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?

What A Week!

No shortage of news...

• Clear Channel managers learn about a new batch of available "programming options" from San Antonio
  
• Ascertainment is back...hey let's find out if we are serving our communities--good idea
  
• Less wasn't more--PSA's are back
  
• Edison Research and Arbitron release a new study that shows young radio listeners are listening less
• Portable digital media devices are STILL growing and fast
  
• 42 million Americans are listening to radio on-line--and lots more competition from non-traditional radio providers like Pandora
  
• A heritage AM station in NE PA goes dark...maybe for good

...and on and on and on

Not a great week the for biz really--repackaged initiatives, discouraging research, and short-sighted operators doing more of what they do every week. Certainly, there are positive nuggets mixed in, but for the most part it's pretty cloudy out there. Innovation is practically a dirty word in the hallways of many companies these days.

I feel compelled to repeat myself a little today:

• Non-stop music machines are not the answer to excite listeners--in the long term even with PPM (long term? yeah, I know)
• Playing 30 and 40 year old classic rock on stations hoping to attract a passionate following of 25-34's is a losing strategy
• Ryan Seacrest can only be on the air for some many hours in any given day
• Why can Top 40 stations play mostly currents and recurrents for women, but most believe that strategy can't work for a "guy" station? (It can, and I am doing it successfully)
• Talk radio is not about political parties, but entertainment...period. (and no, Limbaugh is NOT the leader of the Republican party...good rhetoric though)
• Sometime soon we need to commit to attracting some young new voices to our ranks and encourage them to talk to their peers in ways that 50 year old's can't.
• Commercials are a necessity, how about reinvesting in the process of writing and producing better copy and audio?
  

I'm sure you have a few of you own. Feel free to contribute.

It's a lot easier when we all assume the position of "get along and go along" but that is not what our industry needs right now. We need a revolution of sorts. Evolution ain't gonna cut in anymore. This type of action won't come from cashflow positive stations since no one will risk that type of upheaval--understood. So we wait. We wait for grim reaper of failure to cast its ugliness upon us, and then...

The Day That Was...

Democracy in action in Washington, DC. And at Clear Channel the unfortunate news of being fired was delivered to more than 1800 already nervous employees hoping it wouldn't be them called into conference rooms across the country.

These are challenging times. Tough decisions are being made everywhere. Tough decisions are being made at broadcasting companies. Understood.

Radio is at a crossroads, so, even without the current economic situation we would be facing significant adversity. How we handle it and react to it now will dictate our future. With that in mind I offer you a thoughtful presentation about people, passion, and changing the game. Excellent.

Be a Gamechanger!

View more presentations or upload your own. (tags: collaboration co-creation)

1 Company, 2 Books, and 2 Very Different Stories

Clear Channel is the subject of two new books--one quite critical and the other quite complementary.



Which book is right? That depends on the lens through which you view the company. I worked there and certainly have my opinions, but I will say simply this: like any other place there was good and bad, but overall my experience was good. Don't mean to disappoint those of you who thought there might be some good dirt spewing out of this blog.

I was there, in a senior programming position, as many of the stories were being written about national playlists and other such supposed "crimes." Every time something was written that was patently false, and there were plenty of fictitious or skewed stories being written, I tried to pay as little attention to it as possible and stay focused on productive things.

At the same time the reduction/elimination of the farm team and the multiple rounds of cuts was tough to be a part of. I always believed there needed to be a better plan in place to ensure there would be an adequate stable of passionate radio folks for the future.

So, which book is closer to being right? I will let you decide which story seems closer to the truth. Maybe it's a mix of the two? wink wink.

Cramer On Clear Channel

This afternoon on Cramer's Stop Trading feature on CNBC he talks about the Clear Channel deal and what he thinks might happen. He thinks that the banks buyers remorse will not hold up in court. It's an interesting piece given Cramer's recent pontification on the value of the radio broadcast industry.

I Read the News Today-Oh Boy....

Clear Channel Buyout In Trouble (Reuters)


Report: Clear Channel Deal Collapsing (AP)


Clear Channel Deal Is Close to Collapse (WSJ)

Today, one has to feel badly for the employees of Clear Channel--they've had better days. Much better days. After enduring wave after wave of cuts one has to imagine that many were anxiously awaiting the potential closure that the privatization deal promised. Not that there were any guarantees mind you, but certainly the hope of a new chapter. Some were hoping for a payday from their company stock purchases, 401k contributions, and stock options. Something that looks very uncertain now.

Today, one has to feel badly for all of us in the radio business. If this deal ultimately fails, it will hurt our industry--and bad. If the biggest radio company with some of the most famous stations in the US can't make it happen what will be of the value of radio properties across the street?

What do today's events tell us about the future? What will become of the largest group of stations? Will it be business as usual? [Whatever that means in 2008]

Right now, there are more questions than answers, but I suspect we will learn a lot more about what it all means before the "end of the first quarter."

The Future of Clear Channel

Dow Jones reported today that managing director Richard Bessler of T.H. Lee Partners went before the House Telecommunications Subcommittee and gave us all a glimpse into what Clear Channel will look like in the future.

"Clear Channel Communications Inc.'s (CCU) future path would be "best served" by focusing on fewer radio stations in fewer media markets"...

...said in prepared opening remarks..."that he thought Clear Channel would do well by deconsolidating itself".

"This streamlined approach, in our view, enables Clear Channel to more efficiently deploy and market its digital offerings in the face of competitive challenges from other digital platforms."

Sounds to me like Clear Channel will be a vastly different and smaller company once the deal closes. After reiterating that he expects the deal to close the market responded by sending shares of CCU up more than 6%.

What will be sold off, what he means by "more efficiently deploy and market digital offerings," and what it means for the remaining terrestrial products is not clear. But what we can be sure of is that more bone-crushing change is afoot.

12 years after consolidation began in earnest we are now starting to see the unwinding of some of these deals and I believe many more to come. Only time will tell if this turns out to be a good or a bad thing. Some would argue it could only be good; but I say temper those sentiments until we see the end results. My hope is we see investors come to the table with the desire to make a lot of money(I am a capitalist after all), but, also a desire to rethink, reinvigorate, reinvest in the medium that is capable to engage one's mind in ways a picture can't. To quote that cheesy network radio commercial, "people judge you by the words you use."

I don't know about you, but when I hear a voice on the radio (or podcast) the first thing I try to imagine is what that person looks like. I'm always wrong!

Radio's Cry For Help

That's the way CNBC put it this afternoon in a report on Clear Channel, Cumulus, listening levels, and advertising. Of course, the lead was whether the CCU privatization deal would eventually close and Mr. Hogan's now infamous Q1 budget cut memo--which they outlined in great detail.

They note how the consumption of radio remains "surprisingly strong" and throws off a ton of cash; but is suffering from double digit declines in national advertising due to increased competition from a variety of competitors. None of this is a surprise to any of us in the business, but it seems so much more bleak when it's broadcast in living color.

Here's the CNBC Video.