Music Media Predictions for 2009

The Big Trend: Social Networking

Not just Facebook and MySpace. The concept of building a social network around almost anything and having passionate people come together.

2008 may go down as the year of Twitter -- the 140 character communication system that asks what you're doing -- short and sweet. If you haven't tried Twitter, do it now and experiment with it -- (follow me, too).

We'll be talking a lot about the importance of understanding social networking in the year ahead, but for now let me caution you not to fall into the traditional media misconception that social networking sites are the successor to direct mail.

They are not.

To be successful, social networking sites have to have give and take. You need to listen and respond to others. Offer things that will be helpful and work 24/7 at staying in touch. (I answer all my emails -- and I get plenty, thank God -- whether it's via traditional email, Twitter, Facebook or whatever). Last year I strongly suggested you start a Facebook page if you don't have one. Let me suggest again, try it and you'll be able to understand the conversation about why social networking is a game changer.

Traditional media execs want things to remain the same. They're paying for that stubbornness on their bottom lines. The future is also attractive. Have a little sense of adventure.

Music industry and broadcasting people have proven skills to learn and adapt.

This will be the year of social networking.

The Record Business

When you see the labels backing down from their strategy of divide and sue, you know just how bad things are in the record business. While it is a long overdue move, they are switching strategies with an evil heart.

Labels are still proceeding to litigate cases already started.

That's dumb.

Imagine -- suing customers hasn't worked all these years so go ahead and finish suing the litigants in progress. Makes sense, right?

The real problem in 2009 is not RIAA lawsuits -- they didn't make a difference (except to the poor unfortunate suckers who the labels tried to make an example of -- usually college students).

The labels are headed into 2009 with bad information:

1. That selling CDs in big box stores is a strategy that will work. Actually, it has failed miserably. Why do you think Wal-Mart is cutting back on the number of CD titles it plans to carry? Remember that long-awaited big box bust called Guns N' Roses new album? Selling something the public has cooled off on such as CDs in limited retail locations is like shooting yourself in the foot. Not like -- it is. If labels continue to turn to BestBuy which has tons of problems of its own to sell product, my prediction is the labels will sell fewer CDs when the year ahead ends.

2. That they can actually make money selling 99 cent songs on iTunes. That ship has sailed. While there will be consumers who will spend the 99 cents -- many more will opt for free. Without digital rights management it will be even easier. The labels blew this one. They should have embraced the 99 cent iTunes instead of fight it. Now the next opportunity is to offer music for five or ten cents a song (priced like text messaging) to feed the public's addiction to music. When it costs next to nothing, stealing music won't be as attractive. Then -- and I emphasize then -- the labels can sell package plans just as cell phone operators do for texting. No young person would be without that $20 a month texting add-on. Same could be true for the music industry. But they have to create the desire first. And that's done by feeding the monster not suing it.

3. That artist development is not so important to a turnaround. Hell, if there is one thing the labels had better do in the year ahead it is to get back into the music discovery business. They are no longer big enough or powerful enough to play pin the donkey on the long tail. With the Internet in full force and social networking a rising force to reckon with, if the labels don't quadruple their efforts to discover new bands, singers, writers and genres, they will deserve what they most certainly will get.

4. That radio still sells new music. No, talk to young people. You'll hear them tell you that they are not as influenced by radio -- in fact, they listen only when they have to. It's laughable that the labels have turned on radio stations when they're down and out in pursuit of repealing the performance tax exemption for stations. If the labels eventually win this repeal, they will lose. If they lose their attempts, they lose. The word "lose" is showing up a lot lately. You don't waste your political capital on grudge fights.

5. That consumers will pay for all-you-can-eat music plans. As I said earlier, why should they? They get the music for free now by and large. Without lowering the cost of music to next to nothing, there is no way to drive the demand. It would take balls for them to do it. Ah, forget about it.

6. That ISP's may someday charge consumers a gatekeeper's admission price for access to all the music ever made by man or beast. If the labels keep thinking like this, they would have made more investing their last dollars in the Madoff Ponzi scheme. Seriously, this idea is a loser and deserves no further consideration. Isn't gonna happen.

Radio

Wait until Farid Suleman's compensation is made public. Just wait. Excess compensation for underachievement. $10 million a year for what?

Wait until Clear Channel unleashes the firings and cutbacks it has in mind for the year ahead.

It's going to get ugly.

I think you may find some of these "discombobulators" trying a new tack which I call water torture. Instead of attracting attention and outrage at mass firings, you may see them spread the axing of staff like a slow drip over 52 weeks. This way maybe no one will notice (except of course, the fired).

The radio industry is headed into 2009 with bad information:

1. That the continued growth of using syndication techniques to cut local programming costs actually works. Wrong again. It cuts costs alright, but also makes radio less local which is less good and will make less money. The word "less" seems to be popping up a lot here. But after all, radio is the industry that invented the concept of less is more. If you don't like a washed up Don Imus on the air everywhere some cheap ass consolidator wants to save money, try being the poor listeners. This is a typical radio decision -- act before you think. Bad move. And there will be no getting back the lost radio listeners. It's like spreading the ashes of the deceased over the city by air. You can never get the ashes back in the urn once they have been let go. Nonetheless, 2009 will be the year of radio's own suicide. Up until now it was murder committed by the CEOs.

2. That the next generation can be ignored one more year. This from the braintrust that interrupted the long standing practice of programming to youth to get them addicted on radio. Back in 1996 when consolidation came along, the arrogant new Wall Street Wonders could care less about these kids. Today, "these kids" have taken over the Internet, are governing pop culture on their own terms through social networks and over mobile devices. They are fickle. They don't believe hype and they don't like Ryan Seacrest (sorry, Ryan). Even if one "discombobulator" decided to amp up the move to deliver content where the audience lives, it might be too late. To radio CEOs an Internet initiative is, at best, a small operation that costs little money and gets less than 5% of the group's total budget to go do Internet things. What fools.

3. That selling commercials at a cheaper price in a recession year will work. No one listens to commercials. They never did. You were on the air once (or maybe still are). Listeners don't care about the worst content on any radio station -- a spot. And the radio industry knows this in spite of their public denials. After all, why do you think they allow programmers to bury as many commercials as they can in four to six minute stop sets. Come on! Fewer commercials. Better commercials -- with the goal of actually delivering tangible results for an advertiser will even make ratings irrelevant. This is the only future for radio and yet the radio CEOs are cutting salespeople, cutting prices, cutting people to produce passable commercials. The word "cutting" seems to be showing up a lot -- like in cutting off your nose to spite your face.

4. That you can stream a radio station over a telephone. I know. I know. There's plenty of applications out there to allow streaming radio on phones. But a phone is not a Walkman. The world has changed. Attention spans have changed. People want to choose what they want to hear -- and prefer short snippets of content. The iPhone is turning into a big source of downloading books. That will work. Games on the phone will work. Social networking tools, yes. Radio by nature -- a product broadcast by the source out to the public does not and will not work for most people on a mobile phone. Old radio hands may like it. Otherwise, no young person (the next generation the media industry needs to win over) will listen to radio programming that they don't like on their most precious asset -- a phone. (Steve Jobs had it right when he left radio off iPods and iPhones because he understands the next generation. Radio CEOs do not).

5. That HD radio will still work work. In Washington, there are reports that no radio stations are broadcasting in HD. Zero. Most cities have lousy HD reception and even worse content on the subchannels. Hard pressed operators are now turning their HD equipment off. Sorry about your luck if you are a consumer that bought an HD radio. HD radio will stand as a monument to how stupid decisions quickly become institutionalized until finally hard times killed them off. Consider HD dead in 2009 for radio executives. For everyone else, we "mourned" its loss years ago (wink/wink).

6. That understanding generational media is not as important as understanding business. May I say that I have been able to call a lot of trends up until now not by using business benchmarks but by considering generational aspects.

