Radio's Untold Bankruptcy

Did you see over the weekend that Jay Leno is losing his audience not to other television networks but to – DVR machines?

TiVos are eating television alive.

Leno is down 1.8 rating points in his 10 pm (eastern) daily show. You may remember CBS CEO Les Moonves said at the time Leno’s strip was announced that there will be more viewers available for people who put on great dramas -- I assumed he was talking about CBS.

That’s great one-upsmanship but not very accurate.

What is really happening should serve as a lesson to beleaguered radio stations, failing record labels and other traditional media companies who seem clueless about why their world is changing.

The TiVo is winning.

Yet you may remember that the broadcast television industry decided to fight time-delayed rebroadcasting (DVRs) or stymie it as much as possible when consumers began to embrace it.

Too bad.

One-third of America’s TV households are equipped with DVRs and 10 pm is turning out to be a great time for watching some of the shows they’ve been recording. It’s that way in my house – maybe yours, too?

NBC and ABC are also down when Leno is on (with the exception of when “The Mentalist” that was moved into that slot is aired).

The audience will not be denied – any good programmer knows that. I always say cooperate with the inevitable – after all, the inevitable is, well – inevitable. Why buck it?

TV networks are as clueless as radio execs. They would rather have a live viewer than a TiVo watcher, but would rather have a TiVo viewer than nothing at all.

Kind of silly but perfectly understandable when you arrive at the conclusion that traditional media wants time to stand still.

Broadcasting is so – well, 1920’s.

If aliens arrived on this planet (no, not Wall Street bankers), they wouldn't turn around and say, "let's cut down trees and print news on paper". They'd look around and say, "I like that Droid over there, let's use it". I can't imagine someone from outer space saying, "we need more towers and transmitters". But I can hear them saying, "more iPhones would be out of this world".

Before the technology and sociology "big bang", airing a radio signal and decades later the TV transmission was the only way to get the product to the marketplace.

Today, broadcasting is increasingly becoming the least efficient manner of delivering content and the very one broadcasters are stubbornly holding onto. It would be like saying newspaper publishers insisted that their news be printed on paper … oops, sorry about that.

And, by the way, it doesn’t matter if NBC cancels Leno as rumored. The networks hastened the move to indirect broadcasting by pushing the 10 pm Leno experiment in the first place. (Isn’t it interesting that satellite operator DirecTV is really IndirecTV because so many people record content and then replay it at their convenience?)

As a professor I always warned that today's audience wants what they want when they want it. Media companies should know this because they have been pandering to this desire in promos, copy, shows, scheduling and yet somehow they don’t really believe in it.

Look to the record industry.

The labels are going down with the CD and the CD’s successor – streaming audio for a monthly fee. They can see it no other way because at the labels, they want what they want when they want it, too.

In radio, it is even worse.

Radio hasn’t had time to worry about listeners. Too busy cutting costs and avoiding bankruptcy.

Look at the mess they’ve made of local radio. The smaller companies and few medium-sized operators who defy the death of local radio are still outperforming their smartypants consolidated competitors.

Let’s see now … I wonder why?

Radio listeners are having their way and Lew Tricky Dickey, Fagreed Suleman and John Slogan Hogan don’t care. No one at Cumulus, Citadel or Clear Channel is really paying attention to changing audience habits.

Research budgets are slim or none. No major group budgets for Internet -- doesn't that amaze you? The biggest thing since the industrial revolution and consolidators won't even put in a 3% line item for webcasting. No mobile strategy in sight at any major radio group. Personalities are fired. Program directors spread so thin that they are becoming "program facilitators" of outsourced national content.

Talk about bankruptcy.

I don’t know about you, but if you took away my radio I’d live, but take away my cellphone and you die – you get what I’m saying.

We can’t live without a cellphone and increasingly a smart phone like a Blackberry or iPhone. Thus, we deduce that the audience wants their phone to be the center of their communications universe.

I want to listen to my favorite non-terrestrial radio morning show, Dave & Geri, on my phone in the form of a podcast and I want to make morning drive when I want it to be.

Hey, I’m sounding like the college students I taught.

I want what I want when I want it!

Oh, and I’m tried of commercials period and specifically bad ones that are bunched together for five or eight minutes. Tired of hype, bland playlists, talk stations that are only about politics.

Leno is a great teaching lesson because it shows what happens when you put even a well-liked performer on at a time when the audience doesn’t want him.

Technology.

Sociology.

And pathology.

My readers recognize the first two words because I believe that to succeed in content delivery in the years ahead we will have to, as Steve Jobs does, master where technology and sociology come together.

I also added pathology defined as any deviation from a healthy, normal or efficient condition.

And failing to understand and heed the needs and desire of the audience – not investors – is a deadly deviation.

Invest in the consumer’s interests and you get Apple – a hugely popular company and business that has in essence skipped a deep American recession.

Ignore what the audience is telling you and you get NBC, CBS, ABC, Clear Channel, Cumulus, Citadel, most radio groups and the four major record labels.

Bankruptcy -- the kind facing Citadel January 15th and Clear Channel as well as Cumulus later in the year -- comes from bankrupt programming decisions such as not going where the audience is available and not giving them what they want.

Radio people know this.

Bankers don't care because Saks Fifth Avenue, Chrysler and radio groups are all the same to them -- just commodities upon which they make endless fees and profit even when they fail.

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The Next 6 Weeks of Radio Hell

Six weeks and counting until January 15th – the deadline for the first failed radio consolidator to file for bankruptcy.

That’s when Citadel will either throw itself on the mercy of the courts or its lenders will bitch slap CEO Fagreed Suleman into a prepackaged reorganization that will cede operating ownership to the equity holders.

But to understand what will happen, keep in mind the problems at Clear Channel and Cumulus as well and you can see why the radio industry is in for a rough ride.

Its three largest consolidators are on the ropes.

Clear Channel is playing footsie with its lenders in a game of chicken that could backfire. After all, Clear Channel is largely owned by two investment banks and they’re playing too cute for their own good with their brethren on Wall Street.

Meanwhile, take a look at Clear Channel Outdoor stock and see how at least one major investor is buying it up with an eye toward twisting parent Clear Channel harder until it says “Uncle”.

Then, add to that the inept operation of Cumulus over the past few years as the mean get meaner. At Cumulus when the going gets tough, the tough make it tougher on their employees. CEO Lew “Tricky” Dickey is morphing into his father – Lew, Sr who some have nicknamed “The Cougar”. Does the branch fall far from this family tree?

Meanwhile, you should know that while you were preparing for Thanksgiving, radio’s consolidators have been actively at work reducing their work staffs.

Clear Channel’s 30 Day “Action Plan”

That’s another slick description of termination policy.

Here it is from the lips of someone close to a Clear Channel employee:

“It was strange that the employees that are under the 30 day "Action Plan" were all off the CC network over the weekend.....I was at a weekend event as a sponsor with another CC employee that was not under the plan and she had access all weekend. They could be getting geared-up for after the holiday”.

Clear Channel has a sales initiative it has been flying under the radar since late 2007 called “Radio Confusion” – oh, I’m sorry – it’s called “Radio Fusion”. Clear Channel is reportedly still working out the bugs in the program but it is apparently the future as they see it for radio sales – if you want to call it that.

Look at their description of “Radio Fusion”:

“This web-based CRM and Sales Force Automation tool maximizes radio account executives efficiency by allowing them to strategically manage contacts, create and submit electronic proposals, as well as predict probability of close for more accurate forecasting. ‘The real advantage to Radio Fusion is that all mission-critical data such as avails, rates, and even Arbitron station ratings are conveniently located in one place, the proposal workspace.’ said Ro Catalfo, Director of Customer Relations at LAN International”.

Oh, boy. Repeater Sales using just about everything you can name but relationship selling. Go ask Cox and the other good broadcasting companies. Tools are fine but in lieu of relationship selling it’s folly. Cheap folly, but folly nonetheless.

But there’s more – isn’t there always …

“What’s really cool and unique about VIERO Radio Fusion is that it includes critical information from three or four other systems. Sellers don’t have to go to multiple locations to get rates, ratings and to enter orders…it’s all there in one convenient place,” said Denise Atkins, DOS for Clear Channel Charlotte. “VIERO Radio Fusion is also a great tool for pending business. At any given time, I know exactly where orders are in the workflow, which tells me how much actual revenue is in the pipeline and facilitates much more accurate forecasting.”

Huh?

