Monday, March 24, 2008

Radio: Deal or no deal?


One down, one to go.

I’ll give David “Fumbles” Rehr credit. He managed to pull off every stall and delay tactic imaginable to prolong the inevitable. But when all was said and done, Fumbles just didn’t have the juice to avert the Department of Justice’s green lighting the merger of XM and Sirius.
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“We are astonished the Justice Department would propose granting a monopoly to two companies that systematically broke FCC rules for more than a decade,” was Fumbles' farewell whine.
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Now, it’s up to lame duck FCC Chairman Boy Kevin Martin to rubber stamp it.

But what about that other deal?
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The vernal equinox has come and gone and Clear Channel and BainCaptial and Thomas H.Lee Partners haven’t nudged an inch closer to the altar. We were told that absolutely, positively, without-a-doubt the buyout would be wrapped by the Ides of March.
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Then the date was changed to the first day of spring.

Last we heard was that it would wrap this week.

We are now in this week.

Even the stock prices that were inflated to crimes against nature prices to guarantee a quick wrap are sliding in reverse now.

After the last couple of week’s worth of reality checks, it appears the buyout may never get done.

What are the five words Mark Mays hates to hear on Wall Street? Around here we don’t push.

Nearly every day we’re faced with a new tortured explanation about what may have gone wrong with the Clear Channel-Bain/Lee deal.

“We have a hard contract with the banks that was set up in May 2007 to provide a hard underwriting.” That’s Tommy Lee co-president Scott Sperling speaking last week.

So, what’s it gonna be, Scotty? Yes or no? Hard or soft? In one week we’ve gone from a nearly done deal to a nearly dead deal.

Bain and Lee are ignoring their own rule: an investor’s base isn’t the people who are with him when the company’s right; it’s the people who are with the company when it’s wrong.

Last week, Bain and Lee claimed they’d be unloading stations that aren’t – in their word – “core” to the company.

But who’s buying – and at what price?
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"You want what - for that?"

There are three tell-tale signs that’ll tell you when your deal has hit a rough patch: 1. everyone from CNBC to the Wall Street Journal can’t stop laughing at you; 2. your stock goes in reverse, and 3. Those you fear the most begin talking about waiting you out.
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If the deal ever goes through you’d have to believe Bain and Lee will ask Mark Mays to retire due to ill health. The company will be sick of him.

Whatever the case, there’s an old saying about a bad deal: stupidity is expensive, no matter what price tag you slap on it.

16 comments:

PocketRadio said...

"DOJ Approves Sirius/XM Merger"

"The statement also dismisses claims by HD Radio that a merged Sirius and XM would exclude competing technology from car stereos and other equipment."

http://tinyurl.com/32og6s

"Lack of interoperable radio key to XM+Sirius merger approval"

"In an unusually sideways argument from the US Justice Dept. this afternoon, the fact that both XM and Sirius satellite radio services have been unable to create an interoperable radio device for the foreseeable future, has been put forth as evidence that a merger between the two entities -- which the DoJ approved this afternoon -- would not reduce competition between them."

http://tinyurl.com/2ajgq6

The DOJ also ruled against HD Radio - what a shame, the boys and girls at iBiquity must be in tears.

Anonymous said...

Funny thing is this should have been a relatively easy get for any lobbyist who's worth anything.

When two industries collide in DC, it's a lot easier to preserve the status quo than to make a change. And with Sirius programming being so sleazy, it's an easy target. So failing to prevent this thing shows how weak the NAB is now.

This merger is in direct contradiction of a law. But NAB has made itself so irrelevant it can't even muster a little congressional outrage. Hard to believe this is the once mighty NAB.

As for Clear Channel, that deal is as good as done. Bain and Lee were putting up cash all last week. I know you'd love to see it collapse, and if it did it couldn't happen to a nicer bunch of losers, but unfortunately this one is in the books.

Frantic said...

There is too much time and money invested in the CC-Bain/Lee deal to allow it to fall apart. Having said that, it will go down as one of the great media follies of all time. What lending institution would be reckless enough to back buying the stations CC plans to unload for those multiples? Radio math is easy. Take seventy five percent off the top and go from there. For radio to even have a chance at competing in today's world it requires more people, more talent, and bright innovative management. Those words are not in Clear Channel or Bain or Lee's dictionary.

Kingfish Stevens said...

Hi,

My name is Scott Sperling, co-president of Thomas Lee Capital. I'm not only co-president, I am also a member.

Anonymous said...

They don't have anyone left to fire unless they plan to network most of their programming. I cannot see any way this deal has an up side. There is no way this deal can make money. Radio is overvalued and there are no suckers left for BainCapital and Thomas H. Lee to pawn off these stations to.

Shyde said...

