Spreading Radio's Wealth

Barack Obama is being slammed by John McCain and Fox News Channel for wanting to take from the very rich and give to the poor -- or spreading the wealth.

He denies it.

I kind of like it -- and remember I'm talking as a guy with Clear Channel's money.

I like this idea of spreading the wealth for the radio industry.

So I'd like to run for President of Radio's Conscience. Here is my platform for spreading the wealth. Warning: you have entered a "no win" zone. You may like these ideas or you may not but the only place you can even entertain them is in the fantasy of your own mind.

Having said that, here is my platform:

Spread the Wealth

$11 million last year and all his taxes paid by Citadel. God, you'd think Farid Suleman was Jack Welch. The previous year Farid must have been Warren Buffett. That's when he made $14 million and you know the routine about paying his taxes. So, if you vote for me as your conscience, I will strip Farid of his $11 million and spread the wealth to the Citadel workers that he has fired in the past 12 months and the ones he's going to fire before Christmas.

After all, it was his "management" that helped causes the stock price to tank and revenues to fail.

Oh, and by the way, Cumulus CEO Lew Dickey was supposedly paid seven or eight million dollars as an incentive for signing a new contract.

What's that all about?

He needed a multi-million dollar incentive to be brought back to a company he guided to $1 a share! Just threaten to fire him and don't worry -- he'll take a pay cut.

That brings me to the boards of directors in radio that rubber stamp CEOs with sweet deals while they crap all over their shareholders. If I'm elected your conscience, I will appoint a bipartisan blue ribbon panel to get to the bottom of this (and that's a great choice of words for an industry that has hit rock bottom).

I'm in favor of tying executive pay to performance -- stock price worth nothing, get paid nothing. Make the shareholders money and gainfully employee your talent and you get bigger rewards. This may not be capitalism but who cares.

End Illegal Immigration

This would prevent Mel Karmazin from crossing the border from satellite radio when his Sirius XM contract is up to return to terrestrial radio. We have enough budget cutters running radio into the ground.

A vote for me would require Mel to finish the job he left terrestrial radio for -- no matter how many decades it takes. Then he would have to wait three years before he is readmitted into terrestrial radio.

Social Insecurity

I have no choice but to embrace the welfare state because so many radio people have been sent to the unemployment line in the past year. Yesterday CBS reported that they saved $23 million this year by cutting jobs --- 290 in the third quarter alone and 480 jobs since the beginning of the year.

And I'm not picking on CBS. Citadel is a leader in something even if it isn't revenue, ratings or share price -- firings. Entercom, Cox and Cumulus have been wielding the knife lately. Tom Taylor reports CBS struck again in Pittsburgh just this past week when he wrote “it was a PD, a promotion director, two sales managers and an administrative assistant – spread all around the cluster.”

Don't let Clear Channel get off the hook -- remember the staff reductions they imposed before the Lee & Bain deal went down. Now, they are offering some people multi-year contracts but there are a few catches if you believe what is going on at Critical Mass Media. Clear Channel can fire you anytime during their new "long-term" contract (I'm not making this up -- I wish I were) and -- oh, one small detail -- if you're offered a contract and don't take it, you can be fired. It's radio's version of Social Insecurity.

Vote for me as your conscience and I'll see to it that radio groups contract with their employees for periods of at least one year with fair wages and reasonable security so they can take care of their families.

Universal Health Care

In radio, a company CEO can get the best health care coverage on a par with that of members of Congress. Their employees -- some of whom have cancer and other diseases -- can't get treatment. Now I know that Ryan Seacrest is getting good health care benefits because, God forbid if anything prevented him from doing his show, Clear Channel might have to pay 100 salaries again.

Every radio company that could make you sick just by working for them should pay 100% of your health care.

Joe The Plumber

A vote for me will in effect ban the use of the term Joe the Plumber from every U.S. radio station unless it is for an issue of overriding importance -- like the toilet backing up.

I once worked at WPEN in Philadelphia for a brief spell and the roof leaked one foot away from me while I was on-the-air. It rains a lot in Philly -- didn't you see the World Series? I would put a trash can down and the rain would make a loud noise as it dripped into the can over my right shoulder. Sounded like torture (no, not my show -- the rain dropping into the trash can). When I took a bathroom break, the urinal didn't work. We could have used a plumber to fix both the leaks and the shitty ratings.

That's my position -- plumbers go back to plumbing -- if I'm elected your conscience.

A Heartbeat Away from the Presidency

Outside of Judy Ellis taking over for Farid Suleman, God forbid something happens, most radio groups don't have a line of succession.

This is a good thing.

Do you really want a number two who was trained by the number one who ran the company into the ground?

Vote for me and I'll mandate that no radio group can elevate its biggest suck up to take over should the CEO become incapacitated. By incapacitated I mean sick or jailed. My platform would look to the best general manager in the radio group and take her or him by private jet to headquarters in the event the CEO can't perform their duties.

Oh hell, we already know the CEO can't perform his duties -- just have a bloodless coup and get the best manager in there to run the group.

I'll Raise Your Taxes

That's because every time you vote for someone who says they'll lower your taxes, you still get screwed. I figure you're about ready to figure that one out. I will not be able to do much with Congress if I am elected Radio's Conscience, but I can implement what I'd like to call the Farid-Del Colliano Act. As long as boards of directors automatically pay their CEOs income taxes, they must also pay the income taxes of everyone else in the company.

This is communism at its best, but you'll have to agree it would be a hoot to see.

Abortion

Any radio company whose stock drops to below $1 a share will be considered an abortion and the person performing that abortion will be aborted from his or her CEO job.

Can I make my position on this any clearer? No waffling or flip-flopping here.

Education

I want to be your Education President.

So I am proposing that instead of firing sales people in the midst of declining advertising, radio stations be given an incentive to not only hire more salespeople but educate them to become even better sellers.

Because most voters usually respond positively to patriotic and socially correct slogans I will call this -- "No AE Left Behind". And for those wise asses out there -- I know what you're thinking. How can you tell an AE's left behind from their right behind. Shame on you.

The fundamental difference between me and your radio CEOs is that I will actually give incentives for hiring new salespeople and let them keep their accounts, give them fair rates to sell and help them succeed by educating them on a regular basis.

The War on Terror

I'll end the war on terror by replacing radio CEOs who continue to terrorize their employees by trying to be managers, accountants, programmers and marketing geniuses. I even have a timetable for their withdrawal from the front lines -- yesterday.

And, I will not send them to Guantanamo.

Bring Unemployment to Under 1%

Give incentives to radio CEOs and group executives to maintain full employment. If they don't, they get to be the 1% unemployed while the more essential people running their business (everybody else) stay employed. This is also called "Reverse Unemployment".

So that's where I stand on the issues.

I ask for your vote as President of Radio's Conscience.

I think I can carry New Jersey, Arizona and California -- the question is, how will these policies play in the heartland and the deep south (defined as any region below South Philadelphia).

And, of course, I can't promise that your vote will count in Ohio and Florida. But you knew that already.

We've been having a little fun here because if you don't laugh, you'll cry. Things have been pretty tough in radio the past few years -- having to sit by and watch its decline. More firings are on the way and the industry badly needs an influx of leaders who see the future.

Get it?

That's right.

The ones who know terrestrial radio has less than ten years. That the greatest content talent in the world wants to invent the next Pandora or Facebook or YouTube. It could be a radio initiative.

Not the ones who are content with business as usual -- cut, snip, fire -- and watch their companies erode.

At least in the general presidential election, America gets to vote for the person they want to lead them out of our country's problems when they go to the polls next Tuesday.

We have only fantasy -- and hope that defines the character of all the people working for the mismanagers in radio who seem content to let a good business miss out on the digital future.

As they say in Chicago, vote early and often.

But keep in mind that in radio your fate will always be ultimately decided by Radio's Supreme Court -- the boards of directors who keep returning incompetents to power at a time of great change.

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Radio's Trick or Treat Research

Paragon Research has a new study out that has been getting headlines in The New York Times, Rolling Stone and elsewhere.

The Times headline says "Perhaps iPods Aren't Replacing Radio" and Rolling Stone says "According to New Study, Traditional Radio Gaining Popularity".

You can believe all of this at your own risk.

