Radio: The song remains the same

You haven’t heard from me because there’s been little to write about.

I know. There was Citadel and NextMedia. Those were inevitable.

Citadel. It’s the tale of the bean counter that couldn’t count his own beans. There are reasons why proficient number twos make terrible number ones. Number twos believe in cutting and firing their way to a victory they never achieve.

That’s why other radio chains utilizing the equivalent philosophies will be condemned to same fate.

Are they even worth writing about when we already know the end of the story?

Then there’s NextMedia.

Its business plan was to buy up smaller market stations and sell them to greater fools for more than they paid for them. One problem. They paid some hefty multiples to acquire these stations.

They initially benefited from a bounty of takers but the company didn’t heed Kenny Rogers: Know when to hold them, know when to fold them.

There was that moment in time when they should’ve sold while the greater fools were still buying- but exit strategy disagreements ensued - and Next Media ended up holding on to yesterday.

There’s more.

Lending institutions continue to hold on to their bad assets and allow those that got them into this jam to continue running their empty shell companies.

What was that quote from Citadel’s CEO and architect of doom Farid Suleman?

“Business will continue as usual.”

I keep saying it over and over. I couldn’t make this stuff up if I tried.

That means Citadel, and the other major radio chains, will continue to downsize and devalue their programming, promotion, and marketing. Instead of investing in content, they’ll pick up long-in-the-tooth Donnie Osmond or some other syndication off the bird. Live and local? Get real. The stink of human costs money. Promotion and marketing? That’s a needless and costly expense.

It wasn’t all that long ago, actually, that the only stations that carried nets and syndication in their most important dayparts were small market stations.

Maybe Farid was duped into believing that Donnie can host the 21st century version of Don McNeill's Breakfast Club.

I’ll bet Suleman truly believes that Citadel could survive as a content provider for news, sports, and programming.

It gets better. The other radio chains teetering on bankruptcy believe their eventual bankruptcies will be considered as a cost of doing business.

What about real broadcasters? They’re exercising great patience. Two words: Fire sale.

Radio: Prior Control

It’s Boy Kevin Martin’s FCC so it’s naïve for one to believe that he would abide by existing rules governing prior control.

Correct me if I’m wrong.

Wasn’t it illegal for BainCapital and Thomas H. Lee to seize operational direction at Clear Channel?

A couple of weeks back the FCC rubber stamped the $27.4 billion buyout by Bain/Lee.

But I don’t recollect any FCC-approved lease marketing arrangement covenant allowing the two private equity firms prior control of Clear Channel operations. Do you?

Bain/Lee sent a team from Boston to San Antonio to make some sense of the morass at Clear Channel world headquarters. Their visit would’ve stayed under the radar had it not been for Matthew Karnitschnig’s Wall Street Journal blog leak.

“Waves of panic” were the words Karnitschnig used to describe Bain and Lee’s fear that their Clear Channel deal was dying.

They were dispatched to “to help run the business,” Karnitschnig added.

It’s not uncommon for private equity firms to send it their troops to shore up a company for privatization. Cerberus did with United Rentals in their last-ditch attempt to save that deal.

But the Clear Channel deal is atypical. Bain and Lee hope to take control of federally licensed radio frequencies – and there are laws governing who controls them and when. The I’s have it. Interference is not just inappropriate – it’s illegal.

Is there anyone who believes the Bain/Lee team flew into San Antonio just to help John Hogan write his memo?

Thought so.

I’d have to believe that John Hogan didn’t need Bain/Capital’s expertise to know that the toilets are the only thing Clear Channel hasn’t flushed. That way they can look back on their broadcasting history to see what they accomplished – but I digress.

There are stringent FCC rules regarding “prior control.” I’ve been through this routine dozens of times. One can observe but not participate in operations.

Up to now the FCC’s been mum on the Bain/Lee’s prior control issue, hoping it’ll go away. And that’s the way Boy Kevin likes it. Keep the government out of government.

That aside, even Boy and his FCC 3-2 majority are short of the cosmetics needed to cover the grim fiscal impasse the radio industry faces.

Citadel stock is tanking. Cumulus’ go-private deal with Merrill-Lynch is iffy and it will take more than a whiffle haircut to advance that deal.

The large radio chains want the Clear Channel-Bain/Lee deal done – and without the haircut.

When Clear Channel fell into the lower 30’s, the Wall Street Journal revealed that the five banks Bain and Lee brought into this dubious deal were “eager to escape huge financing commitments.” That $500 million break-up fee could be the lesser of two evils. The banks involved, Citigroup, the Royal Bank of Scotland, Deutsche Bank, Credit Suisse and Morgan Stanley, can’t afford another disaster.

Then there’s fear that if the Clear Channel and Cumulus go-private deals go south – it’ll devalue all radio properties.

I’m on the side of fiscal responsibility in the radio industry.

I know that may not fashionable in some circles but there are those that understand multiples and ready to get back in the game when the price is right.

There’s a suburb not far from where I live. It’s one of the fastest growing cities in the U.S. - trading cattle and corn stalks for a bumper crop of malls and McMansions.

Now it appears that there’s a shift change with supply and demand. Most buying the McMansions now realize they can’t afford them.

We all know people like that. They buy it now and figure out how to pay for it later.

That's been the radio industry’s m.o. for the past decade.

Radio: NAB - Changing crimes

I just realized what world leader David “Fumbles” Rehr of the National Association of Broadcasters (NAB) reminds me of.

North Korean President Kim Jong-Il. 

Like Kim Jong-il, Fumbles runs the NAB like a one-party state. 

When that North Korean test missile fizzled out over the Pacific Ocean, didn’t it remind you of the present condition of the U.S. radio industry? 

