Radio: What's changed?

You wonder why so many look upon the radio industry as a collection of Tin Men these days?

I’m nearly certain that no maritime group or organization ever named “an excellence in shipmasting” award after the captain of the Titanic.

I don’t believe the airline industry will name an “excellence in piloting” award after the two Northwest Airlines pilots that dozed off and overshot their Minneapolis airport destination.

Even Wall Street - in its worst behavior - never named an administration award after Albert “Chainsaw” Dunlap.

But leave it to the National Association of Broadcasters to further humiliate the radio industry by naming an “excellence in broadcasting” award after Clear Channel co-founder and patriarch Lowry Mays.

The Clear Channel Foundation and one of its primary law firms, Wiley Rein, kicked in $125,000 to the dubious Broadcasters Foundation of America with that catch.

The ethically challenged Lowry Mays, in a prepared statement, said the foundation is about “helping others in the industry who have run upon difficult times.”

He could be speaking of the thousands of employees his company downsized over the past decade or he could even be referencing the ownership disaster his family conned private equity firms Bain Capital and Thomas H. Lee into.

One in his position with a cleaner conscience would’ve donated the $125,000 minus the “name the award after me” strings attached covenant.

It’s true there was a time when Lowry Mays’ Clear Channel was a radio industry leader. Whatever moves they made, others followed.

But you’re no longer a leader if no one is following you.

Was anyone stunned by the sudden Chapter 7 liquidation of liberal network Air America? I’m surprised that it lasted as long as it did. It was to a radio network what Terry Schiavo was to life support.

Air America had the wind sucked out of its sails when it chose to be a network instead of a syndicator of talk programming. It was undercapitalized, overstaffed, and mismanaged.

Whatever the case, I won the bet by predicting that of the two artificially-alive radio entities Air America would go belly-up before HD Radio. Speaking of….how many HD Radio units were sold during the Christmas shopping season? Yes, you can include Zune sales.

You have to give props to Rush Limbaugh. Ratings stunts are the oldest trick in radio’s playbook - and Limbaugh parlayed his phony attempted heart attack as a perfect roll-up to the winter Arbitron.

Rush also deserves recognition for hanging on to his showboat crown. Rival Glenn Beck pulls off an appendix scare, Rush tops him with his ticker fib. One can only imagine the medical ills these gasbags will conjure up with for the spring book.

Then there’s Howard Stern. Will he stay or go? Those that know aren’t talking - but the sure bet is that wherever Howard goes Mel Karmazin will follow - or vice versa. Their fortunes, including agent Don Buchwald’s, have been intertwined for twenty-four years and what makes anyone think that’s about to change?

Is it even worth speculating about the next half-dozen or so radio groups about to file for bankruptcy protection?

The Citadel bankruptcy is yesterday's news. Its CEO Farid Suleman is a kept man. Kept by the bankers who can’t figure out his bean counting schemes. How could anyone who made that much money for Mel fall so flatly on his face? Then again, did he actually do anything to make Mel money other than to provide an accurate bean count? When he was at CBS/Infinity was all the Farid hype just hype? ‘Fraid so.

Farid gave himself a nice Christmas present and stuck his investors with coal. He portrayed himself basking in the limelight as the radio industry’s new big time operator of the third largest broadcast chain.

Instead, he proved that he was pulling everyone else’s.

Rewarding failure stifles growth and innovation. It sends the message that wrong is the new right.

Until radio addresses that fact the bad news will continue to outweigh the good.

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Walls of the Buzzard

Radio: Smart phones and dumb radios

There are smart gifts and there are just plain dumb ones.

Let’s handicap the Christmas shopping season with two products that relate to radio.

Say you have a product that few know or care about, which features a medium in desperate need of reinvention and revitalization? Do you really believe that it’s on anyone’s Christmas wish list?

A recently released survey of 4,225 U.S. consumers by Changewave, a research network that spots budding trends and technologies, show that twelve percent plan to buy a smartphone in the next ninety days.