I have nothing against Paragon, a good radio research advocate that reportedly conducted their survey online. But it is very difficult to give much credence to this research that says the trend is switching back to radio. As The Times puts it "Paragon Media Strategies, reports that 14 to 24 year olds mostly say their radio listening has increased over the last year or two, while they said the opposite last year".

From time to time radio produces research that appears to bolster its position in a world where it is losing influence -- with audience and advertisers. I'll refer you to the HD studies that show up from time to time. If you believe their results, I've got a bridge to sell you in Brooklyn.

For those of you who know through your anecdotal experience that it is impossible for young people to return to radio, then you know that the neglect stations have shown their programming these past eight years is the real news story.

I think it's worth examining the rest of the story:

1. The iPod isn't going anywhere

There is no doubt that young people are tired of hearing the same music over and over again but their iPods are their music library. Portable, commercial and idiot free. I have heard student testimony of iPod fatigue, but no willingness to leave their iPods at home. The study said that iPod use is cutting less into radio this time around. Radio doesn't make the radar screen if you actually ask young people face to face whether they like it. (By the way, even iPod carrying Gen Yers listen to radio -- when they have to -- in a car without bluetooth or WiFi. Keep that in mind before you go out investing in radio stations).

2. Radio continues declining as a source for new music

Think about it. Most stations really do not play much new music -- that's always been the knock on radio. Nothing has changed. Young people are not showing any evidence of returning to a medium that plays the least music with the most ignorant djs who are not allowed to be knowledgeable about what they're playing. Believe what you want, but radio lost its listeners at "hello -- I've got 20 minutes of nonstop music for ya". Non-stop, repetitive, short playlist music -- and don't forget the commercials.

3. Music filesharing still rules

Unfortunately for the record labels, piracy is thriving. Gen Y finds music, shares it and never has to worry about paying for it. You know that. If you don't, talk to your children and their friends. They'll show you some research of their own.

4. It's the cell phone, stupid

Remember when the Bill Clinton people said, "It's the economy, stupid" back in 1992? Well in our industry its all about the cell phone. Cell phones are the most indispensable devices young people own and most of them don't want to use it to heart some repetitious Clear Channel stations. They want Pandora -- now that's radio to the next generation. And, don't believe me if am taxing your belief system but the cell phone is the new radio but podcasting will be the new programming.

5. Radio offers nothing to young people

No real music variety. No plethora of music genres. No easy way to own music. No intuitive way to share music. No knowledgeable djs talking about music. No haven from commercials, promos and clutter that they have long ago abandoned. No local input. Need I go on?

Larry Johnson, the Paragon study's author was quoted in The Times as saying "radio stations may be doing a better job at connecting with those people,” and “The music may also simply be more interesting. There tends to be a cycle."

He's kidding, I hope. How can he say that with a straight face?

Music on the radio more interesting?

Rolling Stone actually came down to earth for a second to conclude:

One would think with the economy stumbling and gas prices as high as they are, people would be spending less time in their car and thus listening to less radio. Add to the equation that the demographic to the study is 14 to 24 year olds — a cross section of people with easy access and understanding of song streams and downloads — the results of the online study become even more inexplicable.

Look, I love good news just like the next guy. But good news to radio is not that everything is okay but all the CEOs of radio's big companies were fired and replaced by a general manager or program executive who actually knows how to run something.

That's worth putting the flag out.

But this type of "trick or treat" research is dangerous to the multitude of clueless -- or what you might call radio CEOs.

I know it's Halloween and we dress up and scare people but...

Take the Reese's Peanut Butter cups not the apple with the razor blade in it because this research is misleading and dangerous to an industry that knows next to nothing about the one audience segment they need to own -- the next generation.

And nothing proves it more than these erroneous conclusions.

But if it makes you feel better, go ahead and enjoy this rare bit of news that radio is back.

And don't get mad at me because I don't believe Jeff Smulyan that radio is just going through a tough time and it is all going to be alright. Don't tell me about doom and gloom -- I didn't start the fire.

When things get worse, take two aspirins and call me in the morning. We'll be able to deal with the symptoms but the patient is still going to die.

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Snakebitten Radio

I was a major market program director for a radio GM who used to call me and the station sales manager, a guy whose nickname was "The Snake" -- into his office when the Arbitron rating books arrived.

Behind closed doors, he'd shut his thick drapes that covered the windows overlooking an array of towers in a large field.

He had "The Snake" on his right side and me on his left as he paged through the newly arrived rating books. There was one light on -- a desk lamp, as I remember it.

I was scared no matter how many times he performed this voodoo ritual -- and I wish I was making this up -- but sadly, it's exactly as I remember it.

Every time the GM paged to a new section or daypart, I'd say "we're number two in teens". "The Snake" would say, "I can't sell teens". I'd retort: "Look there, we're number one 18-24". "The Snake" would answer, "We can't live off of 18-24s -- we need adults." This went on and on until the GM was convinced that he had a grasp of the ratings so he could make the big call to his boss in New York (the owner) to spin the numbers.

In those days, teens were unwelcome for exactly the reason "The Snake" argued -- only a handful of advertisers wanted to buy teen demos and if they did, the ads ran in the night shows where rates were lower. Hell, even 18-24s didn't get respect in spite of what they could do for the 18-34 year old breakout.

My programming friends will get a laugh out of this -- eventually the station dropped the top 40 format to become an adult contemporary station. In their infinite wisdom they lusted after all those older demographics that made the market leader number one in ratings as well as revenues.

Of course, they forgot a few things.

They had an inferior signal. No personalities that would appeal to the adult market and no money. Outside of that, it was pure genius. Of course, the format failed.

I often think back to this because today wouldn't radio love to have the "problem" I brought my general manager in his darkened office -- too many young people listening to the radio.

I'm here to tell you that radio never respected teens and 18-24 year olds and assumed they'd always be there to someday grow up to be adults -- still listening to the radio. This disrespect predated the Internet, social networks, iPods, music filesharing and cell phones.

In arrogance that has not served radio well, executives misread the numbers then and continue to do so now.

But as recently as 1996 when consolidation came along, the greedy group operators were more obsessed with buying out a competitor, reducing staff and cutting costs than offering anything significant for young people to listen to.

While consolidators were busy pleasuring themselves, these kids took control of the Internet, figured out how to share music online and looked to each other instead of djs for what's cool on the music scene.

What's more startling is that radio group operators still don't get it.

Their young audiences have moved to the Internet and mobile devices but radio hasn't followed them. Radio execs still think they can get young people to give up their digital life for analog radio. They don't even understand that this generation plain doesn't like radio programming or the way it is presented.

What's worse is that no radio group budgets even chump change to create new revenue streams that are designed to follow the customers to the place where they live -- digital new media.

Arrogance -- pure arrogance.

Radio still thinks putting an Internet stream of a terrestrial station online is new media.

What they missed and still fail to grasp is that the next generation wants their content when they want it -- not when it is broadcast. They want to stop it and start it. They want to share it and have some say in it -- or be part of it.

So there you have it.

One of the major reasons why radio will never be a growth industry again is because they falsely assumed that Gen Y, like previous generations, had no other choice but to be a listener to terrestrial radio.

The world changed, but radio didn't.

It strikes me that yesterday the stock market -- arguably the group owners real ratings -- turned in a 900 plus performance. Yet Citadel closing at just 28 cents was down almost 4%. And Cumulus, Cox, Entercom and Salem also dropped while the remainder of the radio stocks were either unchanged or went up a whopping 4 cents! Most of these radio stocks now routinely sell for under one dollar a share.

It was the biggest day on their beloved stock market and the public voted by saying -- no, not you, radio -- everybody but radio.

It took a lot of work to turn $100, $50 and $25 stocks into mere penny stocks.

And I am sorry to say misunderstanding and not valuing the youth market was at the heart of a strategic failure that will take the radio industry down.

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Rent-a-Radio Station

McDonald's franchises their local stores.

Many other fast food outlets and providers of goods and services everywhere also do.

It's all-American to be in the franchise business.

Which is why I think I have an out for radio operators who have had a devil of a time trying to run their monopolies since consolidation allowed them to put their clusters together.

There's even precedent for it in radio.

Remember how ABC went searching for crummy little AM signals in big markets and did long-term deals where they supplied Radio Disney content while the owner got checks and kept the license?

