station (once they had the large staff that WDEL now has prior to CC's takeover of WILM). WILM offers quality newscasts too, but it's hard to do the same level of reporting that WDEL now does with such a small staff, but WILM is a good news/talk station, but only due to the extreme hard work of those few people in the news staff. So even though I'd not put them in that category of the other three, WILM does get the runner up award for putting out a relatively good quality product in spite of CC.

 

[gr8oldies]

I don't think so far we've defined quality as anything other than live bodies in a studio in the COL. I don't neccesarily make that my criteria.
I will share my top 5.
WLW, Cincinnati. Yes, Clear Channel owns it. But they've managed to stay live, local and mostly entertaining.
WLKI Angola IN.
Always a first class operation. Polished sound with experienced people, but very local.
WCLT-FM Newark OH. This could easily be a Columbus move in but the local owners keep this flamethrower focused on Newark and Southeast Ohio.
WSEV-FM, Gatlinburg/Sevierville TN. Holds it's own in Sevier County against the Knoxville stations and is very visible.
WSWO-LP Huber Heights OH one of the few LPFM success stories. They have an actual studio in a shopping center, attract enough underwriting to keep the bills paid, and do high school sports and remotes. They suffered severe lightning damage the same day WWVA lost their tower and just rebuilt their studio.

 

[gr8oldies]

Let me put the "quality" issue another way. We think of the old top 40 stations as "quality". Our parents and grandparents thought of them as "noise".

 

[MikefromDelaware]

One man's music is another man's noise.

 

[Talk_Dude]

One man's music is another man's noise.

It's almost impossible to tell if a station is being "well operated" just from listening to it. Sometimes a station can manage to sould good on the air even though the off-air operations are a train wreck. By the same token, a station can be well operated, yet on the air sound only bland, vanilla, and boring.

 

[Goat Rodeo Cowboy]

Let me put the "quality" issue another way. We think of the old top 40 stations as "quality". Our parents and grandparents thought of them as "noise".

50 years ago parents and grandparents were waiting for the temporary bubble to burst. any day now that damnable rock and roll will go away and Broadway Show-tunes and pop music ala Sinatra and other will return to the throne as it should be.

Correct me if I am wrong, but that didn't happen.

And you know what scares me, gr8oldies.... I am today's parents and grandparents.... patiently (some days NOT so patiently) waiting for this damnable talk radio in the style of Rush and Hannity and Beck and Boortz to burst so we can get back to something a bit more humanitarian... and after reading your post I had to ask myself: "And what if Talk Radio as we know it is NOT going away... just as Rock and it's other loud offspring have NOT gone away...."

and in line with our original topic: What if CC is destined to go down in the history books as the great path-blazer to the future of radio.

Rock and Roll
Talk Radio
Clear Channel the champion of the future!

I think I shall take Mrs. Cowboy for a drive through the Appalachians this afternoon to the leaves beginning to turn. By next year I suspect somebody will have figured out how to screw that up too.

 

[bturner]

Originally this post began talking about Clear Channel and the Public companies that are the largest group owners in radio.

Where did it go wrong? I have the answer: The big boys paid way too much for many of their holdings. Look at sale prices. When the buying frenzy happened stations were going for 12-15x cash flow...easily double the price a company would have paid for any other business. When you buy a $25,000 car for $40,000-$50,000, you still have a $25,000 car. The trick is to find a way to increase the value. Mostly this was done by increasing spot loads and buying more stations.

Why would a big company pay so much? Easy: They need the station in their portfolio to influence more stock buyers. When you can say you have one or two or five outlets is all the top 20 markets in the country, it sure looks good to the investor.

With so much debt service, the big boys had to figure how to streamline the operations and lower costs. That is why radio is as it is today.

You say major advertisers quit radio? Would you buy position 7 in an 8 unit stop set with two of your direct competitors in the same stop set? Are you going to listen to 8 spots after years of radio making the commercial the 'bad boy'. For decades we have griped about the commercial on the air. How many stations focus on why you should listen because their station plays fewer commercials. As a listener we are trained to hate commercials. Talk about biting the hand that feeds you!

So, add it all up: incredible debt load, less value for the advertiser, a group of people trained to hate your commercial message and your investors demanding more profit year after year after year. This is much like bringing a knife to a gun fight. It is not a scenario that can be won.