7. Young people aren't the only important listeners. True. But they are the change makers. When they adopt iPods, then older folks buy them -- not the other way around. When the next generation wants applications on their phones, then older folks line up to buy iPhones to play games and have fun. When kids used Facebook as a social networking tool, older folks quickly jumped in the moment Facebook opened the door to them. When young people downloaded music online, then older folks discovered how to do it -- not the other way around. And -- sit down for this -- as young folks abandon radio for new media and social networking, watch the decline in traditional media usage in the year ahead for older, typical radio listeners. As Steve Jobs and Barack Obama can tell you -- don't underestimate the power of the next generation to embrace thinking differently and bringing about change. But radio CEOs continue to get it wrong.

And speaking of Steve Jobs -- it's amazing to watch how much one person can mean to a company. Rumors have Jobs dying every other day. Whether he is ill or not, I don't know. CNBC reporters claim they're told by Apple that Jobs is fine.

Beyond that, who in radio -- or the record industry -- is so important to a company that their health would be so much cause for concern as it is with Jobs and Apple.

Radio and record CEOs are the under performers -- underachievers. Pretenders in a Wall Street world where they failed and were ultimately dismissed for poor performance. Some threaten to be delisted in the year ahead.

So, that's the honest to God truth -- as I see it.

Let's see if these screw ups make me look smart again by the end of next year.

I will tell you what I told a group of students a few years back -- I'd give up any money I have earned to this point, any good name I may have made for myself over the years -- just to be their age and coming into the media business at this time of great change.

I smell money.

I didn't say it because I'd rather be 21 than 41 (okay, whose counting?)

It's because we are living in a serendipitous age when the media possibilities are as exciting as they are confounding and where those who pay attention to generational media will eventually reap great rewards.

On a personal note: Thanks to all of you who have helped my website grow this year. Inside Music Media has by far more daily readers than Inside Radio when I owned it -- thanks to you. It has earned a Google page rank 5 -- not possible without you spreading the word, emailing topics of interest to your friends and associates and linking to Inside Music Media on your sites.

Oh, and to all of you in the underground network that spread this "treasonous" content to the employees of Cox and Citadel, blocked from accessing Inside Music Media at work, thanks for waiting to go home to see someone call their executives out when necessary.

So much for censorship.

Happy New Year!

See you on the other side with food for thought.

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Rate the Radio CEO

Apple CEO Steve Jobs was voted as one of the nicest bosses in American business by his employees according to a Glassdoor.com survey.

Jobs, in spite of his quirkiness and tough facade was given a 90% approval ratings by Apple employees. In fact, six of the top ten nicest CEOs headed Silicon Valley companies.

Keep in mind that these six companies are experiencing the same economic downturn as everyone else but somehow they manage to win the admiration of their workers in terms of how they lead their company through tough times. I mention this because the radio "get out of jail" card is always the economy.

Even some financial firms had some "nice" employees -- at least according to their employees -- in spite of all the problems the financial sector has been going through in 2008.

Glassdoor.com was founded in 2008 by three former Expedia employees who initially financed the project. Now Benchmark Capital, where one of the principals (Robert Hohman) is a partner, threw in another $3 million and Sutter Hill Ventures led a $6.5 million contribution.

The all-time worst boss in the Glassdoor.com poll this year is Steve Odland of Office Depot, according to his own employees. He had an 80 percent disapproval rating.

Of course that brings me to the media business where three companies you will recognize were rated by their employees.

Citadel CEO Farid "Fagreed" Suleman earned -- and I emphasis earned -- an 8% approval rating from his people -- a little less than Apple's Jobs, wouldn't you say. I guess firing managers and talent, imposing washed up radio personalities for syndication around what's left of the once proud ABC Radio chain and forcing economic cutbacks to make its 16 cent stock look better didn't go over with the rank and file.

I have heard that one of the big complaints against Fagreed was that he and his Citadel executive wife, Judy Ellis, were not willing to make the sacrifices they have forced their employees to make.

I can't wait until Fagreed's salary is revealed next year -- as public companies must do. Will Fagreed stay above $10 million or be forced to take $9 million? Will Citadel continue to pay all of Fagreed's taxes as they have in the past? After all, there's a recession, isn't there?

At least for Citadel employees.

Well, in these ratings anyway, Fagreed is a loser.

For those doubters among you, check out how Citadel people rated Fagreed for yourself here.

Tribune employees rated their company under 25% for approval although there were no individual stats on Tribune CEO Sam Zell who has also been acting a lot like Fagreed since he got into financial hot water. Glassdoor.com summed it up as "dissatisfied" in describing Tribune employees.

I guess they don't like a company that files for bankruptcy and then reneges on deals it did previously to get employees to retire early thus leaving them absolutely screwed and tattooed. Or maybe they don't like the sound of radio and real estate people trying to save a newspaper business. It's like the blind leading the blind.

Hell, these guys are making Clear Channel's figure head Mark Mays look like a rock star as he eked out the highest ratings in the media section of Glassdoor.com's employee ratings. Some 11% of Clear Channel employees think Mays is nice. Of course, nice would be great, but running a desirable company would be better. On that, Clear Channel employees give their company a 3.4 out of 5. That's not bad for the kind of results Clear Channel has posted.

Nothing succeeds like success which is why Steve Jobs and other top finishers do so well in the eyes of their employees. On the other hand, the way you lead -- and treat your employees -- may be a marker for a successful company. They go hand in hand.

As we start a challenging year ahead, let's hope that the current tactics being employed by radio CEOs will change.

They are not working on Wall Street.

And they are not helping to reprogram the radio industry for the digital future -- its only future.

After the first of the year I am going to share a handful of ideas pertaining to your current audience, the growing importance of understanding social networking and the new rules on being innovative to compete in the digital media business.

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Revaluing Radio

Right from the start of radio consolidation, the smart money said these emerging monopolies could never pay back the huge debt they were running up to buy large concentrations of radio stations.

Back then, $100 million sale prices for individual radio properties were not uncommon. Multiples way in excess of ten times were expected. There was so much funny money around that individuals who wanted extra fees were paid millions just for "introducing" seller to buyer.

It was as phony an excuse for paying fees as investment banks, buyers and sellers could come up with.

Did anyone really believe that the debt being incurred in the run up to consolidation could actually be repaid -- or at least satisfied - or -- maybe even just refinanced endlessly.

No one was worried about the end at the beginning.

Their Kool-Aid tasted great and you were anti-radio if you questioned these Young Turks for buying so much on credit that they couldn't really afford.

Especially if something ever went wrong.

Like a recession.

Like the growth of online advertising.

Or the loss of radio's next generation to new technology.

Oops.

Just before Christmas CBS announced the sale of three Denver radio stations to Wilks Broadcasting for the alleged price of $19 million.

I say alleged because I don't believe CBS will ever see $19 million for the stations.

The usual repricing will take place based on the latest revenue figures before the deal is approved, financed and closed. And because the first quarter should set a record for declining revenue, Wilks would either be crazy or desperate to buy the trio at December's prices.

Unfortunately, CBS President Les Moonves has got a gun to his head -- held by his boss, Sumner Redstone. Redstone is in short pants due to the debt accumulated by Viacom and CBS. He recently considered selling National Amusements (the company he started) as an option to get some breathing room (corrected from earlier editions)

Redstone needs money desperately.

Therefore CBS needs to sell properties. I believe CBS would sell the entire radio group if they could find a buyer at a decent price. You can forget that.

Notice how we're not talking about radio programming, listeners, advertisers, marketing -- none of that -- because it's payback time for the unrealistic deals that were done by consenting adults when times were great.

Now, the economy has tanked. The next generation has slipped away so even without a recession it would not be possible to call radio a growth business. In fact, even on Wall Street where fantasies not only come true but they get financed -- radio is no longer thought of as a growth business.