Well...

Why not now?

Imagine Farid Suleman no longer having to have any expenses. He could work out of his home (and write off one room as an office like the rest of us). Even if he keeps his $11 million annual salary, he won't have to worry about paying for morning shows, personnel, talent, salespeople, health care -- you name it.

Farid's ultimate cutback would be to throw the format off the air, kick the rest of the people to the street and actually rescue himself from the mismanagement that is epitomized by a Citadel stock worth only 29 cents.

Real broadcasters -- the ones who know how to do local radio, provide local content, employ local people can enter into an agreement with Farid to rent a station or two or three and make payments to Farid. Farid declares a profit and then uses the rest to pay down the considerable debt under which he buried himself. And he doesn't have to run anything. How cool is that?

Hey, you other radio groups -- don't laugh. Your stock is in the toilet, too and it doesn't take a college student to see that you're not going to have a comeback when you're cutting programming. Isn't gonna happen. We all know this. You do, too. You're just biding time.

One reader asked what Farid could possible cut next. Citadel, like many other radio groups, have already cut deeply into the bone. But he can always find something -- how silly of us -- he's a bean counter and a damn good one. As far as being a CEO, he's a damn bad one if you judge him by his own Holy Grail -- stock price.

Hear me out.

So a group of your friends decide to invest in a long-term rental of WABC in New York. First, you make sure you include an old ABC hand in this because they actually knew how to run these stations. Then, look at the beauty of this -- Farid just collects his money. After all, he's entitled to his profit, too.

Citadel and the other groups in deep trouble get to actually turn their stations into assets by relinquishing managerial control. This means people who by experience know what they're doing can go back to running the stations. And Farid no longer has to embarrass himself. Left to his own devices, Farid is possibly headed for bankruptcy -- a small detail when your public stock price is about a quarter. Hell, there's not much difference.

Putting radio back in the hands of local people who presumably could run the stations would most certainly be an improvement.

As much as that appeals to me, however, I'm still more optimistic about new media because it is a growth business with very few content providers and marketers who know what they're doing. It's got a lot of problems and is not ready for prime time until some of the issues get resolved (i.e., royalty charges). But it will explode someday.

Let that also be a lesson to radio to heed my 80-20 rule.

80% of your budget should be spent on local programming, sales, marketing and management.

20% (at least) should be spent on podcasting -- new content other than that on terrestrial signals -- with personalities other than the ones on your stations. And hundreds of new and different Internet streams and tons of local content.

Like most of you I love radio and would like to redirect it toward the future but never forget that the future includes the next generation. Gen Y has left and are not coming back.

Still, as strange as this idea may sound, group owners are headed toward bankruptcy or something worse -- continued operation as a wounded entity in a dying business.

These operators are already panicking and heading for the exits. Farid wants to sell a bunch of stations. CBS, too. And just about every group (but not all) would like to unload some stations if the price is right.

But the price isn't right, it's more like "jeopardy" -- announcing that they want to sell and having no one come forward. It's the anti-comp strategy. Not whether radio stations sell for X-times cash flow, but whether radio stations can sell at all.

They need "concentration" before discovering the "wheel of fortune" in which they spin the wheel and hope to avoid -- you guessed it -- bankruptcy.

One of the reasons I'd like to see terrestrial radio get back to its local roots and out of the hands of the geniuses that have turned the business into penny stocks is because...

Terrestrial radio talent is the best resource for building a new business.

A new media business that will overtake terrestrial radio as a revenue source over time as older radio listeners leave us.

New media needs radio talent, managers, programmers, sales and marketers -- the ones who already know the ropes.

Radio needs new media -- where the listeners have gone, the source of all potential growth.

Only a radio group CEO could miss this hole in the market.

Hell, that hole is so big you could drive a big bus through it -- you know, the kind they're now throwing their employees under.

You've had 12 years and you've managed to do what no pre-consolidation manager could ever do -- ruin a great business.

With more layoffs coming, consider laying yourself off.

Or, in the alternative, rent your stations to people who actually know how to run them.

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Radio: The Benefits of Bankruptcy

So Citadel is at 31 cents. Market cap at only $82.36 million.

Entercom is selling for a whopping 70 cents. Market cap a paltry $26.5 million.

Cumulus $1.68 a share. Market cap $71.38 million.

Salem 88 cents. Cap $20.83 million.

Emmis 60 cents. Market cap $21.82 million.

Regent 38 cents. Market cap $15.14 million.

Radio One 9 cents. Market cap $8.86 million.

Beasley $1.50 with a market cap of $35.61 million.

Spanish 19 cents. Cap $12.31 million.

Saga $4.92. Market cap $96.83 million.

And the winner is ...

Cox trading Friday at $6.19 with a market cap of $530.62 million.

God, that was ugly!

It's hard to believe that radio stocks are basically penny stocks and the super achievers still can't get anywhere near $10 a share. This in spite of the fact that some radio stocks were close to $100 a share in the peak following consolidation when even the bad radio groups had good stock prices.

We've talked endless times about what led to the demise of radio -- with listeners, advertisers and the next generation, but in the end the question will be is the radio industry as we know it going bankrupt?

Wall Street seems to be saying it.

Potential buyers seem to be saying it because there are a ton of radio stations for sale right now and no buyers are willing to pay anywhere near the multiples the sellers want.

Refer back to the market cap numbers above and you'll think, Entercom is worth $26 million. Well, that's just not so. The $26 million is the public value. Private value is determined by what buyers are willing to pay. Of course, lately, there is no reference point -- no comps.

I had an interesting talk Friday with one of radio's brightest, Larry Rosin of Edison Research. Larry had a few controversial and stimulating ideas I'd like to share with you that may benefit a declining radio industry.

1. Drop the foreign cap. Currently investors from other countries cannot own more than 20% of U.S. stations.

This is a great idea. That cap means nothing. It does not present a security danger if a wealthy Mexican businessman wants to buy heavily into U.S. media. Maybe it harms the ego, but I'll take the money. It's safe to say large sums of investment capital to help radio reinvent itself is not coming from the public trough. Looking outside the U.S. is prudent under such circumstances.

2. Put a sunset limitation on the AM band. Say, five years to switch radio's best AM brands to FM.

Larry's idea helps reduce competition for listeners and advertisers because it takes an entire band of programming and forces it onto FM. I'm sure this will rile a lot of people. Personally, I think five years from now will be too late. You won't want to think about what radio will be like then, but if you want a preview just look at it now.

Think back to when mega stations like WABC Music Radio in New York -- a great and powerful brand -- died on the vine because AM couldn't figure out how to move it to their one FM station (remember, you could only own an AM and FM in each market -- and a max of seven AMs and seven FMs total).

For some reason radio thinks listeners should come to where they live rather than where the listener lives. By the way, there is no shortage of examples such as WABC. What's CBS' excuse for not taking its money rich all news AM stations and putting them on FM. Only Bonneville seems to get this message as it has migrated some AM formats to FM.

Same problem exists with FM.

In a few years, the FM numbers will be even more watered down and any remaining good brands will die on that frequency while listeners embrace Internet streams, podcasting and mobile entertainment. Of course, that's not new radio -- or is it?

Radio has a long history of blind ambition. When HD radio was developed, HD failed because for one thing it wasn't really about the fidelity (boy, that's for sure). It was about creating even more competition for itself. Thousands of additional stations to help operators commit operational suicide by competing with the same advertising pool.

What don't they understand?

Are they not listening to their prophet The Honorable John Hogan whose career will someday be remembered for his famous words "less is more". More stations mean more competition for fewer advertising dollars. That's plain nuts. And if you consider the growing competition from new media, it's even crazier.

Without capital, the radio industry will be -- well, what you have today. A carrier of syndicated or packaged regional programming -- very cheap, not very local. That's going to kill radio. Watch.

Some think that if a few radio groups go bankrupt, then they'll be forced to sell their stations presumably to people who will know how to run local radio.

But radio is all about free cash flow. There's nothing wrong with the way radio generates its revenue. The problem is bigger than that.

Debt service.

All those champagne corks that popped back in the late Nineties to celebrate yet another station or cluster acquisition was premature as it turned out. No one seemed to care at the time that the prospect of servicing the debt on borrowed money to make their acquisitions was impossible.

