Saturday, June 7, 2008

Radio: Clear Channel – Smells like team spirit!

How will Clear Channel operate under its privatized BainCapital and Thomas H. Lee brave new world version?

We don’t know. But we do know how Clear Channel will be run prior to the takeover.
Let’s check out number two son and Clear Channel CFO Randall Mays’ latest memo to his managers.
I’m surprised BainCapital and Thomas H. Lee didn’t summon their memo rewriters to San Antonio for this one.
Trustafarian Randall would’ve been better off composing this in sycophancy instead of baring his chipped and weakened fangs.

From: Randall Mays

As all of you know we have now signed up the new Merger Agreement and we hope to close sometime during the third quarter.

I think as most of you also know by now, there are certain provisions in the Merger Agreement that make it extremely important for us to be as judicious with cash as we possibly can between now and closing. First, as part of the deal, Clear Channel shareholders will potentially be forced to roll a portion of their shares into the new transaction. It is the preference of our board that no one be forced to roll (everyone has the option to roll and the board would prefer that this remain an option rather than a requirement). There is a certain level of cash which we will need to have at closing in order to insure that no one has to do anything that is not of their choosing.

Additionally, the debt provided by the banks to fund the transaction was fixed at the time of signing the amendment to the merger agreement. Thus, any additional cash outlays between now and the deal closing, have to be funded 100% with equity. For those of you that have run levered return models, it is very difficult to make deals attractive when you have to fund them with 100% equity. Post closing this will not be the case and we will go back to our normal procedures so don’t infer anything in this other than there are timing issues with respect to capital before closing.

What does all that mean? As we look forward between now and closing this means that we will be extremely judicious in any capital spend of any type. We also are going to be very closely monitoring cash generation and balances.
That MBA from the Harvard Business School didn't do much for his memo-writing. That's for sure.

At least he warned the Clear Channel managers in advance.

We know of many Clear Channel employees were busted from full to part-time, while others were forced to take on additional duties with either no additional – or even less compensation.

But let’s be fair and show sympathy toward the Mays family. They’ve made their sacrifices, too, according to a recent SEC filing.

Let’s start with Randall, the no-fun number two son and CFO. From 2006 to 2007, the poor boy went from annual earnings of $9,282,382 to $8,705,760. That’s $576,662 less take home.

Have mercy on poor number one son and CEO Mark Mays, the most revered of all feckless crapweasels. He took a somber hit. In 2006, he made $9,311,996. In 2007, took home only $8,705,760. That’s a $606,236 loss.

The kids are no Lowry Mini-Me’s.

Pater Lowry addressed problems. Sons of privilege Mark and Randall just water them daily.
You could also say that Clear Channel radio division CEO John Hogan’s had a taste of his own down-pricing medicine. Hogan blew a $1 million bonus for failure to achieve certain undefined goals. He did get kissed a bonus $157,500 for his “achieved performance of the management objectives,” which, when translated, means “metza metza coat holder.” In 2006 he pulled $3,039,285. Last year, he was down to a paltry $2,166,308. That’s a loss of $873,000. But as the saying goes, less is more!
Clear Channel also informed the Security and Exchange Commission that its board “engaged an outside security consultant to assess security risks to the physical plant and operations, as well as its employees, including executive management.”
The consultant’s report led to Clear Channel implementing – and here’s how they call it - “numerous security measures for our operations and employees, including a general security program covering selected senior executives.”

Drastic times call for drastic measures. Call for the Gulfstream jet.

“For security purposes and at the direction of the board, Mark Mays, Randall Mays and Lowry Mays utilize Clear Channel’s airplane for all business and personal air travel.”

Translation: We don’t like taking off our shoes and being told where to sit.

Most of us wouldn’t call a private jet an “airplane,” but I digress.

Let’s look at the line item marked “personal air travel.” For 2007, Mark Mays took the one of the company “airplanes” for $55,012 in personal use. Co-founder Lowry Mays hopped the Gulfstream for $92,980, and young Randall logged his at $172,934.

Of course, these figures don’t take in the costs of junkets for key Capitol Hill decision makers supplied by Clear Channel lobbyists. Those are buried in a separate line item.

To those Clear Channel employees that had their travel budgets slashed or eliminated, please remember that it’s all relative. The Mays family shares your pain.

This proves that Clear Channel is a bilingual company. B.S. is second language to them.


Anonymous said...

