TV Is Acting Like Radio

I like Jay Leno.

But Jay Leno stripped at 10 pm is bombing.

Local NBC affiliates are taking the hit with Leno as their late news lead-in and when you lose audience at bedtime, the TV station is not on your channel for the lucrative morning news and fluff shows that permeate television.

Television is acting like radio.

In the past 13 years of consolidation the good and solid programs, formats and personalities that audiences and advertisers loved have given way to Repeater Radio, networked shows to save money and God-awful voice tracking that may sound live but isn’t very local at all.

Network TV cut back on expensive dramas a few seasons back giving more life to reality TV shows most of which are mindless wastes of time.

But they are cheap.

See the radio-TV strategy here – cut expenses and diminish the quality of entertainment and everything will be fine.

Well, it isn’t.

You see the mess the radio industry is in – a new plan every six months to cut costs and further water down local programming and television going with cheapie shows to make their bottom lines look not as bad.

Not as bad is not necessarily good.

Growth companies invest in their products and services. As I have said many times Apple isn’t sailing through this recession for no reason at all. (Apple stock was up almost $8 a share yesterday and yes, I own it).

Apple spends money on staff, hiring, research, development, marketing – can radio and TV say the same?

Of course not.

To make things worse Oprah is planning to leave syndicated TV – another bad omen for dying early local news shows that benefited from her lead-in to their newscasts.

Television doesn’t have another Oprah in the minor leagues waiting for a break unless reality TV's Kate Gosselin or Rachel Ray are the new Oprah's. I doubt it.

Oprah Winfrey gets it.

She is leaving network TV to concentrate on her cable channel. Cable, therefore, has finally become a more potent adversary to broadcast TV than originally thought. The niche programming attracts fans that generalized and watered down network TV is losing. Plus cable channels – some of them anyway – are at least trying to understand the Internet and mobile content as it pertains to their niche.

Is cable big enough for Oprah?

Of course not. Oprah is everywhere her fans want her (re-read this line please).

Magazines. Satellite radio. Mobile content.

And this presents a very interesting teaching point.

While the radio industry is ridding itself of talent and turning its back on local broadcasting (at least the consolidators are), they are looking like the playbook for other losing businesses such as television.

Let’s see ...

Ryan Seacrest on as many Clear Channel stations as possible – a star in LA saving Clear Channel money in 100 different places.

And ...

Jay Leno – a star at 11:30 nightly – as a cheap production version of a 10 o’clock weeknight series.

I’m not sure even Oprah could work out at 10 pm for NBC but I am sure that she is not foolish enough to try.

Oprah is a brand – a very special brand to women. She goes where her fans are. It’s the old Disney success formula.

Marketing. Marketing. Marketing.

Oprah is so powerful she is a cable channel.

She is a magazine all by herself.

She is daily talk show.

So the radio industry and TV business obsessed with cutting costs need more people like Oprah Winfrey making their decisions. You can’t sell what people don’t want. You may like Jay Leno at 11:30 each night but not at 10. NBC would never have put Leno on at 10 had it not been for the financial hot water NBC Universal is now in.

That leads us to the majority interest sale of NBC to Comcast.

Comcast is – a cable company.

It sees the acquisition of NBC as adding content to its cable sports franchises. They are not trying to buy NBC for the Leno show. They want the sports franchises. And in spite of saying all the right things about carrying terrestrial TV on cable, Comcast didn't buy NBC Universal for the network division.

Network TV in the not too distant will be like, well -- radio.

By extension the music industry is making some of the same mistakes.

Long lost in finding ways to save the CD revenue it is losing to piracy and cherry picking 99 cent tunes from previously overpriced albums, the labels have lost their way.

Instead of developing talent and feeding the insatiable appetite of music lovers for discovery, you’ll note that there hasn’t been a new major music trend since the industry began its decline in 2000.

After rap and hip-hop the labels stalled out. Prior to that the new technology of the CD stemmed a windfall of profit to the labels as consumers had to once again buy their favorite vinyl albums so they could enjoy digital sound. (Or is enjoy digital sound even a good way to put it given the better fidelity of vinyl – but I digress).

The marketplace wants singers, bands, stars – the labels give us lawyers suing the pants off of people to save declining CD revenue.

It’s as clear as mud to the labels and for that matter the networks or radio consolidators.

It’s not good to save money at the expense of the product.

When you cut, it hurts.

When you grow, you gain.

