Radio: Head in the clouds

Rewarding failure.

There’s a lot of that going on in the radio industry.

It’s what’s done when your ship is sinking and you want dibs on the first lifeboat.

Just a few weeks back, Cumulus Media, whose slogan is “the best run company in the business,” announced that it was thinning its herd by 259 employees – 7 percent of its total workforce.

“As a result of the economic challenges we face, the entire advertising sector has seen a big drop-off,” Cumulus CEO Lew Dickey whined to the Atlanta Business Journal.  “Like all media companies, we are not immune to this, and consequently have to realign our fixed costs to match the revenue environment, and that simply is what we are doing.”

Days later Lew rewarded his failure with a $500,000 bonus for a job well done in 2008.

He also gave his brother Executive VP/co-Chief Operating Officer John a $165,000 bonus plus 70,000 time-vested shares.

But this isn’t a case of blood being thicker than water.   It’s being thick as thieves.

The non-family EVP/Co-COO Jon Pinch’s failures were rewarded with a $100,000 bonus and 40,000 time-vested shares while CFO Marty Gausvik brought up the rear with a mere $50,000 bonus and 15,000 time-vested shares.

Now please don’t confuse Lew’s haul with the restricted $8.5 million time-valued share grants he furtively received in 2007 – and wasn’t known to us mere mortals until it showed up as a line item in Cumulus’ annual proxy filing.

I haven’t been able to confirm this – but I’ve been told that Lew Dickey’s all-time favorite song is “Crimson and Clover.”  Crimson because he is, after all, a Harvard MBA grad, which, in his own mind, undoubtedly makes him the smartest man in any room, and clover for a four-leaf clover – because he’s the luckiest man in the radio industry. 

It’s true that eventually luck runs out – but in Lew’s case it’s been doing a slow crawl.

Of course, of course Lew fully realizes the emotional, personal, and financial havoc his company recently wreaked on 7 percent of his workforce.  He knows that nearly all who were terminated did nothing to deserve it. Just don’t expect him to feel guilty about it.

At Cumulus, it’s a family affair – and charity begins at home.  In his case, charity begins and ends at home.

From “Most Eligible Bachelor” in People magazine in 2000 to poster boy for the gutted, nearly bankrupted radio industry in 2009.

Last week Dickey ousted Pat Fant as market manager for Cumulus Media’s three Houston stations.

Fant’s name has been synonymous with Houston radio for forty years.  He was managing KRBE, KFNC, and KHJK for Cumulus in the Greater Houston market.  Two of the three – KFNC, known as the Ticket and an ESPN outlet and KHJK, a musically all-over-the-road “Jack” format are suburban-licensed stations – and do not have full Houston-market coverage.

A manager with no Houston market experience replaced Fant. He’s a former Cumulus manager who left the company five-years ago to join the Spanish Broadcasting System – SBS – where, most recently, he was managing two Spanish-language FM stations in Los Angeles.

So instead of a manager who knows every nook and cranny of the market his former masters serve, the Houston cluster will now have a novice who’ll have to establish relationships from scratch in America’s sixth largest radio market.

Fant took the hit for declining revenues at the Houston FMs.  True, in 2009, his stations billed $2.4 million less than the year before.   What you may not know is that both the Ticket and Jack-FM were off-the-air during and following Hurricane Ike.  Lew also neglected to tell you that KRBE, which is Cumulus' only full-market FM signal posted a 1.8 percent gain in local sales.

And just one week ago, Fant was getting props from the local ad community for organizing a new ad campaign with the Greater Houston Partnership to boost the viability of local businesses.

That was Fant’s mistake.  Cumulus awards failure - not success.

Lew Dickey.   He left his bride stranded at the altar and his shareholders stranded in the poor house. What a legacy!

Do you know how to make Lew say “Huh?  You’ve got to be kidding me!”

Tell him if you work with good people and ensure that they all do well, you will succeed.

Let’s pay a quick visit to Toledo, Ohio, where Dickey founded Midwest Broadcasting and owned his first two stations: WLQR-AM and WWWM-FM.

Today, Cumulus clusters eight stations in that market.  It’s where they shut down its HD Radio signal and stations whenever the equipment overheats, which is often.   Sure, HD Radio is crap and doesn’t work well – but the problem’s compounded because its engineers have to oversee stations in Flint, Battle Creek, and Ann Arbor, Michigan, too – and are also called out on special projects in markets as far away as Florence, S.C.   

Cumulus in Toledo hasn’t had a chief engineer in Toledo since March 2008. They now leave their Toledo octagon with an assistant engineer who moved up in rank from part-time announcer.  

There’s spread thin and dead thin and the only differences between the two are three letters.

Cumulus pays its employees like the old Brazil.   You’re either in six figures or hovering in or near minimum wage.   Come to think of it, their Toledo facilities resemble Brazil.  Rio’s Vidigal region - to be precise. 

Dickey also founded Stratford Research, a radio consulting and marketing firm. In 1994 he wrote The Franchise: Building Radio Brands for the National Association of Broadcasters’ book division, which is now out-of-print.   You can find a used copy on Amazon for a little over a hundred bucks.   

Quotes are like ghosts.  They can come back to haunt you.  Wasn’t it was only a couple of months back when Lew Dickey, playing the role of inveterate optimist, told J. Scott Trubey of the Atlanta Business Journal that within 36 months half the radio companies in the U.S. would no longer exist – but Cumulus would still be around?   He also called radio a “sound business” and that he’d “..continue to be a buyer.”

Now, Cumulus is known as just another radio company where shareholders’ dollars go to die.

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The Buzzard Band