What's really significant here is that the inflated prices -- multiples -- paid to purchase radio stations are now coming back down to earth. That's a good thing -- except if you were one of the companies that overextended itself to buy them in the first place. So, that $19 million for three stations in Denver could be $12 million or whatever if and when the deal closes.

What's worse is that the industry hasn't seen the bottom for station prices. I honestly can't say I feel sorry for these money grubbing consolidators -- radio was always a mom and pop business (sometimes a very good one and at other times a money losing proposition).

But, now they are screwed.

The reason we haven't seen a peek at more realistic station prices before the CBS announcement in Denver is because radio companies are deeply in denial. They think this will all pass -- just like a recession and even the Great Depression did. Happy days will be here again -- so they think.

But radio station prices have not only been devalued, radio content has been deflowered by reckless operators who just can't bring themselves to believe that the game is over.

They've been caught.

Even the notorious Bernard Madoff admitted to his Ponzi scheme when he was arrested by the Feds a few weeks back. You don't see radio CEOs admitting to anything.

So for those of you who were fired, forced to take on two or three other jobs as a condition for continued employment or run out of radio on a rail, welcome to radio execs hanging precariously over the Raritan River ready to fall in and drown. (I mentioned the Raritan because of its long history of old tires and pollution wending its way downstream in North Jersey).

Radio CEOs are on a limb.

Watch them squirm most of the year ahead.

And as CBS' Moonves is discovering, the only way to sell radio stations going forward is for a lot less money than the acquirer originally paid.

Those mom and pop operators who got out at the top of the market -- you were the real geniuses proving once again that there's a sucker born every minute.

This time the suckers turned out to be the fifteen or so radio CEOs who paid through the nose to wind up taking it in the -- well, I don't have to be that graphic, do I? You know what I'm saying.

So in the year ahead when the Wilks deal closes for what amounts to pennies on the dollar (compared to the original acquisition prices) and radio CEOs desperately look to hang on through more cutbacks and firings, take solace in the old adage that if it's too good to be true, it probably is.

Radio was a modest, mom and pop business.

It defies consolidation -- it begs to be smaller. If the radio industry had remained in the hands of mom and pop operators, I'll bet that one of the station owner's daughters or sons would have figured out a way to make money off the station on cells phones, podcasting and the emerging Internet.

Funny, isn't it?

Not John Hogan. Not Lew Dickey. Not David Field. Or the other radio CEOs. Some mom and pop operator's kid. Betcha!

A topic for discussion in the year ahead is whether radio in any form can make a comeback.

I don't believe it can as a pure terrestrial operation -- I'm sorry.

But the talented people who built radio -- the departed, the currently still-employed but long suffering and the neglected might be able to help owners do what mom and pop's kid might have done -- if only they had the humility and good business sense to do one simple thing.

Listen to the experts.

They're not on Wall Street.

They're in the station.

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Happy Holidays, Fagreed!

Local radio revenue was off 21% in November.

National down 24%.

And that's with political advertising from a presidential election campaign.

It was the worst month for radio since these tallies were first kept over 20 years ago. And January business is as cold as a New England winter.

Of course, radio executives blame the recession not themselves. The slumping economy is part of the problem, but radio's decline has been in progress longer than the economic downturn.

Unfortunately, the radio industry is not likely to return to break even numbers for years -- if ever -- according to analysts. And the reason for that is not just the recession.

Hundreds, if not thousands of employees have been fired this past year. All types of great radio people -- program directors, managers, sales managers, account execs, operations people, air talent -- the list goes on.

Their day is coming -- when radio CEOs can make no more cuts and when no options are left to return radio to a compelling, addictive medium. Cutting talent. Airing cheap (or bartered) national programming. Cutting resources. Forcing managers to handle two or three jobs. This doesn't make for good radio.

It's going to be a great holiday season for the CEOs of the radio and record industries because they are insulated from accountability.

Their deals are golden (to match their parachutes). They still fly private. Some have their taxes paid by the radio companies they work for even while they are firing people to cut costs. It's true that they own a lot of stock that is worthless and it's not likely to amount to anything valuable going forward, but their compensation alone makes them merry this Christmas season.

CBS was firing people as recently as last week -- a week before Christmas.

My heart goes out to the people who love the radio business. They work until they're fired. Remain loyal to the end. Their reward: unemployment. Jobs are hard to find. Careers in radio -- impossible.

Next year is going to be a tough one -- again. The economy will force the hands of CEOs who are plum out of ideas. I wouldn't be surprised to find one or two of them file for bankruptcy if things get tough enough. I've heard rumors. Believe me, a lot of radio CEOs would like to unload some of their radio stations and, if they do, they'll be giving them away.

And anyone who buys these expendable stations will be purchasing distressed merchandise.

Farid Suleman, a man who I call "Fagreed" because of his arrogant "let them eat tape" mentality is the poster boy for what's wrong with radio. He's not alone by any means. Just read down the short list of radio consolidators who run most of the stations worth owning and you're likely to find a selfish, arrogant dictator running the show.

They feel no pain.

They believe their own corporate b.s. that begins with "we're bleeding red ink" and ends with "thanks for your service" (maybe).

I have little respect for these managerial despots who think they know what is good for a proud and very successful industry. It took over 75 years to build today's radio business and less than ten for a handful of overpaid and under qualified CEOs to ruin it.

I'm told by Citadel employees that Fagreed blocks these pieces that I write so his employees can't read them, but it is for naught because his people have lost faith in their "leader". Same with Bob Neil who apparently has Cox-blocked any criticism from his people.

Radio is acting like a third-world nation.

I hope the folks who are hanging onto their tenuous radio jobs and those who have already had their careers thrown into turmoil by misguided radio CEOs take heart.

Video didn't kill radio.

CB radios (remember when we thought they would be a radio competitor, laughable now).

Cell phones (not killing radio -- maybe other people distracted by drivers who are texting).

Satellite radio (not one day).

The Internet (not yet).

So in the year ahead you can expect several things to happen based on some of the genius moves we've seen in the past.

1. More stations for sale (at even lower prices). But few takers.

2. More stations going silent -- returning their licenses to the FCC.

3. The radio station will become a couple of people running programming acquired elsewhere thus killing off the local advantage. Cheap 104.5. No wonder radio CEOs wanted to do a deal with Google's automated ad sales division. No people. No benefits. No kidding.

4. Commercial fire sales as stations panic (most can't even stand to look at the books for January). Double-digit declines in local revenue every month.

Now, will they listen?

Radio needs new streams of revenue.

Podcasting.

New Internet streams.

Mobile content for sale.

Businesses based on social network surrounding their brands.

New media is also hurt by the recession, but it will rebound. Radio will not.

For my friends in this business that we love, the sincerest hope that you will find health and happiness this holiday season and the ability to sustain yourselves and your families in hard times.

And that you will find your way into the world of new media in the years ahead if you so desire. Radio people are best equipped for creating and marketing professional content in new forms. You are not forgotten here or by thousands of people who know how radio worked best when you were allowed to do your thing.

A few weeks back my radio friends I call "The Scottsdale Study Group" had a Christmas party together.

During the evening I was reminded yet again of what talented, dedicated and special people radio folks really are. It hurts us to watch this industry self-destruct. In many other industries perhaps no one would care.

But the demise of radio -- which is following closely and in lock step with the ruination of the record business -- is well into its second generation.

So Fagreed and all your buddies, perhaps next year when you're faced with no way out, you'll acquire the character trait of humility.

In the meantime, radio people who know how to program good local radio and are anxious to take their expertise to the great digital beyond -- hold your heads high.

I wish for you that which you wish for yourself -- and a chance to find a future in new media as it develops and gathers momentum.

If the old adage "in giving you receive" means anything, then you've done all you can do to help these myopic CEOs save the radio business.

