Wednesday, March 26, 2008

Radio: Fear Channel



Don't say I didn't tell you so.

How pathetic.

We’re supposed to feel the pain for what appears to be the imminent collapse of the Clear Channel-Bain/Lee deal?

Bain and Lee want to close. The banks don’t and for good reason. How do you sell a loan with the name Clear Channel written all over it?

We’re supposed to feel sorry for the poor Mays family because they claim that if this deal dies it will force them to cut donations to their foundations and favorite charities?
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Then there's the staggering price of jet fuel! Do you know how much it cost that family to keep their private planes flying?

We’re supposed to fear their threat of more Clear Channel employees being fired if the deal doesn’t go through. Mark, get real. It’s the other way around. Bain and Lee already have your latest chopping list. Right?

Sickening.

Months ago, I said Clear Channel stock belongs in the teens – not the twenties and definitely not the thirties. Wall Street’s now seeing through their hype.

Clear Channel couldn’t operate radio on such a large scale. Some things aren’t meant to be that big.
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You're not the only one. Just ask Farid. Just ask Lew.








The silver lining in the Mays family cloud of doom and gloom is that a fire sale of publicly traded radio stations will open the doors for real broadcasters and entrepreneurs to enter and re-enter a field they have the passion and desire to succeed in.

Cash flow margins may still look good on paper to some. That is, as long as you avoid the veracity of change.

Radio isn’t dead but its condition is critical. For old media to subsist it has to marry itself to the new –and not in the cosmetic way it’s being done now.

While we’re at it - abandon the inanity of HD Radio. The first chain to forsake this folly will be the first to turnaround.

Radio, done best, provides information and a soundtrack to one’s life.

How many radio station-produced spots do you hear these days that don’t sound rip and read?

When was the last time you heard a spot that sparked imagination and produced a saleable visual of the product?

Tonnage replaced creativity. We all know of creative production people who were supplanted because they couldn’t produce fast enough. Something’s got to give and creativity is so overrated.

How can one blame the banks for backing out of this doomed deal? You tell a lie enough times and you begin to believe it yourself. Bain and Lee fell for their own hype that Clear Channel was indestructible.

Captain Edward John Smith of the Titanic believed his ship would never sink.

Clear Channel is threatening to go to court this morning.

Go ahead. Force the issue. Claim your doing it for the kids’ sake. Lowry’s kids.

It’s a deal that should die and everyone linked to it knows that. Cut your losses and get out. Toss the spectators off the field – and get the real players back in the game.

It’s the only way radio will survive.

This Clear Channel-Bain/Lee deal was written when Wall Street had its blinders on.

Mark, I believe you even convinced yourself into believing your stock was worth far more than it was trading for.

Personally, I believe most broadcast companies’ annual reports as much as I do in the tooth fairy, the Easter rabbit, and Santa Claus.

You want an instant barometer on how a broadcast company is really doing? Go directly to the front line and talk to those in its employ.

Check the morale.

Check their logs.

I have enough connections in the ad community to know how much those spots were really sold for and how many bonus spots were thrown in. You’d be surprised. Then again, maybe not.

You know how cheap cable and UHF buys are these days? Radio sells for even less.

If the radio company fired their seasoned sales staff for making too much money and replaced them with tenderfoots whose prior experience was managing the door at a strip club or receptionist at a dental office, you know where they're headed. Don't laugh. You can't make those scenarios up.

What kind of results are the stations' clients getting from their run?

What are they doing for promoting and marketing their own station? Did they just cancel their spring TV campaign? If they can't afford to promote themselves, how do they expect to market their clients?

That little bit of investigative work will tell you far more than the manipulated math of their annual reports.

A radio station’s real worth is not its studios, its computers, or how many other stations are in the chain. It’s people. They are what provide a station’s commodity.

Successful mergers are based on one and one equaling three.

Once real broadcasters are back in the fold – you’ll see. It’s still a people business. Just ask anyone in a successful new media company.

32 comments:

Anonymous said...