Last Christmas, iPhone owned the smartphone market. This year, iPhone’s 3G S is up against real competition from the Droid, the new Blackberry Storm2, a new Palm Pixi/Pre, Motorola’s CLIQ, and the HTC Hero.

I’m saying Steve Jobs has little to be concerned with on that front. His iPhone remains the superior product. It enjoys a two and a half year head start -and is numero uno in Brand Keys’ annual survey - with a 74 percent of satisfaction rating versus only 43 percent for Blackberry owners.

It’s true that most of the time the pioneers get the arrows. But Jobs has the unique ability of taking roads less traveled, which turn out to be the shortest distance between two points.

Sure, Google is great, Google is good. Let us thank them for our search - and our e-mail, maps, social networking, video sharing, and advertising - but can they make a go of it in the smartphone biz with the Droid?

The iPhone’s not invulnerable. It has its Achilles’ heel. AT&T.

Of all the iPhone users you know - is there one that has not complained about AT&T?

It remains to be seen what becomes of the iPhone-Droid rivalry. My guess is that Jobs will deal with iPhone’s AT&T exclusivity. He doesn’t really have much of a choice when his two chief rivals, Motorola’s Droid and Blackberry’s Storm2, are tied to Verizon.

Advantages? iPhone has over 100,000 apps - ten times the amount of Android, its nearest competitor. Then, again, what product apps will translate into dollars? For example, name one radio station app that will increase its listenership and sales.

This is strictly empirical. Roughly half the smartphone users I know connect to Internet radio - and none via an app. Of those that do, most listen to out-of-town terrestrial, NPR national, or Internet-only stations.

We’ll revisit this topic in next quarter.

Both Apple’s iPhone 3G S and Motorola’s Droid retail for $200 and offer an average $1,500/yr. plan.

Like Mac users, iPhone users are loyalists. If anything, I’d bet on the Droid cutting wide and deep into Blackberry’s Storm2 sales. It limped out of the box with a soft launch compared to Droid’s $100 million-plus campaign. Compared to both iPhone and Droid, Blackberry’s dated design negates any positives on the product’s attributes. Storm2 comes in $20 cheaper than the iPhone and Droid - and that sends a cheaper isn’t better message to consumers.

To some Sprint is a pariah best to be avoided. That translates to a limited market for Palm Pixi/Pre. It’s cheaper - $99 for the Pixi; $150 for the Pre - with an average $1,200/yr. plan. It’ll attract newbies and those in fear of being outsmarted by their phone. Beyond that? Not much.

The same holds true for the HTC Hero. Sprint is the carrier. Hero was the top-selling Sprint product prior to the Palm Pixi/Pre hitting retail. HTC claims it’ll have the heaviest promotional campaign of all smartphones, with its “You” campaign, pushing the Hero's personalization and customization abilities.

It’ll be a Christmas in the red for Motorola’s CLIQ. It’ll do well with the T-Mobile loyalists and young demos - don’t expect much beyond that. It has a boxed-in following, which will attract, at best, a few new consumers into their fold.

There’s also the Samsung Moment - but it’s hitting the market too late to make much of an impact during the Christmas season.

Now, we dumb down to a product that most in the radio industry have chosen to link with - HD Radio.

The only smartness connected with HD Radio comes from the crooked and crookeder Bob “Booble” Struble, whose iBiquity stuck radio with an investment they can’t get out of.

It’s a low-tech 21^st century version of Rebel Without A Cause. We have the major radio chains - and other investors - nervously eyeing one another, and continuing to play chicken with their properties while wondering whom their Buzz Gunderson will be.

By committing to HD Radio, the radio industry bought an apple for an orchard.

It’s perplexing. The economics of the radio industry are remorseless, but it’s still alarming to witness this continued cannibalism.

We don’t need more radio stations and formats - we need better radio stations and formats.

