Tuesday, January 29, 2008

Radio: Lost in Translation

Destination: San Antonio. We’ve turned back the clock to this past Friday, the 25th. Clear Channel Radio CEO John Hogan is tidying up the loose ends of a memo he’s about to send out to his subordinates – just in time to wreck their weekend.

This one heralds the new rules and regulations – effective immediately –for Clear Channel managers.

No one ever went broke trying to underestimate Clear Channel’s knack to screw up the entire radio industry. The proposed LBO with BainCapital and Thomas H. Lee is just the latest in a series to stop their hemorrhaging.

Though Hogan calls his memo a contingency plan it’s not in response to an unforeseen occurrence. The Mays deal with Bain/Lee was put together over a year ago. Since then the Mays clan ran out of rug to sweep their tribulations under and now Bain/Lee’s realizing how dire the deal is.

Hogan’s memo did zilch for Clear Channel stock, which plunged 7 percent since Friday. Bain/Lee did the LBO deal at $39.20. Last night – after doing over twice the average daily volume - CCU finished at $31.42. Backing out of the deal – even at a cost of $500 million – is the lesser of two evils for Bain/Lee and the banks caught up in this debacle.

Let’s consider the bright side of this unfolding disaster. It’s revealing the true valuation of radio properties. That in turn will hasten opportunities for real broadcasters to get back in the game.

The kith and kin at the Clear Channel offices in San Antonio speak in a weird and obscure dialect. They call it Mays as in maze – since its management and employees feel like rats trapped in one.

That’s the raison d'être for the memo’s translation.

From: Hogan, John
Sent: Friday, January 25, 2008 09:31
To: Radio General Managers - All; Radio Business Managers
Cc: Radio EVP's; Radio SVP's ; Radio SVPP; Radio RVP
Subject: First Quarter Contingency Plan

Good Morning,

As you are undoubtedly aware, we are generating less revenue for Q1 than we budgeted and less than what actually ran last year. At the same time, our budgeted expenses for Q1 are up 4%. While there are a number of factors contributing to our revenue shortfall the fact is we are behind on our revenue plan, up over last year on expenses, and as a result we will be well below our budgeted Q1 bcf. As responsible managers, we need to address the shortfall not only by continuing to find ways to increase our revenue but also by implementing cuts on the expense side until revenue production improves.

Translation: The kids are threatening to cut me a new one. The BainCapital/Thomas H. Lee deal is unraveling. What does that say about us if they’re willing to part with $500 million just to get us off of their books?

No one anticipated how challenging Q1 would be for us and while the plans we put in place last Fall made sense then, clearly we are operating in a different environment and thus need an adjustment to our plan.

You’ve heard the saying “from bad to worse?” That’s us.

The following Q1 expense reductions are to be implemented immediately in your market and correctly reflected to San Antonio by having your Market Controller access the Flash website under Reporting Events and complete the form titled "Q1 Contingency Plan". You will need to provide the expenses reduction amounts on the required form at the market level for the items identified below. This needs to be completed by no later than 7 pm ct today.

Hired rhymes with Fired but the latter comes first in the dictionary and we need to be first in something.

If you should have questions regarding the logistics, please contact Jeff Rice or Katie Gingrich and they will help guide you thru the process. The Q1 expense reductions are as follows:

'Q1 Expense Reductions

-all Research monies after 2/1

What we don’t know won’t hurt us.

-all Advertising and Promotion monies after 2/1

We have nothing worth advertising and promoting.

-all New Sales Hire guarantees not already implemented effective immediately (do NOT hire any additional sales people effective immediately)

We have nothing on-air worth selling.

-any New Hires budgeted but not hired effective immediately (do not hire any additional new employees)

Make do with threatening your current employees. There is no reason for us to train new employees to fear for their jobs.

-any/all discretionary monies (i.e. travel, meals and entertainment, etc) for your market. If you can save it, do so

When you take a client to lunch – have them pick up the tab.

Additionally, you are not to replace any departing personnel without specific approval from your EVPO

We can barely make payroll now - and more significantly - the Mays kids already renewed the leases on their Lear jets and limos and we have all those special interest groups payoffs…correct that… payments to deal with.

I completely understand the challenges associated with implementing the above cuts. It will make your job more difficult and have some long term affect (sic) on your overall performance. It goes without saying that leading through these reductions will be challenging. If there were another better alternative, we would not be requiring these reductions be implemented. Unfortunately, there is not another alternative.

Don’t worry about long term. We don’t.

Please contact your EVPO for any questions you have on implementing the reductions. Please recognize that your team will need strong leadership and support while implementing and operating under these expense reductions. Please help them understand the necessity of implementing these cuts and the importance of figuring out how they can operate as effectively as possible in the reduced Q1 expense scenario.

We've mismanaged this company and your employees are going to pay for it. What is there not to understand?

Again, I realize this is a challenging task but I am asking for your help, leadership, and support to implement and then work with the resulting expense plan to the best of your ability. It should go without saying that at the earliest opportunity, that is when revenues begin to stabilize and increase we can reverse the expense reductions.

Let’s face it. Revenues aren’t going to getting better. You’ll be next.

Thank you in advance for communicating the above to your teams and for your Market Controllers completing the information requests on the accompanying website. Please let me know how I can help.

I have a golden parachute and you don’t. If you try to reach me this weekend and I don’t answer – that means I forgot to take my cell phone with me on the golf cart.

John
John Hogan
Pres. & CEO

I have a job and you won’t.

18 comments:

Kingfish Stevens said...

The bigger they are the harder they fall-- on the poor saps who dreamed of working in radio. Aw Me.

yekimi said...

