Friday, January 4, 2008

Radio: We have met the enemy and he is us!

It’s a business that fires its sales staff for being too successful in favor of inexperienced account executives that’ll work for less commission. Relationships are so overrated.

So what if they’ve never sold radio before – or even know much about it? What’s there to know? We have time and we have to sell it. Details get in the way.

Maybe that explains what I heard the week before Christmas on a Clear Channel-owned classic rock station in a nearby market during afternoon drive.

Every spot in the set I heard – minus one – was for a strip club. Sleazeball strip joints. The one exception? A bar promoting a wet T-shirt night.

For the station’s sake, I hope the business was cash up-front.

I pity the poor sales guy. He probably blew his meager commission on lap dances.

The annual Executive Summary from Borrell Associates show 2008 local on-line advertising up by 48 percent, putting it at $12.6 billion with much of it coming from local search and on-line video spots.

The report also says 2008 will present a challenge for old media - radio, TV and cable to newspapers –most which have their time-buy sales staffs also pitching non-traditional revenue on-line ads.

Radio is a business that terminates relationships with its top ratings and revenue air personalities in favor of non-local syndication or voice-tracking.

Yesterday, Radio Daily readers voted “the fired and laid-off employees of Clear Channel, CBS Radio, Citadel, Emmis, Cumulus and other large, medium and small market radio stations who have devoted their immense talents to broadcasting,” its 2008 Radio Persons of the Year award.

Immediately following Radio Daily News publisher Larry Shannon’s announcement word came down from Clear Channel that Valerie Smaldone, the top-rated and best-known air personality at WLTW-FM was off the station after twenty-four year run.


She couldn’t come to terms with a new multi-year contract offered by Clear Channel.

Translation: she wouldn’t take a pay cut.

Valarie’s the third full-time veteran WLTW announcer to vacate the premises in the past six months. Do you detect a pattern here?

WLTW slipped from first to third in the New York Arbitron. Where do you think they’ll place a year from today?

Who said Clear Channel discarded its “less is more” campaign. They have far less employees today than they did six months ago.

You’re a better man than I, Gunga Din. Too bad you rhyme with has been.

Some companies worry about a brain drain while Clear Channel routinely practices brain dumping.

Let’s do a reality check.

These broadcast chains lost over 50% of their value in one year.

Citadel - Jan. 2, 2007 - $9.96; Dec. 31, 2007 - $2.06. (Wall St. viewed it as a positive that Disney unloaded ABC Radio – not the other way around. The same week Disney dumped radio, it bought Pixar from – there’s that name again - Steve Jobs.)

Emmis – Jan. 2 - $8.24; Dec. 31 - $3.85.

Entercom - Jan. 2 - $28.18; Dec. 31 - $13.69.

Radio One - Jan. 2 - $6.75; Dec. 31 - $2.34.

Spanish Broadcasting System - Jan. 2 - $4.11; Dec. 31 - $1.85.

Westwood One - Jan. 2 - $7.06; Dec. 31 - $1.99.

Salem just missed the 50% loss club by a prayer: Jan. 2 - $11.95; Dec. 31 - $6.59.

CBS fell $31.18 to $27.25. (True, there’s writer’s strike and the Katy Couric gaffe – but putting one in Joel Hollander’s back may have effectively tackled, at least temporarily, the downward spiral at the radio division.)

Clear Channel, which wanted to privatize by year end – but couldn’t - is down $35.54 to $34.52 – a price artificially inflated by the $39.90 offering price by BainCapital and Thomas H. Lee. There’s a deal that’s close to turning into a cut and run. If Bain and Lee cut their losses and back out of that deal – Clear Channel will be in free fall.

Theirs isn’t the only deal that could implode. The Merrill Lynch bull, already gelded by the credit and mortgage collapse, is taking a second look at the privatization deal they concocted with Cumulus. When they announced it in July, Cumulus was at $11.75. Last night it closed at $7.25.