Ask anyone with Sirius XM or an Internet radio fan. They listen to the same two, three, four, five - and no more than six stations - that’s it. Most have a favorite and a second favorite. Offering more choice - especially when they're even worse than the conventional terrestrial fare - will not draw consumers to HD Radio.

Struble doesn’t always tell a Struble, which is synonym for not telling the truth. Sometimes he just talks out of both sides of his mouth.

Just a couple of weeks ago Struble released another torrent of press releases announcing new HD radio models, apps, and adapters and predictions on how well HD Radio will do at retail this Christmas. More lies - more Strubles.

The latest misadventure occurred when Struble tried to perfume his HD Radio hog with a new app and attachment.

We live in a compact, wireless world, Bob. Why would you sign off on an HD Radio iPhone app that requires one to go to a participating Radio Shack, and pay $79.95 plus tax for this bulky add-on HD Radio tuner, which you have to attach by wire to your iPhone? And, Bob, it can’t work with a car’s docking system because the iPhone’s 30-pint port connects to only one device at a time. Brilliant.

Please explain this to me. There isn’t a shred of evidence that this is HD Radio’s year at retail. If anything, you’ll sell fewer HD Radios this season than you did last - and that's even less than you did the year before and the year before that. Prove me wrong.

The time has come to recognize and own up to HD Radio as a major blunder. It’s not happening. It hasn’t in the past, it isn’t now, and it never will. DAB radio is a failure in Europe, too.

What’s taking place is simply not working.

I think you look at it a different way. Why work when you’ve forced radio to do all the heavy lifting for you?

After all, robbing isn’t the toughest part of heisting. The getaway is. That's what separates the pros from the cons.

Radio's Rubes

Rube Goldberg is the patron saint of the old radio industry.

Don't know Rube? He was a popular early 20th century cartoonist who sketched comics depicting multifarious devices for performing simple tasks in unusual and often convoluted ways.

By the early thirties, the Merriam-Webster dictionary turned his name into an adjective, defining it as "accomplishing something simple through complex means."

The same definition could be applied to the old radio industry, accompanied by banking, insurance, and a select - but large - number of public companies that cloak their cooked booked financial statements in indecipherable jargon and figures.

But eventually even the most complex, convoluted financial schemes crash and burn.

Take the ethically dubious Farid Suleman, CEO of the crumbling Citadel radio group, which, at any moment, will file for Chapter 11 protection.

Poor Farid. Tired of toiling under Mel Karmazin as his official bean counter, he wanted to prove he could be a number one.

Instead, he proved to be a lifeguard who couldn’t swim. Mini-Mel he will never be.

But failure is rewarded in the radio industry many times over.

Despite his destruction of the third largest radio chain in America, one notion being bandied about would have him falling uphill by staying on as CEO of Citadel to help bring the chain out of bankruptcy.

When Suleman gobbled up the ABC Radio chain - he got the networks, too. Losing Sean Hannity to Clear Channel and Paul Harvey to his life cycle erased $8 million in revenue off the books compared to a year ago. Overall, network revenue was down 31.5 percent, which translates to a $13.5 million loss.

Let’s stop here for a moment. Paul Harvey was 92. How many more years and how many more breaths did Farid foresee squeezing out of him? Did he expect Harvey to give him five years advance notice before he passed away?

I’m stunned that Suleman didn’t come up with some Rube Goldberg apparatus that would record every word Harvey ever said so he could assign some poor minimum wage schlub to continue his broadcast by rearranging words from prior newscasts and commentary.

When Farid bought the nets, Hannity made it apparent that he had no intention of sticking around and cozying up to the draconian management of Citadel once his existing deal expired.

Granted, Citadel-ABC was the last bad big deal in radio broadcasting - but it’s painfully evident no lender bothered to skim through Farid’s faulty Rube Goldberg-style business plan. Was it assumed that being Mel’s beanyman was reason enough to fund his folly?