One broker friend of mine called it from day one. But to say it -- to dare to suggest that these cash rich radio stations one day would not be able to handle their debt was sacrilegious. I know because I said it.

Look today.

Groups obviously worth billions or hundreds of millions are capped in the relatively low millions with share prices from hell and no realistic promise of turning it around without the next generation that bolted for new media.

And if you're hoping you'll be able to put a group together and buy some of these distressed stations some day, be careful what you wish for. Yes, the prices will continue to go down but the money you'll need to buy this Model T technology will be too risky.

I think I have a better idea -- admittedly a radical suggestion -- that can help group owners where they are weak (programming, sales and operations -- just about everything) and at the same time make it possible for individuals or small groups of owner/operator/investors to get their hands on radio stations only a few monopolies can currently own.

I'll write about that very soon.

For now, remember this: I don't think radio will be bankrupted. You probably don't either.

But we don't get a vote.

As of today, Wall Street is playing with real money and they are voting nay to radio every day.

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U.S. Radio vs. Canada (Australia, Europe)

If technology, the Internet and the next generation is killing radio, why is radio doing so much better in Canada, Australia and Europe?

Look, let me say upfront and I am going to underscore this -- I am not an expert in foreign radio. Just an observer. I will say that I have a lot of readers from around the world and although radio is challenged in America right now they report that it is not in such dire condition overseas.

Here are a few thoughts:

Regulation Is Important

Canadian broadcasters are still marching to basically the same orders as they did decades ago but radio is not dying there. Of course, Canadian broadcasters are faced with the very same challenges as in the U.S., but they haven't prostituted their formats and brand names yet. There is more sense of responsibility regarding what listeners expect. There are repercussions if operators don't tow the mark. In the states, it's anything goes. Can you name a radio station that didn't win a license renewal in the past ten years? It's almost impossible. Deregulation in the U.S. was really no regulation. The FCC wrongly posits about Arbitron's People Meter not the people's business. Ironically, depending on who is elected president, radio may see too much regulation in the years ahead.

Cutbacks Erode the Product

U.S. radio's obsession with cutting costs, duplicating jobs to save money and firing talented people has a price -- on the bottom line. The old adage "you have to spend money to make money" didn't become an adage for nothing. It's true. You've also got to have money to spend it and that is the dilemma of American radio right now. They are facing delisting on the stock exchanges because all those economies of scale that began shortly after 1996 and continue to this day have failed. U.S. radio's unprecedented steps to water down the on-air product is the main reason why radio is failing. Not iPods. Not the Internet. Not music filesharing. If radio stations understood this from day one, their challenge going forward would not be one of cutting costs to fill up airtime but to gradually evolve into new media. This cannot happen without the very talented people they are casting away in great numbers.

Denial

In radio, everyone is a cheerleader. I must say it has always been this way. I love this business and more importantly the people in it -- a special breed of very unique personalities. But mindless pep talks for radio in my opinion are not what the industry needs. We're all for radio. So when you read editorials that say stay positive, it's all well and good but it is not a solution. When nice people like Emmis CEO Jeff Smulyan deliver sermons instead of solutions it is just his love for this industry shining through.

Foreign Radio Understands Local

Go almost anywhere in this world and you'll see how local radio is alive and well. That's how radio works best. The Ryan Seacresting of radio dayparts to wallpaper economies of scale into Clear Channel is not helpful. I like Seacrest in LA. Or maybe New York -- wherever he chooses to live. Not everywhere just to cut salaries. I see that Farid hired Mancow to work for him in Chicago and he's supposed to be doing a show separate and apart from his syndicated morning show. Yes -- as long as Mancow remains in Chicago to be part of the local radio scene. Around the world radio companies were blessed that they remained regulated and that so many never forgot the importance of being part of the community in which they broadcast.

New Media is Embraced Everywhere But in the U.S.

That's a bold statement -- maybe not everywhere but almost everywhere around the civilized world -- but not here. U.S. radio's shameful record in making the transition to digital media is largely limited to switching on HD radio. HD radio means nothing to listeners in the U.S. It has more of a chance in other parts of the world where listeners may actually want second and third tier channels from broadcasters they love. And broadcasters there may actually want to invest money and talent into building these channels some day. But not here -- that chance died with consolidation. The digital future isn't HD -- it's making new and separate streams of content that can be aggregated along side terrestrial radio. Terrestrial radio will one day be obsolete technologically speaking, but an investment now in new media will be its successor. Podcasting, mobile content, merchandising, social networks -- why not radio businesses?

In the end, the obituary for radio was written by the actions of its own CEOs, deregulation, false economies, loss of focus on local radio and failure to comprehend the digital future.

There is nothing I see in radio (or for that matter our beloved record industry) that makes me think this will change.

If you want a future, invest in Apple. They understand generational media.

If you want excuses, buy radio.

Time to get real.

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The Radio & Records Rescue Package

They just don't get it.

The record industry is broken beyond repair.

The radio industry exists only for an older available generation.

We see poor decisions by executives in these two industries based on their inability to see what the next generation wants.

For example, in their day radio and record CEOs saw how well the simple process of finding new acts, pressing records and promoting them on radio worked. It was a beneficial relationship for both sides no matter what their rhetoric may be today.

But now, record execs cannot grasp that free downloading is their friend and that they need -- no will absolutely benefit -- from reinventing their business model.

One of my readers, Kurt David Englehardt, told me of a very relevant interview that the singer Richard Marx had with Lou Brutus on XM channel two. In it, Marx very correctly learning from his own children, observed that, indeed, things have changed.

Back in his day, consumers were likely to discover music on radio and have a finite number of favorite singers and bands. And, he observed, they seemed to show more loyalty toward those musicians.

Today, young consumers have access to so many different genres of music and sheer numbers of musicians. And they seem to tire of them faster than in days gone by. This does not necessarily reflect on how good they are, but on how many choices young folks have today when it comes to music.

If you buy any of this -- and I do -- you can reasonably conclude that any fix of the record industry or radio for that matter must take into account the almost insatiable appetite by members of Gen Y for music variety.

Radio stations have a hard time owning up to their limitations. Even before the Internet, Napster, filesharing or Limewire radio programmers were lying to their listeners. They promised fewer commercials, more music and the best variety (make up your own one liners on this empty promise, they did). But the audience had no choice but to listen.

The reality of a generation that has bested radio owners out of their expensive towers and transmitters and relegated record labels to petty sore losers who have traded smart marketing for retribution is too much for these executives to comprehend.

The genie is out of the bottle.

No young person in this -- the most massive generation in terms of population -- will ever have to let radio djs be the trendsetters again. And, if you've listened to local radio, there are few of these tastemakers around anyway. They were expendable -- couldn't survive the non-stop budget cuts.

The big four record labels are smoking something very strong these days -- not that they didn't inhale back in the 60's either -- but now they actually think they are going to rein in these kids and make them pay a monthly fee for access to everything ever recorded. You don't see it working, do you? And you're not likely to.

Look at it like this: the kids control the CEOs. They can workaround radio's limited channel of picking the hits and repeating the same tested music over and over again.

Of course, as a program director I know that repetition works and playing the right music will get you better ratings. Once I started working with the next generation I realized that things have really changed. Now -- as incredible as it may seem -- they actually like no repetition. This is not to say they aren't tougher than our old friend Steve Rivers who knew how to chop a playlist down with the best of them and win. After all, their iPods are their own radio stations -- and yes, they repeat what they like -- but they don't always listen to songs all the way through.

So, times have changed. They defy the best knowledge of radio and record executives.

As smart as they are, the solutions being offered to give radio and future by attracting a new generation and giving labels a new meaning in today's filesharing music world are not likely to work.

Want to see what I mean?

Here are the counter intuitive strategies that deserve a shot because they do have a chance of working.

MUSIC INDUSTRY

1. Charge five cents (ten at the most) for all music downloads. That price is too cheap -- on a par with text messaging expenses -- to force consumers to steal music. Sell volume and yes, I understand five cents won't make them rich. So there will have to be more.

2. Become the radio station of the future and cut out the middleman (terrestrial radio - which is on a suicide mission anyway). Learn about the next generation and deliver music programs and content to them directly through podcasts, mobile content and the Internet.

