Monday, May 25, 2009

Radio: Sympathy for the devils?

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.

One problem.

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.”


Anonymous said...

Adios, you bastards - LOL!

Anonymous said...

the economic scams that cc was able to pull off under the bush administration & before the crash are no longer easy ways out for that company. too bad. i feel sorry for the people who are still employed there. when the stations sell for pennies on the dollar there will be more opportunities for the right people to get back into radio. it is as you said it would be after all.

Anonymous said...

Real kudos to Ben Homel - I'm sure he's still convinced he's a freakin' GENIUS... And he's SUCH a nice guy! He may be wealthy but he sure left behind a pile of POOP...

Anonymous said...

It's about time. I wondered when this soap opera was going to end. Good bye, good riddance. Let us hope that radio can return to being a communications business again with real people and a real understanding of how to balance creativity and commerce. It can be done.

Anonymous said...

I get the distinct impression that none of the companiies that took control of radio post-deregulation were really interested in doing radio. All they did was bleed it dry of it's value as a medium, without nurturing the industry as a whole. Metaphorically speaking, clear cut the forest then sell off the land. When radio is finally dead the companies who now own the property will sell off the space as sinple bandwidth. Oh, I forgot, they'll also bankrupt and skip out on most of their debt to boot!

Anonymous said...

It took a long time. I'm glad to see that reality is catching up with the Mays family and Clear Channel and that this nightmare and blight on the broadcast industry will soon be eradicated.

Anonymous said...

No sympathy from me. I would like to see these guys brought up on charges for all the illegalities from the way they selected music to their treatment of their employees. Then there are all the issues regarding their financials and license holdings. This is a company that deserves everything that is coming to them.

Anonymous said...

I feel badly toward those with contracts at Clear Channel. Bankruptcy will allow that company to get out of deals and personal contracts.

Once again it will be the workers getting the screws turned on them.

This could also Clear Channel Bain/ to screw everyone on severance owed based under the deal they cut with the SEC.

How ever you look at it there is a foul odor coming from San Antonio and Boston. May these people never be allowed to own broadcast companies again.

Anonymous said...

John, Good story as always. Why didn't the other web trades carry this information about Clear Channel?

I agree that radio is not dead and is in dire need of remodeling and reinvention.

Once the scam artists are out there will be a chance.

I hope people like you and the other unique programmers who are on the side lines get back in.

Anonymous said...

This soap opera's got a long way to run yet. Here's the problem. Say you're a bank holding paper on CC. The company informs you that it's violating the covenants. What do you say? Since Bain Lee ain't putting up more money, you have two choices: Renegotiate or call the note.

Say you call the note: CC goes bankrupt. Then, either the company gets auctioned, and the banks get 50 cents on the dollar. Or, a court-approved reorg goes through and the lenders take a hair cut, at let's say 75 cents on the dollar. Either is very bad for the bank's books, where the CC loans are now carried at 100% of face value. Especially with the banks trying to raise money to get out from under the Fed's thumb so they can go back to giving out the big bonuses. So calling the note is probably not feasible.

Say you renegotiate: The problem here is the banks have little leverage, since they don't want to call the note and Bain Lee knows this. Of course, Bain Lee doesn't want to write off the whole deal either, since they did pony up some of their own money for this operation. But the banks are definitely holding the weaker hand. The major leverage the banks have is that if the Feds do an actual takeover of the banks, the CC loans will be dumped into the pool of crap assets and through an auction process the value of the operation will be exposed. So there's enough here to motivate both sides to play together, and they'll work up some dummy concessions from management, like more layoffs, and everything continues as before, possibly with some increases in payments in the out years in exchange for looser covenants.

I know I'm the naysayer among people posting to your blog, but I truly don't see this working out in a way that is good for radio. By the time these properties are sold at market rate prices, say in 10 years, the radio audience will be so fed up with voicetracking and mismanngement, the entire industry will have ceased being viable. To those who think otherwise, best of luck. It would be nice if you were right. But I can't see it.