Pump it and dump it? Radio’s been pumped and dumped to death. It forgot how to draw listeners and sell products for its clients.

Radio can’t just impugn the economy. Sales were bad when the economy was healthier. I know of many long-time radio clients that stopped advertising because they were not getting response from being 10th place in an endless spot set.

Then there’s production – where creative producers that could craft masterpieces for local clients – were fired and replaced by automatons that delivered tonnage and nothing more.

A few years from now we’ll look back at this time as radio’s golden age for rampant buffoonery.

I read an article in the Wall Street Journal’s weekend edition on Facebook. Here’s the condensed version: Three years ago Paul Thiel invested in an unknown social networking site, Facebook. Thiel’s venture capital company put a half million – that’s next-to-nothing in their world. Later, he invested a bit more. Its creators retained autonomy. Today, the value of Facebook increased over fifty times and the site now has over 59 million users.

Think about it. A radio chain could’ve made that very same $500,000+ investment for its future.

Math test: It takes roughly that amount to upgrade how many terrestrial stations to HD Radio? And there’s no future in that con where a dollar chases a dime.

Realize this. Radio was the original social network. Its diversity of formats brought like-minded people together and has been doing so since its inception. Whether it was sports, talk, or requests and dedications, radio was a provider of convergence. It could’ve easily built upon its inimitable position with the Internet.

With few exceptions radio was divided into two camps.

One assumed the Internet to be “the CB Radio of the nineties” (an exact quote from a top ten market manager in response to an observation I made regarding the emergent value of the web).

The other viewed the Internet as competition and felt it was radio’s duty to snuff it out.

There were several discussions I had seven, eight years ago with prominent radio people that couldn’t buy a clue regarding web-based social networking. When I suggested partnering with one, I was met with polite nods and smiles while their eyes glazed over.

Where would radio be today had it actively - not passively - utilized the Internet seven, eight, nine years ago?

The current radio-driven propaganda about the industry learning how to generate added revenue from the Internet is just that.

There are moves that must be made now to insure radio’s future. One is apparent: Invest in and marry the Internet. That doesn’t mean getting bailed out by Google or other on-line services for ad revenue. The Internet can be radio’s best friend for years to come. If ignored or used passively, it will be radio’s worst enemy. It’s that black and white.

Radio also has to learn – or relearn - how to program, market, and sell time in this brave new world. Marketing basics start with customer satisfaction, customer retention, knowing segmentation, building on brand loyalty, and providing clients with ROI.

Show me a naysayer and I’ll show you someone who fears change.

Radio deals aren’t in collapse solely because of the credit crunch. Once the fire sales begin, appraisals will become pragmatic – and when that occurs they’ll be smart money investing in radio, knowing that the medium can be revitalized. That will, in turn, draw the creative and innovative staff to revise the medium.

Maybe it will take Paul Thiel or others like him.

One thing is certain. You’ll be able to spot the real broadcasters. They’ll be the ones not wearing the clown noses.


vanillacokehead said...

It is sad, John.

A good friend of mine worked at a certain corporate-owned Cleveland rock station a few years ago - had decent ratings - a good following - and the station canned him because he wouldn't sign a contract that would have entailed a major pay cut.

I still makes my blood boil when I think of it - and I still refuse to listen to the radio station he used to work for.

Peter Goodman said...

You John are absolutely 100 % correct about radio not recognizing what the internet could do for it. The brain trust running radio for the past decade had blinders on when it came to the internet. I agree that had they invested in radio-like internet sites they would be profitable and that much further ahead. I think the best scenario is for internet companies to buy radio chains when the fire sale hits. They would know how to marry the two and be profitable with both. HD radio? Please.

Lopez said...

Seeing that Clear Channel's deals to go private and sell off smaller markets in faltering and the Cumulus-Merill Lynch deal caving in will history record Farid's Citadel buying ABC radio deal the last bad one? I look forward to the fire sales and more realistic prices for these properties and I know of former station owners champing at the bit, waiting to return. I am counting the days. Thank you, John.

