The Big Four Reckless Labels

By Jerry Del Colliano

(On the road with the Flyers NHL playoffs in Philadelphia pictured with my daughter, Daria and wife, Cheryl).

A few weeks back the RIAA was dealt a blow in a music piracy case. Perhaps you saw it.

A judge in the Atlantic vs. Howell case ruled that the sole act of making a music file available in a "shared folder" does not violate copyright laws.

The RIAA had been arguing that a sound recording that is ripped to a computer and stored in, say, a shared folder, constitutes unlawful use. Even the RIAA doesn’t consider ripping illegal but putting it into a shared folder that can be accessed by peer to peer software is – in their view.

The judge in the case denied the RIAA’s appeal for summary judgment that would render a quick and favorable ruling on its face. Instead, he rejected the RIAA’s theory of file distribution where digital files didn’t change hands.

This simple ruling could make it harder for the RIAA to proceed in other suits and make it more difficult to prosecute file-sharers.

A good question is -- why are the labels even trying to win these cases. It's a reckless policy and doesn't solve as much as one of the many problems the music industry currently faces.

The record industry will certainly lose even if they win every court case – and now, that’s not even assured.

On a college campus you don’t have to look far to see that young people take great pride in finding ways to steal music. Some – I estimate half of the ones I’ve polled – know that it is stealing and that it hurts the record labels. Many have a Robin Hood attitude that they are not hurting the poor artists, just the labels who they rationalize also don’t have the artists’ best interests in mind.

Good or bad, right or wrong – programs to deliver free music to the computers of a new generation are proliferating. These young folks want for nothing when it comes to music.

Should the music industry even be trying to dissuade young people from stealing music since they cannot control the delivery systems?

These are not like the Sam Goody days when if you walked out with a CD you didn’t pay for you likely got caught.

There is no way to safeguard the integrity of music recordings that I know of. Everything can be hacked. Everything can be shared.

It may be wrong. It may be unethical, immoral and maddening, yet it is the reality of the music industry today.

Why don’t the big four reckless labels simply declare victory and withdraw their lawyers.

It might look like defeat – like leaving Vietnam or Iraq without accomplishing the mission – but there really isn’t an alternative. At least a good one.

I have come to believe in the past few months that musicians and artists really do need the record labels, but not as they are defined today.

Look at some of the recent evidence:

Radiohead gives up on its tip jar approach – an admission that it is better as a band than a band of rebel record execs.

Paul McCartney having sold only 100,000 CDs in his much ballyhooed Starbucks deal, is now reverting to giving them away – Prince style – in the pages of London tabloid newspapers. Maybe he will sell more concert dates. It worked for Prince. Neither sold records.

Madonna is doing a deal with Stub Hub to get a piece of the second-hand ticket trading that goes on with her concerts. This has got to rankle music fans who already hate the high cost of going to live events.

Now Madonna is scalping the scalpers, wonderful!

Live Nation doesn’t look like an alternative to a record label to me. It is a concert venue that is locking up classic acts for expensive long haul deals. Lots of luck. Even Bono and U2 did an extended Live Nation deal and kept the distribution part separate – for their record label. You can’t fool a global warming theory advocate like Bono, can you?

One of my gifted students, Meredith Jung, wrote me recently with some good ideas that I think ought to be considered:

1. Albums done on the fan's dollar. Rabid fans would be willing to pay a couple hundred dollars toward their favorite artists' new album in exchange for a private performance or an exclusive ringtone or something cool and of value.

2. The other possible future she sees is like Amie Street. For $25 a fan/investor gets $50 to spend on Amie Street. Nothing costs more than 99 cents and most is cheaper. Once a fan/investor owns a song, they can recommend it to anyone and everyone. If everyone and their brother decides to buy the song after it is recommended, the person doing the recommending gets money they can spend on music. At some point, you don't have to put money into the system. The system starts covering a good chunk of a fan’s music purchases.

3. This is a great way to sell music to a generation that a) loves the opinions of others and b) feels 99 cents is too expensive for music. It doesn't feel so expensive when you're not spending your own money but the money you make from sharing your opinion (which Gen Y loves to do) about the music they’ve bought.

4. Bonus: they recommend new music to you and put the new music on sale for half off on Tuesdays. There's really no other way to go.

Even if you don’t like Meredith’s ideas, you have to admit – at least they have more potential than suing file-sharers in a hopeless attempt to stop piracy.

Only a lawyer could like that strategy.

Then, again, who do you think runs the record industry. Case closed.

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The Weird Channel Deal

Did you see how Clear Channel began saying publicly that the Lee and Bain bailout may never happen? Then, a few days later brinksmanship brought the banks and Clear Channel together to arrive at a lower, more realistic purchase price at $36 a share along with other considerations. Now their fate is in the hands of the shareholders once again.

Leave it to the largest, storied radio group to come up with one of the weirdest sales that has ever graced our industry.

First, Clear Channel honchos do a gut check and find nothing there – so they decide to sell – that’s, what, about two years ago now?

Then, they audition investment bankers – taking their own good time – trying to milk every dollar from the buyout. I guess you can’t blame them for that, but it was almost a regal setting. Investment bankers, kiss our rings and tell us what you have for us.

It’s a far cry from that today.

Then, you may remember, Clear Channel tried to push through a buyout price that made shareholders up in arms. That’s hard to do unless you are screwing them in public – which is what Clear Channel did. Eventually, they wasted more time and had to up the buyout price to quell the shareholder unrest.

Meanwhile the industry continued to declined. Only arbitragers could love the CCU share price spread.

More time passed.

Then, while investment banks started getting jittery, the economy started tanking, Wall Street got nervous, the real estate market took a dive, gas prices went up, radio competition increases and a recession started, the investment side of the deal didn’t even think to renegotiate the price.

Until, that is, the wheels came off a few months back and the banks that were supposed to fund the Clear Channel deal balked.

Then the matter was in Clear Channel’s tried and true territory – the courts.

The deal could get done as it goes for a shareholder vote again. Or, it may not happen at all.

How weird. Clear Channel, used to getting its own way, may not get its way this time. And if it does, Clear Channel may be lucky to get out of Dodge (on a private plane, of course) to ride into the sunset with one more payment -- by compromising.

