Sunday, February 22, 2009

Radio: When?

It’s the question I get asked the most: "When?"

The answer is: "When…."

When the banks truly come clean on their toxic investments and properties.

Media’s recovery (and let me preface that by saying that not all media will) have everything to do with getting a factual and candid understanding of our present economic state.

The meat fell off the bones in radio, television, and newspapers when the economy was purportedly healthy. That's before sub-prime, before the banks tanked, before Bernie and his friends.

Like all nearly extinct species, the radio mega-chains couldn't adapt to the changing environment. It's hard to prop up an industry that requires ears when few are listening.

Toxic investments, toxic radio chains – what’s the difference?

Lenders are distended with non-performing loans.

They didn't balance the books. They unbalanced them.

Delaying the inevitable is postponing recovery.

I have to laugh at David Frigstad, the chairman of Frost & Sullivan, who said in not so many words that media are manipulating "statistics, negativity, exaggeration, and doomsday forecasts,” which “have driven fear and panic among consumers and business alike." His ten cent psychology is a worth a dime less than what he charges for it.

Memo to all dreamers, schemers, and their assorted coatholders: There’s no rug left to sweep anything under.

Don't they remind you of lyrics from Bob Dylan’s “Like A Rolling Stone:” When you got nothing / you got nothing to lose /
You're invisible now / you got no secrets to conceal?

If the past thirty or so years taught us anything it’s that some things were never meant to be as big and unmanageable as they got. Banks and radio chains are just two examples.

We have to separate what can work from what never will.

Dismantle banks and businesses that can’t work and wipe out their shareholders. Strip away toxic their toxic assets – and from the pieces left over create new banks and businesses that will work.

There was a reason why the old trickle-up system worked so well for regulated media.

Some operators proved themselves to be efficient small or medium market size owners and operators while others were comfortable rising in the ranks from small markets to the majors.

The free-for-all of the last dozen years proved that just because these groups were able to con the financing didn’t mean they knew how to run that many of them.

That's a fact you can't confuse free-market cheerleader and New Hampshire Senator John Sununu with. A few years back, when arguing for more radio deregulation, he said the reason Clear Channel had the most listeners, ratings, and revenue was because it was the best radio programmer.

Let’s take Clear Channel, CBS Radio, Citadel, and Cumulus for starters. Of those four, how many will go belly up or be liquidated before December 31, 2009?

Just in the past couple of weeks a few of the smaller groups and regional specialists I work with received probing calls from some of the majors on their interest in some stations their trying to quietly unload.

I smell smoke.

Sunday, February 15, 2009

Radio: Sirius XM – What may save you may also kill you.

Welcome to Mel’s Hell.

Did you ever – even in your wildest dreams - imagine seeing Mel Karmazin, hat in hand, pitching and wooing his own Sirius XM stable, asking for their loyalty at his time of need?

Money changes everything.

For the past couple of weeks, Mel’s been entreating for concessions and pecuniary breaks from Oprah, Martha Stewart, Major League Baseball, and the NFL, just to name a few. The MLB deal runs $60 million per year; Oprah’s at $55 mil, the NFL’s $23 mil, and Martha weighs in at $7.5 mil.

The pro sports teams offer subscription on-line audio and video alternatives in addition to their satellite broadcasts.

Mel already stuck out in his first time at bat with MLB last week. MLB COO Tim Bronsan, who’s responsible for all media negotiations told Business Week, “We have a binding agreement that we intend to honor.” The MLB deal runs through 2015.

There was a time when Mel’s casino dice eyes dared you to trust them. They told you straight out, play me long enough and you’ll lose. His smile was always more for him than it was for you. To Mel, the meek would never inherit the earth; only the small piece they fertilized.

That’s why it's so odd to see him painted as a victim.

Oprah, whose Sirius XM deal is up this fall, could take her channel and move to an on-line subscription service, which would provide Internet radio the break it needs to develop into a major player and move stand-alone Internet radio from its 33-million listener cult status to hundreds-of-millions critical mass. Most likely she would form her own syndication company for independent terrestrial radio distribution with Internet radio options.

There is, of course, Howard Stern’s five year $100 mil per year contract. Signing Howard put a new face on Sirius debt. It was the stimulus package Sirius needed to gain ground from its poor number two to XM showing.