You don’t need to know what’s in the pipeline, you need to look at your sales at the end of each day. That’s the pipeline. But then again, Clear Channel has an outbreak of Dickey’s Disease – the obsessive compulsive need to reinvent something that would work just find without their input.

Dickey’s Disease

It’s fatal if your last name is not Dickey.

This just in from a fired and angry Cumulus pro. I’m redacting the specific call letters to protect the fired in case they decide to file suit against their former employer.

“I worked for (Cumulus) and there were 8 sellers at the beginning of 2009, all experienced. Three of us were targeted in the beginning of the year and all of us are gone. Two quit, I was fired. Recently they shifted all agency business to 3 AEs. I am hearing that another quit last week and yet another had taken matters to the … Labor board.

Also on our floor was the (sister station) staff. They had 9 sellers at the start of 2009, mostly radio veterans, all mature professionals. They also had 3 AEs targeted at the beginning of the year, 2 quit, 1 was fired. Since then 1 more quit, and I'm hearing another left last week after a dispute about accounts being taken away from him.”

In essence this is information flowing in to confirm what we reported to you recently that the full court Cumulus press is underway to reduce its staff one way or the other.

“Add to that the cluster NSM was fired in late '08 (the DOS handles national!) and both FM PDs were fired (and not replaced) in the first half of the year as well. And that is just part of the carnage! Of course many low level staffers and paid interns were let go, the receptionist (after 20+ years!) was an early casualty. Upstairs … the staff also suffered the same kind of AE defections, plus their promotions director was canned. A traffic manager and an accounts receivable person were hired and fired in 2009. They were there less than 3 months I'd say”.

And their outstanding market manager was fired after nearly 40 years in radio – that’s more experience managing than all the Dickey's possess put together.

One reader related another infamous and insensitive Lew Dickey story that sums up the carnage:

“One thing I will never forget is something Lew Dickey said on a visit … in late 2008. He assembled the entire sales staff in the conference room... close to 30 AEs and 7 or 8 managers. We had never met with Lew before. Early in his speech he says 'we know that sales people only work about 30% of their day'. I was thinking did I hear that right?? And he repeated it. He went on to say that 'we need to change our DNA' and 'we need to transform from order takers to demand drivers'".

Order takers?

Most salespeople at that meeting worked their butts off to make Dickey’s numbers but what he was previewing was the beginning of CSOS or the Cyclops System, as I call it – the one-eyed, no brain system of ruining radio sales.

Honey I Shrunk the Radio Stations

If you’re wondering why the consolidators keep their mouths shut when I expose another new lie, perhaps it's because what I am saying is true.

This from a Clear Channel employee:

“I was appointed the Cluster General Sales Manager (a new position starting in 2004) for our seven station group and I had five sales managers, a DOS, a total traffic/NTR manager and a National Sales Manager from 2004 through 2006. Prior to that I had been the GSM of three of the stations. My "position" was eliminated Nov. 1, 2006, and I was informed that my salary was going to the hiring a number of internet sellers (the new hot plan at the time which of course was abandoned nine months later as no one had a clue what they were doing). This was ordered by a person who I had never met. I had been with our group for over 28 years and five owners.

My point is, tying in with your article today, that as well as all those sales managers, we also had a staff of 35-38 sellers. Yesterday I was at the stations and someone had put the new sales structure in my mailbox…I was actually stunned when I looked at the new set up to see that there are now only TWO managers and 12 salespeople to cover SEVEN RADIO STATIONS, plus National, NTR, Total Traffic, Internet!"

With bankruptcy six weeks away for Citadel, a less than boffo fourth quarter going on the books and a first quarter that could be so bad that 2009 could start looking good in retrospect.

In other words, as sad as it is, the worst is yet to come because the big three are out of options and desperate to cut costs.

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Thanksgiving With the Dickeys

If radio had human rights violations, the government would eventually be forced to investigate Clear Channel, Citadel and perhaps the worst offender of all, Cumulus.

These three radio consolidators – the largest in all of radio – share a common disrespect for their employees and a blatant disregard for their careers.

What’s worse is that these are the leaders – like them or not – from whom other smaller radio owners take their direction.

So if Cumulus cuts its way to “success”, then they will as well.

If voice tracking makes it possible for the three “C” consolidators to reduce on-air expenses, then the other smaller groups almost always follow suit.

That's how important these three companies are to the health and vitality of the radio industry.

In the past two years the ranks of the radio industry have been decreased by thousands and thousands of excellent, loyal and talented employees in management, sales, programming, on-air, engineering and in office support roles. It is obvious that the three “leaders” in radio are going to become the smallest big time operators out there by keeping this trend up.

A radio executive wrote to me yesterday and said, “One of the first things one learns in business is you can't shrink yourself to profitability”.

He knows that.

You know that.

I know that.

So what is their problem?

Another reader wrote what he thinks is the Cumulus mantra, "The floggings will continue until morale improves".

So, on the occasion of Thanksgiving, a traditional time for family, friends, turkey and being grateful, I thought it would be useful to see what Thanksgiving is or should be at the Dickey households – that of big brother Lew and little brother, John.

How can they even live with themselves especially this time of year after they’ve ruined careers, fired employees needlessly (and as an act of self-destruction)?

Families have been thrown into crisis and, even as I write this, Cumulus plans to keep cutting its ranks until one master control spews out national radio to local markets while inexperienced new salespeople chase phantom accounts to sell them increasingly cheap advertising.

I’ve often wondered how Clear Channel patriarch Lowry Mays can live with himself.

Good karma comes back as good and bad as bad. But this man more than any epitomizes the Evil Empire he created in his image. In my opinion, Mays sold his soul and will be remembered for that -- and probably not much more.

The other day when I heard of the death of programmer and air talent Dene Hallam or last December when we lost the programming icon Bill Drake, I remembered again how most radio people held them in high esteem. Even if you disagreed with their approach to radio you knew they loved the industry.

Thanksgiving is a scary time at the Dickey households because if they have no trouble enjoying their turkey then they truly have no feelings. When I ran into Lew last September in Philadelphia I got the feeling that the man I knew ten years ago had become bitter, haggard and frankly uncaring about people.

It’s my feeling.

I could be wrong.

But let me tell you why.

Dickey was dismissive every time I said you are being brutal to people. He didn’t deny it. Dickey countered with, “You’re killing me, Jerry” to which as I reported earlier I retorted, “No, you’re killing you – I’m just telling everybody”.

The idea of forcing salespeople to quit rather than pay them unemployment. The farce of telling the happy talk trade press that Cumulus is going to hire more salespeople when he neglects to add how many he is firing or forcing to quit.

Let me say this loud and clear.

Dickey, Fagreed Suleman of Citadel and Lee & Bain, equity owners of Clear Channel have the right to do any damn thing they want with their companies. I don’t have a say and you don’t. Their shareholders one day might have, had they spoken up. Now it’s too late.

But all three companies have been mean-spirited and overly hurtful in dealing with the human aspect of consolidation. Ironically enough, the pain that they are instilling on the folks who rely on them for a living are the only ones who can help them return to profitability.

You don’t cut your way to success.

You cut if you want to run – and that’s what they are going to do.

Run skeleton operations. Dodge the debt mistakes. Wait for the economy to get better and sell the shells to people who will make them rich all over again even at much lower multiples.

If Dickey has a wishbone this holiday and makes a wish for the future, it would be to get out of debt and see his company return to profitability. That wishbone isn’t going to break his way.

If Fagreed makes a wish at his turkey dinner it would be that lenders keep him around after the company files for a pre-packaged bankruptcy on or before January 15 – write that date down on your calendar because as sure as I’m typing this, Fagreed is going to make bankruptcy sound like a growth business when it is announced.

If John Slogan Hogan speaking with the ventriloquist voice of Lee & Bain could grab that turkey bone and yank on it, he would hope no one discovers that he doesn’t know what he is doing. He’s an Atlanta market manager at best and a yes man at worst.

If Mark Mays is enjoying his family this weekend and we sincerely hope he is, one would hope that he had an ounce of decency to remember the people who are in a bad hurt this holiday because of his decisions. Mays forgot that the right thing for his business was to do is to employ not destroy.

These culprits are not going into the radio hall of fame any time soon. They will be remembered for the turkeys they are – the ones who did in a good industry by trying to leverage lives for their own increased compensation.

What makes me proud as the Thanksgiving weekend comes upon us is that there is a lot to be thankful for even if you work for or were even fired from one of the major consolidators this past year.

