The Clownsizing of Radio & Records

I read that Frank Blake, CEO of Home Depot, has discovered something earth-shattering.

In an attempt to help the troubled company respond better to the marketplace he discovered a lot of bad decisions were being made -- by headquarters! You've got to respect him for that realization.

Lawnmowers lined up at Home Depot locations in Arizona when many of the stores considered themselves lucky to sell one each year. Lawnmowers in the desert? Not that big an item. Who would have known? Not necessarily corporate.

So, he could have made some software adjustments and moved toward the kind of smart marketing Wal-Mart is known for but he did them one better. Now, local managers get a say in what to stock based on what they know will sell in their Home Depot stores.

As Sarah Palin would say "Betcha" you know where I'm going with this.

The investment bank that owns Chrysler is trying to merge with General Motors or as Newsweek commented in an article recently -- two wrongs don't make a right. Another reminder that we're living in a world where at best U.S. business knows how to merge but not operate.

What would be the appeal of joining two losing automakers into one? Billions of dollars in cost savings, that's what.

Sound familiar?

Cost cutting. Not product innovation -- that could never spur a merger of this magnitude.

Again, cutting costs seems to be the only thing we do in American business anymore. And where is it getting us?

Plus, we've forgotten who pays the bills.

Starbucks lost its way when it started thinking like a big corporation and not (also) like a cult for java. Starbucks didn't lose its profit edge because they opened too many stores too close to each other as they'd have you think. Starbucks forgot about the product and service that made consumers willing to pay high prices for their coffee. (Dunkin' Donuts and McDonalds helped remind the customer when they got into more reasonably priced coffee -- all it did was shine a light on what was wrong with Starbucks).

Closer to home...

The record industry used to be show business. But it became more business than show when it, too, was driven by some of the less savory rules of the free market. Do you think it will take another twenty years for historians to look back on the record business and easily identify what led to its decline?

I'll bet they won't conclude that the Internet did the labels in.

Or the demise of music radio.

I'm thinking the day the record labels started pulling in the financial reins on finding, producing and marketing new artists, bands and musical trends, they were dead in the water. The labels can't see this yet. They, like other media, think it was a conspiracy between bratty young pirates and that newfangled Internet.

Cost cutting. Not product innovation.

Radio started imitating itself long before consolidation came along. Radio's route to irrelevancy began when owners started finding the wrong ways to save money.

Please forgive me if you've heard me say this before but my old friend Jerry Lee, the multi gazillionaire who owns just one top-rated local radio station (B-101 in Philadelphia) often told me, "I'm always looking for ways to spend more money". His actions back up his words. Of course, he is a privately held company. Lee slammed the door on the consolidators when they whipped their checkbooks out during consolidation in an effort to buy B-101. Whose sorry now besides Connie Francis?

Imagine if one of the big consolidators paid Lee enough to part with B-101. I can't imagine that it would be the station it is today using consol-a-nomics.

An "anonymous" reader of mine wrote the other day that I was nothing more than a mortician -- burying the radio industry. He is, of course, entitled to his opinion which is why it is posted. But morticians don't kill their clients. They bury them after they die.

Radio, records -- and now traditional network and local television -- is killing itself. No one else is doing it except the man (or woman) in the mirror at each company. These are smart people who have made a mockery of prudent downsizing.

I call it the "clownsizing" of American media.

But let's leave the blame game to politicians. Looking deeper into the reason why so many smart people are making so many bad decisions, we can glean the following:

1. The entire U.S. corporate world is built on the benefits of the free market with very little oversight and few DOJ barriers to consolidation. Radio and the record businesses are not atypical. They are, in fact, typical -- just like everything else we do in this country today. Consolidation. Cut operational costs as we monopolize and you see the results -- not just in media -- everywhere.

2. We don't make things any more. Our economy doesn't provide lots of new companies and when we do the Googles of the world become Clear Channel in waiting -- a virtual monopoly. But we could. To inspire startups we have to fund startups.

3. Quality -- and customer satisfaction is all talk. Ask Starbucks. Ask the Friendly Skies. Look no further than our own brethren -- "Less Is More", "fewer commercials", "more variety" -- all lies detected very quickly by the listener.

4. We are separated from the customer and/or consumer. Home Depot has to come up with a brilliant idea to do what Sears Roebuck did in ancient times -- let their managers manage and be rewarded, promoted or fired based on their performances. What a novel idea. Radio has lost touch with the street. We think we are in touch with the next generation but the next generation that I have come to know wants nothing to do with radio and its promises.