Disney wanted ABC Radio off their books. They were cutting a deal with Steve Jobs to acquire Pixar and weren’t interested in holding on to yesterday, especially when the radio division was likened to a country club.

Last Tuesday, just after Suleman signed off on still another massive staff bloodbath and the elimination of whatever localism remained on his distressed properties, he joined eight other radio group heads, to pitch the FCC on myths and legends. Specifically, they were asking the commission to make FM receivers mandatory in cell phones. That way, in case of an emergency - FM stations would be available to provide detailed information on where to go, what to do, and why.

Insert laugh track here.

Excluding public radio, give me twenty FM stations in this great country of ours you could listen to for immediate emergency information. Okay, I’ll settle for ten. No, final game scores on sports-talk FMs don’t count as emergencies.

Actually, I’ll tell you what FMs do provide that coverage. Small, independent market FMs. I’ll give you one - WATD in Boston’s South Shore, which on many occasions has provided my family and friends who live in its signal range with pertinent and vital information related to regional news, weather, and traffic.

Does the station make money? Yes.

Did these radio CEOs understand that the FCC has no jurisdiction to force manufacturers to add FM to cell phones?

Do these radio CEOs really believe the FCC is not aware of how these chains ruined the radio industry post-deregulation?

Then we have Lew Dickey, the CEO of the Cumulus chain who also made the trek to the FCC.

The smartest man in any room was shrewd enough to kick ahead its inevitable insolvency for one more year with his Rube Goldberg accounting so he could continue screw his shareholders, investors, vendors and anyone else who’s reluctantly hitched up to his wagon.

Lew doesn’t know how to make money but credit him for knowing how to filch it. He is challenging Clear Channel CEO John Hogan and the aforementioned Farid Suleman for the title of career derailment king.

Instead of stepping aside when his company spiraled downward in revenue and ratings under his direction, Dickey’s slanted family and friends’ board anointed him to save it.

Dickey’s in serious need of a spine transfusion before he even considers a financial one for his company.

You’ve probably heard the joke. How do you identify an old radio chain? Look for the makeshift morgue.

I define radio to those who ask as a business where luck is running out for those who are presently controlling it - but it’s like passengers in an airplane where the pilot dies and there’s no way to land the plane without crashing.

The only good news is that by keeping Suleman, Dickey and the other usual suspects in place will speed-up the impending fire sales.

I saved the best Rube Goldberg for last. By now, you’ve heard of iBiquity’s latest scheme to jumpstart their D.O.A. HD Radio.

Here’s a seriously flawed technology that has zero consumer interest despite millions of dollars of donated radio time to promote it.

At iBiquity, there’s nothing more rewarding than to spend other people’s money on preposterous promotion, marketing, and gadgetry.

So what do you make of the HD Radio iPhone app?

Yes, the app is free - but there’s a catch. It’s iBiquity. There’s always a catch!

To receive HD Radio on your iPhone, you must go to a participating Radio Shack, er, the Shack store and plunk down $79.95 plus tax for a bulky add-on HD Radio tuner, which you have to attach to your iPhone.

Yes, you are now carrying around two devices. One, which is sleek and stylish, the other - pure Rube Goldberg.

There’s another catch. You cannot use the device through your iPod-docking car stereo system because the 30-pint port of an iPhone connects to only one device at a time.

It is said that iBiquity CEO Bob “Booble” Struble hasn’t even uttered the word “Zune” since his iPod Rube, er, app, was released.

Wonder if Freddie sold him the app? Together we con!

Rube Goldberg and radio. Life imitates art.

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Carl Hirsch & Gil Rosenwald interviews from 1979

Forgotten anniversary

Shame, shame, shame on me. One of the most important dates in recent history and I missed it.

I’m going to stop short of taking full blame here. There were no reminders. No hints. No nothing.

You’d think with Google and Wikipedia someone would’ve flagged this date.

I didn't even see a single Tweet about it.

Eight years ago last Friday, October 23, the iPod was introduced.