I wonder, if this will kill further wasted funds on HD Radio?

Reality Check said...

Hardship, right? This family actually believes they are in need of security? In reality no one cares. No one hates the Mays family or Randy Michaels or anyone else in Clear Channel's present or past for ruining radio. We just stopped listening. That is why you jokers are scared youknowhat-less that when PPMs become commonplace as the prime rating measurement service you will get an accurate read on how few people are listening to your radio stations and that your time spent listening is if you are lucky the length of a song. Your demos for talk are older and dumber. What will happen when you find out that radio is not be listening to in store or at work anymore? Enjoy living in your bubble, gentlemen. It's all you have left.

Anonymous said...

Gorman, it is all relative. Don't you get it? The Mays family did pay for their mistakes. They didn't have to. They could have been like Alfred Liggins, Farid Suleman, Les Moonves and others who blame others for their mistakes.

Are you upset that you were not born with a silver spoon in your mouth and they were? It sounds like this is a typical forced class versus crass blue collar bullcrap whiny complaint.

Get real.

Anonymous said...

You want to increase the worth of your pitful radio stations? Stand in line with the rest of us. Other CEOs, CFOs, and executives are content to fly commercial. You want bottom line? That will give you more bottom line than firing most of your radio station staffs and running them on autopilot. I am supposed to feel bad about John Hogan. He got off easy. His less is more cost CC way over one million dollars. He still came out ahead. Less is more was a good idea if you have content to sell. Clear Channel didn't, doesn't and won't until it is broken up and sold to operators that know how to run radio effectively.

Anonymous said...

What kind of company are they running? That memo and instructions are bush league. He must have been partying at Harvard because he did not learn much about how to be a CFO of a major entertainment company. What a complete joke. The memo should make Forbes and Business Week.

Ex-CC-er & loving every minute of it said...

In other words what master Randall is saying in his best Ivy League prose is that he and his family stand to make less money if their beloved Clear Channel doesn't have bags of cash when the deal closes they'll make less money and the buyout will be less lucrative? As far as I'm concerned the Mays family and other major shareholders should get screwed the way they screwed others and this industry for the past decade.
Do those managers that follow their nickel and dime edict really believe they will have a job after the deal closes? I would also like to know what Randall Mays's definition of "normal" is. Clear Channel hasn't been "normal" since it merged with Jacor a decade ago.
To the Mays family: We built it, you profited from it and now you are going to EAT IT!

Anonymous said...

The only reason the Mays family is taking CC private is because successfully conned Bain Capital and Thomas Lee. When those two realize what they have done they will try to break it up and sell the pieces and to do so they will have to sell them at a loss. I think Gorman may be right about fire sales and good deals. Just like real estate. The smart ones have the cash on hand to buy up when the time is right.

Toms River Rocker said...

Mr. Gorman,

I was in Atlantic City at the NJ Broadcasters Convention in 1988 and heard you speak. Something you said back then has stayed with me through the years. You said back then the radio industry would remain healthy and have continued success as long as it looked at the big picture, was attentive to technological change and resisted some of the greed. At that time technological change was the Walkman and many broadcasters at that convention were concerned that it was cutting into radio listening. Still radio prevailed because it was a place where you could hear music you may want to buy to listen on your Walkman. What really caught my attention was your message of resist some of the greed and how to parlay success into greater success. It is too bad some of the broadcasters running this business today didn't get to hear you then. When deregulation turned radio into a get rich scheme it worked only for those who sold early. We can only hope that this Clear Channel deal does go through and Bain Capital and Thomas Lee break up the company and parcel the stations off to qualified broadcasters. Otherwise we will not have a radio industry ten years from now. Resist some of the greed. That line should be in every corporate headquarters. Everyone would be richer for it.

Anonymous said...

I think it's a bit unfair to include someone's stock options as part of their "earnings."

Who among the readers of this blog would gladly hold stock in Clear Channel? I doubt anyone would.

These guys each get paid under a million a year. That's not excessive for running a $20 billion company.

I just saw how President Bush is flying around Europe on Air Force One. He has more than a half dozen stops on his "farewell tour." I would bet it costs more to fly Air Force One than it costs to fly the Clear Channel jet. The US government is in far worse share than Clear Channel. No one seems to begrudge the President his perks. I'd say what he does affects a few more people than the Mays family.

Anonymous said...