3. Fire all your lawyers. Stop propping up the RIAA which is hurting you more than helping.

4. 360 deals as you define them don't work -- lots of luck.

5. Develop a new business model that encompasses owning the marketing rights of artists you promote and go back to school to learn advanced merchandising -- a panacea for the future. The label of the future will replace the agent, the merchandiser and even the live venue. You may say, " I thought you said 360 deals won't work?" They won't because labels demanding a cut of an artist's future without the skills to advance it is fraud not commerce.

RADIO

1. Fire upper management including regional people.

2. Close the corporate office.

3. The CEO works out of home.

4. All individual station executives have autonomy to run their own formats, marketing programs and digital initiatives. Fire them only if they fail to meet written mutually agreed upon goals.

5. Mandate 85% of all radio broadcasts local in origin.

6. Triple your sales staff. Send them for quarterly sales training. Pay their health care if you want to attract the good ones. Draw for three months. Generous commission after that. Never steal a client and appropriate it to another sales rep. Let them sell digital as a integral part of terrestrial radio.

7. Budget 20% of the corporate budget to digital initiatives.

8. Define digital revenue stream as that derived from non-repurposed material (such as streaming your already existing radio station online).

9. Make it a goal to produce 300 local, five days a week, by the end of the first 12 months and take it from there. Sell a new form of advertising (not spots) once you aggregate the listeners from the various podcasts broken down by interest not demographics.

Hell, I could go on and on.

But why?

Radio and record executives aren't listening. They don't even agree.

Not to worry, then. If they don't see the path to a digital future and return to a growth business, the next generation will be doing it by the time they are 30.

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Clear Channel Locks Up Programmers

When I saw the headline "Clear Channel Locks Up Programmers" in Inside Radio's afternoon email yesterday, I'd be lying if I told you I didn't say, "oh, shit".

It sounded like "Hogan Gone Wild" to me. It's not bad enough to underpay, under budget and under appreciate their employees but now he's throwing them in jail?

Well actually, all kidding aside, I like what Clear Channel Radio President John Hogan is doing on this issue in principle. It's a beginning. He deserves some credit for starting somewhere because the other radio groups aren't even trying to do multi-year deals with their people. It's true Clear Channel is still firing people, but all the groups are doing that, too.

In case you missed it, Clear Channel signed long-term contracts with Alfredo Alonso, Darren Davis, Clay Hunnicutt, Phil Hunt, Tom Owens, Tom Poleman, Gene Romano and Alan Sledge -- what Hogan considers his senior programming team.

That's a good thing and since Clear Channel is often the industry leader -- for better or for worse -- this is a move that has the potential for being for the better and may be worth emulating.

But if you want to go one better, consider this:

1. Now sign your best program directors in local markets to long-term deals so they stay with you and can help make the transition from terrestrial radio to the digital beyond. These programmers may not be the "yes" men you want, but they are the fiduciaries of the format and the license. In years gone by, radio stations that had long tenures were programmed by one or two PDs over the life span of a successful format. There is a reason for that. That's where studying history could be very timely today.

2. Give them an adequate budget to employ live personalities at least 85% of the time and always from 5 am until 12 midnight. It doesn't matter how good the PD is that you have locked into a long-term deal if he or she doesn't have the budget to compete with other stations and new media.

3. Eliminate regional program directors. They stifle creativity and cause more problems than benefits accrued. If you trust the local program director, judge him or her on whether they accomplish the goals you have in mind (more later). If they put the license in jeopardy (which very rarely happens), you have your remedies. Otherwise, trust them and leave them alone to program. I love the programmer John Sebastian. He's his own man. A brilliant program director and he refuses to compromise on quality. He's paid the price for it along the way in his career but if you had a station to turn around -- and you could manage to leave him alone -- his record is consistent in getting the job done. There are lots more of these passionate PDs around but the control freaks running radio groups need a level of hand holding called regional PDs.

4. All music should be determined by the PD you just signed to that long-term deal at each crucial station. It's ludicrous to make music decisions anywhere other than right in the market.

5. While you're paying your lawyers to write contracts, allow these PDs you're signing to also lock in their morning talent where applicable. The mornings are the best part of the station -- at least for revenue. If the morning team gets ratings over the long haul, tie them up and make them a fixture. It's cheaper in the long run. The current panic strategy by group owners to fire morning jocks because they make too much money is stupid. I can't tell you the number of readers who have told me they got fired right after the ratings came out -- and they were number one in the book! (See how these CEO make radio worth less than $1 a share?)

6. Make sure you have 20% of your programming budget allocated for digital media. Let me be clear (as they say in politics). Not money to repurpose the morning show or run a web site with your dj's pictures on it. This is money to start your second business (or dare I say second revenue stream) -- new podcasting content, new Internet streams, new merchandising revenue strategies. (I have some current and former radio personalities as clients who have asked me for help developing a place in podcasting. If they know radio won't last forever, what's a radio CEO's excuse?).

7. I've mentioned it before, but this is as good a time as any to reiterate it. Make that contract include a yearly goal sheet that corporate and the PD must sign to continue the relationship. One sheet of paper. Company puts down the goals. Let's say 25% increase in 25-54 listeners. Morning show improvement of 10% audience and 20% revenue. But you must also include a line with the budget number. The PD must work within that budget if he or she puts their name on the goal sheet. Include a line that says when the year is up, management will review the PD's performance. This way everyone is on the same page. Giving a PD a station to program without a stated budget is like giving a US Airways pilot directions to fly to Philadelphia without a flight plan, money for fuel and help. (What? They do that already? Bad example. You know what I mean).

Look, there's a lot of stuff John Hogan has done that I plainly don't like.

Hogan is on the right track by locking up key personnel.

Now he has to use the long-term contract concept to retain those other than senior people.

You can tell me I'm all wet (I've heard it before), but I called this baby right back in 1996 and I believe I see where it is heading in the future.

Sound, local terrestrial radio -- not cheap programming to save money -- as long as terrestrial radio can attract available, older listeners.

Internet streaming -- a scary thought to the broadcasting industry that is apparently sitting this one out.

Mobile content and podcasting -- the new radio.

It's inevitable. Just look at the generation that is coming of age.

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If Radio Presidents Were Elected by Employees

I got to thinking the other day that if radio presidents were elected by their own employees rather than anointed, you would see change and reform like you've never seen before.

I know what you're thinking.

Radio presidents (often also known as CEOs) are elected.

Yes, by their boards of directors -- a sorry conglomeration of special interest members who have so much integrity that they keep rubber stamping the regimes of chief officers who steadily deliver share prices below -- one dollar.

That's not what I had in mind.

What would happen if radio CEOs were elected by their employees?

I'm just kidding here -- I think.

For sure, you'd see an end to the firings and if they had to fire more people, radio presidents would do what politicians do -- make the unpopular move in the middle of their term. Of course in radio, firing people is relatively easy since there are no consequences for the firer.

I thought it would be fun (if not helpful) to see if we can project what this industry would be like if the slash and burn strategy for running a radio group was tempered a bit by the possible consequence of the president losing his or her own job in a popular vote.

So let me be Karl Rove and Paul Begala all rolled up into one. Here's advice to the candidates. I'm assuming with big salaries and lots of benefits at stake -- all of the present suspects will be running for reelection at their radio groups.

Bring Unemployment Down to Under 50%

I know I'm asking a lot, but you've got to keep in mind that if you want your employees to elect you as president of your company, you'll have to feel their pain. And to borrow a phrase from one of the presidential candidates, "they're angry". That's because cutbacks in the name of economies of scale have been going on continuously since 1996. All that's happened is lots of talented people have been dismissed and lots more will likely get the gate before the holidays (hey, last week was bad enough). And if you find it hard to believe that unemployment could rise to 50% in radio, take a look at any program lineup and see how few local shows are being funded. The number one issue in this election for president of your radio group -- bring unemployment down to below 6%.

Spread the Wealth Around

To borrow a phrase from the presidential campaign, tax the wealthiest five percent. At Citadel that might mean that the board of directors will no longer approve of the company paying tax on Farid Suleman's $11 million annual salary. At other companies it could be across the board pay increases. Hey, with so few live bodies left in place at the nation's radio stations raises for everyone wouldn't be that expensive.