Beyond unemployment or reemployment, we have the digital future which as it unfolds will present many new employment possibilities and entrepreneurial ideas of ex-consolidation workers. I promise to give you the down low on these opportunities over the year ahead. The path to new media is not clearly defined like leaving one station and taking a similar job across the street.

But we're at least there is a growth business ahead and radio people are the best qualified to be in it. Now we must concentrate on doing our homework and checking out challenges and opportunities. No looking back unless you want more heartbreak.

That radio people – even faced with the cruelties that we could have never predicted ten years ago – never turned on each other -- also makes me proud. In fact, I know of multiple cases in which employees were willing to take less to work or to keep associates from being fired.

Showing up and doing more work then they were compensated for – that makes me thankful to be in an industry of fine people who care about their audiences, their advertisers and their local communities even when the employers have forgotten.

Each year I am not grateful for having a multifaceted career in the radio industry in programming, on-the-air, as a publisher and now -- advisor to the digital future.

Unlike the consolidators and like you – it’s radio people that warm my heart.

Resourceful.

Creative.

Independent

Hard working.

And ...

Honest.

This holiday season I’d challenge the major consolidators to look at the man in the mirror and ask if they have the qualities that their fired employees maintain through good times and bad.

There is another way to handle a recession, over leveraged debt and the attack of new media.

With a conscience.

A few of our radio leaders have lost their way and I, for one, hope that one of them will reflect on their unfortunate legacy.

That is my wish – with or without a wishbone.

To the great people of radio, don’t lose heart – 2010 may be a bad year for mean radio but it is going to be a new beginning for your careers, lives and families and we’ll talk about it here all year.

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Who Should Attend The 2010 Media Solutions Lab.

January 28 at the Westin Resort, Scottsdale, AZ. Individuals who work in radio, television, publishing, the music industry, new media, social networking or mobile content who want to see the future better and enhance their core skill development to achieve outstanding results. This is not a convention. It’s a one-day interaction lab with 14 modules taught by Jerry Del Colliano whose background includes an appointment as professor at the University of Southern California. Topics range from reinventing radio, identifying the best new media initiatives for the year ahead, the new webcasting business, how to build a podcasting franchise that turns a profit in the first year. Learn three new technology media businesses you can start the day after attending this lab. Plus, brainstorm the next media growth business. Leave with an action plan. There are no sponsors, no pitchmen or special interests. It’s private. It will not be videotaped, webcasted or available in audio. It's about reinventing you, the media business and your career. Get the details on all 14 modules and register here.

Clear Channel’s Frightening Plans for 2010

I want to show you the future of radio – Clear Channel style -- for the year ahead.

The pieces have been coming together in the past few months like a complex puzzle but now it is evident what investment bank owners Lee & Bain have in mind for the largest radio group in the world.

What I am about to share with you is significant because when Clear Channel burps you can imagine what Cumulus and Citadel will do.

That’s right, the other failed consolidators take their lead from the Evil Empire.

First, let me get this out of the way, Radio President John Slogan Hogan is not calling the shots here so you can't blame it on him. This plan came from the Wall Street banking firms themselves that own Clear Channel.

Hogan is the dummy and Lee and Bain are the ventriloquists.

They put the words into Hogan’s mouth.

Another caveat is that some localities may be different but increasingly during the year ahead, you are likely to see this scenario unfolding at Clear Channel stations and clusters.

1. Virtually no local management.

Regional offices will increasingly dictate what will be done in local markets in spite of all Clear Channel's hype about local radio. It's exactly the opposite. Fewer market managers. Managers are and will continue to be fired. You may even see some clusters that report directly to Centcom circumventing the need for more bodies and more salaries. Rest assured that at Clear Channel when it comes to management as well as talent -- less is still more.

2. Local clusters will be handed their target numbers and they will have to make them.

This should not be confused with that old management tactic called – budgeting. It’s now a one way street from Lee and Bain to you. Increasingly as the year goes on, Clear Channel will be run from headquarters and now that includes management and budget.

3. Skeleton staffs at local stations.

Local sales staffs will increasingly consist of a an ever decreasing staff of survivors, remaining professionals or inexperienced hires. This means buildings that have the minimum number of employees in them -- entire markets run by a handful of people. Even worse than currently.

4. One sales manager per cluster.

To handle the local direct selling effort (overseeing a reduced staff, of course). There may be exceptions to the one Sales Manager per market rule but you will be noticing how few people will be selling direct at the local level. Look to regional and even so-called Yield Managers in the new Clear Channel playbook.

5. Unbearable pressure to make sales numbers.

Local account execs will find it hard to make their numbers because advertisers sense the pressure on radio to make their numbers and have discovered that driving down ad prices even lower is not that hard to do. Lower rates for inventory – bet on it. The first clue you have is all this talk of the 15-second commercial – a supposed byproduct of Less Is More. These new 15-second spots where purchased are cheaper for advertisers and generate less for the stations.

See what I mean, another way to compromise the rate card.

6. Program directors will become extinct in all but the largest markets.

You already have observed that most consolidators have PDs doing double-duty or more. What’s next is the Program Facilitator who acts as a traffic cop and sends national Repeater Radio programming and voice tracked shows to individual conduits formerly known as radio stations.

7. More Non-Local Content.

These Program Facilitators will get to choose from the Clear Channel menu of cheaper national “local” programming alternatives that they call “Premium Choice". I call it “Ground Chuck” because it is Hamburger Helper for formats. Live morning shows will be gone in all but the most important and/or largest markets. Clear Channel is already famous for voice tracking its stations.

8. Automatically-logged national business.

National business will go directly into local programming logs – in fact, I’m told that this is happening now in some Clear Channel locations. No need to pass go, collect $200 or even check with anyone local. Radio is not local at Clear Channel. This is another example.

9. Regional business will be “checked” by so-called Yield Managers.

This is also happening right now.

When regional business is written, so-called Yield Managers are responsible to see that the “local” Clear Channel stations are getting a good price. Keep in mind that many of these Yield Managers are former hotel managers and have no idea what a good price is. They may know what rack rate is good but not a good regional buy.

Sounds like a corporate brainstorm.

No matter.

Someone at Lee and Bain thinks this is really a good way to run the radio business – like Motel 6.

Clear Channel’s apparent plan for 2010 is to cut expenses – again.

Well, there really isn’t any place to cut expenses at a radio station other than – personnel. And in spite of the fact that Clear Channel has been responsible for large scale termination of talent, it has one place to look for further cuts.

More staff reductions.

Big decreases in sales regardless of how badly the company needs to write more business.

Largely national programming to save personnel costs.

Now, Less is More when it comes to market managers and station executives.

This all sounds insane to most people, but not to my readers who know that cutting programming, sales and management is good for radio – that is, if your intention is to cut costs and eventually sell off the properties for whatever the market will support and whatever additional fees the sellers can earn.

Radio consolidators are not operators as I have been insisting for ten years now.

They are owners, investors, speculators.

So if you and I occasionally fantasize about how radio stations could improve their programming, sales and lead the way into the digital future, we can be forgiven.

But the consolidators who are gutting radio stations year after year to wind up with a license to sell and very little overhead cannot be forgiven.

Their intentions are increasingly transparent.

No Internet strategy – forget budgeting for digital – none of them do.

No mobile strategy.

No podcasting or webcasting strategy.

No social networking platforms.

No concept of the importance of local radio.

While I was attending the Flyers game out here in Phoenix over the weekend, a sixty-something man sitting in the row in back of me was showing another over 50 fan what Pandora was on his cell phone.

He played it – loud enough to be heard in a hockey arena (albeit it an empty one) – and went on and on about how great Pandora was.

These older Pandora lovers are radio listeners – or were.

While Lee & Bain, Lew and John, Farid and Judy and Bob, Carol, Ted and Alice are skinning the hide of the radio business, they may be winning the numbers battle but they are losing the war.

Radio is in big trouble.

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Cumulus Invents a New Way To Fire

The three major consolidators – the ones who have made the biggest mess of things in the radio industry – don’t have to come up with ways to avoid firing people.

That’s what they do.

Citadel, Clear Channel and Cumulus have been ridding themselves of talented and loyal employees for years now. But in the past two years the firings – or “layoffs” as they like to call them have been extraordinarily massive.

And more cutbacks are happening now.

A major group in Tucson has only one operations manager for seven stations. Other properties are being gutted of able employees for the fewest number possible and nationally produced “local” content.

Now we hear that the mad scientists at the Cumulus Reinventing the Wheel Project in Atlanta have found a way to fire people without really firing them.

They get them to quit.

That’s right.

They make them miserable (of course) and have added a new element – make it impossible for them to earn their commissions so they eventually have to quit.

