Sunday, February 22, 2009

Radio: When?


It’s the question I get asked the most: "When?"

The answer is: "When…."

When the banks truly come clean on their toxic investments and properties.

Media’s recovery (and let me preface that by saying that not all media will) have everything to do with getting a factual and candid understanding of our present economic state.

The meat fell off the bones in radio, television, and newspapers when the economy was purportedly healthy. That's before sub-prime, before the banks tanked, before Bernie and his friends.

Like all nearly extinct species, the radio mega-chains couldn't adapt to the changing environment. It's hard to prop up an industry that requires ears when few are listening.

Toxic investments, toxic radio chains – what’s the difference?

Lenders are distended with non-performing loans.

They didn't balance the books. They unbalanced them.

Delaying the inevitable is postponing recovery.

I have to laugh at David Frigstad, the chairman of Frost & Sullivan, who said in not so many words that media are manipulating "statistics, negativity, exaggeration, and doomsday forecasts,” which “have driven fear and panic among consumers and business alike." His ten cent psychology is a worth a dime less than what he charges for it.

Memo to all dreamers, schemers, and their assorted coatholders: There’s no rug left to sweep anything under.

Don't they remind you of lyrics from Bob Dylan’s “Like A Rolling Stone:” When you got nothing / you got nothing to lose /
You're invisible now / you got no secrets to conceal?

If the past thirty or so years taught us anything it’s that some things were never meant to be as big and unmanageable as they got. Banks and radio chains are just two examples.

We have to separate what can work from what never will.

Dismantle banks and businesses that can’t work and wipe out their shareholders. Strip away toxic their toxic assets – and from the pieces left over create new banks and businesses that will work.

There was a reason why the old trickle-up system worked so well for regulated media.

Some operators proved themselves to be efficient small or medium market size owners and operators while others were comfortable rising in the ranks from small markets to the majors.

The free-for-all of the last dozen years proved that just because these groups were able to con the financing didn’t mean they knew how to run that many of them.

That's a fact you can't confuse free-market cheerleader and New Hampshire Senator John Sununu with. A few years back, when arguing for more radio deregulation, he said the reason Clear Channel had the most listeners, ratings, and revenue was because it was the best radio programmer.

Let’s take Clear Channel, CBS Radio, Citadel, and Cumulus for starters. Of those four, how many will go belly up or be liquidated before December 31, 2009?

Just in the past couple of weeks a few of the smaller groups and regional specialists I work with received probing calls from some of the majors on their interest in some stations their trying to quietly unload.

I smell smoke.

25 comments:

Anonymous said...

The banks had no problem loaning millions upon millions to the radio chains. Debt service is another issue. Even when things went bad for radio and revenues fell apart Bain and Lee got duped from that little ole Mays family from Texas.

Anonymous said...

"Memo to all dreamers, schemers, and their assorted coatholders: There’s no rug left to sweep anything under."

Listen up, Bob Struble!

Anonymous said...

I concur. Until we know all of the problems with the banks we are not going to be able to move forward on solving other debt problems, especially radio's which is guilty of a lot of false reporting and financial manipulation of its own. I can tell you that first hand from working on the books. I work for one of the "C" companies.

Anonymous said...

John, I think we will see more than just the three C companies you mention go into receivership. Radio One is not too healthy. Salem is trying to pawn off stations (was that one of the companies that contacted your client?) in our market and already called three indie companies in surrounding markets.

joe beans said...

"That's a fact you can't confuse free-market cheerleader and New Hampshire Senator John Sununu with."


John, what are you advocating? How does one not let the market dictate in media? I have a real problem with any allowing any government financial stakeholder in "the Fourth Branch."

I think the main problem with radio isn't necessarily programming, although I would agree that programming is bland in the conglomerate world.

I think the problem, mostly, is a ground shift in the public's time to listen to the radio.

There are four classic times to listen in:

1.) At home, getting ready for work, school, errands, etc.,

2.) In the car, either commuting or "cruising,"

3.) AT work,

4.) At home, after work, school, errands, etc.



Number 4 died in the 1950s with TV's advent. No crying over that one. I would argue it died again (in a modified form) when MTV stopped playing vids and started airing 24-7 Tripe-o-Vision.

Number 1 still happens -- how else could Bob and Tom bits remain in the pop lexicon? How else could Stern have stayed so popular for so long? Obviously, a lot of us are really sophomoric before we've had our morning joe. But 10 - 30 minutes a day is really only enough for some half-listened-to yuks, and radio is feeling it now.

3. At work -- well, one is really at the mercy of one's workspace and co-workers. Example -- I would listen to the radio all day long, but I work in close proximity to four other people, three of who prefer (gads!) silence. So I wear headphones and listen to CDs on my computer, because work filters internet radio.

4. Number 2 -- American Grafitti was a great movie, but let's face it, cruising died with the Trans Am. It died with $2.50 / gal. gas. Cruising's dead. Thank God the Wolfman never lived to see it.



SO.

1.) What are the new mass media venues for the new American worker?

Excepting the unlucky bastards like myself who toil under 'net restriction, Internet radio is golden! Run some commercials on it, folks. It won't hurt. ClearChannel somewhat inexplicably DOES NOT run a separate commercial feed on it's webcasts. Why??? I have to listen to promos about the show I'm already listening to? If I'm already HEARING George Noory, wouldn't it stand to reason that they're marketing to the wrong guy when they play that 'Coast-to-Coast' :30?

