Radio: Drawn and Third Quartered

All hail the genius that believes he’s the smartest man in any room, Cumulus CEO Lew Dickey.

He’s one of a few broadcast CEOs that were spinning their companies’ third quarter results this past week.

Yes, it’s time again for another swirl of misinformation and panic.

So many disasters, so little space. I’ll do my best.

Lew Dickey believes that every time he speaks, he learns something new.

The smartest man believes that every time he reads one of his quotes in a trade, he gains even more insight into his own mind, which he’ll let you know is such a fine mind.

He'll also remind you at least once during conversation that it’s also a Harvard University educated mind.

He has an insatiable obsession to brag of his intellect with the masses, and the smartest man in any room actually looks forward to delivering his spin to his quarterly conference call to analysts.

It gives him a break from seeding future fiascos.

So what is the eminent brainiac of broadcasting ready to impart to us mere mortals?

How about wrong is the new right and smoke and mirrors are the new transparency.

Let’s listen in on how Lew weasels his way in and out of Cumulus’ third quarter.

It’s almost apocryphal. And Lew doesn’t even have to look that word up.

“Larger markets appear to be gaining revenue traction,” sayeth the Lewdick. He reached that conclusion since revenue at the Cumulus Media Partner markets, which include Dallas, Houston, Atlanta and San Francisco, was down an average -15.9% for Q3. His small and medium markets, which Lew used to call the “bread-and-butter” cities of Cumulus Media took an -18.5 percent plunk.

“We have to do a better job of selling our industry, selling the true value of it.”

Here’s one problem with Lew. He assumes we’re almost as smart as he is so he never gets around to explaining exactly what that true value is.

Some of Dickey’s new-speak reads like it was lifted right out of a late nineties dot.com bomb business plan.

For example, he said Cumulus believes in “sustainable operations” in 2010 and beyond by “employing state-of-the-art technology to run the enterprise and drive productivity.”

Maybe Lew was talking up the spy videophones he had installed at most of his stations to keep an eye and ear on his salespeople?

At least that’s what I think he was pontificating about since he followed that line by a claim that Cumulus hired fifty - count ‘em - fifty new sales people in just the last six weeks alone.

He also plans to hire another fifty by the end of the year - though he neglected to mention that the next fifty will be replacing the fifty he just hired over the last six weeks when they don’t work out.

Okay, Lew. Let’s do the numbers. What say you?

“Our industry revenues peaked in 2006 at $21.5 billion. So, in 2006 radio was a $21.5 billion industry – and this year revenues are forecast to finish around $15.5 billion, a decline of $6 billion. We believe it could be – from peak to trough back to peak again – it could be 10 years, maybe 2016 before we reach $21.5 billion again.”

What’s it going to, Lew? 2016 or 2019? Or will 2012 be your apocalypse?

Back to Lew.

'We definitely believe the industry is going to come out of this cycle and continue to grow, but it’s going to be quite some time before we reach the 2006 level. So, more than ever before we believe efficiency is becoming the greatest source of competitive advantage in our business today.”

That all well and good, Lew. But what about all the people you’ve already fired? How do you run a business when you’ve lost or fired most of your best executives and you’re stuck inside a downtrend with a skeleton crew?

“It’s not about cutting bodies, but rather it’s about resource allocation, systems and customer-focused solutions.”

Okay, Lew, enough of the b.s. Let’s do your numbers now.

I’ll spare you his well-placed gobbledygook and get down to business.

Lew successfully sidestepped providing analysts and investors on the conference call with specific dollar figures for its fourth quarter guidance - but insisted that he was budgeting for positive revenue growth in 2010.

Let’s stop here for a moment.

Could you imagine what Lew would’ve done to any sales manager that failed to provide specific sales figures for the next quarter within a nano-second of being asked?

Here’s how Dickey did it. He “expected” to improve on both revenue and the EBITDA performance posted for third quarter, which he released a few hours before the call.

He called it “improvement.” The third quarter revenues were down from a year ago - but they weren’t as bad as the second quarter. Put another way. Q2 was -21.1 percent down. Q3 was only a “mere” -18.5 percent down. And that was directly due to his elimination of human stink at his facilities over the last few months. Need proof? Dickey’s operating expenses dropped 20.9 percent.

Cumulus Media also landed an income tax benefit of $27.2 million in the third quarter. A year ago, it had an income tax expense of $7.3 million.

He added that, “Further consolidation is going to be essential to improving the overall fundamentals of the industry."