Why, you ask, would Cumulus do such a thing?

One reason is that when employees quit on their own volition, Cumulus is not responsible for paying the increased unemployment taxes that are charged to them and with so many Cumulus employees biting the dust, the company is paying a lot in increased unemployment taxes.

You might say, what kind of cheap bastard would be that heartless to rob good people of a career and then try to cheat them out of their unemployment lifeline – especially in tough economic times?

How about a company that reportedly contested even one week of unemployment benefits filed by their own employees who were forced to take mandatory time off without pay. I guess the Cumulus brain trust decided employees would take a bullet for Lew. But some marched to their unemployment offices or went online and filed claims for benefits for the week they were forced to miss work without pay.

Here is how the current screws are being applied to Cumulus salespeople.

Salespeople are reportedly getting accounts taken away from them to the point where they can’t make a living – some are quitting and Cumulus is hiring replacements without radio experience.

Here’s what one of my readers says:

“ALL of their experienced reps are being pushed out the door and all the agency accounts are going to the "K.A.M." (key account manager)position. The KAM gets a low salary and 1.5% override on the net dollars”.

KAMS are supposed to handle only agency accounts in an effort to get the rest of the remaining sales force to focus on direct business.

An insider tells how the amazing scam apparently works:

“…the KAM in our office was allowed to keep all of their largest direct accounts, meanwhile being literally handed hundreds of thousands of dollars of agency billing from the rest of the sales team. This person will make money on months and months of work done by other people...it's simply outrageous”.

In other words this Dickey brainchild is pushing the envelope of unfair practices in the work environment.

The KAM basically has free reign and does not have to attend spy-in-the-sky meetings (an obvious benefit right there).

KAMs do not have to dial for dollars under the watchful eye of big brother. I actually heard salespeople were forced to call on cobblers – that’s right, shoe repair businesses. Hey, that’s not what Lew Dickey told me in Philadelphia. You know, when he said they needed new people to go after health care business and accounts that AEs resist.

Cobblers?

He’s kidding right?

The KAM is also immune from doing his or her own paperwork as some have assistants to do all of that and help with traffic. KAMs get to call on direct as well as agency business.

Meanwhile, the remaining minions get to call on cobblers and other accounts that have never used radio.

As one Cumulus worker said:

“I realize the commission percentage is lower for agency accounts for these salespeople, but what does it matter when their billing increased exponentially overnight, and they are no longer subject to ridiculous CSOS schedules put in place by the increasingly moronic Dickeys”.

To make matters worse the KAM position was apparently not advertised in some local offices meaning existing employees never got to interview for it. The job was handed over to the account exec the manager chose.

In one market, a Cumulus source said:

“Several people in the office I work in had as much, or more agency experience as this person, and were never even considered for the position. Again, it begs the question of fairness and ethics in the workplace”.

How serious is the latest Cumulus move to inflict pain on its people in the name of economy?

Some salespeople relieved of their best accounts are making up to 75% less than previously with no way to make up the difference because of low rates, mundane programming that lacks personality and the continuing recession.

Look, the Dickeys own the company and they can do with it what they want – nobody denies that.

Their record is pretty poor even though they spend a lot of time massaging the press into seeing Einstein when they print Dickey.

What is wrong – dead wrong and this needs to be said – is the hurtful, malicious and premeditated way the Dickey family is playing hardball with its employees.

Hurting them – their careers, their families – all because it’s their company and people are apparently not important to them.

CSOS (their sales system) is.

Local programming that emanates from Atlanta is.

Reinventing the wheel is.

I’ve got some news for Lew "Tricky" Dickey and "Other" Brother John – it isn’t working, won’t work and will ultimately fail.

Fortunately for the Dickeys, failures don't go broke when they are playing with other people’s money.

(Special note: We lost Dene Hallam over the weekend. He was a good solid radio programmer and talent who I have known for years. In recent months Dene would write to me about ice hockey and the state of radio today. When I wrote about the radio industry inviting listeners to go elsewhere with some of the shenanigans consolidators are pulling, Dene would shoot me a note that said "You are so right, professor". I am proud to have known Dene and to work in an industry with so many people who still care. Dene will be missed -- Jerry)

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Radio: Next, It’s Repeater Sales

Clear Channel’s encore to Repeater Radio (local radio dressed up as national or syndicated programming) appears likely to be Repeater Sales.

They fired 1,300 sales people within the past 18 months and vowed to hire 40 so-called regional yield managers although no one can seem to figure out who these 40 people are.

You notice how Clear Channel hasn’t done 40 follow-up announcements after revealing the strategy.

In theory these Yield Managers are going to bypass local salespeople and become a clearinghouse for spot radio. They are not going to do a lot of relationship selling or cross-platform sales. Forget prospecting. Who is left to do that?

Repeater Radio is the term I coined to describe the slight of hand trick Clear Channel President John Slogan Hogan tried to pull a year ago when he talked "local" but meant "corporate".

Anyway, you’ve got to wonder if Hogan is really in charge of this process.

Insiders say Charlie Rahilly is parent company Lee and Bain’s man. He was the guy who took Kraig Kitchen’s place at Premiere – a move that was designed to help along the nationalization of programming. No matter who is in charge or who isn't, the die may be cast – Lee and Bain are investment banks and they are cutting costs.

Next – Repeater Sales.

This has ugly repercussions beyond Clear Channel because underachievers like Cumulus CEO Lew "Tricky" Dickey and Desperate House Cleaner Fagreed Suleman of Citadel look for Clear Channel cover on cost cutting.

Translation: if Clear Channel does it, why not us?

Remember I mentioned a few weeks ago that 2010 would be open season on radio sales. That’s because there’s no one left at home in programming thanks to Repeater Radio.

You can see how Clear Channel is working this.

It takes Tampa’s Director of Sales Chris Soechtig and promotes him to Senior Vice President of Sales Operations reporting to none other than Hogan.

Then Hogan created Clear Channel’s so-called “Sales Operations Center” which will focus on all facets of sales strategy, communication, training, sales material, technology – I’m reading here from the Clear Channel press release.

Wonder why no one is connecting the dots?

Soechtig oversees sales in 150 markets and supervises everything – that’s real local, isn’t it? Same footprint as Repeater Radio.

The reason these guys never learn is because they don’t have to. They just have to cut costs and there are not enough programming cuts to make to deliver the economies of scale that the investment bank owners are demanding.

As one of my readers put it:

“So now they have (a) guy whose sole purpose in life is stealing ideas from one market and making sure every other market does the same exact thing. Here's how (one market) did their One Day Fire Sale and it generated X dollars. Please let me know when you plan on doing the same thing...If you don't plan on doing it let me know and I'll post your job."

“This sounds like a "Gary Pizzati" lite. Someone who will cherry pick ideas/packages/categories etc and then inflict them on the rest of the group, demand implementation, then write the success story for Hogan to publicize”..

Radio could grow sales by hiring people like Jim Taszarek, Gerry Tabio or Steve Marx and Jim Hopes. They are a threat to Hogan because their approach is local because Lee and Bain just want cost cuts – don’t get all warm and fuzzy on them.

But there’s more … at lightning speed:

The Chicago Tribune reported recently that Clear Channel intended to unify three stations there under one single urban banner to be known as the Urban Network. This is a cross-platform, single approach to reaching the African American market by targeting different parts of the group.

Or as I call it, trying to force advertisers to buy three for the price of one.

In Los Angeles, Clear Channel is morphing to Repeater Sales as well.

Combining sales operations for their spoke word formats under one staff a few months ago. This is a predictor of the future. After all, what makes sense in LA must work in Chicago, right?

Wrong.

Nonetheless you’ll see fewer sellers.

In the Midwest region recently, a Clear Channel manager told a staff meeting that he was going to hold a positive meeting – no bloodletting.

The attendees were dubious.

They were reportedly told that Clear Channel is not going bankrupt (amazing what market managers know, isn’t it?) and that Clear Channel had a billion dollars in cash on hand.

Pay not attention to the press or bloggers – Clear Channel is in great shape -- they were told.

Then he made the mistake of telling those attending that their success was due to great programming and a great sales department. In other words, you have done a fantastic job.

So during the Q&A that followed, this former cluster manager was asked if he was going to free up any of that money for promotion?

Nope.

He said the company is willing to spend money if the local cluster can show how it will make money!

Huh?

How about this exchange: “What if an advertiser told you his business was great and didn't need to advertise?”

"That's different. Promotions is different than Advertising."