Did I mention the part about what happens to an industry when the largest (by far) operator is running on empty with an eye toward the exit sign?

It isn’t pretty. The pride and professionalism of Clear Channel employees, station executives and talent is what is going to make the final Mays paycheck possible.

Ironically, the same people the Evil Empire routinely abuses, underpays and restricts is the group that will get them rich one more time.

And it is time that is of the essence here.

The sooner the Clear Channel stations are redistributed to owners who are willing to invest in them – the better it is for the employees and the industry.

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Radio and Airlines

The radio business is really the airline business.

Flying back to Philly for the hockey playoffs this week, it occurred to me that the similarities are so striking.

Radio and airlines crave consolidation and each has failed miserably as consolidated industries. That doesn’t keep them from lobbying for further monopoly, however. See, they are birds of a feather.

The airline business blames high fuel prices for not being able to make a profit. The radio stations of America blame just about anything that can be called entertainment. Those damn iPods are killing us. The Internet is siphoning off radio listeners. Just about everything but newspapers gets the blame.

What’s killing aviation and radio is mismanagement and lack of leadership.

The airline industry is cutting inventory – running fewer planes to pressure inventory so they can charge more. Okay, I lied – radio isn’t like the airlines here, but they should be.

And, there is one other difference – radio execs fly private and poor airline execs fly – well, on their own dirty, under-maintained planes. At least they’re in first.

But there are a lot of other legitimate similarities.

Airline customers are unhappy because the airlines have forgotten or are unwilling to treat their fliers with respect and even dignity. You have to pay to check an extra bag (costs more for extra fuel, you know). More for an aisle or window seat – once a perk for many frequent flier programs. Food – forget about it. I used miles to fly first from Phoenix to Philadelphia. I’m writing this onboard. I was just offered a sandwich. Salad? No, we’re out of them. I lost 150,000 frequent flier miles for these two tickets! At least the seat is wider.

And that’s another similarity – CEOs in both businesses have so many perks they live the good lives and have wider seats!

Radio’s younger listeners are unhappy with the repetition their parents have hated but accepted for years and years. Playlists that are tiny. Too many commercials. Bland programming. No fun. Geez – why not turn on your iPod?

Both the aviation and radio industries live by the mantra – less is more.

The airlines live for the next merger.

The radio business – well, you know.

The airlines are run by a group of maniacal CEOs who think they know everything.

Radio? No comment.

The aviation business is a monopoly that can only be challenged by startups from future mavericks like Southwest and JetBlue. Very costly.

Radio – available for free – can only be challenged by the Internet which is why radio is not interested in seeing new competitors thrive as 24/7 streaming stations thus the cavalier attitude about copyright fees for Internet streamers. Very costly.

Airlines and radio stations make their money traveling through the air.

Both have turbulence in their businesses.

And, as always, a crash landing would be catastrophic for either.

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Randy & The Rainbows

I saw a video of Randy Michaels speaking to a group of newspaper people at the Allentown Morning Call.

I’ll say this – he hasn’t lost much. He’s the same old guy. Still able to leap tall buildings in a single bound.

Seated next to wackadoodle Tribune owner Sam Zell and some poor exec from the Morning Call who looked like, “what planet are these guys from?”, Michaels rolled up his sleeves and went to work.

Randy called for honesty. More ideas. Hard work. He talked about the reality of today’s newspaper business.

It’s a good rehearsal for what he’ll have to say if and when he and Zell acquire some of the Clear Channel properties from Lee and Bain – assuming the banks finance the deal and it closes. The Clear Channel shareholders are not the only ones crossing their fingers while the parties try to reach a compromise on a $36 dollar reduced purchase price.

You may have read that Randy rankled the Los Angeles market recently when he made some untrue claims that the LA Times was bigger than almost the entire radio world out there. He raised the ire of Mary Beth Garber, the outstanding radio advocate who represents the Southern California Broadcasters Association. She’s so good she could even sell CDs to an 18 year old.

Garber skillfully disputed Michaels who was loose with the facts, but it is still classic Randy Michaels. You were expecting a change?

What doesn’t change is his passion to do almost anything to win – a quality an ice hockey fan like me kind of appreciates in some ways. Today, he’s wearing the hat of newspaper publisher. Tomorrow, could it be radio group head?

Zell has again promoted Michaels to in effect make all the major decisions now on running the newspaper and TV company.

Those poor newspaper guys must be thinking a cup of hemlock must be looking awfully good right now.

Plus, they see this band of desperados ride in from the radio business.

Lee Abrams – now that’s a real newspaperman if I’ve ever seen one.

Jerry Kersting – never met a newspaper he didn’t like to read. But acquire more newspapers for Zell? Doubtful.

The usual retinue of Michaels followers are in the house. Bobby Lawrence, Pam Taylor, Frank Wood and a small group of Clear Channel defectors.

I call the entire group -- Randy & the Rainbows.

They have arrived on the scene to create a new age Zelldom for a group of troubled businesses – local TV, newspapers and maybe – just maybe – radio.

This is a corporate statement if there ever was one – a Shirley MacLaine mindset – that through means yet defined something cosmic is due to happen over the rainbow.

Hey, I’m a believer.

While it’s hard to comprehend newspapers doing anything more to become popular in a world that doesn’t need printed publications, Randy & the Rainbows just might do it. Maybe sell the papers as fish wrappers with a code to access the real news online.

Local TV is at a crossroads – it’s main profit staple, local news is being cutback and the available audience is getting older – Randy & the Rainbows just might reinvent television – maybe as a log burning static picture like the ones we see at Christmas time except this one can actually warm the room and save on fuel costs. Who knows?

And radio – well, isn’t that why Randy hired such good radio people to cross over to the dark print side for a while. They are awaiting the arrival of tons of troubled radio stations, the way the medical residents on Grey’s Anatomy await ambulances full of potential surgery patients.

Randy Michaels is having fun again.

And he’s doing it the way he always has – a hard fighting competitor who won’t accept anything less than winning.

And when he tweaks the broadcasters in LA, one of radio’s largest markets in the country, some see a turncoat – a modern day Benedict Arnold.

