Please allow me to introduce you to these men of wealth and waste. A $19 billion - with a b - waste. Debt, to be precise.
I’ve always defined Clear Channel’s post-deregulation radio acquisition business plan as “buy ‘em up now and figure out what to do with ‘em later.” Here’s the rest of it: “We’ll just keep shafting our shareholders and they’ll just keep taking it.”
That didn’t work. Neither did the buyout that followed. That’s what happens when there are no heroes, just villains.
Always being so certain about everyone else’s attentions is a surefire system of failure.
It’s been nine months since private equity firms Bain Capital and Thomas H. Lee privatized Clear Channel in that lethal $27 billion leveraged buyout.
Now, the good ol’ devils are making their implausible claims. Have you heard the one about them remaining in good standing with the terms of its senior loans?
Now, let’s pay a visit to CreditSights, a leading independent credit research company. They’ve heard that one, too – and they’re not buying.
According to their findings, Clear Channel will most likely overreach its debt limit later this year, which will force those poor bastards into bankruptcy.
According to Jake Newman of CreditSights, as revenues and EBITA deteriorate, Clear Channel will surpass covenants that limit its secured leverage to 9.5 times EBITA this year.
The latest impediment occurred when Clear Channel’s largest senior lenders rejected a debt exchange proposal by Bain Capital and Thomas H. Lee, in their all but ineffectual juggling act to restructure the company’s debt before July. If unresolved, terms of the loan agreement will be violated, which, in turn will almost certainly bankrupt Clear Channel.
The senior lenders were allegedly offered in part an exchange of some of their $15 billion in debt for $2.5 billion that is owed to the company from Clear Channel's billboard business.
Though Bain and Lee could pump more money into Clear Channel to avoid bankruptcy, it will do little to stop its fiscal hemorrhaging.
That rumbling and crumbling sound you’re hearing in San Antonio? You guessed right.
Clear Channel’s billboards are someone else’s problem. I’ll focus on the radio side.
We won’t have Clear Channel radio CEO and slogan snatcher John Hogan to kick around anymore.
I’ll give him points for his characteristic concept of stealing slogans and attempting to create programming notions around them.
Let’s get right to it. Hogie, come on down.
You lifted “less is more” from a turn-of-the-last-century proverbial phrase by architect Ludwig Mies Van Rohe. Its original meaning was that simplicity and clarity lead to good design.
You resurrected the phrase to define reducing commercial load time without decreasing spot load by selling shorter-length spots for a higher rate. You managed to convince both the silver spoon Mays kids and yourself that it would result in an increased time spent listening.
Clients refused to pay more for less and you neglected to take into account that your pitiable programming content wouldn’t hold listeners.
Then there’s your just-announced Premium Choice – a name stolen from a cat litter brand - to describe your neither local-nor-live voice-tracking and syndicated content, which has replaced local programming and content at most Clear Channel stations.
Hogie, Ryan Seacrest will never be Dick Clark. Stop repeating that. It's annoying.
Like everything else this King Midas in reverse initiates, Hogie’s method of modern programming was a dizzying decent into irrelevance and a bitter catastrophe for the radio industry. Hub and spoke = Broken wheel.
Even worse. Many of Hogie’s programming conceptions were copied by other radio chains, which- you guessed right - suffered the same disastrous results.
The danger with any monoculture is that one single failure takes everyone down.
Thanks in part to Hogie’s predecessor and tutor, the forked tongued and ever-loathsome Randy Michaels, Clear Channel ruined the sixty-year relationship between radio and the labels in just one decade. Now, every music-formatted station will be penalized with an unwanted and costly performance royalty fee.
Clear Channel led the way in making radio an also-ran in advertising revenue. Ask anyone under forty-five if they even have a favorite radio station anymore. You gave away mornings to TV and afternoons to personal choice. That so-called captive in-car audience found other mediums of captivation.
And if radio listening is being challenged by everything from iPods to satellite, why are NPR’s numbers up?
I’ve said it before but it bears repeating. The view from Clear Channel’s San Antonio offices was that the “masses were asses” and its audience would take whatever it gave them. It failed to take into account that even asses know when they’re getting kicked.
And how about that? Now, the shoe’s on the other foot.
I’d like to say that I hate to say I told you so, but I won’t. I don’t have to.
Actually ,the only thing that’s missing is an end card from one of those old ‘50s or 60s B-movies – “The End.”