Or, the inevitable question to a blowhard that is bragging about a one billion dollar booty.

Well how about raises?

They were reportedly told that while we have done exceptionally well as a company and a cluster, there is still a long way to go.

We have to recognize our priorities.

Meeting adjourned.

When privately questioned about how discouraging it is to hear that Clear Channel is getting so rich while employees make less and don’t have the resources to adequately compete, one person was reportedly told:

“They'll just have to get used to it or go do something else. That's the way the business is now. They should be thankful they have a job. If they leave, we'll get someone better for less."

Less. Less. Less.

The company of Less is More really means it so if you’re wondering what chance Clear Channel has with a wholesale reduction of account execs under a national model akin to Repeater Radio, don’t take the over.

Take the under.

It’s baaack!

From the people who failed with Repeater Radio, Repeater Sales at a market near you.

In the near future I am going to tell you about the new model consolidators will be installing at their stations for 2010 with details about programming, sales and management and a separate piece on a Cumulus tactic that enables them to hurt employees financially to make them quit and avoid having to fire them and thus subject Cumulus to unemployment tax increases.

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Radio: Ando Could Be the New Arbitron

If you’ve been watching the dust up over Ando Media’s new ratings rules for online streaming, you can see some radio people are getting themselves all worked up needlessly.

Ando has done a few positive things in spite of the fact that some radio people are getting upset and have forced them to push back a bit.

The radio industry hates change.

On top of that, radio executives are used to dictating how things are going to be. No one dictates to them.

That’s why the industry has missed the Internet revolution and is ready to miss the even more important smart phone evolution and why it prefers to judge radio listening on its own terms – not that which advertisers and publishers may demand.

Ando could be a force to reckon with in the future.

Like Arbitron, which has a monopoly on radio ratings, Ando has a monopoly on streaming metrics.

Radio loves monopolies – just look at the major consolidators.

There is also a perfect storm brewing in which I believe a lot of radio companies and individual stations will cut out audience ratings and try to go with something else.

Traditional wisdom suggests Nielsen ratings.

But the radio industry isn’t good at supporting alternative rating services – just check the history of underwriting competition to Arbitron over the past three plus decades. Nielsen doesn’t know it yet but it is likely to die on the vine like its predecessors in spite of a flirtation with a few Clear Channel and Cumulus stations.

Ando, on the other hand, could offer relatively inexpensive metrics at a time when the only thing owners will invest in is cutting back expenses.

Take a look at the Ando package.

Ando has dropped average quarter hour and cume as radio as come to know it in Arbitron parlance. Instead, it has substituted three new benchmarks:

1. Average Active Sessions (the average number of streams of one minute or more that are active within a time period).

2. Session Starts (number of streams of one minute or more started within a time period
).

3. Average Time Spent Listening (average number of hours for each session lasting more than one minute within a time period).

Plus, Arbitron’s old five-minute listening rule to earn quarter hour credit is only one minute at Ando. No doubt that helps webcasters and mobile device listening but AQH and cume is not the best way to measure online streaming.

So with Ando, cume as we know it is dead because it measure IP addresses rather than listeners and reducing the five-minute mandate to win a quarter hour to only one-minute games the Ando system toward online streaming which takes advantage of the streamers short attention span.

There is hypocrisy in the criticism of Ando.

For example, so-called Reporting Sessions are Ando's version of what radio calls cume using Arbitron's Portable People Meter – that is, drive-by listening. The radio industry has no problem trying to rig the PPM technology to confuse hearing with listening so I guess it is only fair that the online ratings being offered by Ando skew in favor of streamers.

Two monopolies fighting each other – making up their own rules and acting unilaterally. The radio industry sure doesn’t like it when Ando does it to them but Arbitron has been pandering to radio’s reluctance to join the 21st century for a long time.

Confusing hearing for listening?

Now you have two choices when considering online media.

In the end, some of these changes are good for radio. There is no reason to cling to the past and demand the five-minute rule be maintained.

No reason to insist that cume means something more than it was.

Ando is shrewdly seeking accreditation from Media Ratings Council and should they receive it there will be a whole lotta shakin’ going’ on – to quote Jerry Lee Lewis.

But wait.

Advertisers are the last people to actually demand meaningful audience ratings. Their agencies have been buying campaigns on flawed research for decades now.

In all of this it is important to note that while both Arbitron and Ando get ready to battle, smart broadcasters will look even further ahead to the real holy grail – listener loyalty.

You can have your two million listeners (or hearers) but advertisers will take a smaller more active group of loyal fans.

There may be a lot of ways to measure this and then again, measurement may not be so necessary.

There – I’ve said it.

Soon I will share with you what a major advertiser did when they skipped the middleman and went directly to the consumer.

This is the real heart of the issue.

Radio stations using Arbitron and online streamers through the new Ando service may like their chances but I believe advertisers increasingly will do it themselves. That’s one reason I’m going devote time to this issue at my upcoming Media Solutions Lab.

And, by the way, if I am seeing this development accurately, there are a lot of underemployed or unemployed radio people who will be starting careers to help advertisers take their messages directly to consumers through technology, programming content and social networking.

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Music: The Coming File Sharing Crackdown

The World Intellectual Property Organization says that 40 billion music files were shared illegally in 2008 – that’s more than in 2007 but not as many as will be shared by the time the present year ends.

That’s a piracy rate of 95%!

No wonder the record labels are beside themselves trying to stop this movement right now.

Of course, they cannot. But if it makes them feel better to sue consumers and beg governments to crack down, then you can fully understand what is hitting its stride in Europe right now.

In Great Britain and France there are legislative measures to halt illegal file sharing that has eviscerated the labels market that is $10 billion a year. It was once a lot more. And there is no sign that this trend will be reversed with or without such legislation.

It’s getting ugly.

And, Britain wants to join France to enact punishments for file sharing that could cause repeat offenders to lose their Internet connections.

There have even been jail terms meted out.

Reuters reports a lawsuit in April where four men behind The Pirate Bay, one of the world's biggest free file-sharing websites, were sentenced to a year in jail and ordered to pay $3.6 million in compensation.

There’s that – the U.S. labels version of the PERP walk (referring to the police practice of intentionally parading an arrested suspect or "perp", short for "perpetrator") through a public place so that the media may observe and record the event.

In the case of the music industry the PERP walk is winning a high profile lawsuit as they did earlier this year in which a student was ordered to pay $675,000 for sharing just 30 songs.

Then there is the new obsession by record labels to support streaming music ventures such as Spotify even though previous and similar attempts such as Rhapsody failed to gain traction.

With all this bad news for the labels nowhere does anyone mention the good news which is that the 40 billion music files that were shared last year shows the voracious appetite by the next generation for music.

It could be worse.

What if young people suddenly stopped listening to music?

Now they have done a workaround for radio stations that continue to utilize corporate playlists. It's discovery through online streaming and then downloading free music files. The old system of radio airplay and then ringing up sales at record stores no longer works. But you can't tell that to label executives.

It’s also noteworthy that as big as the iTunes store is in the legal music business today that total sales are rather insignificant when compared to pirated music. Apple CEO Steve Jobs is not about to quit his day job making hardware to be a full-time music entrepreneur.

I’ve said it before – the new price for music is free. It may not be fair but it is true.

And the labels have a right to be concerned even if they shut down innovative ways to deal with the problem.

Let me lay it out in simple terms.

Online music discovery services that charge or eventually intend to charge monthly fees fail to understand the sociology of the technology that is killing the labels.

The next generation apparently doesn’t want all you can eat.

They want what they want when they want it -- if they are hungry, they'll eat (usually for free).

Certainly this should not be a surprise to media executives, but somehow it is. In other words, to quote Mick Jagger, you can’t always get what you want.

Young people want choice.

They have proven it by demolishing the concept of the record album in favor of searching for, owning or stealing one song at a time – the one they want.

Three thousand tunes cached on a mobile device through Spotify may make label executives foam at the mouth but that concept doesn’t create much of an appetite in the general public. So, if the price of music in effect is now free at worst and 99 cents at best (the higher prices the labels charge for hit music now on iTunes has actually spurred more stealing) then how do you remain in business?

Now that’s a good question.

Maybe you don’t.

Or maybe you sell in bulk – five cents a song something like a text message – so that stealing would be not as attractive. (Actually a text message, according to studies, averages out to about a penny a message).

The labels could make the best audio copy available, all the goodies, liner notes, social networking connections – all for a nickel and no one would ever steal music again. Okay, I’m exaggerating but you get the point.