5. Gutless leadership is a symptom of what's wrong with American business and the media business. CEOs answer to a higher power -- the board of directors. And the boards of directors in this country are in cahoots with their CEOs. Check out Citadel now trading at 37 cents -- that's right -- after yesterday's 900 plus resurgence in the Dow. And speaking of that -- does anyone think that 936 point advance marks the turnaround of all the other problems?

It's rather simple.

We buy and sell things and don't run them well.

Even when we get to buy the competition, it still doesn't seem to work.

We get an "F" for innovation -- innovative projects don't make the budget because you can't show a return on investment to shareholders in one or two quarters (but it's okay to show them 35 cents a share and blame the economy).

We piss off consumers and drive them away in spite of all our power and might.

And the next generation is going to kick big businesses' ass. They are gaining control of the Internet -- and commerce. They are hurting you at the box office, record stores and in the ratings books.

Corporate America -- meet the next generation.

You could learn a few things from them now -- or wait until later after you've run the rest of what you own into the ground.

It's a new day, but not in traditional media.

For everyone else -- opportunity abounds.

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Radio's Black Friday

Friday did not just end a bad week for the stock market, it was also the beginning of the end for what's left of the radio industry.

The final round of personnel cuts is coming to a radio group near you between now and the end of the year.

CBS decided to go first.

LARadio broke the news Friday that a massacre occurred at CBS in Los Angeles when KNX and KFWB fired 2o staffers for an estimated one million annual cost savings. We've seen a lot of cost cutting in radio almost since consolidation started back in 1996 -- remember the mantra -- economies of scale.

Now it's panic firing.

Revenues are down due to the failing economy and an antiquated industry that hasn't kept up its content, competition or audience.

Imagine the sense of firing 20 content providers from two news and talk properties when radio is becoming more unlistenable by the day.

How does this make these stations better? Next time there is an earthquake or a wildfire in SoCal, how does this cutback make the product better?

How do they become more local -- the only mission that radio can achieve for any chance of survival?

How does watering down the content excellence help CBS expand its brand to the Internet and mobile space.

It doesn't and they don't care. The end has come because there won't be many left to fire in 2009. I'm told the LA firings are just the beginning in that cluster. More station personnel reportedly have been designated although they have not yet been notified.

If you're working at all-news WINS and WCBS-AM, New York and KYW in Philadelphia right now -- don't make any long-term plans. And in radio long-term plans used to be gauged from ratings book to book. Now they are measured by mistake to mistake by radio CEOs.

This is radio's long goodbye. The once healthy 170 pound athlete -- now a 90 pound weakling.

I don't believe for one minute that most of radio's CEOs want it to be this way. They don't want to fire anyone. I believe this. But the disease is too advanced. Things are too out of control. They are fighting for their own lives.

More than one reader has bravely and candidly let me know in the past few months that they don't want to fire qualified people. What they fear is that if they don't execute corporate orders, they will be next.

I often write about the generational media aspects of radio's decline. How an industry that used to connect with all generations by instinct lost its way. The decline was gradual starting in the late Eighties, but it was exacerbated by the deregulated world of consolidation and then the arrogance of thinking the Internet wouldn't hurt them.

Radio had a chance to become part of the digital age by adapting to the new world media order and by creating new content for delivery to devices other than analog receivers.

But not with economies of scale. That's defense -- not offensive.

Now, with radio groups posting stock prices under $1 and an economy so bad that breaking even seems so out of reach, radio groups are going to reap what they have sown.

I repeat -- what kind of idiotic decision is it that cuts 20 reporters from two news/talk operations in America's second largest city? I get the savings part. I really do. But moves like this do not improve the station, the product nor will it improve the ratings.

And ironically, it will not improve the CBS bottom line either. You'll see.

None of this makes sense.

Now it's on us.

And if you think I'm picking on CBS or Roy Laughlin, the one who triggered this round of cuts, you'd be wrong. I like Roy a lot and think he is an excellent manager. But they're all doing it. And as I have been saying it's going to get uglier in the run up to the Christmas holidays.

More stations -- more firings.

More local radio becoming cheap radio -- vanilla -- less local.

I can name 100 people (maybe more) who could fix KNX and KFWB but not without spending money on content. Some already work for CBS.

I can personally name ten ways CBS should expand its "news" brand from terrestrial to Internet and mobile media. Ask a young person "what means all-news in LA" and don't expect them to say KFWB. CBS should be investing money in the brand not necessarily the terrestrial station.