If HD Radio caught on quickly maybe there would have been a chance, but even I question this. To cite the use of McDonalds or WalMart, if you put one on every street corner will you sell enough to keep all the locations profitable or just fractionalize the market even more so profit becomes even more elusive? There are only so many radio listeners, too many choices and too many options to add more of the same to the bottom line.

Maybe Ted Turner had the right idea when he bought that all news network rival and pulled the plug. He likely realized with two choices, both would suffer.

 

[TheBigA]

Why would a big company pay so much? Easy: They need the station in their portfolio to influence more stock buyers. When you can say you have one or two or five outlets is all the top 20 markets in the country, it sure looks good to the investor.

Only to a stupid investor. I own lots of stock, and I was never influenced by market size. Stockholders are influenced by one thing: profits. The portfolio doesn't matter.

I disagree with the statement that they overpaid. They paid market value at the time. Station prices had been driven up geometrically since the 1980s. They were driven higher and higher by the level of competition over those stations. Longtime companies were selling historic properties that simply had never been available before. How do you price the Mona Lisa? It's whatever the market will pay. That's what drove priced in the 80s and 90s. To say stations were "overpriced" insults the stations, the employees, and radio in general. If I put my company on the market, and people are willing to pay a billion dollars for it, I am the proudest guy on the block.

But like most things, looking back at the prices companies paid ten years ago, and they look too high. Hindsight is 20/20. If I knew Apple would be trading at $289 a share two years ago, I would have mortgaged the house and bought all I could. But I didn't know. If Clear Channel knew they could have bought their entire portfolio for 10 cents on each dollar, they would have done it. But they didn't know. Station prices were multiplying, and nothing was stopping them. If you wanted to own WLW or WLTW, you paid whatever it cost. Because the price was only going to increase. And it did, up to a point. Then it crashed. And even with all those great stations in their portfolio, stockholders sold. And no new investors bought. And the value dropped like a stone. So that portfolio, the one you say was built to attract investors, didn't attract new investors. Because investors know you don't need towers and transmitters to make money. That's why Apple is trading at $289 a share, and Clear Channel isn't.

 

[bturner]

I never said they did not pay fair market price at the time. They did.

The point I am making is when you pay $105 million for one of the top stations in a market that is billing $16 million, the numbers don't work. The price is way above what the billing commands. If memory is correct, the station had sold for around a third that price a few years earlier.

If you'll recall, there were a fair number of single station operators able to command a million bucks from their station when they would have sold it for 1/3rd to 1/2 that price a couple of years prior and laughed all the way to the bank.

It makes me recall an offer we got by phone for 7.2 million for our daytimer back in the late 1990s. A broker friend thinks we might get 3 or if we're really lucky, 3.5 million in today's market.

 

[TheBigA]

The point I am making is when you pay $105 million for one of the top stations in a market that is billing $16 million, the numbers don't work.

You could say the same thing about a 30 year mortgage on a house. No one thinks about how much that house actually costs when you factor interest plus principle. Same math applies for buying a radio station at 10 times cash flow. Contrary to conventional wisdom, no one was buying these stations for short term profit. Over the long haul, the thinking was that cash flow would improve, as well as profitability. Neither happened. Then what? But that's why lots of Americans lost their homes, and why another big bunch are in credit card debt.

No one thinks about paying off the debt. Just the excitement of the purchase. I've sold enough in my life to tell you the game the salesman plays is to dizzy the buyer to the point where he isn't thinking right. Because if he was actually thinking straight, he probably wouldn't buy a thing. Just sit on the couch and watch TV. The same TV he's had for 30 years.

The old saying is you've gotta spend money to make money. These guys didn't want to miss out on the chance to make money because they were afraid to spend. But no one in the process asked "What if the economy tanks?" or "What if some new technology replaces radio?" Then both happened at the same time. What are the chances of that? Who plans for that kind of thing? No one.

What I'm saying is that buying on credit isn't a logical process. My great-grandfather wouldn't do it. But after 1929, he kept all his money in his mattress or in property. It was the only way he could sleep. That idea has been forgotten today.

 

[bturner]

Yep, home mortgages are very costly, but would you pay $200,000 for a rental house that rents for $1,000 a month in today's market?

I doubt either one of us would do such a deal.

The point I think you and I are both making is the big boys paid way too much for the stations that didn't have the track record to support the price paid. In these cases, it was not distressed stations or stations that could be upgraded that were purchased but stations already doing well in their respective markets.

My point is this was the first nail in the coffin.