Video never killed the radio star – that concept is all too simple and incorrect.

Video killed video.

Radio killed radio.

The labels killed the music industry.

And they all did it the same way.

By emphasizing the wrong word in the term -- show business.

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When Hiring Local Costs Radio Jobs

CBS Radio President Dan Mason had to spend some money to hire TV personality and former radio dj Carson Daly to do morning drive at KAMP “Amp” in Los Angeles.

Amp – a newer version of Clear Channel’s CHR market leader KIIS “Kiss” will now pit Daly against Kiss’ Ryan Seacrest the first week in January.

It’s good. It’s local.

But wait.

If it stays good and stays local than CBS did a great job reading its local Los Angeles market. After all, Carson Daly is LA and in my opinion not Buffalo or Nashville or Philadelphia.

There are other people for those markets or as I like to say, the days of syndication are over because radio will be unremarkable if it does no more than repeat a local show designed for one market and try to make it fit all.

Over at Clear Channel Ryan Seacrest exists so that Clear Channel can fire personalities in its group to save money and send networked Repeater Radio to places it should never go. And if CBS eventually does the same thing then I take back everything I said that is good about this move.

There is going to be a big explosion next year and in spite of the fact that the three major groups will be grappling to stay afloat, that’s not the explosion I'm referring to.

Apple is expected to reveal its tablet device – larger than the Touch and smaller than the smallest laptop but this thing will be a game changer.

My friend Barry O’Brien told me recently he and his lovely wife Nancy had to live without a DVR for a week and came to realize that even media savvy people may be underestimating how things have changed. He hated watching television in real-time.

We don’t watch television – one third of America’s households record content and then time delay what we want to watch on our schedules.

We don’t read printed newspapers – that’s why they are dying off. Most people get the news all day through "reporters" called friends and Facebook and Twitter buddies who can tell us when something has happened that we might like to know. That was the job of the newspaper reporter, but newspaper reporters will have to change because their audiences have changed.

We don’t turn the radio on in an emergency even if it is free – we look to our cell phones, smart phones, iPhones or Blackberry devices. We have become the news editor. Meanwhile, radio stations have let us take their jobs because they have been firing critical employees who used to help us in a crisis.

We don’t listen to radio for school closings during snow storms – you guessed it, there is a new age workaround and it's on a cell phone.

We don’t listen to radio for music discovery. Young people listen to streaming sites, share files legally and illegally and listen to Pandora. And more ways to sample music are in the works.

And as the year ahead unfolds, the new Apple tablet will likely be a Kindle killer, PDF reader, iTunes player, video screen, movie theater, link to the Internet, a place to play with Apple apps and whatever else Steve Jobs decides to cram into it.

Radio – the original, free and mobile medium of all – is being relegated to also-ran status because radio owners have ceded their greatest advantage to mobile competition.

That advantage – the ability to employ local personalities who play local music lists and feature news, information, promotions and commerce close to home.

Even the World Wide Web isn’t really a world wide network.

Oh sure, it allows you to reach across the globe in real-time but most people find it invaluable in helping us with social networking – connection, commerce, information and entertainment on demand.

So I wonder how the heads of radio’s most powerful groups cannot see the damage they are doing by firing their successful local personalities in the name of economy.

The people who could best do content were working for radio stations and now most of them are unemployed, underemployed or serving from day-to-day at the will of CEOs who have driven their companies into bankruptcy.

CBS picked a local guy to do a local show and if it doesn’t eventually turn out to be some other market’s Ryan Seacrest, then it appears to be a shrewd move.

But let me throw out a few other ideas:

1. Every station should have 100 podcasts distributed daily – and by that I don’t mean podcasts of air content. They should be developing an under culture of personalities somewhat like what happened on FM as it was coming of age.

2. Someone please start a Boise News, Dallas Now, Philly First type mobile content that is local to the zip code. Radio companies need to create news and local content for mobile uses and applications.

3. Clear Channel brags about iHeartRadio as being radio on a phone but while it did the laziest and perhaps least it could do to cooperate with the inevitable future, it should own 10,000 separate applications using content driven by their local stations.

4. Then, monetize the 10,000 with rates higher than $5.

The power of radio is not the tower or transmitter.

It’s not the fact that it is free.

Or that it is available in just about every automobile.

The real power of radio going forward is in its ability to create mobile content separate and apart from simply broadcasting. Yes, it should continue broadcasting but not cheap, compromised national syndication and voice tracking pawned off as local radio.