Happy Holidays to you and yours from a fellow radio lover, an admirer, advocate and supporter.

For Fagreed and his ilk, as my mother-in-law used to joke: "eat up -- it's all you're getting".

(See you after the holidays -- or on Twitter and Facebook in the meantime)

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

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The RIAA Lawsuit Retreat

The Recording Industry Association of America has declared victory and is withdrawing its troops from courtrooms all over the country.

The RIAA has finally concluded what any young person could have told them ten years ago -- that you can't invade an entire generation's Internet and expect them to pay record store prices for music.

I always knew the RIAA effort to sue its way onto the Internet with a brick and mortar strategy wouldn't work. Many of you knew it, too.

When I became a professor of music industry at the University of Southern California something very telling happened that I don't believe I ever shared with you.

First day. First class. One young man gets up and says, "professor, we can hack anything". Coming from the media world I was taken aback by such a brazen stand but he was right. The kids controlled the Internet "mall" in the way record labels used to control Sam Goody at the Mall of America.

I wondered how an increasing number of young people could be so open about what was considered by many as stealing music.

Look, I never much cared for the RIAA's tactics. To me they represented the supreme arrogance of the record labels that has not served the industry well. But still -- music theft is piracy, isn't it?

One day I invited a rep from RIAA to speak to my students. One young man, who was sued by the RIAA and offered a $5,000 one-time deal to settle the claim, was in the room and clearly still nervous. (His parents picked up the tab, by the way).

Here's the RIAA spinmeister in a surprising civil dialogue with these very bright students. While the student who got caught was very penitent, the rest of the students were not at all intimated.

They basically told the RIAA's rep that neither they nor anyone else short of God (and maybe not even God) could stop them from discovering music online, sharing it and helping to promote and recommend the artists they liked.

You might find it hard to believe that many of these young people thought they were doing nothing wrong -- even though a minority refused to download music for free based on ethical issues.

You're familiar with many of their arguments:

• The record labels are greedy -- they rob from the artist (that argument, they felt, was juxtapositioned with the RIAA's assertion that stealing music hurts bands and singers -- still, the students felt it was the other way around).

• You can't get music variety on the radio -- the Internet is necessary to discover new music (they've certainly got a point there if you go by how radio is taking a dive as a viable music medium these days).

• "We still buy CDs and things" -- positing that their generation has considerable money available to them (or did prior to the recession) and they go to concerts, buy t-shirts and merchandise. And for those of you who want to say The University of Spoiled Children is not typical, forget it. Every college campus -- and for that matter high school -- has students who steal music, buy CDs, go to concerts and purchase merchandise.

The RIAA rep talked, maybe listened, but could do nothing that day because it was the stupidity of the record labels that got them defending the silly notion that suing kids and terrorizing universities with the fear of litigation would work.

In fact they were wrong.

Now the RIAA by their actions is admitting it -- and I want you to keep this in mind because in a moment I'm going to give the labels another piece of advice that they will probably not take -- until it is too late.

Oh, and if you think the RIAA has had the Scrooge beaten out of them just in time for the Yuletide season, think again.

They are proceeding with all present lawsuits against alleged pirates. That may sound ridiculous to the uninformed but you and I know that it makes perfect sense for the labels to admit a huge mistake and keep on making it. Anything less would be -- well, not the record industry.

And, if you think the labels will just wrap up the outstanding lawsuits now in progress and give back the money they got from settlements or successful litigation (of which there was not much), you would be drinking too much spiked eggnog too soon this season.

You've no doubt read a lot of news accounts about the kinder-gentler RIAA, but I'm from New Jersey and we don't believe no one -- I mean, anyone. And I sure as hell don't trust the RIAA.

They have some cockamamie arrangement with some -- keyword some -- Internet Service Providers (they won't say which ones) to send letters to people who the RIAA informs them are sharing music illegally. The new, "nice" RIAA would then not demand to know the customers' identity although the labels reserve the right to sue the pants off heavy file sharers.

Now that's more like it -- the old RIAA we've come to distrust and dislike.

My friend Eric Garland of BigChampagne is quoted in a recent Wall Street Journal article as saying he likes a solution that works more with consumers.

Wink. Wink.

What Eric is saying basically is that just nicely informing people they are stealing music will never stop it. He's being very diplomatic and he's too smart to mislead anyone into thinking this juggernaut can be stopped.

Meanwhile, don't rest easy.

I just think the RIAA is headed for a different strategy that forces -- that's right, forces -- ISPs to become part of their solution. Right now there is no public or governmental sentiment for it. A few months ago New York Attorney General Andrew Cuomo was trying to help the ISPs and the labels negotiate an agreement that would address piracy concerns. The Attorney General's office wants the lawsuits over this matter to stop.

There's another factor.

The record business is taking on water faster than the Titanic. CD sales are off again and when the 2008 figures come in, all razor blades will be kept away from record label mid-managers.

I say mid-managers because the top guns are living in a cushy world with benefits and no repercussions for being screw ups. Sounds like radio, eh?

There are lessons to learn here but it doesn't appear that the record labels will learn them any time soon:

1. You can't sue your way out of music piracy. Like it or not, until the labels can control the front door of the Internet the same way they can control the front door to a brick and mortar record store, free filesharing is here to stay.

2. Music is still too expensive -- the price is what makes stealing music even more attractive.

3. Young consumers do buy things. They buy a lot of things. They get robbed by TicketMaster. Held up once they go through security at concert venues. And they still buy merchandise, CDs and support bands that they love.

4. Radio died a long time ago for music discovery. The stations actually did it to themselves with ultra-short playlists. The genie is out of the bottle now and the Internet is the gateway to music discovery.

5. iPods are not a passing fancy. They are in fact, the institutionalized official music player of an entire generation. The labels and radio industry turned out to be wrong.

6. Record labels are pompous. They are part of the problem and not the solution in today's music industry.

7. Labels should be concentrating -- not on getting chummy with ISPs -- but going out and (forgive me because I'm going to use some dirty words) make music. Lots of music. All kinds of music. Helping artists get their product professional enough to find its market.

8. Wal-Mart and Best Buy are not even close to an answer for slumping CD sales. Going direct to Wal-Mart is like going directly to hell for the industry. Marketing in big box stores is the physical manifestation of big egos that think going around the labels will make them -- a label.

So, as it turns out -- the labels finally took my advice and stopped the lawsuits that were having absolutely no effect on halting free filesharing.

And here's my next advice -- which they are free to ignore because I'll just write a lot of pieces right here for the next five years and then do a story about how they finally decided to take it.

Sell music -- tons of music online and via mobile devices.

Sell each song for a nominal price -- say, the same price as a text message -- five or ten cents a tune.

Feed the music monster until the next generation is even more addicted -- make music accessible and too cheap to steal.

When consumers get hooked on hundreds of downloads a month -- or week, for that matter -- offer them a package for $20 a month -- same as many mobile operators charge for unlimited downloading.

The consumer owns the songs and can discard them the way they discard (or save) a text message.

This system is far different than the labels' feeble attempt to sell all-you-can-eat music packages to consumers without first creating the addiction. Again, I refer you to how text messaging developed into such an accidental success for mobile operators. No young person can live without text messaging -- no one! But at higher prices, they would have to. Instead, volume sells the unlimited monthly fee package.

Labels can feel free to deduct your fee and mine for this advice. We don't want anything, do we?

Except a music industry that discovers new music, helps artists succeed and cooperates with the inevitable which is...

Music must be free or close to it.

The labels need to go from being retailers to bulk wholesalers -- in a hurry.

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Good News For Radio & Records

We know the bad news.

Now, how about some good news about the radio industry.

1. Satellite Radio Isn't Hurting Radio

Remember when Saga CEO Ed Christian would throw a snit over satellite radio content as it related to terrestrial stations. Are you aware of the NAB spending millions of dollars on fighting satellite radio?