I see – a calling card.

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Radio One Dollar

Radio One CEO Alfred Liggins doesn’t understand how his stock has plummeted to below one dollar a share.

While’s he’s pondering that question, he has accepted a bonus, a nice salary and it's business as usual – for him.

Many radio people are wondering how a once mighty business can fall this far with so many talented and capable people still on the payroll of the major broadcast companies.

Radio One Dollar is not alone.

You know about Citadel – or should we call it Cita-Sell -- where a $1.50 a share stock earns its CEO Farid Suleman $11 million a year. By contrast, Radio One Dollar shareholders are getting a real bargain.

Do I even have to mention Clear Channel – the largest consolidator and biggest trendsetter for the radio industry? Papa Mays and his two sons have been escaping with large compensation packages for many years. Their shareholders must be scared to death. The share price only trades at the mid to upper $20 price because greedy Wall Street money people and investors want to make a quick buck. But if the Lee and Bain deal doesn’t get done, Clear Channel shares will take a further dive and it will be ugly in San Antonio.

And don’t worry. The Clear Channel management team -- very concerned about security issues hired consultants to tell them that the Mays family needs to fly private. So what else is new?

These three companies are not alone in their you-not-us cutbacks. But they represent the companies most blatantly spitting in the faces of the employees they have fired or even retained on a shoestring – not to mention the almighty shareholders.

I have little sympathy for the shareholders who let these guys get away with murder and have failed to demand better corporate financial compensation oversight.

So how do major broadcast entities – loaded with free cash flow potential – manage to scrape up the bottom with poor performance and clueless answers for how to turn it around?

That’s what is so frustrating – it’s all needless.

Even if you don’t like consolidation – and I never have and never will – it didn’t have to turn out like this.

Take Chancellor, the company that was once run by Jimmy de Castro that later morphed into AM/FM before it wound up as collateral damage for Clear Channel.

I know. I know. It was a different time. Things were better. Radio had less competition. It still had young listeners. The record industry was still vital and Steve Jobs hadn’t developed his killer app – the iPod.

But.

Study de Castro. His New York market stations could drop a fortune on a party – one party – for advertisers and no one questioned it as long as they performed. And did they.

Try that today and Farid, Al or the Mays would have your head. It wouldn’t be prudent – unless that money went into NetJets and inflated fuel charges.

Another quality missing in many radio operators today is motivation. I always said de Castro was the Tony Robbins of radio. He was so charismatic you could understand why his managers worked so hard to deliver. Hell, even when I had differences of opinion with Jimmy – and I did – I still liked the guy.

The ability to spend your own budgets.

Someone who believes in you and makes you want to kill for them.

How about foresight?

Don’t you like to work for someone who is up on technology? I hate to mention de Castro again – but – he was one of the first radio execs I know who carried a Blackberry.

Jimmy’s wasn’t the only one who knew what he is doing.

Randy Michaels was as good a competitive programmer as existed back then. He made Jacor what it was on the back of loyalty, aggressive marketing and programming.

Mel Karmazin is another guy I liked. His bean counter, Farid Suleman, should have learned more working by his side at Infinity for all those years. Mel may have thrown nickels around like manhole covers but even today I get emails from his former programmers who say Mel is no Farid when it comes to giving programmers what they need. Of course, Farid is no Mel, either.

Emmis is a radio group paying a horrible price for being good in a bad industry. We forget Rick Cummings was the architect of the Power brand that sustains the company to this day and his boss Jeff Smulyan is one of the most people-friendly operators there is. Jeff tried to buy back his public company and take it private – the right thing to do. Shareholders prevented him in an ugly public fight. The wrong thing to do. Smulyan was acting in their interest. Check the Emmis share price today.

As much as I dislike consolidation, even I will admit that consolidation alone did not bring the radio industry to its knees.

The people who took the groups private did – and they are all still securely in their jobs while the talent around them is paying for their incompetence.

What if the Mays family didn’t didn't grow Clear Channel into an 1,100 station behemoth – what if Smulyan did? Who could argue that the Evil Empire would at least not be that evil and Emmis might have done a better job.

What if the Mays boys had chosen Jimmy de Castro to run radio – even though they surely felt the hot breath of Jacor’s Sam Zell down their backs before Zell agreed to the merger and assured the appointment of his man, Randy Michaels.

Okay, what if Clear Channel kept Michaels in charge instead of elevating John Hogan back in 2002? Is there anyone who would argue that Hogan couldn’t carry Randy’s Blackberry?

Then Joel Hollander at CBS – the wrong man for the big job. Les Moonves fixed that with his skillful hiring of a good radio man – Dan Mason. But still, Mason is still cleaning up the mess and a lot of time, good will and money has been lost.

Entercom is a closely held company of the Field family and it hasn’t really met or advanced the fate of radio under its control.

What if Michael Eisner bought stations instead of passing on consolidation? It’s hard to argue that Disney was not a better operator than Citadel or a lot of other big radio companies.

What if some of the smaller groups got to buy ten or 20 more significant properties that instead wound up in the Clear Channel or CBS portfolio?

What if. What if. What if.

So perhaps the reason we have a Radio One Dollar and a Cita-Sell today is because the fathers of radio’s consolidation movement were not and still are not ready for prime time.

A new day is coming for the media business, but it is not coming for radio until new blood deals with the harsh reality of 12 years of mismanagement and lack of leadership.

That’s the only cure – not cutbacks. Cutbacks are the excuses of CEOs who don’t have what it takes to compete in today’s world.

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Farid Einstein: Half is More

No, the CEO of Citadel is not talking about his company's stock price -- that's much lower than half.

At about $1.50 a share, what's half -- 75 cents?

Farid Suleman, the bean counter loosely disguised as a wannabe Jack Welsh, is considering cutting his sales staff.

Brilliant.

And you wonder why this hapless radio industry can't get it turned around.

He believes as much as half of revenues would come in with or without a salesperson. That's right. Open mouth, put foot in. Suleman as quoted in Inside Radio added "why are we paying commissions for that revenue?"

Note that he did not say why Citadel is paying him $11 million (including his tax bill) for driving the company into the penny stock arena.