Hire back the wasted talent that has been fired and put them to work on new media, podcasting, webcasting and social networking businesses that can provide a new stream of free cash flow.

Or, I will train these fine folks at my Media Solutions Lab in January and don’t be surprised if they kick your butt attracting new media advertisers going forward.

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Citadel With a Noose Around Its Neck

Citadel CEO Farid Suleman – as arrogant as ever – did an interview with Inside Radio that was published Monday and admitted making no mistakes.

It’s the economy – not him.

And while Farid said every option was on the table regarding their debt payment that Citadel is coming up empty on January 15th, he referred to the bankruptcy option as the “B” word.

Apparently this bean counter learned nothing from Mel Karmazin when he worked for him. You see, Mel – the great salesman – would have had analysts thinking bankruptcy was a great thing.

And it is -- for the equity holders -- not radio, its people, its advertisers or listeners.

When Farid Suleman has the noose around his neck he jumps.

Farid admitted what we’ve been saying here for months that he is negotiating with his lenders to do a prepackaged bankruptcy. Of course, the 27% stake Forstmann Little has in Citadel will be diminished and Suleman will be lucky to come away with a job.

Suleman told Inside Radio “some agreement will be struck”.

Ya think.

Here’s a disingenuous statement if I ever heard it:

“Nobody is happy about what the decline in radio revenue is doing to our capital structure, but they understand that we’re doing everything we possibly can to preserve our business and position it for future growth.”

Now that’s just not true.

Let’s say it.

Farid Suleman has done many things that have made the situation worse but you can’t expect him to take responsibility for wrecking the company by firing talented managers, sales execs, reps, programmers and air personalities.

It’s not the ABC acquisition that his big ego liked but Jeff Smulyan’s business sense rejected.

Can’t be. Farid said so. After all he said in his interview that the ABC acquisition was good strategy and bad timing.

What!

There was no recession when he bought ABC. Farid is revising history again. Guarantees against a recession do not come when deals are struck but smart deal makers usually have a plan B.

What is significant is that Citadel will either file for Chapter 11 on or before January 15th – voluntarily with a pre-arranged deal with lenders or involuntarily because it can’t make its loan payment. Either way, Citadel is weaker.

The lenders come out ahead. They’ll take write-offs. Continue to cut expenses and pray for the economy to come back so that they have the option of selling some or all of the properties.

In a way, the lenders never lose money.

They make fees. They wind up with the assets after the fools that they lend money to screw things up. You didn’t need a recession back in 1996 to know that consolidators were buying stations at multiples so high that they could never make the debt payments.

But no one noticed.

Look at Clear Channel.

The equity owners of Clear Channel, Lee and Bain, are getting ready to hit their credit card again to raise $2.5 billion through its outdoor unit so that the outdoor company can repay parent Clear Channel.

Got that?

But that’s not the big story. The big story is that instead of borrowing this money at 5 percent as it has done in the past, it will have to pay between 8-9 percent for the money in the current market according to The Wall Street Journal.

There’s talk that the money market is ripe for this and the trade press is falling for it but what is happening is what caused the problem in the first place – refinancing debt at higher interest rates.

On Wall Street, this is how it’s done.

For those of you who actually think this is a radio industry out there, you would be wrong. (Only in smaller markets where local operators are doing local radio and their debt is under control).

The top three consolidators are playing their own game of “Money” where they get to be the bank.

Clear Channel’s existing bonds have been selling at the whopping price of 68 cents (up from 28) and that’s a rally on Wall Street these days.

Clear Channel isn’t going to default.

Citadel isn’t going to take its chances with a bankruptcy judge – they are going to do it themselves.

Cumulus has a little more time to come up with a Harvard Business School case study to lead them out of the financial mess but they can hide but not run to turn the old phrase around backwards.

Regent, well – that’s another matter. They could go belly up in front of a judge.

So, what’s worse than bankruptcy?

More of the same.

More of Farid, John Hogan and Lew Dickey.

The equity owners run companies into the ground all the time in all kinds of economies.

If you don’t want to get your heart broken any more than it is right now, understand this – the leaders in radio are playing with Wall Street’s money and lenders get to make the rules.

Rule number one: don’t sweat the big stuff and rule number two?

It's all big stuff.

When these bankers can emerge time and time again after shipwrecking their assets, can you think of any better CEOs to be at the helm than Suleman, Hogan and Dickey?