Gorman, I thought you would have egg on your face this morning. I was wrong. It is good to see that Wall Street is seeing through the fantasies created by the broadcast media and especially those created by Clear Channel and Bain and Lee. You are right about the banks. Those CC loans are not saleable. I hope you are right about the fire sales. I'm ready.

Anonymous said...

Maybe you haven't read the papers. That's OK...no one does anymore. But banks are reluctant to loan money to anyone. They're once bitten twice shy. (Was that Mott the Hoople?) It has nothing to do with Clear Channel. It has nothing to do with the issues you cite. It's all about the mortgage loan crisis and the fear of these banks that they'll end up like Bear Sterns.

Anonymous said...

"fire sale of publicly traded radio stations will open the doors for real broadcasters and entrepreneurs"

Oh please, talk about wishful thinking.

Like who? Mapleton Communications? Did you see what they've been doing out west? The exact same thing CC has been doing.

The people you'd like to buy these stations are retired. They won't be spending their billions on radio. They're too busy enjoying life.

There are no real broadcasters with money. The people you'd consider "real broadcasters" have no money, no ambition, and no abilities beyond their desire to blog and complain about the powers that be. To actually risk their own capital and reputation is way beyond anything they'd do.

Tell you what: Why don't you get some money together and offer to buy WMMS?

Kingfish Stevens said...

Big radio chains are/were destined to fail. No one wants to listen to 10 minutes of commercials on all stations at all times, no one wants canned play lists and voice tracking and the loud mouths idiots have long since played out. The way back is to return to local programming with a 21st century twist. BTW all of the mortgage issues and Bear Sterns issues are directly related to the banking deregulation of the President Ray-gun era. You can only prop the house up on sticks for so long. HMMMMMM. See a pattern? Deregulate and failure follows.

Anonymous said...

To anonymous #2: True. That will change. We need one chain to tank. Then things will change. We are still operating under the old rules right now. Inflated worth.

jan said...

Poor Mark Mays. Fifteen months of deception and lies and all for nothing.

Tim Edwards said...

Could someone please explain why Jerry DelColliano is so hell bent on Sam Zell and Randy Michaels taking over Clear Channel? These two DESTROYED Clear Channel radio when they brought their slash and burn spoke 'n wheel concept to radio. It became a good ol' boys club with those closest to Randy given golden parachutes. Everyone else got..politely put..screwed. I know they settled their law suit years ago and Jerry walked away with a chunk o' change. Did this turn the former enemies into friends? What ever may be the case it has to be said that the reason Clear Channel is in the mess it is in is because of Randy Michaels. John Hogan is nothing more than one of his golden parachute boys. I am disapointed in Jerry's sudden infatuation for Randy Michaels and Sam Zell. He is trying to position their take over of Clear Channel as a good thing if it happens. It is anything but.

ex cc said...

in answer to the last comment. i think jerry wants a job with randy and sam. not a whole lot of scratch in teaching. adjunct, i believe. sounds like he is playing the foes become friends card. that is almost as pathetic as the moves the mays family are making to save this deal.

Anonymous said...

Next Question for John.

Who are the "angels" out there that will buy up distressed radio stations. Who are these broadcasters and when will they make their move?

Clemaster said...

The difference between the Titanic and Clear Channel? The Titanic band had a better playlist than any Clear Channel station.

Anonymous said...

John doesn't end up with egg on his face very often-I worked with him for 10 years at WMMS-he's usually on the mark. He and I have been talking about the demise of Clear Channmel since they started wrecking great stations-some of them were even legendary like WMMS. Instead of improving the art and allowing it to thrive-which they could have done and succeeded with, they cut corners and basically went against the instincts and sound practices of broadcasting that were time proven. Add to that their treatment of career broadcasters-treating them like dirt and/or throwing them out-they deserve everything they get-they are the last ones left holding the bag-the greedy bastards should just declare bankruptcy and sell off the stations at what they're actual values really are-which is far less than they paid for them, and even less now that terrestrial radio has so many competitors-all they'll have left are the fossilized bones of Rush Limbaugh-he, they, and their cronie friends should all rot in hell!!!!

Mr. Predictor said...