Put An End to Outsourcing

Forget Bangalore, put a stop to Ryan Seacrest and others like him. I mean the final straw was putting Seacrest syndication on a small local market station recently that couldn't afford being live in that time period. The market was -- friggin' New York City!! Under my plan, Seacrest only gets one vote. But if John Hogan got a hold of this idea, he'll give "super voting power" so one can represent, say, 100 people. His argument might be -- well, Seacrest should represent 100 voters because that's how many live jocks he's replaced.

Talk to All Our Enemies

I think you'll see some radio presidents, concerned about whether they could get reelected by their own employees, propose negotiating with their enemy -- without first forcing the enemy to agree with them. That enemy would be their own program directors, general managers and sales managers. Under the current system, the Axis of Evil for a lot of group presidents exists in these three job descriptions. Under a radio president who fears for his or her reelection, they might begin a dialogue with everyone who holds these positions not just the one or two yes men who have sold their souls "to the company store".

The Spin Stops Here

With direct accountability to their employees, you'd be less likely to hear pep talks like radio is going through a tough time and things will get better. Bet you'd get more votes if you said, "radio is in critical condition and some of the things we've done have hurt the industry". Then ask for help and start a two-way dialogue. Much more believable. Oh, and if you think these pie-in-the-sky comments when radio stocks are selling for less than a dollar are for Wall Street's ears -- forget about it. Wall Street bailed out on radio a long time ago. Didn't anyone notice?

End the War

Few, if any, current radio presidents could survive a vote by their own employees based on the war that is going on between Main Street and Wall Street. It's one thing for a radio president to suck up to an investment banker when he is paying for an expensive dinner at Il Mulino in New York but it's another thing to turn a blind eye to local radio, local advertisers, local talent and listeners. It is the only way for radio to remain a cash flow machine for the next few years. Run on that platform. Declare victory on Wall Street and retreat to local radio on Main Street. And yes, I would set timetables and benchmarks. How about yesterday?

Bailout Wall Street

Just as Congress funneled lots of money into rescuing the nation's banks and mortgage lenders, radio will have to bail out its investment banks. My plan to do this -- double your stock to, say, $2 a share. Then maybe $3. A windfall, even -- as Yogi Bear would say. Hey, don't knock the bear. He survived. Bear Stearns did not.

Don't Hang Around with Terrorists

If in the past you hung around with sleazy, unethical characters (or as I would call them financial terrorists), you'll need a game plan to withstand attack ads from competitors who would like to have your job. It may come back to burn you later with your employees when they are deciding whether to vote for you or the person who could really do a great job running the radio group -- say, a local manager who actually knows about programming, sales and management because they're doing it successfully.

Regain Our Position in the Media World

Ever since 2002 the radio industry has been on a decline. The rest of the media world no longer respects us because we make unilateral decisions that are not in the best interests of the entertainment industry. To be elected president of radio should your employees get to vote, you're probably going to have to bite the bullet and get into new media. After all, the rest of the world has passed you by. There is a thing called the Internet and it isn't just for posting a website with your djs pictures (should you happen to have a picture of Ryan Seacrest). Some hard choices will have to be made. You'll have to decide whether to spend on guns or butter. Better yet, Guns 'n Roses. Guns and something, anyway. You can't win the support of your employees unless you can acknowledge that we need to join the race to make money on the Internet.

McCain wants reform.

Obama wants change.

I just want rebirth for a dying industry in digital media.

Is there a radio person out there who has the vision to see the digital future, the grace and confidence to be a steward to the once mighty local radio cash flow machine and the compassion to understand that local radio is not an option, it is a fundamental right for listeners in towns and hamlets everywhere?

If so, keep your mouth shut, go out and win support from your people for your plan and then lead this industry into the future.

Wait. Wait. I've been dreaming again. Those pills my program director friends have been giving me are causing hallucinations. For a moment, I thought I almost saw a vision of the once shining radio industry on a hill.

I will throw my support behind the independent in the race -- that manager who is already running a successful station. I hope you win because if you lose, your ass is so fired.

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Levi Stubbs

When I heard that Levi Stubbs, the phenomenal lead singer of the Motown group The Four Tops died Friday I had all the usual reactions someone in this industry would have.

And a few more.

Stubbs, the handsome rough voiced baritone, was a special part of a very special group.

And I'm not just talking about singing talent.

This was a man who was loved and who loved the business as well as his fellow group members. He turned down chances to star in the movies deciding instead to remain with the group -- a special guy in an entertainment industry populated by divas.

I have a point to make about the music industry and radio that I think you will relate to.

My friend Brian Pastoria sent me this 50th anniversary tribute to The Four Tops by Aretha Franklin at the Detroit Opera House. Stubbs was hobbled by cancer and a stroke but he showed up on stage in a wheelchair with the Tops and one last survivor Abdul "Duke" Fakir and a microphone. Take time to watch it. I promise you will not have a dry eye.



It strikes me that what has changed in the music industry today is not that three of The Four Tops are gone. Not that a lot of r&b and rock 'n roll era artists will be following Stubbs and those than have gone before to the ultimate Hy Lit record hop in the sky. Today, music is very much alive even if the record labels have atrophied.

At the risk of being called a partisan, I know lots of young talent at USC's Thornton School of Music. They come into their own not as Levi and his group did, but worse off. The record labels are turning a deaf ear to the young stars of tomorrow. These young talents out of necessity are taking another path.

Berry Gordy, the impresario and founder of the Motown sound, signed The Four Tops after seeing them perform "In the Still of the Night" on the Jack Paar Tonight Show.

First, where are the Berry Gordys in an industry of lawyers and accountants?

Gordy sent the group to the legendary Brian Holland, Lamont Dozier and Eddie Holland to work on developing their sound and deliver him a hit record. Holland, Dozier and Holland decided to feature Levi's gravelly voice backed up by the harmonies of the other singers along with female vocals by a group called Andantes and as a New York Times obituary pointed out, "supported by the Motown studio band knows as the Funk Brothers".

The labels don't do this any more -- not on this scale, not on this level of commitment.

And to paraphrase the genius radio programmer Bill Drake -- the hits just kept on coming.

Speaking of radio, none of this would have been possible without radio -- none. In spite of what the record labels are spewing out these days as they campaign for retribution against their old business partners in broadcasting to get radio's performance tax exemption repealed.

Radio drove the hit making machine.

I, along with many of my programming friends and readers of this space, played Motown music in the same era that feature Gamble & Huff and Sigma Sound in Philly as well as a little something that came from overseas known as The British Invasion led by the Beatles.

Even radio couldn't screw that up. Forget problems, we just played the music right through them.

Radio forgot the importance of breaking new music as far back as 1990 and the corporate playlists that were implemented helped to kill off the music industry and radio.

The labels had an important role in an era that preceded MySpace and viral communication.

The colorful characters of the recording industry knew what they were doing after all. They may not have worn suits or held law degrees. They may have known nothing about accounting. And were unorthodox in so many ways -- still, they presented a wide variety of new music to radio.

Wide variety today? You're kidding, right?

Radio programmers decided what got on the air and what didn't. There were some consultants and a few powerful music directors, but decisions were basically local. You see, it was to everyone's benefit that records were worked locally because that's how you grew a national hit.

Radio local? You're kidding, right?

Dick Clark did it when Bandstand was a local after school Philadelphia teenage TV dance show. My old record buddy Matty "The Humdinger" Singer worked upstate Pennsylvania so hard for small market airplay on everything his label released just so he could sit down with me in Philadelphia and Jay Cook at the competition to make his compelling case for major market airplay.

Record promotion didn't survive the suits and their budget cuts.

This local airplay could take weeks or months, but when enough of it happened and bullets appeared in Billboard, Cashbox and R&R, the labels knew how to take their investment the rest of the way. Yes, even this motley crew -- most of whom never went to college-- just the proverbial school of Hard Knocks.

Matty Singer, by the way, once threatened to stay in my office and chain himself to my desk until I played a new artist no one ever heard of called Jim Croce. When I finally relented, he ran across the street to Jay Cook and snagged both of the major stations he needed. And when "You Don't Mess Around with Jim" became a smash hit, in Matty's tradition, he never let me live it down.