(My Media Solutions Lab is seven weeks away … it’s very different from conventions and seminars … interactive, no boring speakers, a teaching/learning event … private just for you to get a leg up on the many challenges and opportunities in the year ahead …not available on a webcast, audio or text … what happens in Scottsdale stays in Scottsdale so to speak … great topics like reinventing radio, betting on the right new media initiatives, understanding social networking, learning to think like Apple CEO Steve Jobs … the time will fly by and you will leave with an action plan. I’d like to invite you to attend and take advantage of the early bird registration rate for a few more days. Learn more here.)

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Apple’s Next Surprise for Radio & Records

While the radio industry is doing everything it can to turn its stations into iPods, Apple – the undisputed leader in mobile entertainment – is preparing what eventually could be the final blow to the radio and records industry.

Apple is getting into cloud computing.

That is, with its purchase of the failed cloud service Lala last week, Apple is pulling a Warren Buffett and buying the brains and technology to one day make music libraries available anywhere, anytime on any device (presumably Apples).

This is a story worth following for those in the music business and radio industry because it will prove that they are headed in the wrong direction while Apple is cooperating with the inevitable once again.

And before I layout the potential Apple strategy in this area, it’s important to recognize that radio’s decision to cut personalities, implement networked Repeater Radio and utilize virtual voice tracking to save money is going to actually cost them profits – big time.

Not the money they are trying to save – but their franchises – because once cloud-based streaming takes off it will be a virtual customizable individual radio station available anywhere on demand.

And by "radio station" I mean a playlist because that's all radio is at too many stations these days.

If Pandora has proved anything, it is that music discovery is the franchise it took away from terrestrial radio.

Even iHeartburnRadio – the much publicized “radio app” of Clear Channel will really have no reason for being once cloud-based streaming comes of age. In many ways it has no reason for being now as most of the next generation’s consumers avoid radio through traditional devices and mobile phones.

Apple bought the four-year old Lala for an undisclosed sum but few predict that Apple will pick up where Lala left off.

Lala was a CD swapping service about four years ago. Then, it began to allow customers to make copies of their music collections in the “cloud”. Of course the music industry objected and that put an end to that until Lala relented and offered a model that let consumers either download or buy a tune for 89 cents or 79 cents or ten cents to be able to stream a song without limitations from the Internet.

Lala, it turns out, was just another good idea held back by the labels and not able to win the confidence of consumers unwilling to bet their music collections on a startup company.

But Apple is no startup company.

It surely is watching Spotify, the monthly paid service that offers streaming audio to consumers in Europe and soon here in the U.S.

As I have said in the past, it is doubtful that a paid model such as Spotify will work even for streaming audio and streaming audio is the new music radio. However, Apple, with a proven history of getting consumers to pay for 99 cent tunes, 99 cent apps for their mobile devices and even $99 a year for Mobile Me service could make cloud subscriptions an add-on through the iTunes store.

If that happens radio will run into a wall it could have avoided if it offered more than just music on the radio.

So while the record industry is trying to bully startup companies into paid models that have virtually no chance of public acceptance, Apple is about to one-up them again with this acquisition of technology and talent.

A generation has now grown up thinking the record store is the iTunes store – because to them it has been. And unlike brick and mortar record outlets before them, the iTunes people don’t stop with one idea.

And that brings us back to radio.

The major consolidators and therefore the many followers who ape their every move are probably scratching their heads about cloud-based streaming and trying to figure out ways to trick the Arbitron People Meter to drain the last available listener. While they are doing this, their trade organizations and research companies are pushing out "positive" news releases about how good old fashioned terrestrial radio is where everyone on earth turns for music.

This apparently makes them feel better, but their heads are up -- well, shall we say -- in the clouds – the wrong clouds.

The best defense against what Apple is likely to pull off – streaming personal libraries accessible without having to download the music and sync it with their increasingly popular mobile devices and their laptops – is personality radio.

The very kind of radio consolidators have killed off.

And personality radio has gone the way of the Christmas bonus – bye-bye.

Because the only thing that could save terrestrial radio from being a musical dinosaur is to get back in the entertainment, discovery and music business. In other words, enhancing what a consumer will be able to do with their music libraries alone. And even then, it's probably too late.

There was a time when radio’s advantage was that radio is available for free everywhere.

Now, a consumer’s music library will be available anywhere and Apple, not the record labels, will have the clout to set the price point.