But then again, CBS is a seller in a lot of smaller markets along with a lot of other group owners. Unfortunately for them there are few buyers -- especially at good multiples.

Perhaps you can see why I have so little faith in the ability of radio CEOs to compete in a digital world. You can blame the Internet all you want. Damn those kids who walk around with iPods and steal music. Curse cellphones.

Radio is on more than a system wide Atkins Diet. It's having bypass surgery to remove as many expenses as corporate needs to explain another quarter of losses.

The industry that coined the phrase "less is more" is really hell bent to deliver on their promise.

Less resources, fewer people -- more failure.

It's over. Get the lights.

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Mobile Terrestrial Radio -- The Prognosis

An Ann Arbor based weather service called Weather Underground launched a new Apple app within the past few days that promises to be very popular with some potential audience members.

For $5.99, you get the app for your Apple iPhone. It has a GPS function that can find local stations with ease from wherever you are with your phone. It also offers thousands of stations seamlessly. Great audio. Intuitive interface. Sounds like radio's greatest wish -- to be on an Apple mobile device.

I paid my money. Downloaded the app. I didn't need AOL Radio or FlyCast or anyone else. Everything worked just fine. The audio was great. There I was listening to as many stations as I could think of from my sunny Arizona locale.

For radio this must be nirvana -- small "n".

Not so fast.

I'm not 25 years old even if I try to Photoshop my picture tomorrow. In fact, most of my friends, radio people, trade press -- are not 25.

I have often cautioned that one of the problems the radio industry faces is that it does not understand the next generation. They make costly, foolish decisions based on this ignorance. Some arrogantly think that Gen Y -- the next generation -- isn't that important in spite of its numbers and coming of age.

All they want is to put radio on a mobile device -- even an Apple device.

Problem is the next generation will be nonplussed.

1. Gen Y doesn't like to pay for things. They steal music, share it and believe they are entitled to free video and audio. So far, they're right. They control the delivery system -- not the broadcast stations, not the record labels. Charging $5.99 for an app is asking for payment, not a big one, but nonetheless a payment. But let's say they spring for the money, then what?

2. The next generation doesn't like terrestrial radio. They'll listen when there's nothing else. You don't have to be a parent to know that Gen Y will almost always choose another alternative to radio if available.

3. Thousands of stations that many young people presumably do not want is not a solution to radio's lack of growth potential. Here's the generational media secret: they already have thousands of stations to choose from. It's called Internet streams. And they much prefer anything that is not produced by traditional terrestrial radio.

4. This WunderRadio Apple app is limited by -- yes, Apple CEO Steve Jobs' anal-retentive instincts. As iPhone users know, you can't listen to streaming radio on an iPhone and do anything else in any other application simultaneously. Therefore -- now think of this -- an attention deficit challenged young generation would have to choose WunderRadio and stay with it -- and not, I repeat not -- multitask. Lots of luck!

5. This app may be cool and it may be on a cool device but it is for us -- a formerly "hip", but not a presently cool, generation. A baby boomer or Gen Xer is used to listening to a radio -- so WunderRadio may work for them and that's fine. For the next generation, are you kidding? There's zero chance they are going to choose terrestrial radio on an iPhone and do nothing else but listen. Nothing against WunderRadio.

To borrow a phrase from drug advertising, "see if listening to only radio is right for you".

In fact, even if they could multitask, they're still not going to listen to terrestrial radio. Have we learned nothing? This generation grew up without a love of radio. They love the Internet.

I'm saying it's a great addition for an older, available radio listeners. And not an option for young ones. Time will tell. I may be wrong, but I think a year from now we'll see that easily accessible terrestrial radio on mobile phones and devices will not make a dent in radio's greater problems.

Their content sucks -- at least as far as young listeners are concerned.

Therefore, radio applications such as WunderRadio are an added advantage for people who like radio and want to listen to it everywhere -- usually older demographics.

Pandora's apple app is free and Gen Y loves Pandora.

New Internet streams such as AccuRadio, a wide-ranging music service and individual branded Internet streams are also available on the fly without a lot of terrestrial radio's baggage.

WunderRadio is WunderWhy radio when you try to figure how in the world the radio industry it is going to have a future when they continue to leave young people to everyone else.

Radio's problem is content first.

Lack of new, younger audiences second.

Monetization third (you have to attract them to market them).

Delivery last. And when it is delivered don't be surprised that a specific program is more attractive than a continuous feed.

If you build it they will come. Look no further than the Internet for your evidence.

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