2.) When the RIAA stops fighting Internet radio and trying to shut down sites like Pandora with exorbitant royalty suits, realizing that sites like Pandora are actually CAUSING folks to discover and buy new music again, and the RIAA gets its head on straight about supporting translatable, semi-permanent, high-quality format (no one wants to repeatedly buy the album every 10 years on a new format? What about (gasp!) a yearly licensing system? What about (zounds!) realizing that more people are born every day, and those people want to buy "Thriller," too?) . . .

3.) Once the RIAA puts pressure on MTV to START AIRING VIDS FOR THE KIDS! (TV killed the radio star . . . so why are you forsaking the TV star, too, when you're not feeding the Internet star and letting him grow big and strong like his papa?),

4.) Once the RIAA puts some tech-heads on to figuring out a way to get me a free, Internet radio broadcast in my car (why CAN'T I listen to Pandora in my car?),



Then, THEN, I say, will the music return.

Transistor Radio said...

John, listeners and employees of radio were all thrown under the bus, so that these greedy walls street operators could make more money...

John Sununu is another clueless government official who's probaly on the old lobbyist payola payroll system. Say what we want and we pay you. What a bunch of crooks..

There was a time in radio and American when the harder you worked the more money you made! What a concept.. Instead the more you make, the more your budgets go up..and the more your sales commissions go down. When you worked hard there were more programming opportunities and promotions. But today they're cutting...

And now wall street bankers want more of our money! Well screw them!

Anonymous said...

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Anonymous said...

John you are putting the blame where it belongs. Sure the radio industry is filled with know-nothings running it but how did they get there in the first place? Banks and other lenders willing to give them whatever money they needed to buy radio stations recklessly. In some ways the radio chains are as bad as those that knew better in the subprime scandal.

Deregulation eliminated qualification and allowed the wrong operators to take over. Even before deregulation most forget that when Reagan pushed the FCC to relax ownership rules and the station cap that we had a number of flim flam operators that did not deserve to own radio licenses. Sky Broadcasting and Joe Dorton is one example.

I hope the Obama administration's version of the FCC forces more qualifiers for radio and TV licenses/

Anonymous said...

i hope you are right assuming your 'i smell smoke' predicts 'fire sales'. 4 x cash flow will be top of the card & could return broadcasters to broadcasting. Let cbs et al own the major markets where they belong. Radio needs to return to specialty owners that know the lay of the land & how best to exploit it not ruin it. in their quest to own everything radio ended up owning nothing. hope for change.

Anonymous said...

I think you are being too conservative. You could say what radio chains will be in receivership in six months and you'll have a few from the "C" group to choose from. I don't know whether it will be Citadel or Cumulus. I think Cumulus is in worse shape that Lew Dickey is letting on. His Harvard education would never allow him to admit failure. This one will be everyone else's fault.

Anonymous said...

It would be great if you're right, John. But my experience with companies in decline is the owners don't sell until there is no chance of reviving the corpse. If I own a business that has $10 million in debt, but you and I agree it's only worth $5 million, I still can't sell it to you for less than $10 million. Because the bondholders have to get paid their $10 million. Period. Bankruptcy is a more viable option than a fire sale. And if you look at the statistics on companies that go through chapter 11, you don't see many success stories. That's mainly because to satisfy creditors, the terms are generally so onerous that it's impossible for the company to revive itself.

There simply is no way to sell off a property at a loss as long as it's producing some cash flow. It will only be dumped once it's hopeless and the lenders are convinced they will never see any of their money returned from continuing operations. At that point they'll consider taking part of their money from sale.

My guess is the fire sales are probably still three to five years away, after some sort of recovery has taken hold and the losses can be buried in the footnotes of the annual reports. But who knows. Maybe the industry will be in a position to recover then.

Anonymous said...

To the last blogger: You present some good facts here. I think the bankruptcy of major chains will happen sooner than even Gorman predicts. After reading the financials and estimates of what these chains are really doing I think they will be filing over the next few months. Since they are federal licenses, the FCC will want those stations transferred to companies that can run them. We may go through a period of time where a number of stations are dark and some may stay that way. I think the fire sales will happen quickly to get those losing stations off of the books. Some will reorganize but I doubt they will hang on to properties other than those they can run best. Farid Suleman and Lew Dickey cannot run major markets while CBS and Clear Channel are best at sticking to those. Everything else will be fair game.

Anonymous said...

The scary reality is that these deals got done under the old business model. There is no way radio can survive by doing things the same old way. Going forward, the trick is to figure out how to monetize radio's real killer ap: localism. The operators that figure that out will thrive.

Tom Yates said...

John...As always, right on it....

Best

Tom Yates
The Coast

Jeff Ryan said...

John - just because there are free market failures doesn't mean the free market itself is a failure. Socialism props up industries that have no business staying in business. I'm all for the failure of radio and banks if that is what the market is deciding. Let's allow them to continue to make that decision without government intervention.

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Jack Frost said...

This is a bit late (I've only just across your blog), but it's also timeless: I noticed the swipe you took at David Frigstad and his gang of cowboys known as Frost & Sullivan.

As someone who had the misfortune of working there at some stage, his gibberish comes as no surprise. What comes as a surprise is that there are still people prepared to lap it up. Worse still, some even pay for it.

When one understands how Frost & Sullivan conducts its "research", it's easy to see how they arrive at ludicrous conclusions.

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