It will be a shame and a sham if the CC deal does go through. It will be a shame and a sham if the CC doesn't go through. Either way they win. If the deal is done the Mays family gets richer. I don't believe for a second that Bain/Lee will make Marky answer to them. What will really happen is the underlings who think they have it bad now will have it even worse and working for CC will be the ultimate in pressure cookery. If the deal is not completed the Mays family walks with $500,000,000 and Bain/Lee will write it off as another deal they couldn't complete. In their world profits and losses are routinely weighed in the billions. No big deal. I don't see radio coming back unless there is that fire sale you have talked about in the past. Long as radio is going for those kind of dollars they will be forced to continue downsizing, adding more voicetracking and doing less localism and that will translate into fewer listeners. Now what if the newly combined XM-Sirius begins doing localized programming by using their repeaters for regionalism?

Former Infinity slave said...

I predict Mel Karmazin will drop the number of channels, raise the subscription prices and claim it is too expensive to do a la carte subscriptions. I also preidct Mel Karmazin will be CEO long enough to take out his millions and leave XM-Sirius in the lurch. They willnot be around fiveyears from now and neither will Mel. He will own Bora Bora by then.

Anonymous said...

Nothing has changed. Bush/Cheney are still running the store. XM-Sirius mergers, Clear Channel-Bain-Lee, Sam Zell-Tribune. I expect to see the madness continue and fortunes built on the backs of others until the end of the year and even then I'm not sure we have that much of a choice. It cost a lot of money to run a presidential campaign and many favors will be owed. Who is the NAB backing? Who is Ibiquity backing? Who is Mel and Zell backing? The answers to those questions will determine what the future will hold. I think the next run to be made will be done on the internet to get control of that baby out of the hands of our U.S. citizens.

Anonymous said...

Nothing has changed. Bush/Cheney are still running the store. XM-Sirius mergers, Clear Channel-Bain-Lee, Sam Zell-Tribune. I expect to see the madness continue and fortunes built on the backs of others until the end of the year and even then I'm not sure we have that much of a choice. It cost a lot of money to run a presidential campaign and many favors will be owed. Who is the NAB backing? Who is Ibiquity backing? Who is Mel and Zell backing? The answers to those questions will determine what the future will hold. I think the next run to be made will be done on the internet to get control of that baby out of the hands of our U.S. citizens.

Anonymous said...

the buyout will happen. there is too much money at stake for those setting up the deal. whatever happens after that is someone else's problem. maybe you don't believe they can cut anything else out from radio operations but you are wrong. clear channel, cbs, and citadel are all creating national personalities. what is not national will be voice tracked or other syndication will be carried. that is the real reason the nab did not want the xm-sirius merger to occur. just by running live programming in other dayparts will guive them an advantage.

Sick of NAB said...

Maybe the NAB had the clout to see dereg through. Since then the NAB has created more disasters than it solved. They were not even aware of the DMCA until the SoundExchange came to collect. The AFTRA LA deal was inexcusable. How could NO ONE IN RADIO KNOW THAT THOSE NEGOTIATIONS WERE GOING ON. The NAB set back terrestrial radio on the internet by YEARS. I am not even sure the NAB deserves credit for delaying the merger between Sirius and XM. There may have been other issues. The FCC WILL approve the merger and I WILL BET THAT MEL K doesn't even after to do ALACARTE pricing. The NAB is worthless. We need young creative leadership and not some beer guy for hire.

jan said...

Gorman, good to see you back doing radio. Don't you think the deal has to get done because they are so far into it? I think they have too much invested in the deal to back out and if they have to change a few backer banks I think they will find a way to do it. It will be a bad deal. It will be the deal that puts radio in a tail spin. I say why delay the inevitable.

Anonymous said...

Radio is all about big egos, big money and more than it’s fair share of bull and broken promises. But consumers hold all the power and they will decide the success of HD radio, old fashion radio and yes the future of satellite too. Mean while over at Apple, Steve Jobs just keeps cranking out more ipods. Apple wants to put radio of business. Steve Jobs thinks “radio is old fashion technology” And radio's future "adults 18-34" keep slipping away to anything other than radio. And those pesky cell phone, guys, internet guys, wifi/wimax guys, and more all want a piece of the radio’s action too. Seems like listeners have so many choices now, and radio hasn’t figured out how to hang to any of them.

Clear Channel wants out because they see the future and realize their stock price won’t maintain and will continue to decline. The radio bubble is bursting just like the housing market did.

Anonymous said...

In deals like this there is the screwer and the screwee. Bain and Lee are clearly the screwees. The Mays bros have it all over these bozos. In another life they were proctologists.

Anonymous said...

It's a bad deal which means it will probably go through. More jobs lost, more listeners gone. What a future.

Anonymous said...

There is now a whole generation out there for whom the paradigm, at least where music is concerned, is no longer AM vs FM, top 40 vs AOR, WMMS vs WGCL or M105, or satellite vs broadcast. It is MY music (iPods and downloads) vs SOMEONE ELSE's music (radio). Radio as a music service will be over as soon as the older demo's die off. Radio as a news and information service is losing to the internet in the same fashion. Bain and Lee are going to end up holding a bunch of buggy whip manufacturers at the dawn of the automobile era.