Pick your own analogy.
Does it really make a difference?
Remember the Mobro? It was the name of that renowned New York garbage scow that was turned away by every state along the eastern seaboard and three other countries. No one wanted their trash.
We have radio chains defaulting – or close to it –but the banks don’t want to take possession.
Since there’s no credit to be found there are no buyers to be had – even at fire sale prices – both sides are still stuck in deals they can’t get out of.
Disney sold their ABC Radio group to them the same week
they bought Pixar from Steve Jobs in an unrelated pair of deals, which could be best described as out with the old and in with the new.
ABC Radio was the country club of radio chains. At ABC, you didn’t have to work hard. You hardly worked.
History will record it as one of the worst radio deals ever concocted.
Citadel renegotiated its deal with creditors twice this past year and landed a waiver for its leverage requirements through the end of this year. On August 15th, Citadel missed a $2 million interest payment on its subordinated debt. It had previously renegotiated its deal with creditors twice over the past year.
Its next payment is due next Tuesday, September 15. The company has $27.8 million in cash and south of $2 billion in debt. Can you spell default? Remember this date: January 10, 2010. You know how time flies when you’re on the run. Tick, tick, tick.
The economy only adds to radio’s problems, which stem from overpaying for properties back in the immediate post-radio deregulation days when the battle cry was “buy ‘em now and figure out what to do with ‘em later.”
That U.S. media ad budgets fell by $10 billion-plus in the first six months of 2009 just added to radio’s misery. The Financial Times breaks it out here and they didn’t even bother to mention radio.
I spend a fair amount of time with ad people. Radio clients – past and present – noted a decrease in effectiveness over the past decade – some of it attributed to too many spots in a cluster while others feel radio listening is in a steady decline; therefore, less effective. Eventually, the ad market will bounce bank. When it does will radio be part of their plan?
I carry the curse of being a magnet for opinions and discussion about radio. It’s nearly a given that when I’m introduced to others in a social setting, the conversation will tilt toward radio as in “what ever happened to…”
That leaves me to explain why something that’s free and so readily accessible is used by so few.
Then there are always a couple of people in the crowd that are proud to say that their subscriptions to satellite radio are worth it. And, these days, at least one or two people will whip out their smart phones to turn me on to their favorite on-line Internet radio stations (which I thoroughly enjoy). It's the new "what's on your iPod?"
Clear Channel corporate complain that they’re the lightning rod for everything that went wrong with radio, post-deregulations. But they deserve every bolt thrown their way. What Lowry and his silver spooned children didn’t realize was that deregulation would lead them into a death march, forcing everyone to lower rates, lower revenue, lower payroll, have fewer employees do more and find themselves in a downward spiral where the
only solution to death is to keep downsizing.
Last week the Wall Street Journal did another throwaway piece on the state of the radio industry. Did you see the headline? Radio Firms Beg Lenders for Mercy.
Is that the same kind of mercy Cumulus shows its staff? Earlier this year, in the court of the Crimson King, CEO Lew Dickey informed his managers that they’d be penalized with a 5 percent salary cut if they failed to reach their goal. One manager in a particularly difficult market hit 99.59 percent of his second quarter revenue goal – but because he fell short by 0.41 percent, he got the
5 percent slash.
Since Lew (how many times did he tell you he went to Harvard?) claimed on more than one
occasion that he subscribes to the ethic of reciprocity (that’s the Golden Rule for those of you not worthy of his “smartest man in the room” title), don't you feel that Cumulus should be treated with the same respect the next time their troubled finances come up for review with their lenders? Do unto others, as you wold have them do unto you. Right?
America’s stuck in neutral and will continue to be until credit begins flowing again – albeit cautiously. Whatever the case, radio chains are ready to unload properties at fire sale prices but no one - including those who have the wherewithal to reinvent the medium, are liquid enough to go on a buying spree.
Until then, we’ll have to put up with borrowers and lenders acting like a last-place baseball team with the pitchers blaming the hitters and the hitters blaming the pitchers.
You know that game some morning drive shows play – Dead or Alive? Contestants are told the name of a celebrity and they have to guess whether they’re living or dead.
I think they’ll be a new version of that game dealing with radio groups.