Sirius even got a year’s supply of free plugs from his former company, CBS Radio – known as Infinity while Mel was there – when Howard did his daily rant on evils of CBS and other terrestrial radio chains, while promoting his future-cast on Sirius.

And what a coincidence - Mel ended up at Sirius, too. Who would’ve (or wouldn’t have) thought?

2006 was the year Sirius shelled out that $500 million for Howard in an effort to lure a large share of his 10 to 12 million predominantly adult male terrestrial audience to satellite. In 2007, A Bridge Ratings research study estimated that 2.5 million of that 10 to 12 million were Stern’s most loyal listeners. Of that 2.5 million, it’s estimated that Howard brought in 1.3 million new subscribers to Sirius.

Be assured that Howard leaving Sirius is not one of Mel’s problems. Unlike the rest of Sirius XM stable, there’s a tight, deep, multi-decade business connection with Howard and agent Don Buchwald. Wherever Mel goes, Howard will be there, too – unless he decides to retire and that’s an option that can’t be ignored.

Being Mel Karmazin today is like working for Mel Karmazin yesterday.

Bob Dylan could rewrite “Gotta Serve Somebody” with Mel lyrics.

Then again, there’s only one Mel Karmazin.

Just ask Farid Suleman. Just ask Lew Dickey.

It’s really not Mel’s fault that Sirius XM is a penny stock.

In their most primitive days, both Sirius and XM over paid for everything. When money was no object and IPOs were being announced daily, XM ran a series of pricey spots featuring pianos and violins crashing to Earth – and paid David Bowie millions for his endorsement. Sirius burned through multi-millions years before its first broadcast on the physical plant and its gold-brick per square inch lease.

It must be said that Sirius XM was the outcome of merging two bad business models. Before the merger, both companies were stuck with debt they couldn’t get out of. The merger changed nothing. Now, the combined company is stuck with debt it can’t get out of.

Though Sirius XM managed to exchange $172.5 million of debt maturing in December for new debt due in 2011, it still has roughly $175 mil and change, which was due yesterday.

So the news about Sirius XM’s potentially impending bankruptcy, which I wrote about on December 29, should be a surprise to absolutely no one. The first time I mentioned it was back in October. Look it up.

But it doesn’t end here.

Meet Charlie Ergen, the CEO of Dish Network and EchoStar. He tried unsuccessfully to take control of Sirius – but was rejected by Mel. Now he’s bought up $300 million of discounted Sirius Bonds that come due next week and he’d like nothing better than to take Mel out.

Don’t look for a whole lotta love between Charlie and Mel. When Mel was at Viacom, he pulled its cable channels off Dish Network. Charlie responded by posting the Mel’s home phone number for viewer complaints.

And guess who’s on EchoStar’s Board? Joe Clayton.

Name doesn’t ring a bell?

Let me introduce you to former Sirius CEO and Chairman Joe Clayton. Mel came to the decision that Sirius was not big enough for the both of them.

The question has to be asked. Is Joe Clayton to Mel Karmazin what Mel Karmazin was to Roscoe Mercer? Just asking.

Both the Wall Street Journal and New York Times identify Mel’s white knight as one of Ergen’s rivals, Liberty Media CEO John Malone. But it must also be said that white knights come with a price.

So, come Tuesday, when the debt is due, we’ll see if Sirius XM makes it, breaks it, or does an all-bets-are-off, all-contracts-are dead bankruptcy filing.

There’s one of two endings. One of them has Sirius XM fading into the memory vault along side 8-tracks, New Coke, the Edsel, and Pauly Shore.

Monday, February 9, 2009

Radio: RIAA v. NAB - two wrongs don't make it right

By now you know that the record labels are demanding a bailout from the radio industry.

Their claim, which they’ve taken to Congress to resolve, is that radio has been on the receiving end of an unmerited free ride.

The Record Industry Association of America (RIAA), the lobbying arm of the recording industry, wants Congress to impose a performance tax on radio.

The National Association of Broadcasters (NAB), the lobbying arm of the radio industry, opposes it.

Radio already pays annual fees for music airplay to ASCAP, BMI, and SESAC.