I was in my Apple store last week. I’ve gotten to know most of the people there.

You’d think someone would’ve invited me to stop by and have cake and ice cream last Friday.

But no. Not a word.

Do you remember the first iPod?

Radio ignored it.

The labels mumbled something about intellectual property and copyrights.

Though it was a significant technological advance over the Diamond RIO MP3 player, the iPod was compatible only with Macs, which excluded 90 percent of the computer market.

And only geeks and Goths and art students owned Macs.

It was weird looking and clunky; the size of a deck of cards. It didn’t look or operate like a radio or a Walkman.

Just a year earlier Diamond REO released its second and third MP3 players with 32 MB and 64 MB of internal memory respectably which were compatible with PCs.

They weighed roughly 2.5 ounces and ranged in price from $200 to $250.

The downside was their fragility. They were prone to cracks and breakage.

The iPod, by comparison, weighed 6.5 ounces and had a whopping maximum 5 GB of storage.

Initially, the only way you could add music to it was by ripping songs from CDs.

And it was pricey. $400.

2001 - the year that Apple introduced the iPod, it made $5.4 billion - nearly all of it from sales of Macs to geeks, Goths, and art students. It posted a loss of $25 million.

Let’s fast forward to last year’s figures. Apple made $36.5 billion - good for $6 billion in profits - from the sale of iPods, iPhones, Macs, and digital content.

220 million iPods users can’t be wrong.

While I’m thinking of it. We missed another important date earlier this year.

January 5.

The eighth anniversary of the sale of the first HD Radio.

That’s when Cedar Rapids, Iowa resident Nathan Franzen bought a Kenwood KTC-HR 100 HD Radio tuner to install in his 2001 Pontiac Gran Prix.

The less said about HD Radio the better.

220 HD Radio users can’t be right.

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Seger & Sweet in Cleveland

Radio: The Peter Principle

Peter Smyth, it’s true that people are worried about the future of radio - or at least those of us who work for radio are.

I read your latest From the Corner Office last week and have to respond.

Peter, I’m not going to counter-point the half-truths and untruths in your latest letter.

Just a few points, please.

You say the Great Recession is over? Really.

How might I ask did you reach that conclusion? Unemployment continues to rise. Foreclosures are on the increase.

They’re related, you know.

If you don’t have a job, you can’t afford to pay the mortgage - and you lose the house.

And Peter, what does one do when they're foreclosed-upon. For one, they're less likely to spend whatever money they have left.

Our industry is based on consumer advertising. If they’re not buying, clients stop advertising. Some go out of business.

Here are all the stats you need.

The real world isn’t like radio, Peter. When Lew Dickey or Farid Suleman misses a payment, they have floatible options. They can give up more equity or try and pawn off debt.

Happy days are here again because the Dow cracked 10,000? Two words: Sucker’s rally.

Peter, you need to get out more. There’s little reality between Wall Street and Main Street. Or Dorchester Street.

I can even show you a few empty storefronts Newbury Street? How about Copley Place? It has a few shaky tenants.

Remember that 10,000 hallmark was hit a decade ago - March 30, 1999 to be exact. So even by Wall Street terms, our economy is, at best, torpid.

Are we really better off today than we were a year ago? Yes and no. The stimulus programs - tax credits and “Cash for Clunkers” brought consumers out of hiding - but all of that money’s been absorbed.

How many publicly traded radio groups are about to go belly-up?

How about the radio industry? Are we better off today, post-pillage deregulation?

I’d prefer your optimism to remain cautious, Peter.

We now know that the country was thisclose to plummeting into another Great Depression. We also know that we’re not even close to lifting ourselves out of this current Great Recession.

Truth be told, Peter. We’ve managed some temporary form of stabilization in a still depressed market.

Did you read Northeastern University economic prof Alan Clayton-Matthews' take on the economy in yesterday's Boston Globe? "I had seemed we hit the bottom this summer, but I'm not so sure anymore."