Anonymous said...

Anonymous said... "No sympathy from me. I would like to see these guys brought up on charges for all the illegalities from the way they selected music to their treatment of their employees."

I'de like to see Bob Struble and his cohorts brought up on charges of false claims about HD Radio, and jamming adjacent-channel stations off the dial.

Anonymous said...

The old economics may not figure into play now. The banks can't play their games and so forth which may in fact speed liquidation faster. I think you are right about time being of the essence and that being the case it would be in the best interest of all concerned to move forward and get any deadweight off the books. Gorman mentioned a number of stations going silent in an earlier blog and I believe that is a possibility too. It cannot go on much longer like this. Its not only Clear Channel. Citadel, Cumulus, Emmis and the list goes on. All of the greed chains are in financial straits right now.

Anonymous said...

Has anyone noticed that Clear Channel's Pravda daily INSIDE RADIO made only a brief reference to Clear Channel's bankruptcy threat. Even Tom Taylor downplayed what should have been the lead story.

We know Clear Channel is not going to print any bad news about itself. So why did Tom Taylor bury it and why didnt other website trades pick up on it?

Any comments?

Anonymous said...


Anonymous said...

Leave it to Clear Channel. They will do a bankruptcy deal just to get out of their obligations to former employees.

I don't know who should be considered more disgusting. Clear Channel's May family or Bain Capital and Thomas H. Lee.

What is next? A govt. bailout?

Anonymous said...

I wish the employees the best. Maybe the next owners will be broadcasters that know the results talented people bring to the table.

I wish the owners, operators and the rest of the swine running Clear Channel and their subsidiaries get what is coming to them and soon.

Anonymous said...


I see a Clear Channel GM or OM has decided to chime in.

Note the complex cognitve abilities and intelligence that has brought the industry to where it is today...

Anonymous said...

I love the way everyone is turning on each other. At one time financial institutions would watch each others backs. That is not true anymore. Bain Capital and Thomas H Lee were never challenged like this before and for good reason. Anyone can see that the Clear Channel deal was wrong. I don't know what Bain and THL thought they could get out of it.

Everyone loses on this deal except the Mays family.

Anonymous said...

"Leave it to Clear Channel. They will do a bankruptcy deal just to get out of their obligations to former employees."

The Clear Channel severence to former employees (something the SEC mandated when the privitization deal was going down) is an ERISA-qualified plan, meaning its assets cannot be confiscated or taxed by creditors.

In theory, it means those let go by CC should get the money owed to them. The problems stem from having to sue to get the money if Clear Channel balks at this obligation. I'm betting they do this, thinking nobody is going to spend money on a lawyer up front to collect what amounts to a minor amount of wages (compared to the lawyer bills).

I sometimes look at my employee handbook from CC with the letter from one of the Mays saying "Welcome to the family!"
Quite a f#@$ed up family...I'm glad my divorce went through on January 20th!

Anonymous said...

Heil Hogan!

Anonymous said...

You don't get it, Queer Channel clown! Gorman doesn't want to see radio fail, just the jackass fortunate sons in San Antonio (and maybe a few other deserving types!).

Anonymous said...

Was "Fortunate Son" on Clear Channel's national don't play list? If not, it now will be.

Anonymous said...

It appears that in spite of the financial problems Sam Zell is having with Tribune Corp. it is not affecting Benji Homel aka Randy Michael's appetite. That guy looks like he has put on some serious poundage and I don't just mean his fat head.

Anonymous said...

Randy looks like a super-sized Karl Rove - & he's probably a bigger ASSHOLE!

Anonymous said...

The shameful bastards get theirs. Their phony claimto localism is disgusting. Give it up already. Hogan is unemployable.

Anonymous said...


I see a Clear Channel GM or OM has decided to chime in.

Note the complex cognitve abilities and intelligence that has brought the industry to where it is today... "

Hee hee hee, well played, sir!