Farid wanted to be Mel. Lew wanted to be the brain of the bunch. Mark wanted to be king of the world. You can't always get what you want. The only guy that will make out is Mel. Any takers on betting that Mel will cash in on XM-Sirius when it peaks and take the money and run and that will coincide with Howard Stern leaving as well. Will satellite radio be around in five years. Really now.

Anonymous said...

27.55 as of 12 noon. Lessee, that is about 10 higher than it should be trading. The day is young. Long may you fallllllll!!!!!!

Anonymous said...

27.55 as of 12 noon. Lessee, that is about 10 higher than it should be trading. The day is young. Long may you fallllllll!!!!!!

Quizical said...

John, I am still not clear as to how a decline in radio stocks makes the industry a better place to do business with. I would think the reverse would be true with radio being branded as another has-been ad outlet. In some ways thanks to Clear Channel and CBS it already has. The prices will have to drop considerably and the multiples almost to the single digits for new investors to even consider radio. If they ask their kids as many do they will be told that radio is not part of their lives. Those teens will be influencing the 18 + demographic shortly.

Anonymous said...

Clear Channel is getting what they deserve. Finally.

Anonymous said...

Mark Mays ran out of rabbits to pull out of his hat. This will definitely kill the Cumulus deal with Merrill Lynch which was a bad one to begin with and it puts Farid is a precarious position with Citadel. You were right about Citadel going down in history as the last bad big deal. I doubt we will see any more like this. If anything the reduction of stations owned should begin shortly. I hope you are right about the real broadcasters. We need them.

How now Dow Jones said...

CHICAGO (Dow Jones) -- Shares of Clear Channel Communications Inc. were down 17% Wednesday following a report that its $19 billion buyout deal by two private-equity firms is about to fall apart over the firms' credit terms to finance the transaction.

Clear Channel stock (CCU) was $5.38 lower at $27.18 on very heavy volume of more than 36 million shares.

Discussions among Thomas H. Lee and Bain Capital Partners and the banks that were lined up to back the deal -- Morgan Stanley, Citigroup, Deutsche Bank and others -- have stalled in a dispute over the details of the credit agreement, The Wall Street Journal reported Tuesday afternoon, citing people familiar with the situation.

A Clear Channel spokeswoman declined to comment. Representatives of Thomas H. Lee and Bain Capital did not return calls seeking comment.

The banks involved in the deal also declined comment.

One problem for the private-equity firms is how they could scuttle the transaction without incurring a $600 million breakup fee and being sued by Clear Channel, according to Citi credit analysts David Hamburger and Patrice Cucinello.

"Likewise, it is hard to fathom that the banks can get out of their financing commitments without risking a lawsuit from the private-equity sponsors to pay the breakup fee and from Clear Channel shareholders for damages," they wrote in a note.

The banks may already have taken possible litigation into consideration, said Mitch Walker, a partner at the M&A law firm of Bass, Berry & Sims.

"They might determine that if they did have to pay damages to the buyout group, they could fight it and defer that payment for some time," he commented. "It may be that $600 million wouldn't be as bad as the $3 billion or $4 billion they might have to take in write-downs if they finance the deal under the current terms."

The banks could also be merely negotiating for more favorable terms at this point, Walker added.

Thomas H. Lee and Bain Capital Partners are in an agreement to acquire Clear Channel for $39.20 a share. Previously, the deal had been expected to close before the end of 2007, but Clear Channel said last December that the transaction was likely to be completed by the end of the first quarter of 2008.

Radio stocks have generally been weak in recent years, due to enervated advertising trends and investor anxiety about increasing audio competition, including MP3 players, Internet streams and audio from cable and satellite- television services, as well as satellite radio. Clear Channel opted to take itself private so it could make capital investments and other decisions away from the scrutiny of Wall Street.

In a stagnant U.S. economy, hampered by the subprime-mortgage crisis, the credit market has become much more difficult to navigate, potentially slowing down consolidation in a number of industries, including media.

Anonymous said...

I hope Rush owned a lot of CC stock but chances are even he was smart enough to cash it in for crack.

Anonymous said...