Here is the genius idea he is kicking around: employ a salaried staff (imagine that pay grade) who would handle "service or fulfillment" of the ads he thinks in his delirium would come to Citadel by magic without salespeople.

Then the Mad Man Ad Man would pay higher commissions to those poor suckers who would be left to attract and develop new business. I presume that includes free Nexium for heartburn and tranquilizers for the pressure their boss would put on them since obviously the problem with Citadel is everyone other than the boss.

Farid has already waved his magic wand to consolidate one national sales manager per cluster -- after all, he isn't going to lose his job -- only everybody else.

Someone stop this guy.

He actually believes -- and look at the quotation marks here -- "We have to re-evaluate how we do business. You can't continue to invest in programming and sales if you can't get revenue for that?"

What?

He's investing in programming and sales? Who knew.

I now officially apologize to Clear Channel Radio President John Hogan. I used to think he was the biggest empty suit in the business but now it just has to be Farid. Hogan is not dumb enough to think up Farid's cockamamie nuclear option. And I mean that.

Farid has been slicing, dicing and damaging his company because he just doesn't know how to run a radio company. He is poised to lose Sean Hannity on Citadel-owned ABC because as Einstein puts it, "the era of doing stupid deals is over".

Well, Farid better hope it's not. Because his board of directors pays his $11 million a year for him to drive their share price down and everyone including Teddy Forstmann has swallowed their tongues. Executive compensation oversight? Not at Citadel. Talk about stupid deals.

And he's promising more cutbacks: "Every programming decision has to be evaluated in the light of the daypart and to make sure that it is profitable".

Huh?

Hey all you great programmers out there -- is that how you do it? Create programming by daypart so it is profitable or do you program by daypart to gain the maximum available audience and then your sales professionals go out and sell it.

Oh, sorry -- I forgot. Under Suleman half the business gets called in and the other half gets developed by underpaid people who get a slightly higher commission.

Alright. Enough of Suleman's logic. Let's help him out. I know he has never really worked on the air or in programming. I don't think he ever sold anything. He was Mel Karmazin's bookkeeper -- that was his ticket.

Remember that this article you are now reading on Inside Music Media -- is blocked from corporate distribution so Citadel employees can't access it at work. So I will have to rely on my network of elves to send the following antidote to Farid's self destructive plan to jam the spam.

Ready, Farid?

Forget reinventing the wheel.

Just dial 610-667-8400.

That's WBEB radio in Philadelphia. Ask for Jerry Lee, the owner. He has your future all tested and ready to give away for free. I'm serious -- call him, he wants radio to get bigger and is willing to help anyone who will understand that you spend money to make money.

Yahoo cuts budget and loses money.

Google spends and makes.

Dell cuts.

Apple spends.

You get the idea.

Jerry Lee will tell you to cut your inventory, raise your rates, spend on promotion (lots of TV), test your music and your ads as a service to your advertisers. Let your sales manager get rich a la Blaise Howard, his capable sales genius. Let your salespeople make more money not less -- the best salespeople want commission-only not salary and commission. You don't see any of WBEB's salespeople going anywhere.

WBEB outperforms a bad economy, a dying industry, incompetent management at other stations in the market and does nothing but make money.

Let me repeat that -- make money.

So, assuming this message didn't self destruct before it got to Farid's corporate email -- let's make it real simple.

1. You don't cut people. You add them.

2. Sales will not come to you on their own -- this isn't fantasy land.

3. Salespeople need to get rich -- and when they do, you get rich.

4. Programmers are not salespeople -- they don't program by profitable dayparts. Anyone who asks them to doesn't know what radio is.

5. If you can't stop the brain drain from Citadel, make sure you're the next one to go. Betcha someone else in the executive suite could do better. How could they do worse than $1.50 a share?

6. Call -- no drive down the Jersey Turnpike to Philly -- to see Jerry Lee. Kiss his -- well, ring. Ask him to forgive you for making a mockery of a great industry. Your penance is to say two Our Fathers, and two Hail Marys and hire someone who can run a major radio group. You can still fly private. Just don't touch anything or make decisions.

I wish this was all made up -- that I could say never mind -- and it would all go away. But it won't because Farid Einstein is actually proposing these changes in public -- another dumb move.

Farid is a danger to himself, his company and his once proud industry and he should be replaced by -- anybody.

There is a reason Citadel is a worthless stock -- look to its leader -- the one who comes up with worthless ideas like the ones I am sharing with you today.

The speed of the leader determines the speed of the team -- and until Suleman is gone Citadel is stuck with a CEO who keeps proving he is not ready for prime time even though his employees are.

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New Technology Is Already Replacing Radio

My longtime friend Dan Mason, the CBS Radio President who is leading the dramatic turnaround of the company made a statement the other day about technology and radio.

Dan reportedly told his new media road show in New York that "$1 billion in ad dollars were telling you that the iPod or satellite radio will lead to the death of radio. That's a myth. To say that an iPod or satellite radio, with little or no human connection, will ever replace radio is absurd." (from PaidContent.org).

Well, maybe not satellite radio, but iPods have already changed the dynamic for radio. Just ask a young person who is not listening to a Walkman and is listening to an iPod. Not radio. But an MP3 player.

CBS is moving in the direction of trying to get radio into new technology. It revealed a new media player that will feature several radio stations at once including Internet brands. They've jumped into the personalized radio business with Last.FM. Have a deal with AOL. Their own individual station streams and so on.

My experience with the next generation does not bode well for any strategy that proliferates traditional radio onto new delivery systems.

The next generation doesn't like radio.

Not the stations. Not the concept. There's simply less need for it in their lives.

New technologies will not only replace radio among the next generation, they already have. And this generation is huge -- with as many Gen Y'ers as there are baby boomers.

I agree with Dan that the idea that new technologies will replace radio is -- to use his word -- "absurd" if you're talking about older Gen X'ers and baby boomers. This group loves radio and will appreciate receiving something they already like on their computers or mobile devices.

But that's as far as you can go.

Without the next generation the radio business will continue to hit the wall. Once the present economic downturn ends -- still a long way off -- there won't be enough new young listeners to help radio continue to grow. It becomes a losing proposition. More radio listeners die and fewer new radio listeners use traditional radio.