Why listen to Cumulus, Citadel or Clear Channel run through its corporate playlist when you can hear your own and through a system that is trusted by almost everyone – Apple’s iTunes store.

The cloud is coming – probably not in the image of Spotify and certainly not Lala – but in the image of Steve Jobs as he does what his competitors still haven’t learned to do.

While radio and records have their heads in the clouds.

Jobs will be borrowing a phrase from The Rolling Stones singing, “Hey! You! Get off of my cloud”.

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The Sellout of the Radio Industry

When Terry Gross interviewed Joshua Kosman, author of "The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis" on NPR’s Fresh Air recently, she nailed the issue from the start.

Gross said, “Honestly, like, I really don't understand how that works, that, like, I buy your company, and then you have to pay the debt for me to buy you? Like, why...?

Kosman’s answer was:

“It's really because of this giant tax loophole, and the giant tax loophole is called interest tax deductibility, and this is how - why LBOs are generally profitable for the private equity firm. Any company can deduct the interest they pay on loans from their taxes.

So if you buy a company, and you buy it with all this debt financing, well, now suddenly, you're basically not paying taxes anymore, and because of that, that company then can, in theory, use that money to pay off its debt quickly. Reality is this is not the way it typically plays out, but in theory, that's the way it works”.

Kosman’s theory starts to get a little too close to home for radio people.

“Typically what happens is the company is more profitable in one sense, its earnings increase, usually because the private equity firm is starving the company a bit of capital because that's - a private equity firm, and I should have said this at the start, they're in the business of buying and selling companies within four or five years. So there's no long-term interest”.

The end game for the private equity firms that now have the likes of Citadel and Cumulus on the ropes is to sell what they have acquired, but these companies are in such short pants, that they have to trade back equity for the huge debt that they cannot repay.

The recession hurts, no doubt.

But the real problem is that the debt was not repayable from the start.

Kosman shows how the private equity firms move to cut costs and artificially improve the balance sheet.

“So typically - and a Davos study shows this. Private equity firms eliminate more workers than their direct competitors, and at the same time, they usually decrease investment in research and development and capital expenditures. That helps the companies they buy pay off their debt more quickly.

And you know, typically, you know, while the companies become more profitable short-term, until that pressure causes them to be less competitive, what it also - but you know, at the same time, the company still has interest to pay on the debt. It may have to take - may be able to take it off your taxes, but you still have to pay the interest. So typically, these companies actually are much less profitable than when they buy them”.

The PE deals are no more than a financial crap shoot and when you hear what the failure rate may be from the last ten years of funding buyouts, you’ll see why.

It gives context to why the radio industry is in harm’s way because of venture capital.

Most people who don’t understand how buyouts work, still think they are basically a good thing. But America – if not just the radio industry – is increasingly being operated by private equity firms that overpay for companies and then follow a consistent formula that more often than not wrecks the company and sometimes the industry itself.

Private investors use the same cheap credit that caused the credit crisis in the first place. Private equity firms are the largest employers in the country when you aggregate them. A lot of the debt on these companies is beginning to come to pass now and an estimated 50% of those companies could end up filing for bankruptcy – 1.9 million people could be unemployed.

More home loan defaults – a potential freeze in lending – more economic woes.

That’s what’s happening right now in radio.

As debt comes due the companies end up in bankruptcy and a lot of people become unemployed. How could this be good for an economy? And as we said, with private equity firms as a group the largest employer of people in this country you can see why this recession is really a repression of capitalism.

This country and the radio industry was not served well by the private equity buyouts that have altered the business landscape and threaten it in the future.

This program with Joshua Kosman is so good – so on target that if you can find the time, listen here.

The buyout of America that Kosman speaks of was really a sellout to venture capitalists by greedy people who often sold excellent businesses for a high return that ultimately led to these businesses being tanked by the private equity firms.

That’s why Citadel has a date with a bankruptcy judge January 15th if it can’t come up with its loan repayments thus making loan sharks look legitimate.

Why Cumulus will be faced with the same fate in the year ahead if it can’t repay its loan payments.

Both will have to cough up much of their ownership stake as a punishment. Citadel will probably lose operating control.

Lee and Bain are private equity companies and they already have control of Clear Channel. Their mission which they have gladly accepted is to shrink the expenses and somewhere in the future increase the profits – until, that is – until they sell everything again. And watch the write-downs they take.