Consider the similarities. 

Most of North Korea suffers from food shortages and lack of electricity.  Its archaic industry is at a standstill.  It has isolated itself from most of the world. 

Most of the radio industry suffers from revenue shortages and lack of time spent listening.  Its archaic formats are lackluster.  It has isolated itself from most of its listeners and clients. 

Let me put it another way.  A house united cannot stand.  

When you never disagree or appraise an optional viewpoint, Fumbles, you suppress any opportunity to move forward.

Fumbles, you’ve been reprocessing the same old promotions and campaigns over and over since you joined the NAB after the beer lobby sent you packing for doing the same thing,

How many new campaigns for HD Radio must you launch before you realize the product is terminal?   

How many variations of that Radio Heard Here campaign must you introduce before you realize that no one except NAB members ever see them?

So, what’s it going to be, Fumbles, when you address the NAB in Vegas?   Will you reprocess still another variation of your same old song and dance? 

Even your GOP buds are beginning to recognize that, in actuality, you’re a political Bolshevik in drag who refuses to face the challenges of the 21^st century. 

Is there anyone that truly believes the NAB cut a good deal for radio’s streaming audio fees? 

If you think he did, let me know.  I’ll call you back in 2012 – unless you don’t plan to be in this business.by then. Thought so. 

That’s the dilemma with Fumbles and his closed-door negotiations with the RIAA’s SoundExchange. 

Did the labels really bushwhack you, Fumbles – or did both of you agree that those outrageous per song, per listener costs will be someone else’s problem in the future? 

The NAB cut a pact that evokes the one the UAW and the Big Three cut many years back when both sides shook hands and concluded that those pensions and payoffs would be someone else’s quandary in the future. 

Fumbles, you’ve managed add more devalue to every radio station in America – well, at least the ones that haven’t gone news and talk or fire and brimstone. 

Yes, I hear your tough talk, Fumbles.  We’ll charge the labels to play their music. Keep saying that and you’ll be reliving 2001 – the year radio’s pay-for-play playlists starting losing touch with popular culture.  That’s when the kids – and a sizable number of adults - abandoned radio and went elsewhere to find their musical soundtrack. 

You see, that’s the problem with popular culture.  The artists and labels that consent to paying the most money to get their songs played aren’t necessarily what listeners want to hear. 

Add social networking to the mix and you’ve got a no b.s. zone that pay-for-play radio can’t penetrate. 

Here and now, when the great convergence to the Internet escalating, do you think it’s wise to stop streaming when that’s the method of delivery more radio listeners? 

And how about those three deadly words, Fumbles: Performance Royalty Fee. 

Fumbles, you gave the RIAA's Mitch Bainwol a free meal and he’s sticking around to lick your plate dry. 

Though the Internet is getting the credit for the new free market system it was radio that invented it by playing music it didn’t own as programming content following World War II.

It’s time for a NAB insurrection – and, Fumbles, it’s about time you know your close.

Radio: Of schadenfreude and obsolescence

And so it comes to pass.

The radio industry as we’ve known it for the past decade is a bloated mess. Wall Street doesn’t want it. No one wants it – at least in its current state.

The word is schadenfreude. It’s the art of taking pleasure in the downfall of others, especially when they’re sanctimonious carpetbaggers who have it coming to them.

Is it my imagination or is there a marked increase in schadenfreude ostensibly directed at the radio industry these days?

By the way, did I mention that I’m reading Alec Foege’s book on Clear Channel, Right of the Dial. I recommend it.

There was a good piece in Sunday’s New York Times Business section on Disney and Pixar and how well that merger is playing out.

In the same time frame that Disney CEO Robert Iger acquired Pixar, he also unloaded its ABC Radio chain to Citadel. Disney successfully rid itself of the old at the same time he was bringing in the new.

*

Pixar is Steve Jobs. Farid Suleman is Citadel. Whose wagon would you prefer being hitched up to?

It’s safe to say that Citadel’s acquisition of ABC Radio is, at least for the foreseeable future, radio’s last bad, bad, incredibly bad deal.

Disney, under Iger, couldn’t hide his disgust at the mess ABC Radio had become.

*

A country club disguised as a radio chain.

We hear a lot about supply and demand.

There’s a glut of radio stations on the block – but who’s buying?

If everyone’s selling and no one’s buying, prices drop.

The Clear Channel owned Inside Radio referred to the radio business on Monday as being on a “death spiral.”

And some of you were upset with me for using the words fire sale?

And some of you were upset with me for putting the word devalue in print?

Believe me. Lenders are already bundling and reselling their radio debt at Filene’s Basement closeout prices. 50% off.

*

And that’s before the automatic markdowns come into play.

As more owners default on their loans, more stations will go on the block and as more stations go on the block…you know the drill.

Clear Channel’s latest 8-K form filing to the SEC mentions that 173 of their stations are “no longer being marketed for sale.” Crisis over? Hardly.

Now, for their next trick. Dig deeper and you learn of another 275 “non-core stations” (a fancy way of saying “we don’t want them anymore”) that they’re trying to dump. When Clear Channel didn’t go private as planned, it was forced to reclassify dozens of stations as “continuing operations” instead of “discontinued operations.” (I don’t make this stuff up) Translation: those formerly put-up-for-adoption stations are now back in the family fold – for now.

Eventually, some of their stations will fall into the ownership of those that actually know how to run a radio station in the twenty-first century.

Remember when Clear Channel was one big happy family?

That is, if you were part of the family. The Mays family.

Now, that family’s as dysfunctional as their stations.

The father, the sons, and their holy roast.

----

When you don't want to get up and change the record