I smell smoke.
It’s been wafting in the air, barely perceptible, for the last few weeks.
The sense of the smoke of a distant fire.
Now, it’s getting stronger, closer.
It reminds me of the outdoors as fall turns to winter and the smoke from a fireplace mingles with the cold, crisp air.
Throughout Greater Boston and Providence, there’s a chain of discount stores called Building 19. They’re in the insurance salvage business. They buy damaged goods - bankruptcy stocks, irregulars, railroad salvage, and merchandise that survived a store or warehouse fire.
It’s too bad Building 19 isn’t in the radio business because the fire sales are about to begin and it could be one hell of a meltdown.
How do I know? Sniff the air and ask these questions:
Is it true that lenders will now only deal with those that are real broadcasters?
Does this mean that business plans that read; “Buy them now and figure out what to do with them later” are no longer acceptable?
Does that also mean that those who’ve done a less than desirable job at running properties acquired over the past decade will have a difficult time raising money for any further radio deals?
Could it be that some banks may choose to call in some radio loans?
Is it true that even Payday Loans lock their doors and pull the shades when they see someone from radio pulling into the parking lot?
One more question. What’s in your wallet?
This much we do know. The unruly irresponsibility of the freewheeling credit charging, mortgage lending days have come to an abrupt halt. Radio is real estate. That’s what the chains were telling lenders for years.
Remember the radio real estate pitch? They aren’t making any more of them. They’ll only increase in value. They have to listen to us.
It’s not unlike commercial real estate before the bust when buyers looked at buildings with under forty percent vacancy and bought them as if they were ninety percent occupied.
One of – if not the – very first lesson I was taught when I got into this business was never believe your own hype.
Not everyone in radio heard that one.
Another question. Does that mean opportunities for former owners and operators who have been on the sidelines since selling their original properties for obscene multiples?
The answer is you better believe it.
These were the sharp guys. They wisely took the multi-millions that AMFM, Clear Channel, and CBS paid and invested sensibly. Now, they’re sitting on how many dead presidents?
Lenders want owners and operators who know when to hold ‘em and know when to fold ‘em. That’s something this crop of gamblers didn’t know how to do.
Few knew how to make radio profitable in the long term.
Even fewer knew how to hold on to younger demographics. Most teens still listening to the radio do so because of socio-economics. They can’t afford a computer. They can’t afford an iPod. Those that can are long gone from terrestrial radio. That reality cannot be argued.
There’s a line in the Bob Dylan song, “It’s Alright, Ma (I’m Only Bleeding),” that says, “Money doesn’t talk it swears.” You have to admit – some of the scams pulled in radio over the past decade were blatantly profane.
It’s true with all industries. Some things are never meant to get that big. Radio is one of them. It did best when there were long-range goals based on a station’s performance.
Consistency is the true mark of a champion? Please don’t confuse them with the facts.
All the while, radio chains insisted that their stations were solvent. Are you making money? Sorry, no more questions.
The past decade was all about acquiring. The decade we’re in now is all about operating and turning profit.
The past decade was price is no object. The decade we’re in now is all about rational multiples.
How much is a business worth that shows barely a one percent growth rate anyway?
Ask CL King & Associates analyst Jim Boyle. Overall, he's forecasting the radio industry to lose one percent for the month of July weighed against July 2006 results.
You would be correct if you identified that snapping sound followed by a loud squawk as wings being clipped.
There were more bugs in most radio chain operations than a Patricia Dunn Hewlett-Packard board meeting.
It’s not the business. It’s the people that have been running it. They royally screwed it up and the rank and file took the heat.
But seriously, you can’t feel bad for some of those know-everything regional VPs who are already well past their expiration date. You know the old saying: when one door closes, another opens. For them, it’s a swinging door into the Applebee’s kitchen.
The radio industry is overdue for change and improvement.
Sniff! Where there’s smoke…..