Well, they wasted their time and money.

Satellite radio was never the enemy and it is even less potent a threat as 2008 winds down.

Have you listened to the new Sirius XM lately?

Since the XM people (known for longer playlists) merged with the Sirius programming (more hit oriented) the result has been a mess. Many music channels previously good are now unlistenable. Satellite radio has become a repository for stiffs.

This is not just my conclusion.

It's yours.

Many of my industry readers have cancelled (some sending notes to Mel so he knows it). Ask the average listener and they'll tell you the merged entity is not as good. There was a 4,000 person grassroots effort to bring back country personality Dan Dixon -- so far to no avail -- and Sirius XM relented on the disco "Strobe" channel and old school hip-hop "Backspin" station.

After all, satellite is supposed to be about more variety, isn't it?

With fewer autos being sold and a world recession taking hold, life at satellite radio is tough when your content is no better than -- say, terrestrial radio.

In fact, terrestrial broadcasters have gone out of the way to cheapen their product over the past year so terrestrial radio is not much better than satellite.

But satellite radio carries a hefty monthly subscription fee.

Radio is free.

Advantage: Terrestrial radio.

2. The Music Performance Tax Has Not Been Passed

You can give your NAB some credit for this one, but the record industry campaign to get radio stations to pay additional punitive taxes for helping them expose music to the CD buying public has stalled in Congress.

Both sides are quite adolescent in their pissing match with each other -- one that deserves a more serious approach in my opinion.

Just this week, according to Kurt Hanson, the NAB sent a Christmas message to members of Congress "reminding lawmakers 'free airplay and promotion to recording artists' makes for a U.S. radio industry 'mutually beneficial' to broadcasters, artists, and the record industry alike".

Then the labels' musicFIRST coalition shot back, "'Radio, don’t be a Scrooge,' musicFIRST executive director Jennifer Bendall wrote in a statement. 'Join us in creating a performance right on radio that is fair to artists and musicians and fair to AM and FM radio stations,' she asked broadcasters".

Next year could be another thing.

The vote is close. This is no slam dunk for radio and any additional financial burden on radio operators could cause more cutbacks in personnel at local stations.

That means lost jobs.

And that's the message I'd be sending Congress -- they most certainly don't want to be responsible for anyone in their district losing jobs because of their vote, do they?

Forget the kid stuff.

Still, radio for now, retains a special exemption that allows it to expose the record labels' music to their benefit and for the benefit of radio listeners.

Advantage: Both Radio and Records.

3. Music Is Alive and Well Even Though the Music Industry Isn't

This is a good news and bad news scenario.

What often gets lost in the remarkable decline of the big four record labels is that more music is being made -- with more variety, from more artists with virtually unrestricted distribution.

The appetite for music in our popular culture is as strong if not stronger than in previous generations.

What's wrong is that record labels, basically manufacturers of plastic in the entertainment business, can't figure out whether or not they can be a player in the new digital world.

Paid downloads are healthy but are not likely to make up the shortfall in CD sales. And, yes, CD sales are down again. Music is being shared for free at greater numbers than ever before. The record industry's problem is not exactly like radio's because their consumers (or pirates waiting to consume) love the product.

Radio listeners on the other hand are increasingly disappointed with radio content. They use it, sure enough -- especially when they are in a car, but with radio companies never missing a chance to cutback, the loyal radio listener is getting shortchanged on programming.

So an unrelenting passion for music -- not just by label-anointed artists but by amateurs with grand dreams has fed the music monster.

Advantage: record industry -- if it finds a way to create a business based around free music distribution and ancillary streams of revenue.

4. Stay of Execution: Phones Still Being Used for Talk, But...

I keep saying that the cell phone will be the most important delivery system for content in the future. And the future is approaching very rapidly.

There's a new Pew study that shows the mobile phone will be how most consumers access the Internet within the next 11 years. Mobile phones are fast becoming the new laptop.

In the meantime, it isn't surprising to see that laptop sales have increased as consumers want to become untethered to their desktop computers. The next logical step will be to rely on future generation mobile phones and universal standard of delivery.

These phones won't be just cell phones. They will be thought of the way we think of laptops today. Look at an iPhone for an early preview of the mobile future.

The USC Annenberg Center for the Digital Future says,

"While there are dramatic increases in the functions Americans find for their cell phones, it 
is clear that they are still overwhelmingly seen as devices for voice communication. Close 
to 100% of cell phone owners use their phones to communicate by voice. But steadily in
creasing numbers of web users are also finding additional uses for their mobile phones. 
Close to 40% of web users take pictures on their phones and almost as many also send 
text messages. Just under 20% play games on their phones and just under 10% access 
the web".

Therefore, radio executives who have been dallying on becoming content creators still have time to do their homework and conjure up new business revenue streams.

As offensive as it is to broadcasters, the next generation has already moved beyond the radio. They haven't. But their young listeners have.

What is also alarming is that older demographics are embracing the technology and even social networking of the younger Gen Y. The only people, it seems, that fight the new technology and changing sociology are -- radio executives. Perhaps that explains why almost every decision they've made in 2008 has been harmful to their own companies.

But let's not lose the thought.

We know mobile is the future. Oddly, radio is not considered mobile by the next generation even though transistor radios and Walkman devices used to qualify as mobile to previous generations. Look at young people today and see what they don't just own, but what many actually carry around in their hands all day -- a mobile device.

Advantage: radio -- if it can accept that broadcasting on a telephone is of limited appeal and that they still have the creative talent and production values to own the mobile content business.

5. There Is A Solution To Radio's Decline

It's the talented and dedicated people who built radio into the business that investment groups open their wallets and overpaid for over the past 12 years.

Unfortunately, the group CEOs aren't convinced of that which is why you see good companies like CBS acting like Citadel and Clear Channel. Our former compadre Mel Karmazin fired 22% of his satellite radio force this year.

That's 458 people with names, families, kids to put through college and this tends to get lost as part of doing business.

After all, according to Inside Radio, Sirius XM expects to save $425 million next year between these layoffs and other expense savings.

Lucky listeners.

We've got programmers, consultants, researchers, voice talent, morning personalities, general managers, programmers and sales people sitting on the sidelines when they are needed the most.

And many of the employees that are left in radio are fearful of losing their jobs, their dignity and of course their reputations because it absolutely is not possible for one person to do all that they are being asked to do in the name of the economy.

While 2009 will be brutal -- even these misguided radio CEOs will eventually come to realize that they cut too deeply into the backbone of their content and they will have a bigger problem than finding ways to cut costs -- especially when their franchises continue to evaporate.

I said this was good news and let me tell you why.

I know many under-employed or unemployed radio people who would have been willing to take a pay cut to keep their jobs or return to radio. This pool of talent will be available to these screw ups who have run the industry we love into the ground.

So, there it is.

Radio may never be what it was to previous generations, but it has the potential of becoming a content provider to the number one delivery system of the future -- HD radio.

Just kidding -- I was checking to see if you're still with me.

Not HD radio. Not satellite radio. Not car radio. Not TV. Not the computer.

It's the mobile phone.

Look up to the masthead of this website and note the subtitle for Inside Music Media.

It's says "Music, Broadcasting & the Mobile Future" and that says it all.

The future of radio and records is mobile.

Get on board now.

Or wait too long.

But the future of all media will be mobile.

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Radio To Die For

In spite of all the bad news we hear in both the music and media businesses these days, there are also a lot of new opportunities rising from these challenges.

Instead of letting potentially good ideas die, let's allow the entrepreneurs who read this space every day to have at some of them.

What you are about to read are true stories. The names have not been changed to protect the guilty.

Trend: Newspapers cut back print editions

The Detroit Media Partnership which publishes the city's two newspapers (Free Press and Detroit News) have decided to cut home delivery to Thursdays, Fridays and Sundays, the most lucrative days for publishing.