There are no good guys here. Pot, meet Kettle. Glass House, meet Stones. Deflation, meet Stagnation. Wrong, meet wrong.

Both radio and record industries are wholly dysfunctional and delusional. For the past decade both have ignored their customer base. Now, they wonder why their market share has dwindled.

Radio homogenized its formats, eliminating localism, talent, and R&D. Labels churned out mostly mediocre CDs and retailed them for almost double the cost of a hit movie DVD.

Customers are as loyal to you as you are to them. Do most consumers really miss record stores? If the station you listen to – assuming you still listen to radio – went off the air, would you really miss it?

The labels only cared about getting the adds and spins. Now, they’re claiming that radio, imbalanced with mundane voice-tracking and jockless jukebox formats like Jack, Bob, and Radio, no longer sells their music because song identification is an option.

Both industries resisted and rebuffed new media.

The labels may have invented payola but radio bought in and listeners were deceived by hearing new music restricted to those that could afford to pay for play. Like drugs, radio couldn’t just say no.

The consequence? The public has no empathy for either.

They’ve migrated to the Internet for music – both to hear it and to download it – legally and illegally.

Now each side is out to make the other look bad.

The labels claim this new performance tax will trickle down as royalty payments to artists.

Is that before or after Universal Music pays CEO Doug Morris’ $14.5 million dollar salary?

Is that before or after Warner Music pays CEO Edgar Bronfman Jr., who bought the company so he could run it, albeit poorly, his $6 million package?

Just for the record, CBS CEO Les Moonves, whose watch includes CBS Radio, collected $33.7 million last year. In the same time period, CBS Radio purged 700 jobs.

Still, like a mastodon slowly sinking into a tar pit, the labels are thisclose to extinction. But unlike dinosaurs, they’re trying to lug radio into the pit with it.

If you want supplementary background on these organizations, just go to the “search blog” box at the top of this page and type in “NAB” and “RIAA.”

The RIAA has been seeking to squelch or control Internet radio for years through its collection arm – SoundExchange.

The RIAA has their act together under its CEO Mitch Bainwol and they’ve been snarling, snapping and barking like rabid dogs at the NAB while its CEO David “Fumbles” Rehr plays scared mouse and writes long, rambling, meaningless letters to anyone with the time to read them, which is absolutely no one on Capitol Hill.

The RIAA-backed Performance Rights Act was introduced by John Conyers (D-MI) and Howard Berman (D-CA). The NAB, known for its own hyperbole, claims it will cost the radio industry between $400 million and $7 billion. But the truth is still somewhere in-between. It’s an expenditure the radio industry cannot afford.

There is always the possibility of the law of unintended consequences. The bill passes and all music radio formats go – wackjobs unite - talk.

While Fumbles was mailing stuffed ducks with an anti-RIAA message tacked on them to members of Congress, RIAA lobbyists worked the room, shaking hands and taking names. There’s an old saying – never under estimate the value of a cash bribe and there’s a new saying – never underestimate the value of front row tickets to a U2 or Coldplay concert for one of your high-roller campaign supporters.

Fumbles is Mr. Outside, Bainwol’s Mr. Inside. They’re both recurring presences, like ants at a picnic, snakes at the garden party, or herpes.

The RIAA cites the devastating drop in both listeners and their time spent listening to radio as the reason for its loss of influence. Right now, the odds are in favor of Congress approving the tax.

Been to Capitol Hill lately? Check the demos. You’ll see a whole lot of people working on the Hill who were listening to the radio when deregulation and Clear Channelization kicked in and kicked them out.

Look it up. Early last year I suggested that Internet radio only owners and the NAB should join forces since the heavy-handed tactics they were receiving from the RIAA would eventually close in on terrestrial radio, too. *

Let the record show that Fumbles ended up taking the opposite tack. He tried to pull a fast one, and got outed for a clandestine maneuver in Congress to block passage of the Webcaster Settlement Act of 2008, which allowed negotiations to continue between the RIAA’s SoundExchange and Internet radio over Internet radio royalty payments.

The NAB will never criticize what it doesn’t understand – it’ll just try to kill it.

Can’t we get Fumbles to quit due to ill health? We’re sick of him.