The next generation wants to stop, start, time-delay and delete its programming.

This generation wants to mash it up -- have a say in what it sounds like or how it is used.

They want to deliver it to each other -- share it -- at will.

They want community (what we used to call local radio) through social networking online.

One of the hardest things for me to deal with in my years of working with the next generation is that they don't like radio and don't understand what I like about it.

When I describe it, they say what I am describing is not what they hear on the radio.

We're an industry in denial that technology has changed the game. But only radio people have the power to adapt and create new content for a new generation and on the devices they use.

But to begin, we have to understand that more has changed than how to deliver radio programming.

It's not about the technology.

It's the sociology.

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Radio's Salary Cap

Radio groups that have been chopping away at expenses are beginning to see the ratings repercussions of their actions.

Morning shows -- down and in some cases out.

Total ratings down (especially with a weakened morning show).

The decision makers decided they had to cut to the bone and their companies are getting ready to pay the price. You can't get top rates for declining shares. The economic downturn is prompting some advertisers not to buy as deeply in the top ranked stations for their desired demographics. Where they might have bought four or five deep, soon it will be three. After all, these are hard times for the media business.

Lower revenues mean the necessity of lower expenses. And, I guess you could understand how the many radio groups that have been forced to lay off people and drastically cut budgets had to do something.

But they are going about it in the wrong way.

Just as in many professional sports, the radio industry now has a de facto salary cap.

And while some CEOs are trying to be the Billy Bean of radio (Billy Bean, the Oakland A's GM who fields a competitive team on a shoestring budget), the answer is in capology.

Capology in football and other sports such as hockey requires executives to look at the total amount of revenue -- in their case -- that the league will allow them to spend on players. The teams then have to decide whether locking in a long-term contract for, say New England Patriot's quarterback Tom Brady, is a strategy they can build upon.

That's an easy one, right?

Obviously these teams don't have the money to pay whatever they want for whatever they need.

Nowadays, neither does radio.

Except radio managers are letting their Tom Bradys go (morning personalities) and replacing them with cheaper second or third string talent. This is why you won't have to look too closely to see their pain as the ratings continue to reflect such reckless moves.

If the group mandates a budget cut, then the manager must be responsible for making the right decision or -- as I'd like to put it -- assembling the best talent within the dictated salary cap.

Here's where managers have been failing.

They are rightfully nervous that the next axing will be their job so they are dutifully making the cuts that they are being forced to make.

The problem is -- they are making the wrong cuts.

Example: look at the stations that fired morning personalities in the last six to eight months. It's hard to find many that have maintained the fired personality's numbers. Worse yet, the overall station ratings are declining and they have made it more difficult for their salespeople to get their best advertising rates.

The result: financial disaster -- the opposite of what group managers wanted.

So, where to begin?

The GM is the general manager as well as head coach.

He or she is directly responsible to corporate for the stations profitability, ratings and operation. They must fight harder for the budgets they need -- that is, the top limit of the de facto salary cap. I think a lot of managers -- not all -- have been wimpy about fighting for the money necessary to deliver results. Ironically, in the end, they could pay with their jobs.

The morning show is a number one priority because it typically can generate 40 or 50 percent of the stations total revenues. This is where panicked managers are cutting first because of the high salary expense, but because the first cut is the deepest doesn't necessarily mean it is the most prudent.

Instead, the morning show should be fully funded and performing talent locked into long-term contracts. I'll write more about this separately because I think there are innovative ways to pay less for morning talent by giving them the one thing station's either overlook or refuse to do.

The program director is a critical component to ratings success. Put him or her on the air to save money if necessary, but pay for the best you can find. The PD is your wide receiver -- without whom your quarterback is useless. You must have a morning show upon which the PD can build the station's ratings all day.

Sales managers shouldn't see cutbacks -- they should see more sales incentives. Instead of forcing them to take accounts away from successful salespeople or upping the ante on commission rates after salespeople have achieved some success, help them get filthy rich as they make you filthy rich.

I read recently that my old buddy Randy Michaels was critical of print salesmen in his new job at Tribune for leaving money on the table. He was calling for the extra effort to bring in the extra revenue. He is right, but the rewards system needs to be tied directly and fairly to the production of the sales staff.

There are lesser players at most stations these days. Where once the afternoon drive show was highly personality based, many stations have gone bland to -- repeat after me, please -- save money. Afternoons are a great place to develop talent (refer back to a good PD). It obviously won't cost what a morning personality will cost, but it will cost more than voice tracking or paying a rent-a-jock to attempt to play personality radio.

Each team needs as much talent as it can bring in -- under the salary cap.

So, as you're shaking your head at the ratings that are now coming out wondering -- how did we get ourselves into this fine mess -- remember, this --

Budgets are one thing, but good judgment is then again something totally different.

From now on if radio groups would embrace capology when taking into account budget cuts necessitated by declining revenue, then their managers wouldn't have to give away the franchise in order to save their own jobs.

I'm just sayin'.

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The Attention Span Problem

When public radio has to consider making its programs shorter because young listeners won't listen, we officially have a documented attention span problem.

Of course, it doesn't take any more than a few minutes in the company of the next generation before you realize that the number one problem going forward isn't too many commercials or too little new music or stupid djs or lack of social networking.

That, too.

But the inability or unwillingness of young listeners to extend their listening is problem number one. It deserves discussion, understanding and then innovation.

In NPR's case listening is up but for shorter periods. NPR is the last frontier of taking the time to do it right. If NPR is feeling the heat, commercial stations have a big problem they may not care to know they have.

NPR's Morning Edition has almost 13 million listeners a week and is the second most listened to national radio program behind Rush Limbaugh. (We will reserve our discussion on local radio for another day as NPR is a national entity -- and a damn successful one at that).

Young listeners are going to be a challenge. In terrestrial radio, very little meaningful programming is aimed at them because young listeners have abandoned radio for the Internet and mobile world. But all listeners are getting antsy.

What's a radio station to do?