What are these guys nuts?

Just cease operating.

Hell, it would be like radio only putting programming on in morning drive and then signing off because it costs too much to broadcast the rest of the day (oops, hope I don't give anyone in radio any ideas, here).

It's nice to know that other industries are capable of foolish strategic decisions. The real problem is that no one reads newspapers (except newspaper lovers and apparently there are not enough of them to pay the bills). That's the problem. It's just what we want -- news on three days because the poor publishers can't afford to deliver it the rest of the week.

Step back -- examine -- and answer this.

So, since 9-11 didn't happen on a publishing day, I guess at-home readers would have to go to the paper's website for coverage.

Or not?

Who needs newspapers when they refuse to act like newspapers (i.e., present addictive and compelling content). Sounds like radio, doesn't it? Bean counters saying -- hey, cut out the least profitable news days and publish on the weekend.

New Opportunity: Go into the digital publishing business

Now, if I'm radio I am hiring some of the best reporters away from these misguided newspapers and getting them to set up a blog franchise (say, like this one) and market it, grow it through social networking and report the income to your ungrateful cluster manager who could never have come up with your great idea anyway.

But wait. There's more.

Radio would just increase news -- maybe.

Another mistake.

If there is an all-news brand in a market where newspapers are wimping out, then don't add coverage on-the-air. No one who reads a newspaper is going to be at a loss without a printed copy. Instead, start a large 200+ topic daily podcast service. Deliver the news to people who can choose what they want. Start with a big name reporter to cover current events, another for business, sports and lifestyles. (Don't tell me it can't be done, I'm doing it with clients now).

In other words, when the newspaper publisher decides to cut back, don't think you're going to pick up their subscribers who are disappointed. Papers are dying. Few will be disappointed. Take this move as an incentive to get in the content business -- deliver it by podcast, monetize it with ancillary forms of income and grow it by social networks.

Of course if you are a music station(s), this wouldn't apply, would it?

Wrong.

Who cares what your terrestrial station is programming? This is about new streams of revenue. You don't have to be a newspaper publisher to expand your revenue into podcasting and it doesn't matter if you are a music station to develop a non-music income source.

Trend: Radio sales are down 10-20%

Analysts say that the radio industry is likely to be off 10-11% by the end of the 2008 fiscal year in December. Some markets are down currently 20 or 30 percent. What's more troubling is that the hard hit retail business is also hurting local radio in what used to be the great fourth quarter of the year. The first quarter of 2009 will also be bleak.

What's a consolidator to do?

Cut back.

Run Don Imus all day the way Sirius runs Howard Stern and fire whatever moves and talks.

Appoint one manager to run ten stations. One program director per genre (don't laugh, that one's coming).

But will cuts be enough?

They haven't been up until now so here's another approach.

New Opportunity: Sell something not on the radio

There is no law that says radio stations can't sell things other than commercials and if commercials aren't selling.

I'll tell you if I were running a cluster for Clear Channel (before they found out and fired me), I would schedule a series of one-hour seminars around my marketing area. I'd look to a credible source to lead them and I'd use topics such as "WXXX Dollar Stretcher Meeting". I'll sue you if you use that name -- just kidding. Go ahead, use it.

Get a reasonably priced hotel conference room (believe me, there will be a lot of these available for rent after January 1). Go to local sponsors and get them to buy into it. They need help like this. Real customers in a meeting room.

Think of it? Car dealers with special $1,000 off coupons for use within the next 30 days after attending one of your meetings.

You can do seminars every night of the week around the listening area. Yes, you can use your airtime to promote it but you could also use social networking sites, email lists you own, etc. After each meeting you'll get word of mouth advertising for free.

The next series might cover -- stretching the food dollar or paying for college in tough times or how to manage mortgage payments. Make these branded "help meetings". See where I am going with this? Then, before John Hogan figures I am working for his company, I report all this revenue to my cluster manager who then proceeds to take credit for it after I did all the work.

Hey, you can't say that I'm not being realistic here.

Seriously, if you're off 10-20% in radio advertising, make it up with special events every night of the week. Give your salespeople something extra to sell when spot radio is slumping.

Okay, Mr. Hogan, you can't fire me. I quit.

Trend: People want to be buried with their mobile devices

Now I'll bet you think I've gone too far.

It's one thing to call Farid Suleman -- Fagreed -- because he does a reverse Robin Hood on his Citadel employees but it is quite another thing to state that people increasingly want to be buried with a cell phone, iPod, Blackberry or Game Boy.

Well, it's true -- even if the report comes from Hollywood. Where else? One of my readers told me about this report that actually came via Philadelphia which is about as far away from a sister city to Hollywood as it could be.

I know of Flyers fans who want to be buried with their Mike Richards or Jeff Carter jerseys on but putting a cell phone in a casket so the family can talk to the departed (while batteries last) is the pinnacle of media loyalty. One pundit commented that it would be useful just in case anyone was buried alive -- accidentally, of course. The only way you could get buried alive in South Philly, r-i-g-h-t?

New Opportunity: Develop compelling content that could raise the dead

All kidding aside, when was the last time (or first time) you ever heard someone say they wanted to be buried with a radio?

Radio has become like toothpaste. You use it and don't even think about it. Radio optimists point out that listening has increased again -- 234 million up from 232 million compared to September, 2007 the last time RADAR did this PR research for the establishment. (I'm wondering that if this is such good news, why are radio executives being kept away from windows in tall buildings?).

Fact is -- radio stopped making compelling content over twenty years ago. We're noticing it more today because radio has become a vacuous entertainment medium that values business over show and thinks it can get away with stuffing cheap commercials into five-minute clusters.

That alone is insane from a content point of view not to mention a marketing maneuver.

The article about going to the great beyond with a cell phone nearby may be a stretch -- even by my beloved California standards -- but it gives serious radio operators a good litmus test for creating content in the challenging year ahead.

Is what you're creating on the radio addictive?

Can you not live (or die) without it?

Do we in this business breed loyalty within our audience?

If we took a hint from these Hollywood funeral directors and used all our waking hours to create radio to die for, then perhaps radio wouldn't be a dying industry.

Just a thought.

At times when we watch bonehead moves in the media business, we have to wonder how did these people ever get to run a company?

There are plenty of trends out there -- and even more opportunities. I've thrown down a couple, right here.

Imagine if Farid, Hogan, David Field, Lew Dickey and a few other radio execs were not the only ones doing all the thinking.

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Radio on Hospice

If you go by my mail, a lot of readers are scratching their heads about Emmis CEO Jeff Smulyan's decision to give 41-year old Chief Financial Officer Patrick Walsh the additional responsibility of running U.S. radio operations.

The radio industry sure has a lot of financial wizards running things.

It's clear that the radio industry still doesn't get it.

The problem with radio is not money.

It's worse.

It's a lack of compelling and addictive content. Failure to create content for the mobile world and a terrible misunderstanding of what the Internet can mean in terms of future revenue. Plus a total disregard for the critical importance of social networking.

Okay, I'm nuts. I'm all wrong. Radio needs another numbers cruncher.

Let's see -- we have Fagreed Suleman, and I'm not saying Walsh is Suleman -- just pointing out the financial pedigree. Of course, I wish Walsh success and hope he can ram this computer down my throat and say, "Told you so, I turned it around".

In the meantime, let me use my computer's RAM to make my case:

Have you taken a look at the prices stations are getting in morning drive these days?

Some major group owners that used to get thousands of dollars a spot in LA morning drive are getting under $1,o00 -- and dropping. And that's LA. Main Street's got its own problems. If a radio station makes 50% of its total revenue in morning drive, then you can obviously see the need for a financial guy running a radio company.

That is, if you're a radio CEO.