Then on top of that, make an intuitive site available to hear streamed music for discovery purposes and five-cent purchases for those who want to own it.

Look, if someone took the concept of text messaging to record execs 15 years ago and said we want you to invest in this, it’s going to be big. They would have thrown that someone out on their butts.

The audacity of charging people a few pennies to type “hey” on a mobile device.

Can’t work.

Won’t be enough people willing to pay for such silliness.

And there you have the mentality of label execs who have tried threats, fines, jail and “I got a deal for you that you can’t refuse”.

It’s not that hard to figure out.

You’re out of the manufacturing business and should be in the music discovery business.

You don’t need radio.

You don’t need promotion.

But you do need illegal file sharing – or as I like to call it, the new music radio – for discovery purposes.

Your profit comes when you get out of your own way and make it easy for a fan to sample, buy and become a customer again.

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Major Cumulus Staff Cuts Coming

Recently Cumulus CEO Lew Dickey proved once again why he has earned his nickname “Tricky” Dickey.

Lew fed the happy talk radio trade press red meat recently when he proclaimed Cumulus had hired 50 sales people in the past year and planned to hire 50 more.

Perhaps you saw it.

Of course what Tricky Dickey failed to mention was all the careers he ended this past year. Politically correct as he thought it might be to emphasize hiring, Lew for some reason or other just happened to leave out all his firing -- go figure.

In one account, Dickey was quoted as saying, “We hired 50
new sellers in the last six weeks, and we’ll hire 50 more before year’s end.” He credited the recovering sales market that is spurring the new hiring.

Dickey seems to want it both ways.

At the same time he says things are getting better, he tells analysts “It could be ten years, or maybe 2016 before we reach $21.5 billion again” referring to the radio industry high from three years ago.

Dickey is both optimistic and pessimistic at the same time.

Must be nice to be the boss of a family-owned dry cleaning business – I mean, media business.

That’s why Lew goes on to perform another one of his “now you see it-now you don’t” tricks. Dickey says Cumulus will key on cutting expenses at the exact same time he is managing by cutting back.

There you have it -- guns and butter at the same time.

Hiring and cost cutting all at once.

This man is a genius.

You may wonder how CEOs like Dickey get away with such illusions as part of their quarterly reporting of revenue. That’s because the analysts who are on the conference call are just like him.

Here’s what is really ahead.

Insiders at Cumulus say more staff cuts are in the works:

• No more Senior VPs . Does that mean that corporate henchmen like Gary Pizzati and Mark Sullivan will be Market Managers again?

• More Market Managers to be changed out. New hires come in at much lower compensation and fit into Dickey’s plan to continue to cut costs. Most Market Managers will likely have more than one job because it will save the company – well, you get the point.

• More cuts in market sales management on the way. Sales seems to be a big area of focus not in the way you would think. You know, the economy is down, radio is hurting, let’s get more AEs on the street selling. Not that kind. The let’s hire inexperienced people to drum up new business and give the prime accounts to a chosen few – for the purpose of …? You guessed it, saving money.

• Potentially more changes in account executive compensation.

• Almost all stations will have syndicated or non-live AM Drive shows.

• Voice tracking will handle the remainder of the day except specifically approved markets where a one-person PM drive show may be allowed. That person may also have to multi-task in promotions and/or other jobs in the stations.

And before you dismiss any of this, keep in mind that the Cumulus M.O. is to deny everything while they are implementing it.

I’ll say this for the Dickeys. They sure don’t let failure stop their plans for future failure.

They have had their way with people’s careers as well as surrenderedtheir fiduciary responsibilities as licensees in markets where they really don’t do much local programming.

Cumulus sales initiatives have done no better than Clear Channel or Citadel – in fact, Citadel lost a little less money and you know who Citadel has a date with ...

Judge Shorty Long at bankruptcy court.

I feel badly for the fine people at Cumulus. They, like their brethren at the other two nearly bankrupt consolidators, are helpless to do anything.

These employees could turn the ship around but not while the know-it-all Dickey brothers are playing monopoly.

One reader sadly wrote about a friend of his at Cumulus, “The one guy said, ‘you think you know what pressure is.... You have no idea! Not only is the pressure intense, but at Cumulus no longer does anyone have any friends.... people are afraid to talk with each other! They are afraid to use the phone! Some people leave the bldg to use the rest room. They go to their car to use their cell phone."

So, what have we learned from all this?

If Lew Dickey tells you that Cumulus is hiring, it is code language for firing (just the first letter is different)?

If Lew Dickey says radio will be in the toilet until 2016, why is he the Happy Warrior at just about every convention he attends (and that's a lot of them)?

When Dickey says the only way to hold out until 2016, he means turn his radio stations into dry cleaners. Reduce the costs, cut the hours, hire the cheapest employees, use toxic chemicals (okay, I’m lying about the last one, but the others are good).

And if you don’t believe that these Dickey brothers are nincompoops then perhaps you haven’t heard what "Other" Brother John Dickey said about Apple.

Check it out with Cumulus employees, some of them have already heard what I'm going to tell you.

Seems that John Dickey, also known as Fredo to some, told a stunned sales meeting a few weeks ago that these cockamamie Cumulus policies (spy meetings, sales initiatives, cutbacks) should be viewed and thought of much like what Steve Jobs is doing at Apple – always innovative, daring to be different and cutting edge versus their competitors.

Needless to say the staff was dumbfounded by this unbelievable analogy.

The Dickeys have it all wrong.

Apple is hiring.

Apple is not firing.

People want to work for them.

Apple employees love to work for their boss and Cumulus employees can’t wait to leave.

Apple's CEO is quirky and odd but at least he is successful.

Harvard, the school that brought you Lew Dickey, is renown for teaching business by examining case studies.

Here’s some homework: Read this article about Apple CEO Steve Jobs and tell me whether it is describing Lew Dickey, too.

We report. You'll split your sides laughing.

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Citadel's Game Plan

Even in ice hockey, there is sportsmanship.

At the end of each playoff round, after tough competition in which sticks come up high and bodies take a beating, the players line up and shake hands – one of the marvels of sports.

Not so in radio.

Last Friday, Citadel CEO Farid “Fagreed” Suleman showed the industry why he lives up to his nickname “fa-greed” by unilaterally cutting off many non-Citadel affiliates from their 24-hour ABC format specific programming without consideration to what these paying clients were going to be left with.

The personalities that they built their local stations around were gone in another bad decision – just like that!

One of my readers hit the nail right on the head when he said,

“Farid's brilliant move of firing network people who were long-term talent on the satellite formats has caused a firestorm across the country. Most of the stations affected were medium and small markets and a lot....a whole lot... of owners are really pissed. What a stupid thing to do. It just shows that he has absolutely no understanding of the business he's running. This is the opportunity of a lifetime for Dial Global to pick up more affiliates and some excellent talent. I hear they've been on the phone with about-to-be former ABC affiliates all day”.

It’s hard to imagine the old ABC Radio Networks pulling a stunt like this in their Cap Cities days. In fact, didn’t networks and program suppliers used to solicit the business of affiliates? Now, this guy seems not the least bit concerned that he’s burning his former clients on the way to Citadel's bankruptcy.

FCC Commissioner Michael Copps is sounding like he wants to return to the days of yesteryear and get tougher with license holders and of course, the big x factor, bankruptcy, is coming to a consolidator near you within months.

This begs the question, what is Fagreed going to do next?

Here is my view of Citadel’s options and to borrow a phrase from the Drake programming book, let’s present Fagreed Greatest Hits counted down in order (is there any other way for a Drake PD to count something down?).

1. Fagreed will do more housecleaning before the end of the year. After all, he’s currently negotiating a pre-packaged bankruptcy with his lenders. They not only want controlling ownership in the new company but they want a new company that looks like, acts like and smells like a venture capitalists dream. That is, few employees, lots of cash flow and assets for them to sell off when the market gets better.

2. More dumpster programming – the kind only a bean counter like Fagreed could embrace. I hear he doesn’t like to call the paid programming in PM drive on KABC paid programming. Well, get ready for more of it. This really offends the survivors at Citadel because it is, frankly, embarrassing to them. They know how to run radio stations, but running stations are not what the next few months will be about. You may fatten up cattle before you slaughter them but in radio, Citadel slaughters its talent before they turn their company over to lenders.

3. I fear for ABC. Fagreed overpaid for these great stations and some of them actually still sound excellent in spite of the CEOs interference. But I think the jig is up. Investment banks don’t know squat about our proud heritage of ABC stations and don’t care. I think it could get ugly at these last holdouts from Fagreed’s knife. It is not impossible that you won’t know the difference from an ABC station and a run-of-the-mill Citadel repeater station.