1. Break the programming down into smaller chunks. That is, one hour of music is fine if you're in the mood to listen for an hour. You'll rarely find a young person doing that. In the past radio worked well with block programming -- variable length shows at different times. Growing up I remember "the adults" listening to WOR, New York that had, say, a 15-minute newscast, then a 45-minute program with the legendary Jean Sheppard. There was a different standard for program length. You just had to stay tuned. Maybe it's a 45-minute show. Maybe a 55-minute program on health. The all-night show tended to be one long block figuring that the station was providing company for night owls. Back to the future. Even a top 40 station can break into a five song countdown anywhere on its clock -- say, featuring the five newest releases in the genre.

2. Play to multitaskers. Everyone seems to be a multitasker today even older demographics. So content should be created with that in mind. Broadcast to them and ask them to do something else -- pick up a Blackberry and text in to win a mortgage payment. This cooperates with the inevitable. Too frequently radio programming is created under the misguided belief that the station has the full attention of their listeners. They don't. They won't.

3. Several years ago a student lab I taught at USC was dealing with the issue of radio commercials. It concluded that Bill Drake was right -- play one commercial, play a song, play another commercial and so on. A few songs in a row after that was fine. What they didn't care for is four minutes in a row. Their limit, when pressed in this unscientific but revealing setting, was one commercial in a row. And no, they didn't care if it was a minute, a 30 or a so-called "blink".

4. Billboarding what's ahead doesn't necessarily help with short attention span listeners. How often do radio stations tell you four or five artists that will be played next and how often do listeners tune out anyway? I've concluded that today's listener is more concerned about what they might miss than what you say is upcoming. That's a big difference. If a station gains the reputation for being live and unpredictable, it will teach even older listeners -- don't touch that dial.

5. Eliminating fluff and clutter is more in the stations interest than ever before -- and it was always in the station's best interest. Too much chatter. Promos that are repetitious and long. Features that, in the end, don't matter. Endless commercials. Traffic (in some formats). Just about any feature that can be sold to an advertiser is probably suspect here. Clutter is an open invitation to go elsewhere.

I found that teaching young people involved new techniques to keep their attention -- and I don't mean PowerPoint slides. They hate that. Different tempos in presenting information. Lots of discussion. Bits -- yes, bits -- that help launch a topic. In a recent class I asked everyone to bring me one social networking site that I may never have heard of (you know, other than MySpace or Facebook). For 45 minutes, the students went to the computer and put their sites on large screens visible to all. In the end, many techniques were involved in communicating for an hour and fifty minute class. When I went to college, someone wound the professor up and he or she went like the energizer bunny for two hours.

All of us -- no matter how old we are -- have a shorter attention span in this fast-paced media world.

Adapting to shorter attention spans is easier than ramming HD technology down the throats of listeners. My programming friends will have a field day with this challenge because that's what radio programmers do -- adapt and change.

This reminds me that I have been asked -- and I have accepted -- an invitation to teach at the upcoming Conclave in Minneapolis. Somehow I have managed to miss this great event which radio people revere. I'll tell you more in the future, but it will be fun to have a "class" of real live radio executives talking about traditional and new media. And will be great fun to meet many of you in person and see old friends.

One more thing -- you win the short attention span battle one minute at a time -- not one show at a time.

This is something we definitely can do.

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Radio's Deadly Game of Beat the Bomb

For those who may not remember it, radio (back when it did great on-air contests) used to feature a game called Beat the Bomb.

My first recollection of it was at the legendary top 40 station WFIL in Philadelphia -- either under the brilliant programmers Jim Hilliard or the late Jay Cook.

A listener is chosen at random and the sound effect of a bomb ticks for up to 60 seconds on-the-air. However, anytime along the way if the bomb goes off, the listener loses a chance to win up to $60. The idea is to shout STOP before the bomb goes off or you lose everything.

Today's radio industry is playing a deadlier version of Beat the Bomb with its future.

Radio One stock is selling for under $1. Do you hear anyone yelling STOP as its chief officer gets a big bonus -- that's right a bonus -- while Radio One's stock teeters on the brink of being delisted from the stock exchange. Think of it. Back then a lucky contestant could potentially make over 60 times more money by playing a contest than by owning Radio One stock today.

Citadel is worth under one-fifty a share -- that's one dollar and fifty cents yet its shareholders thought CEO Farid Suleman was worth $11 million in compensation last year. You'd think a governance board would yell STOP before Citadel gets into trouble over executive compensation.

Clear Channel is adrift -- thousands of talented people working on shoe string budgets for entertaining their listeners while the Mays boys and their father are flying private amidst concerns about their security. You read that right -- their security. Someone please yell STOP before the place implodes from neglect.

Radio is an industry without a meaningful Internet strategy -- impossible to imagine from the best producers of content in the world. Mobile strategy -- nothing. Does this mean the programmers are incapable of competing in that arena or that their bosses are unwilling?

The radio industry is just now acknowledging the brain drain in the radio industry. The trades are all abuzz. I guess someone just figured out that a lot of the good and talented ones got away -- more precisely were driven away and that it puts radio in peril. As a result the best and the brightest don't want a career in this business.

Again and again it's the handful of people -- could I call them thieves -- running away with their shareholders money while delivering little or no return on investment. You'd think the shareholders would yell STOP before the big explosion.

Look, generational and technological changes have had a great impact on the radio industry -- no question -- but it is this handful of bandidos who have dealt the most severe blow to broadcasting.

One, they have put the interests of a few over the interests of many including their employees and shareholders.

Two, they are guilty of not leading.

There are exceptions.

Dan Mason's focus on programming terrestrial radio to the available audience instead of the unavailable young audience as well as his efforts to make something of online radio through AOL, its own websites and CBS-owned Last.FM qualifies as one. There's more to do -- such as program channels that are not terrestrial channels -- aimed at young listeners. And CBS' inclusion of HD sub-channels in the strategy seem misguided, yet -- who has a more aggressive posture in new media among traditional broadcasters? Arguably, CBS Radio is the leader.

Saga CEO Ed Christian did something that impressed me the other day. He took out an ad in my alma mater -- Inside Radio -- and he acknowledged that radio is having trouble attracting good people to the business. While complimenting his loyal current managers, he admitted that he's looking to find more good ones. It's about time someone confronted this issue head on.

