Radio on Hospice

If you go by my mail, a lot of readers are scratching their heads about Emmis CEO Jeff Smulyan's decision to give 41-year old Chief Financial Officer Patrick Walsh the additional responsibility of running U.S. radio operations.

The radio industry sure has a lot of financial wizards running things.

It's clear that the radio industry still doesn't get it.

The problem with radio is not money.

It's worse.

It's a lack of compelling and addictive content. Failure to create content for the mobile world and a terrible misunderstanding of what the Internet can mean in terms of future revenue. Plus a total disregard for the critical importance of social networking.

Okay, I'm nuts. I'm all wrong. Radio needs another numbers cruncher.

Let's see -- we have Fagreed Suleman, and I'm not saying Walsh is Suleman -- just pointing out the financial pedigree. Of course, I wish Walsh success and hope he can ram this computer down my throat and say, "Told you so, I turned it around".

In the meantime, let me use my computer's RAM to make my case:

Have you taken a look at the prices stations are getting in morning drive these days?

Some major group owners that used to get thousands of dollars a spot in LA morning drive are getting under $1,o00 -- and dropping. And that's LA. Main Street's got its own problems. If a radio station makes 50% of its total revenue in morning drive, then you can obviously see the need for a financial guy running a radio company.

That is, if you're a radio CEO.

I'm partial to programmers running things -- I admit it, because they at least know something about programming. Not all of their decisions are good, but they've got a better batting average than most. They know the product. I can guarantee you it is not their idea to cutback local content or local people.

Yet, even programming-minded operators are being forced to cut morning talent to save money. At Citadel, Fagreed would just pipe in an over-the-hill morning show from another one of his markets. At least a programming-type knows that you need a live, local morning show in the market.

Okay, so we're down drastically in morning drive revenue and we acknowledge that morning drive is where we make our profit. Now what?

If you're a radio exec these days, you cut costs, right?

Look where that has gotten them. Nowhere -- fast.

Then, it's logical that if you've been trained by the numbers, you look elsewhere to cut costs. After all, when expenses exceed income you cut costs, right?

Wrong again.

Only if you want to put radio in the hospice program. You know, the patient is dying and you just want to make things as comfortable as you can. It can't be saved, but at least it can live a little longer.

Because if the patient could be saved, you would do surgery. You'd look to cure the ills and treat the maladies and make the station healthy again. I don't see anyone in radio really trying to save the patient.

The radio industry is the hospice program -- at least in the sense that hospice is the course of last resort.

I have a lot of respect for hospice workers. My family and maybe yours has experienced their many kindnesses and the dignity with which they treat the terminally ill. So in that respect, my comparison between radio and hospice ends.

Radio executives are cruel.

They don't care about their talented employees or their families. They are worried about themselves -- and surprisingly, not even their shareholders. Dignity from a radio CEO? I haven't seen many cases of that in the past year.

But when I say radio is on hospice I mean it is on its last legs.

If you plan to be an auto retailer, you don't cut out all your cars and bring a few rentals cars in from another city and call that a business.

But in radio, you fire the local talent and give local advertisers nothing to buy other than whatever you schlepped in from another market.

There's no there there anymore in radio.

The other day I said Phoenix is off 36% right now. You know, a little market like Phoenix. That's a whopping 36% and I'll bet the first quarter of 2009 won't get better.

A bean counter sees an opportunity to cut more costs. You know the drill -- if your expenses exceed your income, you cut costs, right?

What the groups should be doing is investing in something to sell. Hey, want to know why buyers are not going ga-ga over morning radio? What's to go ga-ga over? You've cut everything either down or out.

Now a programming mentality will tell you that you have to get listeners in order to sell advertising. Note I said listeners first. So cutting back on programming -- which is what bean counters do -- is not an option if you want to succeed.

Hospice workers give their patients medication to ease the pain.

Radio groups inflict more pain by firing loyal people before the Christmas holidays.

And this brings me back to what's eating the radio business alive.

Sure, the next generation has moved on. Radio lost them from neglect. They're only available in new media -- a place radio CEOs know nothing about.

But the reason radio has dropped off the face of the earth in billing, morning drive and compelling programming is because radio was never meant to be a big business. And it was overvalued (in terms of multiples) to siphon larger sale prices from willing investors -- a strategy that now has come back to haunt the values of radio properties.

Radio was a bad candidate for consolidation back in the mid-90's but no one really cared. If those unbelievable debt structures weren't an indication, then how about the fact that radio is really a local mom and pop business.

Sorry guys, you ruined a good thing by taking it to Wall Street.

And now, we still can't seem to learn our lessons that Wall Street is not the answer for radio. That's why we keep turning to the magicians with financial resumes to bail us out of the mess we've created.

It should be the other way around.

May I make a radical suggestion?

Starting tomorrow, every group owner breaks his or her company into little companies. Have 20 markets? You now have 20 local independent businesses -- I said independent.

Are you still with me here?

Then, put someone local in charge of each business. Preferably someone who actually ran or programmed a radio station successfully.

So far, no brain surgery, right?

Tell them they are in the content business not just terrestrial radio. Give them a budget. Tell them what you expect. Put it in writing. Make it simple (one page). Put a time frame on it (say, a year or two). Get lost and leave them alone.

Reward the "local businesses" that do well. Find new people to run the ones still failing. Do not -- I repeat -- do not make one local manager run two markets because he or she did a good job in any one market. That's just more consolihallucination.

What radio CEOs don't want to hear is that their stations are worth next to nothing -- certainly under $1 a share -- for a good reason.

Radio is not a national business.

At best, it is a patchwork of local businesses best run by local content people and marketers.

Remember when consolidators would buy a new cluster back in the post-1996 days, all that revenue poured right into the acquiring group and their stock went up? More cash flow -- by acquisition.

That was before some of these not-ready-for-primetime players tried to actually run the acquired properties with their own cockamamie regional managers, corporate b.s. and national economies of scale.

The reason these acquisitions did worse the longer the acquiring group owned them is because the buyers didn't have the skills to run what they bought. Look at their report card on the stock exchange board.

Bankruptcies, stations going silent, auto-moron stations that run by themselves with bland foreign programming and formats on the cheap are not the answer to a dying patient.

Call the doctor -- a specialist, if necessary. Someone who went to medical school (or in this case, at least worked in a radio station for starters).

You can't cure the mess radio CEOs have gotten this proud industry into until their boards either remove them from power or until one of them starts running their radio group as a cluster of local, independent businesses.

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