To Lowry, Mark and evryone else at Clear Channel corporate. You made our lives miserable for the past decade. You disgraced a respectable business and had no respect for your listeners and employees. How about that. The tables have turned and there are hundreds of former employees that thoroughly enjoy watching you trip, stumble and fall. May you get everything you deserve and more for making our lives miserable. Peace.

another excc said...

What will tomorrow bring.
Going down?

Anonymous said...

"The way back is to return to local programming..."

Where do you get this idea?

That MIGHT work if there were only a handful of radio stations in each town. But we have towns with 50,000 people and 15 radio stations. You can't do local with that kind of math. Not enough people.

The fact is the public doesn't care about local, and that's what's killing radio. They want to hear about the big national celebrities. The ones they see on TV. If you can get them closer to Brittney's pants, you have a chance. But no one cares about the local school board or who the mayor screwed last week.

ManMade said...

Thank you, thank you, thank you. I sold the momnent I read your crimes against nature line about CCU stock yesterday. Beat the bloodbath. Now I hope they fold for effing up radio over the past ten years.

Anonymous said...

TO the last anonymous poster if I may. John has stated in the past that there are too many radio terrestrial radio stations. I would have to agree. In radio's case it has become too much of nothing. I think some AM and LPFM and class As should be allowed to go dark. That still leaves enough viable stations to make a go at being local and regional. All music formats play the same music city to city because their playlists are all corporately approved. If we start to see some localism and regionalism in all aspects of radio including music as well as local news, sports we may see more people using radio more often because of its localism. Beach music for example would not do well in Boston or San Francisco but could easily own the Carolinas. Hard rock does best in industrial regions. There was a time that each city has a distinct sound. The franchising of America does not work either. McDonalds and Wendys still have regional menus designed for specific tastes even though they are national brands. Satellite radio could target local and regional too and that cannot be dismissed with using their ground transmitters. I don't want to be cynical and say local radio cannot happen again. I believe under the right circumstances, ownership and management it could again thrive and also have an opportunity to reach a younger audience if it creates formats that younger people want to hear.

Anonymous said...

Bain Capital and THL Partners Sue Banks to Demand Completion of Clear Channel Acquisition

http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080326006105&newsLang=en

R Flough (inou) said...

Don't you hate to see grown men cry? CC & Bain/Lee have filed suit against the banks for backing out of the deal. This could get good especially if it is revealed that CC, Bain/Lee was not forthcoming with the condition the company was in. Did you notice too that CC is trying to play up its billboard/outdoor business over radio?

Anonymous said...

These guys are cockroaches, so don't be surprised if they find a way out.. and land safely with a golden parachute.

Like the housing bubble the radio bubble is bursting too. If you think it's bad for housing.. just watch what happens to radio

Anonymous said...

You know how cheap cable and UHF buys are these days?

NBC is selling its O&O TV station in Hartford -- a UHF station. GE will get good money because that station is top-3 in a 9-station market. At least Clear Channel didn't own it.

Judge orders banks to fund Clear Channel buyout said...

LONDON (MarketWatch) -- A Texas judge ordered banks to fund the proposed $19 billion buyout of Clear Channel Communications by two private-equity firms, the San Antonio radio broadcaster said in a statement on Thursday.

Anonymous said...

"All music formats play the same music city to city because their playlists are all corporately approved."

Absolutely wrong. They play the same music because the songs are hits.

If you go back to the 60s before consolidation, you'd see the same thing. The Beatles got airplay on every pop station in the country. Were there corporate playlists? No! The songs were hits. Same with today.

If you want to criticize consultants, be my guest. They have more to do with playlists than ownership. And if ownership was back to 7-7-7, we'd still have the same number of consultants. But there are no corporate playlists. That is pure fiction.

Anonymous said...

"we may see more people using radio more often because of its localism."

That hasn't been the motivation for the internet or TV. Why should it benefit radio?

The internet and national TV has ruined the market for localism. People simply aren't interested in anything local except for weather and traffic.

Meanwhile, just about every town has its share of totally local radio stations. They're doing exactly what you want, with local announcing staffs, talking about local issues on thousands of radio stations. Are they all getting good ratings? No. Are they all making money? No.

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