Former RAB CEO Bill Stakelin's radio group is hiring additional salespeople. Hooray. Copy Bill. When you need to improve sales, improve and grow your sales staff.

Cumulus has drawn a line in the sand on affordable audience ratings -- that line is in small markets. It is looking away from Arbitron for better alternatives. This is a good thing if it doesn't trash the industry standard accepted by ad agencies everywhere -- Arbitron. And it will be even better when Arbitron responds by improving its small market service and Cumulus winds up saying "never mind" to a new initiative -- which is where I'm placing my bet right now.

Some radio companies and people have decided to stop playing Beat the Bomb with their future, but many continue to risk it all for nothing.

At least in the radio contest version of Beat the Bomb, the listener had a chance to win something.

In the radio consolidators' version, it's only a matter of time before everything blows up and everyone loses.

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Radiohead -- One and Done

So much for Radiohead's publicity-laced experiment to give their music away for free online -- or more precisely, let their fans determine if they are going to pay for it.

The band recently announced there will be no more pay-if-you-like releases from Radiohead.

I read an account of the story online the other day and the reporter wrote "The band remained quiet about whether the experiment was a success with so many fans opting not to pay anything for "In Rainbows"."

Well, let's see.

If it were a success, don't you think Radiohead would be repeating the offer? Instead, they're moving on. But to what?

The Radiohead experiment may have also helped launch Trent Reznor's Nine Inch Nails strategy of letting the marketplace decide. Coldplay is now promising to give away its new single "Violet Hill". The band's website crashed once the fans learned of the news.

But who needs free music from the artists when young people are able to easily use bit torrent programs to steal what they want?

Radiohead may have been reacting to its departure from EMI when it decided to act in loco-recordis -- which is my Latin phrase for in place of a record label.

But in spite of all the recent defections -- Madonna to Live Nation for touring, U2 to Live Nation without leaving its record label, Jay Z to Live Nation as an entrepreneurial association -- maybe artists are proving they really need record labels after all.

Of course they do.

But not how most of the labels are operating today.

Last in on digital downloading.

Resistant to mash-ups.

Incompetent to be fronting 360 deals for established artists.

Still afraid to cut their trade association -- the RIAA -- off at the knees on their ineffective piracy lawsuit barrage.

Artists need labels because they are proving that they had better stick to singing. But the labels haven't been keeping up so credit some artists with at least trying to be innovative when their labels refuse.

The labels are caught in a disaster of their own creation.

They should have licensed the original Napster back in the day and even though they half-heartily tried, they should have persisted.

They should have developed Plan B -- when they realized that digital downloading would cut into their CD sales. Year after year, they either shelve or do not have a Plan B.

The labels should have increased their budgets for finding and developing new acts. They were helpless to do so because they themselves made cutting expenses a priority (are you reading this radio consolidators?).

Because in the end, if you want to sell lots music, you have to make lots of music.

Not cutback finding bands or developing artists.

Not become obsessed with retaining CD sales or relying to heavily on ring tone sales.

So, Radiohead is dead in their imitation of Clive Davis. Hey, even Clive is being kicked aside -- as if the labels have a deep bench.

What we are learning is that in spite of their recent ineptitude, the music industry may yet need the record labels if there is to be a future.

What will it be?

Stuffing CDs into tabloid newspapers as Prince did to sell concert tickets?

Putting a tip jar on a web site and asking fans to choose to pay?

Doing deals with Live Nation -- which are nothing more than expensive long-term contracts for big name acts and not a solution to the distribution problem?

I don't think so.

Does the record industry possibly have one last good try at adapting to the digital world?

Until new artists are discovered and talented acts are developed, music cannot thrive.

Whether music is available on a CD or online is irrelevant -- if it's not (to borrow an outdated vinyl phrase) in the grooves.

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HD and Apple -- Imperfect Together

Now that the Polk iSonic is on sale in Apple stores nationwide -- and soon to be available at Best Buy can we talk?

I mean this is as close as an HD radio is going to get to Apple coolness.

The Polk iSonic lets listeners buy the songs they hear on HD radio stations -- that is, if only there were HD radio stations and listeners to those HD stations.

If you want to hear loud laughing just describe the iSonic to a group of young people.

"You can now 1) buy an HD radio that has a 2) built in feature that allows users to tag whatever song they want. Then all you have to do is 3) sync your iPod and you get a chance to 4) buy the songs through the iTunes music store". Simple as one, two, three, four."

Okay, let me try this another way.

You're a big executive with access to investment capital.

I walk in and pitch you on a technology that involves a radio that no one owns (and that they aren't likely to start buying) which with burdensome technology to buy music off HD channels.

You ask me, "Are the big consolidators behind this"?

I say, "Of course --Clear Channel (you can't get any bigger than that), Cox, CBS, Cumulus -- all the consolidators that begin with a "C" and some that start with an "E" and a "G". How's that for impressive?"

You ask me, "Did you bring a spreadsheet on the sale of radios -- HD and analog -- over the past five years"?

I say, "I left it on the plane -- you know that American Airlines MD-80 that I had to get off of real quickly".

You ask me, "So how will these new iTunes tagging HD radios stack up with the sale of iPods"?

I say, "Exactly".

You then kick my butt out of your office and tell me never to return.

Why hasn't this happened already?

Why is HD news like the Second Coming?

By the way, I don't want to rain on your parade but most young people steal their music through bit torrent programs -- they don't buy. That's why the record industry is in so much trouble. Anyone listening?

And young people are evacuating from radio faster than the New Orleans residents did from Katrina.

HD is dead.

The issue should be dead because radio is going to be -- well, you get it.

Follow the logic:

1. Consolidators won't program HD channels with compelling programming.

2. Some cities barely have even a bad HD channel. They have no channels. (Maybe that's actually good).

3. HD radios aren't exactly flying off the shelves at Best Buy and Radio Shack.

4. HD tagging for later use with iTunes is a joke. No iTunes user is going to tag music on a radio they won't buy for a radio station that won't bother to program compelling sub-channels.

The HD issue keeps getting raised by the HD Alliance and iBiquity.

They are misleading radio people into thinking that under some scenario of persistence HD radio will eventually help the declining radio industry.

