Saturday, May 9, 2009

What Happens When the Cash Flow is Gone?

For an industry that has trumpeted the amount of cash it throws off; what happens when that cash flow evaporates? We are witnessing what happens--it's happening in the radio business right now. Forget about debt service...forget about stockholders...forget about EBITDA...simply look at the most basic of measures--a station's/cluster's the top line revenue minus the expense line and what we are beginning to see is red ink. As I talk with people around the country and hear stories of business, in some cases, declining 30 or 40 percent over last years weak performance something has to give.

Late Friday Radio and Records published a story outlining how Clear Channel has begun using centralized music logs and talent with local PD's adding weather, traffic, news, promos and other local content. Initially this has been rolled out on 17 stations around the country. Don't be surprised when that number grows to 170 stations before too long.

When the ink turns red, all bets are off.

Reading stories like this is very painful for radio pros and fans like us. But then, at least for me, I step back and think I am not surprised at all. In our quest to improve the product and maximize this or that we sucked the fun and creativity out of our product. It's like running an amusement park without the amusement.

"Shut up and play the music" was the order of the day. Did it work? Yup and still does. But the truth is, when you make the music the only star you don't need local people to pull that off. Sorry. Is it worth the cost of an entire staff to be able to play your locally focused music library that varies from other markets by maybe 10 or 15%? No.

The fact is that when the personality factor was factored out of local radio you might as well just put it up on the bird or have a centralized programmer handle your music. The fact is when your air talent talk for six seconds 3 or 4 times per hour and say nothing you might as well put it up on the bird or have a centralized air talent read your liners.

It's the perfect storm--negative cash flow and bland & sterile local radio stations.

Are you mad yet? I hope a little bit.

If a local radio station can't or is not allowed to produce a product that is unique and compelling, then it should simply pull back and play the music with little else. Is the current revenue situation, at least in part, equalizing to the quality of the product?