We often think of what has happened to the radio industry is the result of poor management. But it really is good management if by good management you mean playing out the game plan of private equity investors.

That plan – as you’ll see vividly in the next few months – is to take a growth industry and squeeze it for profits until it dies on the vine.

Then sell the assets and make another payday.

The hell with the public.

Screw the employees.

Then just like the predators they are, move on to greener pastures.

The Obama Administration is looking for ways to reign in the system that ruined a lot of businesses including the radio industry. I don’t know whether more government intervention is good or not, but in retrospect some form of oversight might have saved a perfectly healthy industry from investors who eat companies alive.

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Reinventing Radio

One of the reasons my January Media Solutions Lab seminar is going to delve into reinventing radio is because simply turning back the hands of time (as Tyrone Davis would have us do) will no longer work.

That’s right.

Even reinstalling the morning show, cutting commercial loads, eliminating voice tracking, rehiring everybody and raising ad rates can only have a limited effect on any turnaround of radio going forward.

Would these things help?

Yes, of course.

Are they "The Answer"?

No, Allen Iverson is the “The Answer”. In radio we no longer have answers -- just clues.

One place to look for clues is not how radio has changed, but rather, how our listeners' lives have changed and in fact how listeners are very different compared to just a few years ago.

Radio remains the same – a strategic disadvantage as you're coming to see.

Audiences have grown by embracing new devices, more accessibility to content, new ways to get what they want and to go where they want to go.

I was talking with Dave Jagger and Geri Jarvis (of Dave & Geri podcast fame) yesterday about how far the terrestrial radio industry has drifted even in the few years that they have been off the air in Grand Rapids.

Dave & Geri are icons in local radio and had been delivering top ratings for the best part of 18 years until the consolidator they worked for decided to save their salaries.

Thought you’d like the essence of what we discussed as it impacts on whether the radio industry can be resuscitated from incompetent owners, Wall Street lenders, an audience that has been frittered away and advertisers who have now become accustomed to really cheap ad rates.

Since Dave & Geri were laid off – there, I’ve used those dastardly words – the following things have changed:

1. The rise of the iPhone. Previously Blackberry devices were in use mostly as a business accessory but the proliferation of iPhones made it possible for more morning commuters to get the weather in the palm of their hand.

2. Text messaging took off – even in cars – invading the sacred listening space of morning show audiences. Like it or not, text messaging and, in fact, cell phone use has skyrocketed while driving.

3. Music streaming sites and music discovery itself have expanded to off-the-dial places such as smart phones and laptops as well as desktops. The desire to hear new music has been satisfied by media not exclusively a traditional radio station.

4. Listener attention spans have become shorter – and not just for Gen Y that seems to get all the blame of not being able to concentrate – but for older audiences as well. That’s why one third of the nation’s TV households have DVRs such as TiVo and use them to watch TV on demand.

5. News now travels a different circuit to consumers. It used to be not long ago that the radio newscast aired the serious stuff on the way to work and the morning show covered Tiger Woods’ affair. But now TMZ is the official Tiger Woods “station” and believe it or not The National Enquirer has become a reliable source of gossip news (John Edwards affair, Tiger Woods, et al). Former morning show content is no longer exclusive to radio – and that’s assuming some asinine decision hasn’t turned the local morning show into syndication. I got 12 emails yesterday with the Tiger Woods Christmas card send up complete with a golf ball stuffed in his ear and stitches on his face. Viral broadcasting has arrived on our computers and mobile devices.

Let’s start with this.

You know right now there is only one Larry Wilson willing to buy radio stations for very low multiples. But if equity owners of the major radio groups have their way, there will be an entire sea of Larry Wilson's ready to put their life’s savings at risk to fulfill their dream of owning radio stations.

Yesterday I mentioned how Clear Channel and other major consolidators are dropping their rates to a handful of dollars in some markets. It is fair to say – and advertisers will concur on this – that they expect radio to keep dropping its prices.

Even as I type this Clear Channel is getting ready to succumb to so called yield managers with strategically placed dollar holler type sales blitzes that advertisers are now able to wait out.

That is, the stations are driving down whatever they could have gotten for ad rates through misguided sales strategies such as this.

Meanwhile, the happy talk press played up a recent Nielsen study – another shameless pep talk for “everything is great as is in radio”.

Nielsen is bragging that half of adult audio is listening to AM/FM.