Yes, I believe we will have a turnaround - but it will be slow and imbalanced. Not everyone will get out of here alive.

Could we agree that the Internet is to radio what the horse was to the car?

The first cars were manufactured in retooled horse carriage factories.

The engine replaced the part where the horse used to be.

The only surviving radio stations will be those with creative content and retooled and grafted to on line and mobile.

See, we don’t need more radio stations. We already have too many. We do need live and localized radio stations providing what our potential audience wants.

And I don’t care what your consultants say. Slapping one of your radio station apps on a smart phone isn’t social networking.

There’s only one alternative. It’s the obit you don’t want to read, Peter: After several attempts to shock the radio industry back to life with gimmicks like HD Radio failed, it was pronounced obsolete on - fill in the date.

Since deregulation, radio’s been in denial.

Don’t blame the casino for losing your money. Look in the mirror.

Don’t blame the audience for your loss of time spent listening. Just listen to your product.

Don’t say it can’t happen here. It already has.

Radio lives in an alternate reality where fish sing, birds swim, and humans get in the way of voice tracking and syndication.

There will be more rounds of economic disasters from time to time. It’s inevitable. But you are in control of your own destiny. The disasters will be measured by how much or how little you prepared for them.

Here are three more words: Commercial real estate. We haven’t felt the aftershocks - because the quake hasn’t happened yet. But it will. Those commercial deals were bundled up and sold along side the equally toxic subprime residential mortgages.

Remember the tech boom at the end of the last decade when VC’s were running out of ink signing off on anything that had the word Internet embodied in the first sentence of a business plan?

Remember it was assumed that housing prices would continue to rise forever, which led to banks giving away mortgages to anyone whether they wanted them or not? Supply and demand? Come on.

Normally, I try to let sleeping dogs lie. But this is one hound that keeps barking and won't shut up.

I’m talking about your bud Lew Dickey. He’s now whining to Inside Radio that he gave away the store just to fill inventory. He forgot to add that he and others kept adding more inventory, too, in an attempt to meet budget. Supply and demand? Come on.

How can you have demand when you have an endless supply?

I don't know how everyone missed this one. A couple of weeks back a Seattle paper got radio broker Gary Stevens on the phone to discuss classical music formatted KING-FM's financial problems.

You're familiar with classical music, Peter. You dumped the format in two markets, Detroit and Philadelphia. Too bad the formats you replaced them with stiffed, too.

Here's what Gary said about the radio market to Seattle Crosscut: "Two years ago, a Seattle FM would have been worth $50-70 million, even if it wasn't profitable. In the current meltdown, so few radio stations have been traded, there aren't comparable sales numbers, but if I had to guess, KING-FM might bring in $15-25 million, in today's market, assuming a buyer could find financing."

Times are tough when even a seasoned radio broker like Stevens is quoting rates out of Filene's Basement's automatic markdown - before the markdown.

Shall we join reality, already in progress, Peter?

Let’s start with this report from Veronis Suhler Stevenson (VSS).

Their 23rd annual U.S. Communications Industry Forecast report that the largest declines in 2009 ad revenues will be newspapers (-18.7 percent/$35.5 billion); consumer magazines (-14.8 /$11 billion); radio (-11.7 percent/$15.8 billion), and broadcast television (-10.1 percent/$43.0 billion).

Growth will come from digital media. VSS forecasts increases in mobile (+18.1 percent/$1.3 billion) and Internet (+9.2/$23.8 billion).

VSS also predicts 2010 will be the year marketers will move advanced and sophisticated social media into its mainstream - effecting nearly all marketing initiatives.

Sounds like radio has some work to do. Up for it?

Finally, Peter, are you aware of the TV sitcom Gary Unmarried. In a recent episode the lead character, played by Jay Mohr, is trying to land a gig as a L.A. radio sports talk show host. He sends the station a demo and….well, click here and hear it yourself.

Ouch!

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The song remains the same