4. Once Fagreed has whipped his Citadel and ABC properties into proper form for investors turned operators, you’ll hear an announcement that Citadel is headed to bankruptcy court with a pre-packaged deal to be blessed by a judge. At the end of one single day, power transfers to the lenders but Fagreed is doing their business right now. After all, he’s available to remain CEO of the company he ruined. This is tantamount to the inmates running the prison.

5. Once power changes hands, Citadel stations will be run like windmills generating electricity. There’s not much to them, but their new owners will expect the free cash flow to keep coming. After all, the massive debt will have been erased – eaten by the lenders – and there will be no excuse for not making their numbers.

2010 will be the toughest and ugliest year for radio -- sorry to say.

Citadel will go bankrupt first. Then Regent is likely.

Clear Channel has more trouble than you know – or they are admitting. It appears some of the companies biggest lenders are trying to take control of the Evil Empire’s outdoor division – putting a squeeze on their cash flow that could make them say “uncle” – at least that’s what those nice folks on Wall Street trying to do.

The New York Post reports:

“According to sources familiar with the matter, Leon Black's Apollo Management and Blackstone Group's GSO Capital are quietly buying up shares in Clear Channel Outdoor, the financially struggling company's publicly traded outdoor unit, in order to crimp the parent company's ability to keep using the outdoor unit as its personal ATM”.

Clear Channel is entering its fourth restructuring of debt – unsuccessful in their first three.

The Post reports that Apollo and Blackstone may be buying up Clear Channel Outdoor shares to gain a leg up on negotiations over Clear Channel’s debt.

Clear Channel Outdoor owes Clear Channel $2.5 billion in a loan that matures
next August so if creditors can seize control of CC Outdoor that may influence the parent company.

The Post reports:

“Just this week, the company in a filing said it may make a fourth attempt to pare down its debt, either by buying it back or swapping some of its loans. In the filing, the company suggested those deals could be "material" in size. Time is not on the company's side: Clear Channel this week reported that the debt-to-cash flow ratio on its senior loans rose in the third quarter to 8.8 from 8.1. A ratio of 9.5 violates the terms of those loans, and given the state of the radio sector, some speculate the company could default”.

Finally, Cumulus, also has considerable debt obligations and a slightly longer window in which to turn their company into a pre-packaged bankruptcy kind of player.

Clear Channel, Cumulus, Citadel and the other nearly broke radio companies are sadly playing good and talented radio people for fools as they protect their own necks.

But the ones who are in for the biggest surprise are the top management folks at these major companies.

Let me put it bluntly.

Turning radio stations into real estate not local radio is actually hastening the demise of their own businesses.

While you won’t read this elsewhere I’m going to give it to you straight -- the stations that are now being run down for the last time are going to eventually be sold by lenders – I mean operators or whatever they are – and they are not going to like the multiples.

Write this down – 2 to three times streaming cash flow.

As we used to say in Philly, you heard it first on WFIL.

Thank God for fees because without the many fees these snakes in the grass will continue to earn, they would be stuck with empty buildings, lost sales franchises and vanishing listeners.

That may not sound like good business to you and me but it’s standard operating procedure for investors who often make their money not by succeeding but by failing.

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The Citadel Blood Bath Begins

Citadel CEO Farid “Fagreed” Suleman yesterday did what we said he was going to eventually do – turn to the “Nuclear Option”.

In advance of the anticipated bankruptcy of Citadel on or before January 15th, Fagreed started to blow up what’s left of his company after years of mismanagement on his part.

And, this is only the beginning – sad to say.

Here it is -- unfiltered -- keeping in mind that I read a trade press story yesterday playing up the “hiring marquee talent” instead of all of Fagreed's firings. While I can appreciate good spin on occasion, it’s the holidays, talented people are getting fired, stations are being gutted and lies are being told.

1. Citadel started massive layoffs in Dallas and elsewhere yesterday. Talent, program directors and more will likely follow. PDs Richard Lee and Peter Stewart are out. Watch how many more Citadel tries to slip under the radar because under their repeater radio scenario no PDs will be needed on the local level. Just “traffic cops” as I was saying yesterday to direct repeater programming onto local stations. (Someone please, contact FCC Commissioner Michael Copps who is aiming to tighten what it takes to hold an FCC license. So much for getting the FCC off our backs if it results in this mess called consolidated radio).

2. Live and local morning shows will be a thing of the past on most Citadel stations. In their place, Repeater Radio – syndicated non-local, less expensive options.

3. Citadel will be adopting what it calls a new approach to on-air talent. They call it “Marquee Talent” from Citadel-owned major market stations voice tracking shifts in other markets. I call it “Cheapee Talent” -- not local and amortized by the more stations that carry it. You can decide if they are marquee talent when you see their ratings – in local markets!

4. KSCS, Dallas jock Jeremy Robinson to do non-local Repeater Radio in the evenings. KSCS will run the Citadel Media national show. Race Taylor WPLJ, New York to do PM drive nationally in addition to his local shift. A few examples of radio on the cheap. More work for less money. More national and less local. More desperation from the folks who brought you Citadel bankruptcy – the mini series.

5. Now you know why Citadel Media President John Rosso took over for Jim Robinson. Citadel Media will be the cost-cutting programming arm of Citadel so they can crank out national programming so Citadel can cut more live and local programming.

6. Mike McVay gets an expanded role as consultant to programming targeted at key advertiser demos. I like Mike and he’s really a good and talented guy, but this makes no sense. Citadel is targeting nothing but bankruptcy and running on empty. What’s there for Mike to consult? A repeater format?

7. “Timeless” soft rock format will be discontinued in February. They say it’s less attractive to advertisers and affiliates are bailing. I say, Citadel doesn’t need “Timeless” as a Repeater Feeder to its other stations so it’s outta here.

So, what we see unfolding is that Citadel has begun its long farewell.

Fagreed keeps his job and benefits, but he wastes more talented people to cut what will not even amount to 1% of his deficit – thus the term “nuclear option”. Even with the cutbacks the savings are statistical aberration even!

Citadel is hell bent to get into shape – that is, bankruptcy fit. Ready for the prepackaged bankruptcy that is most likely going to be announced by Christmas or shortly after. They are not looking to develop programming or target new advertisers.

There is a recession, and advertisers are spending on new media and cutting back on everything else.

No, it’s about self-preservation.

Fagreed is negotiating with lenders that Citadel owes $150 million on January 15th and wants to come away with continued gainful employment.

I’ve called just about every shot with this guy and with this company and each day we see more evidence that Citadel is not and does not intend to be an operator.

Citadel is planning to become a holding company for station facilities, real estate and licenses.

When the pre-packaged bankruptcy gets approved, the lenders who Citadel can’t pay are going to become the owners and caretakers of these assets.

In Shakespeare’s The Merchant of Venice, a Shylock is a moneylender who lends money to his rival, Antonio, setting the bond at a pound of Antonio’s flesh.

When the bankrupt Antonio defaults on his loan, Shylock demands the pound of flesh as revenge for Antonio having previously insulted and spat on him.

The Merchant of Venice is a comedy but what is going on at Citadel right now is no laughing matter.

Except in our modern day version, the Shylock is the investment banks and the rival is Citadel.

We already know that Citadel’s lenders are after a pound of flesh. They want control of the Citadel assets including the valuable ABC properties.

But now, when Citadel defaults on its loan and has to get on bended knee to negotiate and then accept a prepackaged bankruptcy that puts ownership in the hands of the Shylock, Fagreed Suleman wants to make sure that he isn’t the one who is going to offer up his flesh as payment for the mistakes made while running Citadel.

That’s why he’s offering up everyone else as a sacrificial lamb.

For Citadel it is now the final act of a tragedy in which so many talented people who know what they are doing were led by into bankruptcy by an empty suit who now must avoid the wrath of the lenders (perfectly depicted by “Shylock” Al Pacino) who are coming after him.

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Beasley Edict: One PD Per Station

You want good news?

I’ve got it.

Beasley Broadcasting, a small family-run group of stations publicly traded, has decided that having one program director for each of its stations provides the kind of focus necessary for the station, its people and their audiences.

This is major and is bucking the trend of bean counters who are moving in the opposite direction.

Natalie Conner, VP of Beasley’s Philly operation recently broke the news to her staff and portrayed the move as emanating from corporate.