Funny you mention Bush. Lowry Mays and Bush travel in the same circles along with Tom Hicks and others. All cut from the same cloth. If you like the way Bush has run this country you will probably love the way Lowry and his children ran Clear Channel. Right into the ground.

Anonymous said...

Let me get this right. You say CC management can't spend a nickel and their each and every move will be watched just so the Mays family can make the most of their bounty from BainCapital and Thomas H. Lee? I hope this deal collapses on their asses.

Anonymous said...

Other than the Mays family conning everyone I fail to see any benefits of the deal for anyone else especially Bain and Lee. Even if they part out the stations like used car parts they will lucky to get ten cents on the dollar. Anyone got any answers?

Anonymous said...

Clear Channel's own Inside Radio mentions that no one in radio is getting raises unless there is a union contract involved. We are supposed to feel sorry for the Mays family taking a cut (but keeping their private jet and all expenses)? They should have given up their salaries and paid themselves a dollar. What did they do other than drive their company into the ground.

Anonymous said...

"Even if they part out the stations like used car parts they will lucky to get ten cents on the dollar. Anyone got any answers?"

The real estate will get them far more than ten cents on the dollar.

All of the sales have been in excess of the purchase price.

A lot of people want bad things for them no matter what they do. But they are hardly hurting for money. The issue with regards to expenses is throwing good money after bad.

If the conclusion everyone has reached is the on-air radio is dead, why does everyone want these companies to continually spend money on those stations, as though that will change anyone's listening habits?

Anonymous said...

What is the annual growth rate of radio? I rest my case. It is a dumb deal. Obviously a number of investors will make out well in whatever scheme was conjured up to make this happen. The losers will be the listeners and the station employees. The FCC is useless. The time when The FCC made sure radio served the community of license are long gone. Now the broadcasters are insulted and claim they will have to go off the air because it is too expensive to be local. I can't believe I'm reading some of this crap. I don't have a solution. I don't think there is one. Radio 2020? Radio will be dead by 2010.

Anonymous said...

Warning. If you are a CC on air employee and under contract. Be aware. Your contract will not be renewed - even if you are in negotiations. CC is ready to terminate ANY non-syndicated jock or announcer. Even if you achieve all ratings goals CC believes that it is now practical to have a low cost morning show and balance the spot rate to achive the same goals or better than by having a costly a.m. drive show. Bain Capital and Thomas Lee equity and bank debt is in escrow. The debt money from the banks is in escrow. If CC comes up short at closing, it comes out of Mays family hide.

Anonymous said...

What does John Hogan do for Clear Channel to increase share holder value? Does he have photos of Mark Mays and a goat?

Anonymous said...

So Bain/Lee buy a bomb. They write it off against profits from other ventures, that's all. Everyone gets what they want except the employees of Clear Channel and what is left of their listenership.

Sad. Whatever happened to serving the public interest?

Anonymous said...

I work in a CC market you are familiar with, John. It is apathy cut with fear. We don't care about the product because we know that no matter how well we do that we could be cut at any time. Our superiors foster the apathy. Try asking them a question. "I dunno" is always the answer. This is a wonderful way to run a business.

Anonymous said...

Correction please. B.S. is the ONLY language used at Clear Channel.

Anonymous said...

"Sad. Whatever happened to serving the public interest?"

The late Bill Paley said many years ago, "The public interest is whatever the public is interested in."

It worked well then, it works well now.

Anonymous said...

I read the CC book. The real one, Right Side of the Dial. Lowry was a nose to the grind owner.operator and that is okay. He was innovative, creative and knew his strengths and weaknesses. It was Cheap Channel in many ways but fiscally responsible and that is the bottom line. It is clear that he trusted Randy Michaels and his gang far too much as well as giving his Ivy League but slacker kids too much control. That is what did CC in. All the kids are worried about is their own trust fund and hanging on to the private jets.

another ex-cc-er happy to be out said...

Back to "normal?" That is, Back to "normal" under new ownership (Bain/Lee)? What is "normal" at CC anyway? That place has not been normal since 1997.

Anonymous said...

Here's a slight topic change that is relevant because news that broke just yesterday. Many internet service providers are going to start charging more for users who spend a lot of time on the internet, such as radio station stream users. What this means is that now you get to PAY for COMMERCIALS on your radio stations if you listen online. Oh boy!

So the choice will become whether you want to pay for what was once "free" radio (with commercials) if you listen online, or else pay a little more for commercial free radio via satellite.

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