HD isn't going to attract the much-needed next generation -- they don't like the main channels on terrestrial radio. Hell, as each day goes on, they listen less to radio -- even casual listening.

HD radio isn't going to help with older listeners. They are relatively happy with what they grew up with -- there's plenty of choice for them on analog channels. And you'd be assuming these older listeners actually want choice.

Shut HD down. It's not helpful to radio folks who are trying to turn a giant industry around on a dime.

Don't run their free spots -- even at 3 in the morning.

Don't continue to embarrass your main channels by making local HD channels the dumpster of the broadcasting spectrum.

And don't kid yourself.

HD is a sham.

New media is the space where terrestrial radio must focus if it wants to compete in a changing media world.

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Cell Phones Are Not Transistor Radios

There's new research I thought you'd like to know about that is in direct conflict with what I have been observing in my work with the next generation.

I'll report. You decide.

Let's breakdown a fairly recent RCW Wireless news account:

"A recent study from TNS Global Telecoms found that 43% of all mobile users listen to some form of music on their phones, and 73% of smartphones double as music players. And while the use of MP3 players on phones is up 78% in the last year, mobile radio uptake has seen a whopping 140% increase".

The high use of mobile devices for listening to music is not surprising, but mobile radio listening is. The reason may be that this study was worldwide in scope including countries where radio has not yet committed consolidated suicide.

"TNS — which polled an astounding 16,000 consumers in 29 countries for the study — also found that 45% of users list AM/FM as one of the top three factors in purchasing a mobile phone".

I'll make you a money bet that if you polled U.S. consumers only, you would find AM/FM's effect on purchasing a mobile phone almost negligible.

Ask anyone.

Who do you know that requires AM/FM access on a mobile device? The next generation will tell you that they have moved on beyond radio. It's simply not important to them.

"Meanwhile, a recent study from the Pew Internet & American Life Project found that 17% of U.S. mobile users play music on their phones, nearly matching the 19% who use mobile e-mail or surf the wireless Web".

Note the lower use of mobile phones for listening to music. Keep in mind many of these folks listen to MP3s not streaming radio.

"Side-loaded tunes account for much of that activity, it seems. But an increasing number of listeners are tuning in to streaming mobile stations including satellite radio from Sirius and XM as well as terrestrial stations".

This is looking at mobile music through rose-colored glasses.

What's scary is the next great divide forming between proponents of live mobile radio and the next generation.

The next generation -- Gen Y -- has already been born. They are in various stages of growing up. Some are in college and soon to graduate. As a group they represent numbers equal to or greater than the huge baby boom population so without them there is no future.

My personal observations are:

1. Young people increasingly want to time delay their entertainment. They want to stop it, start it, advance it -- control it the way older people use a TiVo for television entertainment. This indicates to me that Gen Y would be a perfect market for podcasting once the music royalty issues are worked out. That's why I often call podcasting the new radio.

2. Radio does not interest the next generation -- at least not the brand that terrestrial operators are offering. They are more likely to enjoy Internet streams from "nobodies" if they are still up and running after the burdensome CRB ruling. The unfortunate overtaxing of Internet streamers at the hands of the CRB has put a crimp in what could be a great growth medium.

3. The next generation wants control of their music. They are, in my opinion, less likely to let content providers dictate the terms of the entertainment. I've mentioned this before and I'll say it again -- mash-ups are growing increasingly popular with this segment. In short, they want to touch, shape, edit, advance and change their listening experience.

None of the above cooperates with where radio and satellite heads are at right now.

Bright people looking for innovative answers must first study the market -- the way Apple's Steve Jobs' does by instinct.

To put it bluntly, the next generation -- the one you need -- doesn't want to save radio.

They want something different, new -- something they have a hand in programming.

This is lesson number one for those taking notes.

The cell phone may be everywhere but consumers don't necessarily want it to do everything.

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Radio & Records -- Playing Not To Lose

As many of you know I love ice hockey.

More specifically, I love the Philadelphia Flyers for their physical play and great passion for winning.

I see a lot of similarities between hockey and life. In fact my son and daughter were raised on Flyers hockey from six months old.

The Flyers never give up, I told them.

Look at the Hound (Bob Kelly) in the corner mucking it up trying to make something happen, I used to say. The lesson is obvious.

Stand up and fight for what's worth fighting for.

When you lose, you don't really lose unless you give up. There's always something to build on.

But recently it has occurred to me from watching the Flyers during the regular season and in the NHL playoffs that sometimes they look like they are playing not to lose -- in other words, they're not playing to win. That's why they get tentative and cough up a goal in the final seconds to lose the game. Last night's game -- an exception.

We sometimes do the same thing in life -- and specifically in two businesses of which I am really fond -- radio and records.

Somehow you get the feeling that these two ex-powerhouses are concerned with trying not to give up another goal (profits, CDs, listeners, advertisers -- you name it). They're not on their game. They are on the defensive.

Instead of blazing the way into the digital future, the record industry has been trying to hold on to CD market share since 2000.

Not figure a way to handle Napster.

Not get an answer to illegal filesharing.

Neither iTunes nor iPod can make the labels go on the offensive -- other than suing people. Occasionally, they buy a small company to show that they can or they do an unremarkable deal. But you get the feeling that if the mighty record labels wanted to score with two minutes left, they could -- if they played to win.

Instead of getting into the mobile and Internet content businesses, the radio industry has also played defense -- in hockey we might call it playing the "trap" -- trying to keep others from "scoring" in new media instead of pulling out the stops and going for it.

The analogy breaks down here: in hockey you'd put the best men on the ice to win, but in radio they've fired, retired or demoted their best players and benched the others.

I have a hard time believing that these two industries wouldn't be doing a lot better in their quest to find a meaningful and profitable role in the world of new media -- but not by complaining to the referees (the courts, by the RIAA), threatening to field a team of minor leaguers (the ones who will work cheaply) or using players from their farm teams to win in the big leagues -- that is if they still have a farm team.

In life, you play to win but sometimes you lose.

In radio and records, they play not to lose and sometimes hope to win.

If these two mediums are not ready to take a few chances and play with the talent they have "on the bench", they soon will be out of competition in their fight for survival.

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