Conner said, “I wanted to let everyone know about a few corporate changes that have recently occurred in our structure across Beasley—all markets where there had been one PD running multiple stations, corporate now feels the best interest in the greater good for those stations and staff is to have a more focused direction from one PD and one PD only per station”.

Conner runs Beasley's “Wired 96.5” and WXTU in Philadelphia. Now each station there will have its own program director.

What is significant is that Beasley corporate has arrived at the right decision to have one person tending to the content at every station in every market from now on. This will no doubt improve the Beasley group but it also stands in stark contrast to the mistakes being made by many other larger companies.

In fact, the trend as I see it for 2010, is the polar opposite of Beasley’s one station-one PD edict.

Looking ahead you will see:

1. More clusters looking like a ghost town with a skeleton staff of live talent. Everything else will be Repeater Radio imported from out of Dodge or voice tracked to save money.

2. When stations are not local, today’s radio corporation feel they don't need a PD at every station so you can expect one person running several properties. This has been going on since consolidation began back in 1996 and will continue, but it may get worse.

3. A corporate person acting as a “traffic cop” directing programming to different clusters in markets, regions and nationwide without respect to whether that programming is local. Don't confuse this "switcher" with an in-market program director.

4. The demise of the local morning show. With Clear Channel, Cumulus and whatever is left of post-bankruptcy Citadel, mornings will be turned into “more music” marathons with the customary long commercial junk heaps. They like this concept because it plays to the People Meter misconception that more music gains more listeners. What it really does is game PPM’s vulnerabilities and produces hearers not listeners.

5. Lack of localization. 2010 will be the year that did in local radio in most markets. Where an independent operator continues to invest in local personalities, news and community commitment, they will continue to do well. For everyone else, there’s MasterCard. Charge the future to vanilla programming that doesn’t really fit where listeners live.

The other day a school principal was taken hostage in New York state. It made the national news. Coverage was everywhere on the Internet.

Here’s an email that a radio pro in that market sent to me that says it all:

“About 3 hours ago in Dutchess County, NY, a gunman stormed a high school in the next town over. He held a school administrator hostage at gunpoint. As soon as I heard, I started scanning the local radio dial.

Cumulus coverage: F (I'm not sure they even knew).

Clear Channel: C- At least they did a few taped break-in's with luke warm information. They still didn't stop their syndicated programming.

Pamal/K-104/WSPK: A+. Much to my surprise, this 50K watt top 40 station stopped all programming and did nonstop coverage for 2 1/2 hours. They interviewed the town supervisor and continuously broadcast news to scared parents, where to stage, how to communicate with their children and live reports with area residents. I was shocked. The last station in the world I would have ever expected to go live and nonstop was K-104. Yes, they are a corporate group, but they took their responsibility seriously.

Maybe there is hope for some radio stations?

There is always hope for local radio.

Locally run.

Locally programmed.

Locally sold.

That’s why Beasley’s decision to put someone in charge of the product 24/7 for each station is sending the right message.

It would be nice if everyone followed their lead.

Beasley is not usually a trendsetter positively or negatively. Here’s how the group ranks in the current Best & Worst Radio Groups poll -- click here.

But, every time you see radio done well – aimed at the community whether it’s WCBS-FM in the big town or a small station in Oklahoma, it is not surprising that their approach always works.

What hasn’t worked is the cost-cutter version of radio that has driven listeners away and hasn’t even succeeded as a publicly-funded business.

Do you think maybe the real smart people are the ones with their egos in check and not the ones who lined their pockets turning radio into a commodity?

They're the ones headed to bankruptcy.

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Register Now for Jerry's Next Media Solutions Lab

Preview MODULE 1 of 14: The Most Useful New Media Secrets for 2010

Music: Keep an Eye on Spotify

By Jerry Del Colliano

If you haven’t heard about the European music streaming site Spotify, I think you'll be interested.

Spotify is headed for the U.S. sometime after the new year. In Europe it is getting rave reviews and making lots of friends.

But when Spotify tries to monetize its operation through monthly consumer charges, a very popular service may become less desirable.

The question is what makes Spotify different from the dearly departed Yahoo Music Unlimited, MTV Urge or Virgin Digital – all three of which failed miserably competing with Apple’s iTunes story.

Spotify launched in late 2008 and it is serving up both free and premium options for on-demand music.

With Spotify, a consumer gets access to over six million tunes. The free model is ad-supported. There is a mobile version for iPhone and Android devices in Europe so you can see how the scene is being set for the launch here and a way of caching 3,000 songs.

Will consumers pay $15 a month for the premium package?

They haven’t been willing to sign on for these types of ventures previously -- at least not in large numbers. After all, young people live in a world of bit torrent sites, illegal piracy and buying what they absolutely must own for 99 cents or less.

Why pay more?

Why pay anything at all?

Well, the major labels love the idea for Europe which ought to tell you that there is something wrong with Spotify’s paid model.

The labels haven’t been able to spot a trend since the 33 1/3 RPM record – and even then, they were probably trying to hold on to the 78. (I kid the labels here, but really, they are so out of touch with today’s consumer that their wish for a monthly cash stream in return for a monthly music stream seems to be more fantasy than reality).

Remember what I always say -- observe the sociology not just the technology.

Talks are going on between Spotify and the U.S. labels as if the U.S. labels really have a negotiating position.

Here’s the thing with streaming.

Streaming is the new music radio.

Every label, artist and writer should want their music streamed on these popular free services because it is the new age way for consumers to discover music.

Radio got out of the music discovery business when top 40 became top 25 and when playlists were cut sharply to game the Arbitron ratings diary system.

You see broadcasters doing the same thing again as Arbitron rolls out its Portable People Meter that records drive-by listening from encoded signals picked up by respondents who carry the PPM device.

Someday when all this fuss dies down and smart programmers get together to analyze how they let radio give up its music discovery monopoly, they’ll find that they were more concerned with playing to Arbitron than to listeners. That’s why PDs argue that if they cut their playlists, they succeed – even today.

True – they succeed with Arbitron.

They don’t score with music loving consumers who are continuously abandoning radio for the digital frontier.

Back to streaming music services such as Spotify – they allow consumers to sample music without having to buy it.

Isn't that what radio used to do!

Spotify needs to sell advertising to make its money but may not be able to sell enough of it to satisfy the greedy record labels. Spotify does a good job in tastefully inserting ads, but in the end if their model is built on getting consumers to pay $15 a month for access, I’m saying chalk this one up, too.

In fact, Spotify has only been able to convert 10% of its European customer base to monthly streaming fees. Its policy is to convert so-called “freemium” customers to premium.

And to that I say, good luck with that, too.

We’ve been there before.

Rhapsody had fewer than one million customers willing to pay for streaming. The new fangled Napster about three quarter of a million when Best Buy bought it. That’s scary, too. Best Buy owning Napster.

One thing Spotify gets right – real right – is how important mobile access is to its strategy. No streaming music service will make it if it is tethered to a computer or laptop.

The deal is to get mobile users who, after all, buy applications for their smart phones, to pay. In the past mobile subscription services have required syncing between the home computer and mobile devices if for no other reason than to attest to the fact that the consumer still has a paid license. Since the music is streamed instead of downloaded, Spotify avoids the problem.

So consumers can cache more than 3,000 tunes on mobile devices but they still have to check in and verify that they still have a license.

In case you’re wondering what "He" would do (“He” being Steve Jobs), it is significant that Apple is not standing in the way of Spotify when it wants to use an Apple app to go mobile here in the US.

That should tell long time Jobs-watchers something significant.

Jobs understands that streaming is the new radio – why else do you think Pandora is on its way to being number one in online stream just barely behind CBS Radio and ahead of Clear Channel (see the Ando Media chart to the left).

Let’s put it like this.

In the past, consumers discovered the music on their radios and then went to record stores to go buy what they could afford – singles, albums, whatever.

It’s really no different today except that streaming services help consumers discover music – radio still has uncomfortably tight playlists everywhere – and then they can buy what they want from the iTunes store or a traditional CD if they want.

Radio has so many ways it can be in the music discovery business if it wanted to and we’re going to get into that at my January Media Solutions Lab in Scottsdale, but for now consumers are continuing to have their way with the record industry and broadcasting interests.

Watch Spotify because of its significance as a music discovery streaming system that consumers need and want.

Not a replacement for the CD, legally downloaded music files, pirated bit torrent site downloads or essential monthly consumer expenses such as text messaging packages with their mobile carriers.

Don’t mistake it for a replacement of the profit that record labels lost because they insist on having it their way instead of letting consumer’s get theirs.

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