I fear that when it comes time for the face-off between the RIAA and the NAB, Fumbles will be prepared for a Punch and Judy show while Bainwol will be ready for nuclear war.


Saturday, February 7, 2009

Radio: Austere Channel

Did someone say that the Clear Channel budgetary crisis is even worse than anticipated?

Did someone at Bain Capital and Thomas H. Lee tell Mark Mays and his fun lovin’ chiselers, “We’re in a hurry…Chop, chop?

If you are a Clear Channel employee are you at risk of losing your job? Do you work in billing or traffic? If the answer to the latter is yes, the answer to the former is also yes – depending on your market size.

With Bain Capital and Thomas H. Lee deep in the throes of buyer’s remorse over their Clear Channel acquisition, reliable sources say that they will announce their new regionalized traffic and billing hub-and-spoke network on Friday, February 20.

In this new scenario, larger market clusters will oversee those departments for smaller markets, thus eliminating those positions in the latter markets.

Spywitnesses at Clear Channel corporate also maintain that an analogous 100-mile radius hub-and-spoke management plan will also be announced shortly; possibly in tandem with their traffic and billing announcement. This plan would purge market managers and assistants within a 100-mile radius of a larger market.

I’m only guessing here – but I’d save those whack-eroos for the next go-round. March? April?

Here’s the dark humor joke making the rounds at the Clear Channel clusters on that one: What will save our manager from getting fired is that the new Bain-Lee Clear Channel wants to look at itself as family. And our manager is a member of that family - the family dog.

There’s also the most obvious of imminent job cuts – program directors and air talent – though no date has been confirmed for that carnage other than it being inexorable and sooner than later. *

It’s a problem not exclusive to Clear Channel. We’ll see a few radio chains filing for financial bankruptcy this year. Their moral bankruptcy occurred some time prior.

Sunday, February 1, 2009

Radio: Fire Fumbles!

Over 100,000 lost their jobs this past week.

Why wasn’t David “Fumbles” Rehr, the President and CEO of the National Association of Broadcasters among them?

"I did a lot of things that were mostly right."

Fumbles didn’t say that. That was Governor Rod Blagojevich at his impeachment trial in Illinois.

But it reads just like an archetypal Fumbles line, doesn’t it?

Fumbles, you should’ve taken your cue from Boy Kevin Martin. Some former FCC Chairmen are considered distinguished. Boy Kevin was extinguished.

The Boy ran his own little fiefdom at the FCC with a blithe lack of accountability. Fumbles, you continue to run the NAB with a blithe lack of accountability.

The radio industry was in critical condition even when the economy was still considered healthy.

Did you really believe bad news would go away if you ignored it?

Your solution to the industry’s anguish was to claim “Radio Heard Here” as a triumphant campaign that’s restoring listener awareness for radio. Tell that to Arbitron.

Fumbles, how does it feel that you’ll forever be known as one to helped put radio in the grip of a malaise from which there seems to be no relief? Your leadership isn’t leading to anything worthwhile.

If anything, a reverse magnetism has metastasized between the radio industry and its listeners.

The recent “re-engineering” (Clear Channel Radio CEO John Hogan’s idiom) moves by the major radio groups would have one believe that the sole purpose of running a radio chain is to manage the bottom line – and to do so effectively, one must eliminate talent, innovation, content, and sales people that make too much money or have limited experience.

One agency head I talked with this past week compared radio to a creaky old house left to neglect.
The reality is that some radio stations will go dark. They’ll have to. Do the math. There are too many stations and not enough revenue to go around.

You can’t build on a future without a farm team. Does Clear Channel really believe they have a five-year plan with Ryan Seacrest? Does Clear Channel really believe Rush and Beck will translate to the next generation? Do you think Bain Capital and Thomas H. Lee are tormented by their severe case of buyer’s remorse?

Fumbles, instead of taking advantage of the great convergence to the Internet, you pushed HD Radio like a man possessed by demons. It has proven to be a bitter failure and a costly mistake for the radio industry – and you still continue to push it.
Did you read Deloitte's State of the Media Democracy survey? If not, you should. The study shows that three-fourths of Millennials - those between the ages of 14 to 25 and the demo that’s vital to radio’s present and future ratings and revenue - consider the computer their number one entertainment device.