On every level, the music industry is broken today.

The wrong people, the wrong mission -- out of touch and clueless about the future.

The best music is ahead -- yet to be made. As I said previously music is alive and kicking. Anyone watching electronica? They should be.

All the best music wasn't made in the past, it's out there right now.

And a replacement for the record label/radio collaboration I described is on its way and it includes social networking, live local performances and free music.

That's right, free music.

Just as free as it was when it was heard on KHJ in Los Angeles, WLS in Chicago, CKLW in Detroit or WABC in New York.

And this is what the labels choke on. They can't see that the free airplay that made groups like The Four Tops successful has morphed into free downloads that music lovers have been "stealing" from them since Napster.

In the past, it was simple. The labels made money from selling 45 rpm records and vinyl 33 1/3 albums. Now, the music is tantamount to promotion. The labels need a new way to cash in. The lawyers running the final four can't get their arms around this notion. Visit any college campus for a period of time and you'll see that the next generation will not be denied.

Because they own the record store -- not the labels.

And the record stores are online with names like iTunes but also Limewire.

Levi Stubbs and his singing buddies stayed and played together for forty years -- remarkable in any industry let alone our ego driven business.

Obie Benson, a Four Tops singer, said he was sadden to perform without Levi Stubbs and Lawrence Payton (who died in 1997).

Obie said "It's like having one body with two limbs missing".

The same could be said of the music industry as 2009 approaches.

It's like having one body of music with two limbs -- the labels and radio -- missing.

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Joe the Radio Guy

During the final debate between Barack Obama and John McCain, McCain invoked the named of a middle class Ohio worker he called "Joe the Plumber".

In spite of the fact that both McCain and Obama addressed "Joe" directly on camera during the debate and that Joe (whose real name is Samuel J. Wurzelbacher) was a bit loose on the facts, it was interesting to see how concerned both candidates are with addressing the needs and concerns of Joe Six Pack or middle class Americans.

I wonder what the leaders running radio would say to Joe the Radio Guy if he could get their attention if only but for one minute in time. Of course, I will be politically correct by mentioning that Joe the Radio Guy could also be Jill -- nonetheless...

Let's imagine that we can get a whole bunch of radio execs in the same room (it's cheaper tham door to door, economies of scale -- we can keep a weekend shift live for one more week if we do) to answer questions from Joe the Radio Guy:

Joe the Radio Guy: "Mr. Suleman, what are you doing to ensure that all Citadel workers will be able to meet their mortgage payments during the current economic crisis?"

Farid Suleman: "We are working tirelessly to see that every able bodied Citadel employee no matter what race, color, creed or level of seniority has a full-time job -- at some other company."

Joe: "Mr. Smulyan, please tell us why we should believe you, as Emmis CEO, when you say over and over again that radio is simply going through some hard times and that we can survive them?"

Jeff Smulyan: "Our stock price is double that of Citadel"! (48 cents)

Joe: "What is Clear Channel doing to insure that its workers will retain full health insurance benefits?"

John Hogan: "For one, we're not taking on any unnecessary workers to overburden the company wide insurance plan. By aggressively reducing the number of critically ill people in the plan, we can produce a health care product using our less is more policy. With that in mind, we have purchased a full Blue Cross and Blue Shield policy with zero co-pay, 100% prescription coverage and no referral needed to treat any condition. This would apply to 25% of our employees or as we call it, Ryan Seacrest."

Joe: "As a religious broadcaster, isn't there some way you can lead the industry out of its economic doldrums -- perhaps by taking important issues to a higher power?"

Ed Atsinger: "I did. I called John Hogan, but he wouldn't take my call. So we at Salem have decided to do the one -- and only thing that can save us from a bad economy, loss of the next generation and no Internet strategy -- pray!

Joe: "How do you guys expect to compete with new media when some of you are so opposed to the People Meter that could be the solution to underreporting radio audiences?"

Bob Neil: "I want to say this publicly, Cox is not against the People Meter, I am not against the People Meter and most importantly Randy Kabrich is not against the People Meter. We're simply against any system that uses an electronic device that you could attach to your person, that reports what people are listening to, that doesn't allow for radio program directors to manipulate the numbers and that starts with an "A" and ends with an "n". Otherwise, we're for it."

Joe: "Saga is a small to medium market radio group and my fellow radio guys hear that the best and safest place to work is in a small market. Things are supposed to still be pretty good there -- fewer losses in revenue than, say, New York.

Ed Christian: "Security, cuff that guy and tazer him."

Joe: "Don't Taze me, bro -- don't taze me, bro"

Ed Christian: "Look, I categorically reject that small markets are doing better than big ones. In fact, we're being pounded by a force greater than anything affecting the top 20 markets -- satellite radio."

Joe: "Mr. Moonves, sir -- why is CBS trying to sell radio stations when no one apparently wants to buy them?"

Les Moonves: "CBS is the industry leader in everything including trying to sell its radio stations in a bad market."

Joe: "I think the critical question for those of us left working in radio is why hasn't HD Radio attracted more listeners?"

Bob Struble: "We at iBiquity look at it this way -- if an HD radio showed up in a forest and there is nobody there to hear it, did it make a sound? There, see what I mean? There are millions of HD radios out there but they are all in the forests. So we're planning to spend several million dollars along with the NAB to promote HD radio outside of wooded areas."

Joe: "How do you maintain one of the industry-leading radio stocks at Entercom at $1.69?"

David Field: "We never do anything that isn't accretive vis-a-vis our stock position. Shareholder value is paramount. We value our most valuable assets -- our people... oh, damn, what's the use -- okay, we just got lucky, alright. I blurted it out."

Joe: "What makes you think that a bunch of old radio guys can reinvent the newspaper business?"

Randy Michaels: "Because we can do better. The newspaper people helping us turn Tribune Company into the next Jacor (if in no other way than the number of Jacor employees we have hired) know that if they don't adapt to the future -- if they don't start coming up with great new, noisy ideas -- then Sam Zell will have no other choice other than to evict them and their families from the alleys of any strip centers they may be living in. And I personally will start a website call Inside Inside Tribune Company with all the lies that have ever been said about you -- as an inspiration for the new way we want our people to write stories for the Times and Tribune. And, by the way, roll up your old papers and give them to Lee on the way out."

Joe: "Why do you think new media is the future and why should we in radio follow you into it?"

Jerry Del Colliano: "New media is the future because they made me give up Inside Radio and that was all I was allowed to do for four years. Terrestrial radio is over because my USC students think it's over. The answer to all the radio industry's problems is to hire college students to run your stations. No, hire college students from USC who were born and raised in New Jersey to run your stations. No, better yet, hire as many USC students as you can who were born and raised in New Jersey and are hockey fans. And, it wouldn't hurt if they were all Italian.

Well, we've had a little fun here with the industry. God knows, we are facing lots of problems. Let's hope we haven't lost our sense of humor.

The key thought is that the radio industry could do a much better job responding honestly to the concerns of investors as well as employees. It is a business that faces many years of tough times ahead.

We can't have four more years of business as usual.

Maybe some "reform" or a "change" is appropriate for an industry that seems to have lost its way.

Radio was built on the backs of Joe the Radio Guy. If the Joe's of this industry have continued to work hard, stay loyal and outperform other media in terms of talent, don't they deserve to have one thing that has alluded them?

Better leadership. Just sayin'.

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When Bad Things Happen to Good Radio

One of my readers broke down the bad news for me yesterday about the market capitalization of several radio companies.

Keep in mind that many radio stocks had already entered no man's land way in advance of the turbulent stock market. Capitalization is the price of the stock multiplied by the number of outstanding shares.

Citadel, for example, has a capitalization of $70 million. Keep in mind that they paid $2.7 billion (like in "b" billion) for ABC alone. Their debt ratio is through the roof.

Entercom comes in at $88 million. They are worth more than most radio groups but incredibly, not even worth $100 million after twelves years of consolidation if market price is considered.

Emmis' market capitalization is only $23 million. They own a few very big radio stations in the two largest American cities that on a bad day are worth far more than their total group public value.

Salem, the religious broadcaster, may be programming to a higher power but their market capitalization is a sinful $46 million.

Regent is at $28 million.