I had to laugh when I saw that memo because I just drove by a Clear Channel billboard begging for salespeople to call them! So far I think only a handful of homeless and the mentally challenged have applied! [and if they aren't mentally challenged before they work for CC, they certainlly will be afterwords!]

Anonymous said...

How not to run a company. As you say...fish stink from the head.

Ex-Clear Channel #1 Arbitron said...

I want to thank John Hogan for devaluing radio. Since I have no stock in broadcast media I'm all for its fall. Even though I was #1in my daypart and hit all the demo numbers I was downsized for budgetary reasons. Clear Channel rewards failure. While I lose my job and have to refigure my life the Mays family continue to run CC into the ground and pay themselves handsomely for doing so.

Ex-Clear Channel #1 Arbitron said...

I want to thank John Hogan for devaluing radio. Since I have no stock in broadcast media I'm all for its fall. Even though I was #1in my daypart and hit all the demo numbers I was downsized for budgetary reasons. Clear Channel rewards failure. While I lose my job and have to refigure my life the Mays family continue to run CC into the ground and pay themselves handsomely for doing so.

Ex-Clear Channel #1 Arbitron said...

I want to thank John Hogan for devaluing radio. Since I have no stock in broadcast media I'm all for its fall. Even though I was #1in my daypart and hit all the demo numbers I was downsized for budgetary reasons. Clear Channel rewards failure. While I lose my job and have to refigure my life the Mays family continue to run CC into the ground and pay themselves handsomely for doing so.

Anonymous said...

By eliminating thier promotion and marketing CC is telling its clients that advertising is meaningless. I would hate to be on thier sales staff.

Anonymous said...

so, what do you think the businesses around town will think after reading that memo? Imagine the poor salesperson trying to "sell" their station--whem the company itself says NO MORE MARKETING money...i feel badly for the current employees..BUT maybe and just maybe...there is hope that radio could re-imagine itself after this is all said and done!

Anonymous said...

I cannot believe that a company CEO would issue such a memo and in such detail. They really are that clueless in San Antonio. John Hogan is one of the original Randy Michaels boys. Is there a possibility that when Hogan's deal is up that he will jump ship to Tribune? The way he operates it is believable that he wants CC to boot him out so he can collect his golden parachute money.

Gepp said...

John Hogan must have a pretty hefty golden parachute to be kept in the position of CEO for Clear Channel Radio.

His operation violates nearly every rule of effective management. Anyone worth their salt has to be looking for another company to work for since they have absolutely no control of their destiny.

Is that anyway to run a business? I am a bit shocked at the Mays family too. Lowry Mays was considered a brilliant businessman. You may or may not agree with his principles but he did know how to run a profitable company.

Lowry went wrong when he allowed the Jacor contingent to take over radio programming and sales. They never recovered from Randy Michaels. (and the same will be said of Tribune Corp.)

Clear Channel began its rapid downward spiral when the Lowry Mays's sons took over the operation. Young, rich and dumb.

hogans heros said...

it could be that randy micahels' way of getting even with clear channel for humiliating him was to make john hogan the next in command. that guaranteed to kill clear channel. the way that company has treated its employees over the years they deserve to have their bain capital/lee deal fall apart. the mays family is well insultated and wont be hurt financially which is sad. if there is good news its that they will be exposed as the pariahs they are and they will be out of "the game".

Anonymous said...

How does a "just hired" feel at a Clear Channel station? Is there a worse job than trying to sell time for that company especially after this memo leaked out? Buyers have to be having a field day. This is from a company that has already been spreading its legs and giving away bonus spots galore just to keep clients on the air. What now?

My Town said...

I have worked for both CBS and Clear Channel and one is almost as bad as the other. Both stifle any promotion or marketing. CBS at least in "my town" is a political mess overseen by a skinny runt who fancies himself "The Godfather". He makes all the decisions regardless of department and radio stations. He is "owned" by his consultant who makes the programming decisions at two of the stations. Clear Channel in "my town" had invisible management. I met our market manager only once and we were never formally introduced. We go through that once a month exercise of who is going to get fired. How can either cluster survive in the long run. One run by a megolomaniac and the other barely run at all. I could not tell you which is worse. There are far more politics and even decisons based on religious beliefs made at CBS and at Clear Channel no decision is made locally.

ggood said...

Well, tough to say no one saw it coming. I've been gone from the business over10 years, though I stay in touch. I agree that the mismanagement in radio might pave the way for greater creativity down the line. But only if the collapse comes fast enough that when better ownership takes control people still have radios to listen to.

FWIW, I think you're wrong about Bain bailing out. As stupid as corporate radio management is, investment bankers are even stupider.

Peter Principle said...

I read, re-read and re-read again John Hogan's memo. That has to be the most morale-busting memo I have ever read. Not to mention transparent. That memo should be an example on how not to write one. Hogan should have done this in a conference call not an email. I can see this memo being used as an example of how not to do it.

eeeet fffreshhh said...

You really have to admire the tremendous respect Mr. Hogan has for his managers. He gives them a marching orders and expects a written response by the end of the day. This guy couldn't manage a Subway or maybe he could. Use one less pepperoni, one less cheese slice and fewer cold cuts. That is how he runs a radio company.

Anonymous said...

NINE DOLLARS AND CHANGE. GOTTA LOVE IT. BAIN/LEE DON'T HAVE A CHOICE. BACKOUT OR CC TAKES A HAIRCUT.

THE DEVALUATION HAS BEGUN.

HALLELUJAH!!!!!!!!

Anonymous said...

How many sales personnel of competing stations are showing prospective clients this memo around in their markets?