I'm partial to programmers running things -- I admit it, because they at least know something about programming. Not all of their decisions are good, but they've got a better batting average than most. They know the product. I can guarantee you it is not their idea to cutback local content or local people.

Yet, even programming-minded operators are being forced to cut morning talent to save money. At Citadel, Fagreed would just pipe in an over-the-hill morning show from another one of his markets. At least a programming-type knows that you need a live, local morning show in the market.

Okay, so we're down drastically in morning drive revenue and we acknowledge that morning drive is where we make our profit. Now what?

If you're a radio exec these days, you cut costs, right?

Look where that has gotten them. Nowhere -- fast.

Then, it's logical that if you've been trained by the numbers, you look elsewhere to cut costs. After all, when expenses exceed income you cut costs, right?

Wrong again.

Only if you want to put radio in the hospice program. You know, the patient is dying and you just want to make things as comfortable as you can. It can't be saved, but at least it can live a little longer.

Because if the patient could be saved, you would do surgery. You'd look to cure the ills and treat the maladies and make the station healthy again. I don't see anyone in radio really trying to save the patient.

The radio industry is the hospice program -- at least in the sense that hospice is the course of last resort.

I have a lot of respect for hospice workers. My family and maybe yours has experienced their many kindnesses and the dignity with which they treat the terminally ill. So in that respect, my comparison between radio and hospice ends.

Radio executives are cruel.

They don't care about their talented employees or their families. They are worried about themselves -- and surprisingly, not even their shareholders. Dignity from a radio CEO? I haven't seen many cases of that in the past year.

But when I say radio is on hospice I mean it is on its last legs.

If you plan to be an auto retailer, you don't cut out all your cars and bring a few rentals cars in from another city and call that a business.

But in radio, you fire the local talent and give local advertisers nothing to buy other than whatever you schlepped in from another market.

There's no there there anymore in radio.

The other day I said Phoenix is off 36% right now. You know, a little market like Phoenix. That's a whopping 36% and I'll bet the first quarter of 2009 won't get better.

A bean counter sees an opportunity to cut more costs. You know the drill -- if your expenses exceed your income, you cut costs, right?

What the groups should be doing is investing in something to sell. Hey, want to know why buyers are not going ga-ga over morning radio? What's to go ga-ga over? You've cut everything either down or out.

Now a programming mentality will tell you that you have to get listeners in order to sell advertising. Note I said listeners first. So cutting back on programming -- which is what bean counters do -- is not an option if you want to succeed.

Hospice workers give their patients medication to ease the pain.

Radio groups inflict more pain by firing loyal people before the Christmas holidays.

And this brings me back to what's eating the radio business alive.

Sure, the next generation has moved on. Radio lost them from neglect. They're only available in new media -- a place radio CEOs know nothing about.

But the reason radio has dropped off the face of the earth in billing, morning drive and compelling programming is because radio was never meant to be a big business. And it was overvalued (in terms of multiples) to siphon larger sale prices from willing investors -- a strategy that now has come back to haunt the values of radio properties.

Radio was a bad candidate for consolidation back in the mid-90's but no one really cared. If those unbelievable debt structures weren't an indication, then how about the fact that radio is really a local mom and pop business.

Sorry guys, you ruined a good thing by taking it to Wall Street.

And now, we still can't seem to learn our lessons that Wall Street is not the answer for radio. That's why we keep turning to the magicians with financial resumes to bail us out of the mess we've created.

It should be the other way around.

May I make a radical suggestion?

Starting tomorrow, every group owner breaks his or her company into little companies. Have 20 markets? You now have 20 local independent businesses -- I said independent.

Are you still with me here?

Then, put someone local in charge of each business. Preferably someone who actually ran or programmed a radio station successfully.

So far, no brain surgery, right?

Tell them they are in the content business not just terrestrial radio. Give them a budget. Tell them what you expect. Put it in writing. Make it simple (one page). Put a time frame on it (say, a year or two). Get lost and leave them alone.

Reward the "local businesses" that do well. Find new people to run the ones still failing. Do not -- I repeat -- do not make one local manager run two markets because he or she did a good job in any one market. That's just more consolihallucination.

What radio CEOs don't want to hear is that their stations are worth next to nothing -- certainly under $1 a share -- for a good reason.

Radio is not a national business.

At best, it is a patchwork of local businesses best run by local content people and marketers.

Remember when consolidators would buy a new cluster back in the post-1996 days, all that revenue poured right into the acquiring group and their stock went up? More cash flow -- by acquisition.

That was before some of these not-ready-for-primetime players tried to actually run the acquired properties with their own cockamamie regional managers, corporate b.s. and national economies of scale.

The reason these acquisitions did worse the longer the acquiring group owned them is because the buyers didn't have the skills to run what they bought. Look at their report card on the stock exchange board.

Bankruptcies, stations going silent, auto-moron stations that run by themselves with bland foreign programming and formats on the cheap are not the answer to a dying patient.

Call the doctor -- a specialist, if necessary. Someone who went to medical school (or in this case, at least worked in a radio station for starters).

You can't cure the mess radio CEOs have gotten this proud industry into until their boards either remove them from power or until one of them starts running their radio group as a cluster of local, independent businesses.

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The Clear Channel-CBS Swap

Their employees may have received assorted pink slips on the run up to the holiday season, but Christmas came early to Clear Channel and CBS who announced a swap of stations yesterday.

CBS gets two FMs that the Department of Justice is forcing Clear Channel to sell (Spanish KLOL and AC KHMX in Houston).

Clear Channel gets KBKS, Seattle, WQSR, Baltimore, KXJM/KLTH, Portland, OR and KQJK, Sacramento.

The deal must be approved by the FCC and DOJ -- no problem there and no cash changed hands.

I repeat, no cash was involved so the tax benefits were there for both groups.

This is about the best you're going to see for a while in a declining radio industry. Trades are better than accepting multiples lower than sellers are asking. And while CBS may position the move as being the first step in relieving themselves of some smaller market stations, don't hold your breath waiting for the second step.

CBS' Viacom parent Sumner Redstone is in short pants. Some think he's margined himself out of business. He needs to sell the company he started -- National Amusement, but there doesn't seem to be any buyers. Certainly, Redstone will have trouble getting the best price under these circumstances.

That brings us back to CBS -- also a Sumner Redstone investment. CBS President Les Moonves has already announced the sale of smaller market stations, but so far no deals have been revealed. It's going to be pressure on CBS if Redstone's financial mess doesn't improve. Right now it's hard to find anything that's improving.

Clear Channel, under new owners Lee & Bain, is supposedly readying the next phase of cutbacks and economic pruning to meet declining income. As we discussed recently, syndicating programming and realizing economies of scale is likely to be the blueprint for 2009.

The CBS-Clear Channel swap in and of itself is harmless. It makes sense for them and this kind of move was expected.

That's the big story on Action News today.

Behind the scenes you can expect a more complicated scenario going forward. You're likely to be reading about numerous owners who have decided to pull the plug and cease operating because they can't pay their bills. Then, you'll see licenses returned to the FCC.

The larger markets and even healthier medium markets will likely avoid this fate for as long as possible. It's unfathomable to believe that a major market operator would pull the plug. It's obviously the choice of last resort.

But, it's also unfathomable to have predicted radio's worst case scenario come true just a short while ago:

1. The distracting hubris from consolidators.

2. Unqualified CEOs running large broadcasting groups.

3. The fatal expectation that the youth audience would always migrate through their teens to become radio listeners -- instead Gen Y found their own way to listen, to share and steal music without the use of radio.

4. Cutbacks that were unnecessary -- other than to make profits look better for the newly consolidated radio companies -- even before the economy tanked.

5. Failure to come up with Plan B for the digital age. No podcasting revenue. No Internet streaming revenue (other than the meager effort in simulcasting terrestrial streams). No foot in the door to mobile content for the growing industries of smart phones and mobile devices.