Don't start with satellite radio. Mel is saying he is confident he can refinance his expensive debt once he achieves economies of scale following the XM merger (i.e., firing XM people and service reductions).

One thing you have to say about the radio business -- we sure talk a good game. In fact, that this dog and pony show lasted as long as it did is the real story.

You can say a lot of things about the Mays boys of San Antonio, Texas but when it comes to timing, they are A#1. They still have a piece of the devalued Lee & Bain acquisition, but don't worry about them. They assembled their group in swift steps of acquisition right after 1996 and bought Jacor and AMFM to add to their smaller assets to build an 1,100 station behemoth.
Even though Randy Michaels did the heavy lifting when he came aboard, the Mayses profited. And they got out earlier this year saddling those poor suckers at Lee and Bain with all their debt

Didn't you think Lee & Bain were looking to get out? I'll bet they wish they had.

Mission accomplished -- really.

Except for one thing -- radio is really bankrupt. If a company's debt is so enormous, that meets Webster's definition of bankruptcy.

What I've been citing is the public market value and there is no getting around radio capitalization based on share price. But we all know that Citadel is worth more than $70 million. Unfortunately the private market is non existent and until some comps come to the fore, we won't know what Citadel is worth today in the private market.

We do know that most radio companies are loaded with debt. When they were assembling their groups in the early days of consolidation, no one was concerned about how these companies were ever going to pay down their borrowed debt -- or, more realistically at least manage it.

We have the Radio One sale to Bonneville in LA for $100 million most recently as a nice comp. But you likely couldn't get that price today.

The market can't be fooled. It's telling you what it thinks companies in each sector are worth. On the upside, when the private market is high on a sector, it is not unusual for the public price to reflect it.

Radio still has a few things going for it.

Stations have huge write-offs -- the value of the license, equipment, contracts, etc.

Cash flow is abundant even when sales revenues are off due to a souring economy.

In retrospect, radio should never have looked to Wall Street to go public. Radio's accounting doesn't lend itself to public money. (I'm putting aside how bad going public has been for the listening public during this discussion, but not forgetting it).

All of this is my way of saying that investors have pronounced radio dead. We're not alone, there's a lot of companies that the market has on life support right now.

The U.S. economy is obviously worse off than we've been led to think. Market forces are not apparently reassured by government intervention. And pardon me for mentioning hedge funds in the same breath because if we discover that pension funds and insurance money has been propping up hedge funds, then all bets are off. No amount of government intervention can save it.

Where does that leave us?

Back to zero.

Real valuations. Having to deal with real issues like unmanageable debt.

Then, we start over.

New buyers. New operators. New realities.

Perhaps this helps to explain why so many smart CEOs have snubbed their noses at the digital future. For them, it's the here and now that counts.

There is no future for a terrestrial radio as a group of public companies.

And there is no way to become a growth business again by leaving out the next generation -- the one that has been moving away from terrestrial radio and choosing Internet, mobile and cell phone options instead.

If there is any good news here it is this.

Once radio assets are transferred to new owners who presumably will use realistic accounting to run private companies, there is a window of opportunity for a lot of talented people to join the next generation's move toward the Internet already in progress.

Better late than never.

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Free Wireless Internet

The FCC helped take the free wireless web a step closer to reality this past week when it approved an engineering report that dismisses concerns that the concept will interfere with other carriers.

The Commission can now auction off the airwaves to any bidder who agrees to offer the service nationally.

T-Mobile is up in arms because the spectrum for this free web service is adjacent to theirs. And it's fair to say other competitors who have had to invest in the infrastructure to deliver mobile service are not happy.

I'm sure the NAB will have its grouch face on -- this threatens the fabric of local radio, and all that stuff. In reality nothing threatens the fabric of local radio as much as the people who own and run large radio groups.

The Wall Street Journal reports that any proposed auction rules appear to favor M2Z Networks, Inc., the startup that developed the concept a few years ago. M2Z believes it could pay for the costs of building the national free Internet platform through advertising and add-on services such as optional paid plans for faster speeds.

The Commission intends for the free Internet platform to reach 50% of the U.S. population in four years and almost 100% in ten.

Terrestrial radio sees this coming and I guarantee you they are looking the other way. Watch, they will repackage the "advantages" of what they call "local radio" instead of thinking differently. That is, getting into the content and marketing business separate and apart from over-the-air radio.

I can tell you from a generational point of view, the next generation will not be denied their Internet, social networks or mobile access. You see the effect Gen Y has had on traditional media already -- without free wireless Internet for everyone.

While teaching at USC, I was always surprised to hear the students talk about their mobile devices, laptops and iPods as if everyone had them. I used to tell them that when I left the University Park campus and drove down Jefferson home to Marina del Rey, it didn't take me 30 seconds to see a whole stretch of humanity that did not have the same access as they had. Critics would use the old SC -- spoiled children -- argument, but I never bought it. Many students -- even at private colleges -- have to work their way through school or augment the scholarships they might have earned.

This is tantamount to mental mind games -- that all young people are privileged. Most young people are not when you take into account the entire population. And the ones who are -- look in the mirror to see how they got that way. This entire argument, in my opinion, is counterproductive to understanding the future.

The real issue is that consumers do not have 100% penetration of free mobile Internet. But I believe that as the free service grows, free radio listenership will decline proportionately.

I've reported anecdotal evidence that young folks don't like radio. Interestingly, many of my readers have augmented my observations with their own. Gen Y still must listen to radio if they are in a car and don't want to listen to their iPods. In other words, even a generation that would rather not, has to listen to radio from time to time.

Free wireless Internet changes all that.

One of my readers emailed me the other day that "it ain’t just the 'next generation' that’s disenfranchised. It’s our generation—the biggest users of radio in the history of the world!" The baby boomers.

And this is another thing I'd ask you to consider. Older radio listeners are succumbing to new media -- even at this primitive stage. Check the iPhones, Blackberries and iPods in the hands of older consumers. The more they are on their mobile devices, the less time they have for traditional media. Some use these devices to access terrestrial radio when possible, but they didn't buy the device to be a radio. That's become secondary.

The free wireless Internet -- what does it mean?

Someday -- when the record labels get their heads out of their grooves and fair royalty compensation is applied -- anyone can become a Clear Channel. Ooh, sorry about that. I meant that anyone can start a business and be free to own thousands of streams using music as well as vocal content.

Better yet, one person -- that special someone who has a talent or body of knowledge like no other person -- can set up shop without having to convince some regional vice president that it's worth doing.

Success will be judged by the listener.

Revenue will mainly be derived from ancillary sources other than commercials.

In 30 years radio has developed very few formats. Look around, the same small list of genres market after market. That ends with this new idea.

Delivering podcasts to the entire population on the fly without a deal with Apple or Verizon -- priceless.

Connectivity to all people no matter of race, color or economic group that might have previously prevented them from sharing a stake in the Internet.

And remember, I love radio. You can see my criticism of the CEOs as being disloyal but I respectfully disagree. Radio people are the most talented and professional producers of content on this planet. They are simply producing it on yesterday's delivery system for previous generations who are in many ways not like their present audiences.

And, they are being let go in a death wish by radio groups who dance to the tunes of Wall Street. Can you say penny stocks?

Earlier this year a student said to me, "why don't you give up on radio, it's over". This is why you have to love these young people telling it like it is. I explained, no one knows it's over better than I do. I reject the Kool-Aid of some trade publications and associations, stand ready to publicly hold CEOs accountable for their stupidity but I'm never ready to give up on the people who sell the ads, manage the stations, program the formats and when they are allowed -- entertain local audiences.

Radio has taken its own hemlock but to those who can hold on or stand at the ready, a new world is here and plans such as free wireless Internet will help new media grow exponentially.

But it's when that new world is available to everyone everywhere for free that their expertise will be pressed into action again.

In 1996 I took a lot of legal, professional and personal hits over declaring that consolidation was as evil as the "empires" aggregating it. Inside Radio exposed excesses, mistreatment of employees and a gorwing disregard for radio's employees and audience.

Now I want to go on record as saying, these same terrestrial broadcasters are being told by their own FCC in effect that they have ten years to come up with a plan to do something other than repurpose their terrestrial radio formats on Internet streams.

Someday radio won't be the only thing free and available everywhere.

They've got ten years.

I'm starting the clock.

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