Only the smartest man in any room would want to acquire even more radio stations when he can’t even preserve what he already has.

Excuses, excuses. When it comes to answering a question, Lew, despite his Harvard education, is a man of few words - repeated over and over and over again.

You’re Lew Dickey, you’ve been there, done that, and really, what will it all amount to in the end?

Now, let’s quickly move to CBS, where the news was not too bad being the new incredible. Revenue dropped a mere one percent.

Good news first. TV’s doing well - both network and syndication - to show a 9 percent increase. Radio? Well, would you believe a -19 percent drop? That translates to a fall from $392.5 million to $318.9 mil.

CBS Radio operating income was $41.1 million, which included an impairment charge of $31.7 million for station divestures; in particular, the Portland, Oregon stations sold to Larry Wilson.

Though CBS CEO Les Moonves alleged that he planned to keep radio as part of CBS’s portfolio, he was barely believable. Would you be if you had Dan Mason running your stations and running out of excuses?

They don’t make radio CEOs like Dan Mason anymore. Then again, the world he occupied simply doesn’t exist anymore.

Now, let’s touch upon the “not really a radio company” radio company, Sirius XM. Their revenue was up $630 million - a 3 percent increase over a year ago. Its subscriber base was down 2 percent from a year ago, but up by 102,295 subscribers. Mel Karmazin didn’t say why - but I will. Three words: Cash for clunkers.

Mel’s creative financing also made their “material” payments due disappear until 2011. How does Mel do it?

“We expect the company’s cash flow growth momentum to continue into 2010,” sayeth the King of Karma. “And we project full-year adjusted income from operations to increase approximately 20 percent next year.”

Mel also told the Street he expects revenue growth in the “mid to high single digits” and free cash flow growth.

And how about that? Mel’s the only radio guy being taken seriously by Wall Street.

In keeping with bad is the new good; Salem’s 11 percent tumble in Q3 was nothing short of a Godsend, so to speak.

True, it would've been a lot worse had the saints at Salem not bartered most of their stations up the tokus with religious programming.

Salem. I feel for you. Seems like only yesterday that you could conjure up even a C-list of right wing zealots for a talk show network and make it work. Alas, their audience is getting long in the tooth, and harder to sell; especially when so many of them have turned into survivalists. You know that survivalists don’t listen to the radio because they’re convinced they’re all implanted with microchips and they're listening to them.

Then you have Christian Hot AC. The Fish format programmers are just figuring out that when all of your music sounds the same, the entire format fries.

Their Fish and Foul talkers revenue fell from $47.4 million to $42 mil.

Sale hoped to find some divine revenue intervention with new media - like TownHall.org - but that site has been renamed Defendmyvote.com, an inactive site, which is being maintained in the interim by GoDaddy, where you can watch their host’s “Too Hot for TV” spots. OMG! Still, some of the other sites are still on-line but their revenue slipped from $7.1 million to $6.9 mil.

Salem also took a $14.1 impairment charge on the value of radio licenses in Dallas, Atlanta, Detroit, and Portland Oregon, and its still playing the waiting game on selling WRFD, a AM in Columbus, Ohio to another conservative group, Christian Voice of Central Ohio for a whopping $4 mil. Will it ever close? God only knows.

Come on, now. Admit it. If you’re in radio - either in sales or programming - do you really believe you could get away with offering the same lame excuses your CEOs offered to Wall Street last week?

I’m calling it radio noir. There are those unable to change with the times. So the changing times roll over them.

The past decade of unrestrained consolidation led to an arduous crusade of cost reductions, as well as departures of key long-time creative executives. Sure, Dickey, Mays, Mason, and the usual suspects can aver new hires - but it’s obvious that the loss of institutional knowledge has crippled the industry.

In the go-go buy-sell days of the late nineties, few mega-chains even considered a plan B. Now, it faces an uphill battle to define to both listeners and clients what radio is - and will be - in the 21^st century.

Instead of being mired in its own mediocrity, radio needs to concentrate its efforts on where it can win and contain its losses.

There are so many radio CEOs that are chasing something they couldn’t hold on to even if they caught it. Some part of them realizes the vainness of this chase even as another part clings to the need for it.

For the next quarterly report, I suggest that Lew Dickey allow other radio CEOs to share his videophone - and instead of another mumbo jumbo of words and figures, show a Road Runner cartoon. Fast forward to the end where Wile E. Coyote takes a flying leap of a cliff, followed by a rising cloud of dust.

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A 1981 investigative report into radio station exclusives