As big a story as the Clear Channel-CBS station swap appears to be, the bigger story is that all of it doesn't matter now.

The world economy is in a deep recession. Banking is broken (that doesn't help sellers and buyers of stations). The real estate slump is affecting economies in communities in every media market. The scandals, Ponzi schemes, the auto industry bailout -- you name it -- doesn't make for a promising future for much.

Radio stations were always overvalued and now the industry is going to have to bite the bullet and get down to reality. Once stations are more properly assessed, the question will be which operators want to throw money at an industry that can probably never attract the youth market again.

How many will be smart enough to know that without a digital blueprint content providers can no longer make it on terrestrial towers and transmitters? Hell, the real estate upon which towers are built isn't even marketable right now.

Let's not forget the many talented people who have been losing their jobs while radio groups are sticking their fingers in the dikes to keep the red ink from drowning them.

It's a rough year ahead, but good will result from bad and here's hoping that the good will finally be a realization that radio companies can return to being local content providers and that they will seriously commit to looking beyond towers and transmitters for their future growth.

What you're seeing today -- a trade of stations -- is acknowledgement in a sense that stations are worth something only if the parties can come up with their own trade value.

Failure to produce buyers with cash or funding is not just the state of radio right now but the fate of radio in the year ahead.

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The Shrink Wrapping of Radio

Less Is More is getting ready for the next phase.

Any day now -- and certainly within weeks -- don't be surprised to see your number one radio group, Clear Channel, give radio a glimpse of the consolidated future.

Again.

Clear Channel has led the way -- or should I say, bullied its way into recreating radio in its own image that harkens back to the old moniker "Cheap Channel" back in the Mays days.

I don't know about you, but way back when consolidation was getting started I was somewhat surprised to see Lowry Mays and his Texas Sue-Boys wind up as the industry's top consolidator. Not that it matters now, but had it been almost anyone else, radio might not have come to current precipice -- the make it or break it year for radio.

You might think I'm talking about make it or break on the bottom line.

I'm not.

Green ink is a long way off -- analysts agree that radio would be lucky to break even anytime soon. Nationwide we could see an almost ten percent drop in revenues by the time Dick Clark's New Year's Rockin' Eve gets fired up. Next year, it promises to be even worse. Hey, in the Phoenix market, radio is off a whopping 36%. This is major.

No, the make it or break it in 2009 will be whether anyone of major influence in the radio industry can figure out how to preserve, if not create, saleable brands that someday may be worth something.

As CBS is finding out, there isn't a big market for suckers -- I mean, buyers -- for some of their smaller market properties at the customary inflated multiples. And if you think that CBS is the only group that would like to unload radio stations, think again. Fagreed Suleman at Citadel has a bunch of stations that would drive his company's 17 cent stock way up over, say -- 50 cents!

You hear about all the people out there keeping their powder dry like former Citadel chief Larry Wilson, but so far all of this is pure speculation. They have been smarter than the rumor mongers will give them credit for.

Look, the wallet is willing but even people who love radio are too smart to buy now. Why make that misstep -- station prices are likely to go even lower, much lower after what radio CEOs have in store for their industry in the year ahead. And, let's not forget the recession - a double whammy.

My friend George Johns, the very able programmer, reminds me that with all the mistakes large consolidated companies are making by gutting their stations, they are vulnerable to anyone with the guts to step up and do radio right. An interesting thought.

But time is running out.

And 2009 will be perhaps the most significant year because at the present rate of destruction, radio stations are nothing more than spot carriers jammed into regional, group syndication or network programming.

Some have even likened this to the age of radio networks -- you know, NBC's Monitor, and the like. But I see it a different way. Then, networks spent money on putting content together. They had news bureaus. It wasn't done on the cheap. And most affiliate stations were local with local assets, local news. Network news and programming gave them more. More was more back then, I guess.

Now, see the future.

Fagreed signed MSNBC's Joe Scarborough to do a show on his WABC, New York and it fits his model -- throw anything up in the air and syndicate it to the rest of your stations. Fire local talent, save their salaries. Make the show available for other damn fools who are willing to take his two-hour version or customized one-hour and forty five minute version. (Sometimes, I wonder about my old friend Rick Sklar, the legendary programmer of WABC when it was a "local" New York Top 40 station with a "national" reputation. He must be turning over in his grave. Today many stations are "national" with a local reputation to live down).

Fagreed is a serial syndicator.

Imus saves him money in New York only if he can put the cranky, has-been on other Citadel stations -- then off to those damn fools I mentioned earlier.

Forget that Imus is an east coast acquired taste -- and I do mean acquired.

KABC just dumped talk show host Larry Elder and it could be that Curtis Sliwa, the totally New York personality, may be his replacement in La La Land. I can tell you LA isn't going to buy Curtis Sliwa, but Fagreed doesn't care. Fagreed buys him and that's what saves money.

Clear Channel may have made its name on Less Is More, but Fagreed's Citadel has built its reputation on Cheap Is Chic.

CBS has been cutting back in management. Duplicating responsibilities. Plus axing big name morning shows (although I am told that was not the reason for John Lander's demise in Boston).

For CBS it isn't about Less Is More or Cheap is Chic, it's Two For The Price of One 0r where you see one, you get two (or three) -- jobs! (As an ex-Metromedia man this reminds me of the old inside joke about Metromedia's outdoor company then known as Foster & Kleiser. The joke goes, "where you see F you see K". Think about it).

So Christmas is coming in a little over a week. More firings are ahead -- with or without severance pay. And, don't even mention Sam Zell to Tribune employees. When he went Chapter 11 he stopped paying compensation to the folks Tribune talked into buying out their contracts through early retirement. Screwed. And this guy is strapped right now, but as you know, I think the play he was looking for was in radio before he screwed up in newspapers and local TV. After all, he's got 20 odd ex-Jacor employees playing newspaper for now. Interesting that he's opted to continue to pay their salaries -- the salaries of all those radio people with nothing to do in his dying newspaper empire.

What's so insane about all of this shrink wrapping of radio is that after the consolidators get finished with screwing their talented employees, they're ready to screw themselves. (Don't worry, they already screwed their stockholders).

That's right.

The old saw "be careful what you wish for" will most certainly come back to haunt this bunch of not ready for prime time players -- who sit around and pleasure themselves by syndicating.

I can say that because this final indignity is the worst of all.

If radio was anything, it was a group of local stations that had a clear and marketable "brand". What would Fagreed's predecessor, the WABC Top 40 station, for example, have been without Dan Ingram, Cousin Brucie, Chuck Leonard -- you could go on and on -- and the rest of its brand leaders.

Nothing.

And that's what these desperado's who call themselves radio CEOs are going to wind up with after they finish their strategy of gutting local radio.

Nothing to sell to suckers who might have been willing to pay a lower multiple and give it a try the right way.

Nothing to stream on the Internet -- you're kidding, right? With what radio CEOs are forcing their stations to do, who is going to want to hear Curtis Sliwa on the Internet -- or Joe Scarborough or Don Imus?

No one from the all important next generation, that's for damn sure.

Nothing upon which to build local podcasts, mobile content or extended branded programming.

Nothing.

So as radio as we and our listeners know it comes to the end of its long nightmare, what radio will amount to -- I'm so sorry to say -- is nothing.

During the year ahead, the only hope I have is that some brave board of directors somewhere in this industry grounds its private jet and replaces its CEO with a swashbuckler from today who is reminiscent of the pioneers who built radio into the business that Wall Street coveted 12 years ago.

One last chance -- that will probably never come in this critical year of 2009 -- unless or until the overseers of radio's destruction are stopped in their tracks.

The clock is ticking.

As they say in the old "Beat The Bomb" radio contest, say "stop" before the whole thing blows up.

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