The questionable study that is portrayed as “good news” for radio is really deceiving. The average 18+ year old listens to 2 hours and 45 minutes of audio each day with terrestrial radio making up half of that listening.

What’s in “second place”: CD/Tape Players (16%), satellite radio (8%), iPod/MP3 Players (5%), streaming audio on the computer (4%) and MP3s on the computer (4%). “Other” is 13%.

Five cities, no reference to actual sample size, only the number of minutes observed and some strange study limitations (see the full study here)

If things are so good, so wonderful then radio doesn’t have the problems it has. Owners won’t be cutting the rates, firing staff or trading syndication for local programming.

Hey, they can't have it both ways.

One media buyer begs to differ with Nielsen’s conclusions:

“I'm 47. My iPhone is my primary delivery system for audio - podcasts, mostly, and WunderRadio app to listen to Imus and occasionally CBS-FM. I'm in Chicago - WGN gets me if I'm in the car at all 9 a.m - 4 p.m. My wife is 37, commutes on the train. NPR gets her for about 20 minutes a day (over the air). Our daughter is 16 - mostly iPod, occasionally CC's CHR here - KISS, when her alarm clock goes off. Even if the numbers are close, it begs a bigger issue: I won't recommend to anyone that they waste a penny on a spot buried in a 6 minute stopset.

A few years back, a research group questioned Gallup's numbers on how many people attend church on Sundays. Gallup was reporting big numbers. The researchers believed that people who are polled on that topic lie and report what they think they should be doing vs. what they really do.

So the researchers (from Notre Dame and the Hartford Institute for Religion) designed a study in which they identified representative counties across regions of the U.S. They put teams in each of those counties for just over a month each, stationed outside of churches on Sunday mornings, and counted.

Results? About a third of what people were self-reporting. I want to see numbers like that for radio. Maybe deploy teams of midgets into peoples' glove compartments?”

So when we convene in January, we’ll work together as a group on what can be done to have an immediate impact on radio listening and advertising. Then, look to how to grow new streams of revenue through new media. What to do with social networking and put it all together.

It’s like a hybrid – 85% radio, 15% new media as sources of revenue.

But by January 2011, it will have to ramp up to 20% new media and 80% radio.

Then as a slow economic recovery digs in, new media will take off as advertisers were posting plus numbers in new media buying even during this recession. If they are into it now, they are not likely to retreat during prosperity.

It hurts to see radio’s leading companies do destructive things to their people, their audiences and their advertisers, but ignoring it won’t make it stop.

But there is a way to come out ahead – for those who dare to think differently

As far as the Nielsen PR eye candy research goes, I’d like to bend a Harry Nilsson album title to put it like this …

Nielsen Schmielsen.


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Clear Channel’s Unbelievable New Sales Strategy

The first quarter sales package has arrived at Clear Channel’s seven station Tucson cluster.

The radio industry’s “leader” is at it again.

It appears the Evil Empire has the same low opinion of radio’s value as it does of its employees.

The Tucson cluster rates beginning in January start at $4 and go all the way up to – well, maybe not all the way up -- to $15 a spot.

That’s before negotiating.

Threatening.

Begging.

And before you dismiss these low rates because Tucson is one of Clear Channel's smaller markets, wait.

Clear Channel has dominant ratings in Tucson. Four of their FMs are in the top five.

And the Clear Channel Tucson cluster used to price spots in the $50-100 range. Talk about off price. Less is More has finally become less.

Clear Channel doesn’t have to drop its trousers to sell ads – the stations are not performing poorly. Their corporate management is.

So much for the "leader".

If Clear Channel doesn’t push back on this prostitution of pricing everyone in the market will be doomed. That’s what happens when empty suits run the largest radio group and investment banks apply the same strategies to managing radio yield.

And speaking of yield, wasn't Clear Channel the company that made a big woo ha out of hiring 50 new yield managers to make damn sure they weren't selling ads for less than they can get?

Or do they really believe $4 - $15 is all they can get for a spot in Tucson.

In the case of Tucson – under this brilliant new strategy – the entire Clear Channel cluster could sell out and come nowhere near what they were billing five years ago. Of course, their owners are not worried about five years ago nor are they concerned about anyone else’s real estate. They’ve cut costs and now they want to sell cheap ads.

Certainly you can see where all this is headed.

If the biggest operator is going to cut rates to the bone, you can see that they will never generate enough money to invest in their air product, Internet strategy or mobile future. I never liked the concept of less is more – who wants less of anything (except pain). And Clear Channel’s new strategy is going to inflict pain on its stations, the markets they do business in and the industry in general.