During the years that “legal payola” determined most current music radio playlists, terrestrial radio ceased being a soundtrack to popular culture. Instead of playing music its audience wanted to hear – radio played music from the labels that spent the most money to be heard. As a result, 80 percent of Millennials listen, search, and download music from the Internet.

If the major radio groups you represent weren’t so myopic, they would’ve invested in social networking sites like MySpace and Facebook when they were affordable. Today, 73 percent of Millennials socialize on-line.

Let's put it another way. In November, Facebook had 200 million unique users and MySpace had 100 million. That’s cross-promotion the radio industry lost!

Instead of investing in sites that could augment their stations, the radio groups went on a quest that’s best defined as “the group that dies with the most number of stations wins.” Ain’t that the truth!

Maybe that’s why Millennials rank radio at the bottom - fifth in having the most impact on their buying decisions. That puts radio behind TV, on-line, magazines, and newspapers.

Poor Fumbles. Even on the rare occasion he gets something right, he gets most of it wrong.

Take his new campaign to get radio on mobile phones. 59 percent of Millennials and 33 percent of all consumers use their mobile phone as an entertainment device.

Last week, Fumbles went into another one of his letter-writing frenzies and fired off a wordy one to T-Mobile USA President Robert Dawson to thank him for the FM listening capability available on the Nokia 7510 model. Fumbles is now pleading with Dawson to get FM on all T-Mobile units.

I don’t know how many Nokia 7510’s on the market but, Fumbles, there’s far more interest in the iPhone and other models that provide Internet radio capability. True, CBS Radio, Clear Channel, Citadel, and the other usual suspects are streaming what they believe to be their “best” terrestrial stations on line – but they are in competition with stations worldwide – from better- programmed terrestrial radio stations in countries where radio is still a profitable business – to unique Internet-only radio stations featuring every conceivable format. Then there are sites like Pandora that will create a radio station based on specific musical tastes and preference.

Now, before the terrestrial radioasauruses claim I don’t know what I’m talking about again, click here for Bob Lefsetz’s Lefsetz Letter and his p.o.v. Lefsetz is a music attorney and consultant to the music industry. He loves his industry as much as I love mine. He started the Lefsetz Letter in May, 2005. At first, the old school record labels and music executives tried to pin him as a gibbering gadfly for new media. Now, it’s become a must-read for anyone in the music industry.

Is there anyone that believes that the Fumbles version of the NAB can fight the RIAA’s Performance Rights Act, which will force radio to – how about this for a reverse play – pay-to-play music? If that mouse of a negotiator Fumbles is still running the show, they’ll be a glut of news-talk radio formats by the end of the year.

Fumbles, I don’t want to belabor on why it’s time for you to go. Over the past couple of years, I’ve provided more than enough reasons. Let me add one more I haven’t brought up before.

Meet your next FCC Commissioner. Julius Genachowski. He’s no Boy Kevin. Genachowski and President Barack Obama were classmates at Harvard Law. He’s a stanch advocate for net neutrality – meaning that on-line service providers shouldn’t be allowed to confine or influence the right to access service by a rival owner. It’s a regulatory concept. You can read about it here.

Yes, get used it, Fumbles. It used to be that when corporate interests collided with the public interest, our votes no longer seem to count. Now, the Objectivists and the Libertarians are officially out of favor on Capitol Hill. There will be regulations, when and where needed.

I’m sure even you’ve got it figured out by now that President Obama knows radio and it’s on his radar screen.

Radio stations are still federally licensed. How about a rule where a company must return a license if it cannot afford and chooses not to keep a station on the air? If you can’t pay the mortgage, you lose the house. If you can’t afford the station, you lose the license. What’s so unfair about that? Successful stations will be superior competitors, not controllers.

We live in a world where it is imperative to be connected and radio must reflect that in real time.

Though it suffers from a tarnished image, radio still has the ability to dominate listener gratification the way Google dominates search.

Radio is a business and the same rules apply. Customer service cements relationships.

Real broadcasters won’t have a problem with Genachowski but the pretenders will.

Fumbles, if the radio chains are dumb enough keep you hangin’ on, here’s a new line you can use to promote your product: Do not attempt to adjust your radio. This is the way radio sounds today. And forget domani.