Anonymous said...

Would love to know the difference in value between what Susquehanna was before and after Cumulus got its hands on it. The first thing they did at closing was dump all the tenured employees.
Thanks, John. I love the blog.

Radio Man said...

Exactly what I have been saying too. Instead of embracing new technology radio pretended it wasnt there until it bit them on the ass. Then instead of trying to figure out new media radio judged it to the enemy. Newspapers and TV are suffering too although they are attempting to link old media with new and the ones doing it correctly will have a fighting chance. I heard you on NPR a few months back defending TV News soundbites saying that stations and networks have learned how to use the internet to provide indepth information on their web sites. It leaves control to the consumer and successfully marries old media with new. I agree wholeheartedly. Radio on the other hand has web sites that are as bad as their programming. See one Clear Channel or CBS radio web site and you have seen them all. There is nothing to directly link on a continual basis the radio station with their web site. I love your blog and hope to see your influence on radio and the internet. At least you are not like those other consultants that blame the stations for following their suggestions and denying they ever made them. While they stay stuck in the past you are looking toward the future. Thank you. I am forwarding your piece to my regional manager.

LM Cle said...

Your blog was forwarded to me. I love your writing and viewpoint. As someone who has also spent four decades in radio I fully agree with your assessment.

The greed coupled with immaturity destroyed radio. Money was easy to come by and the con game was convincing.

Thank you John.

Anonymous said...

Here's the fact:

If the future of radio means embracing the internet and new technologies, then all those employees wedded to old technologies are no longer necessary. Keeping a full staff of DJs around 24/7 is a waste of time & money when the market share is half what it was, and everyone is getting their music from other devices.

If the new technologies are attracting money and audience with lean & mean staffs (and they are), then it's obvious where the future lies.

So when you encourage things like new technologies, you're not doing radio employees any favors. If you're in radio now, and you don't understand the internet, you're a dead man walking.

Meanwhile, we're all jumping to conclusions about the ABC-Citadel deal, and haven't given anyone there a chance to actually do anything. It's going to take a few years to find out if that was a good or bad deal. Just because the stock dropped in the first month doesn't mean a thing. If you buy stocks for the short term, you're going to lose money. No matter what you buy. Apple dropped $15 on Friday. I wouldn't take that as an indication that the stock is dead.

Anonymous said...

"I look forward to the fire sales and more realistic prices for these properties and I know of former station owners champing at the bit, waiting to return."

If they do, the first thing they'll notice is the cost of the station was their cheapest expense. That's what Citadel discovered. Buying the stations is a lot easier and cheaper than running them.

If former owners jump back into the mix, I predict they'll do the same thing the current owners are doing: Cut expenses to the bone, get rid of old employees, and embrace new technologies. That's what one former owner, Sam Zell, is about to do.

Folks: It's not the 80s any more. Radio doesn't have the monopoly it once had. There hasn't been a cool radio for people to buy in 20 years. An entire generation has grown up thinking that radio is something attached to their car. None of that is any good. Programming changes won't change any of the problems radio faces. If you just think fixing programming will bring listeners back, then you haven't talked to listeners lately.

Radioman100 said...

"Spanish Broadcasting System - Jan. 2 - $4.11; Dec. 31 - $1.85."

David Eduardo is worth only $1.85

Anonymous said...

Generation X no longer listens to radio. They were the last to at least sample it and only because alternative rock went mainstream before idiots like Fred Jacobs effed them up with the Edge franchise. Radio is not even on the radar of Generation Y. It's a non entity.

You hit the nail on the head when you said they found other medium to replace radio. Kids still listen to music, discuss politics (more than radio programmers are willing to believe)and crave news and information (and not just pop princess gossip).

Radio doesn't deliver so that demo goes elsewhere. It's a demo that is the largest since the baby boomers. Look what radio is throwing away.

HD radio. Get real.

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