A Clear Channel salesperson wrote to say:

“I would love to say that you are wrong about Clear Channel, but the 2010 piece...already in motion. After reading your article, I can see the beginning of the plan being put into place. I am one of the top billers in the cluster and am making less than ever. Someone is definitely making money off of me, and it certainly isn't me! I can't even cover my bills each month”.

Low rates.

Fewer sales reps.

A wider variety of rescue plans.

And it’s not as if buyers are that dumb. They know they have you on the ropes when four of five top stations can’t charge more than $15 a spot.

A longtime radio advertiser reminds us that:

“As a business man I have an observation. How do you have a business that employees 13 managers related to sales and only 23 sales people for 7 stations and 2 sports teams. No business in the world has 1 manager for every 2 sales people. Then when they want to reduce costs they fire from the bottom, eliminating the core support people that make the business run. This would be like the Flyers starting the season 0-10 and the owners disposing of 10 players and adding 5 coaches. Just amazing”.

No! He didn’t invoke the name of The Philadelphia Flyers, did he? Now I’m really worried.

But seriously, it all makes no sense.

Good sellers know you don’t decimate the ranks of your account execs, hand off existing business to one person to “manage” and then cut rates drastically. It’s dangerous when any one station does this, but when Clear Channel leads the way you can see why I am worried about the future of this industry we all love.

Because when E.F. Hogan talks, then Cumulus listens.

That’s why the price per spot at Cumulus has turned to spit, too. Lew Tricky Dickey, a Harvard grad with zero experience in sales (or anything else useful to a radio station) is hell bent on reinventing radio as a Harvard Case Study.

A former Cumulus sales person suggests that corporate forcing sales people to sell to their predetermined list of prospects is not going to help:

“I and others (all veteran sellers) went through exactly what you describe. Accounts taken away, commission cuts, even a reduced draw. And then to add insult to injury, CSOS. Here we are … being forced to cold call Cumulus provided 'leads' that were the equivalent of calling random businesses from the phone book. I was trained (at another company) to spend my new business energy targeting QUALIFIED prospects. Needless to say the CSOS system is a total failure but, management credits every piece of new business to CSOS to appease corporate”.

Or as another long suffering Cumulus sales exec says, right sizing and wrong hiring makes no sense, either:

“Recently we lost our sales manager who left for greener pastures in October. He had over 20 years of experience and the respect of everyone around him. Now, we have a number of longtime, dedicated employees who could have easily moved into the management possition (sic). One employee had even been a market manager in other markets and she has 23 years of experience in the business. We have a perfectly capable and ready sales manager in house, handling the agency work as is (which goes back to a prior article).

But who did we hire? Did we bring in another rep from another radio group? Did we find anyone who has managed a radio station or company? Nope. Cumulus hired a 29 year old from Xerox with no sales management skills. Again, No prior work in radio or upper management! While we have tried to retain an open mind, he has not been greeted warmly, but that mostly is his abrasive personality. I share this with you and ask, why would a company not hire internally, especially when you have someone who is ready, willing and capable of filling the spot? It's so bad, we lost a rep of 10 years to a competing radio group.”

A mobile industry exec says he thinks the market for broadcast spots will decline a whopping 50% in the next five or six years. And that radio revenues will be down from the $20 billion all time high in 2006 to $10 billion as equity owners flush their investments down the drain along with a lot of debt writedown.

In other news ...

Citadel is preparing for B-Day January 15th.

Some 18 more people – mostly air talent at their ABC format division in Dallas were shown the street just last week (as in Thanksgiving week). No station relations people. A shell remains. It’s too late for Citadel to be trying cockamamie sales strategies and fire sale pricing.

At Citadel, their employees derisively refer to the January 15th date when the company must come up with $150 million to repay a loan as “Fat Chance”.

But Citadel is ready to go willingly, the Reverend is reading the Bible as they walk down the cell block before the stroke of midnight.

Now we see that Clear Channel is pricing its spots to take that walk next.

Then Cumulus will follow Clear Channel off the Brooklyn Bridge -- doesn't it always?

Because there could be something worse than bankruptcy for these industry leaders – like having to continue to embarrass themselves into further failure.

To borrow a well-known phrase from Visa that applies to consolidated radio these days, “bankruptcy -- It's everywhere you want to be.”

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