Radio GaGa
What do you do if you’re billions in debt?
Let’s say you’re already paying $1 billion a year in interest on $18 billion in debt and $4.5 billion is due in 2014 yet your company only generates $200 million in net profit each year?
If you’re Clear Channel radio, the largest radio conglomerate in the nation, you consider some extreme action because $200 million this year plus $200 million more for the next two years is a LONG way from $4.5 billion.
So, you start by hiring Bob Pittman, former head at MTV, to future-think radio and the Internet, to lean on creditors to restructure the debt and to lobby Congress for more changes to FCC rules regarding radio ownership. And, of course, you cut expenses, like payroll.
This is what deregulation of the media has brought us.
Let’s back up to the mid-90s. After a great deal of lobbying, you know, giving Congress boatloads of money to change the rules in your favor (see: Wall Street 1998), the FCC altered the restrictions limiting ownership of stations in one market. Under the old rules you could not own more than two stations in any market.
So, the explosion of acquisitions and consolidation began. Fifteen years later Clear Channel owns over 1,200 stations. They bought up so many that the FCC made them sell some along the way because even under the money-buys-influence rules of the FCC, there apparently was a line too far.
Where does all the money come from to buy all these stations? From borrowing money, billions of it. Now all this mountain of debt is coming due and CC is searching for a way to dig out. Actually, some of it has come due in the last two years and one solution Clear Channel came up with was to have their Billboard division borrow $2.5 billion to give to the radio division to pay $700 million in loans due.
But, the creditors will only allow those shenanigans so long so CC has about 2 ½ years to turn those $200 million magic beans into $4.5 billion.
How does that affect us? Well, as of this week it means a real loss of local news, talk and personality on our radio stations. Just three months ago the entire traffic reporting division at KFAB was let go so traffic updates could now be operated by a company located in Minneapolis. Yes, our traffic reports now come from Minnesota! Guess who owned the traffic reporting company in Minneapolis? Yup, Clear Channel.
It was just the first step in reducing costs.
Despite having one of the most successful shows in the city, KFAB news-talk host Tom Becka was let go along with others at the local Clear Channel stations.
What will be the effect? It will mean more syndicated radio shows on both news talk and on music FM formats. Dump the morning show host and replace with Ryan Seacrest.
What exactly is the point of I Heart Radio, CC’s internet streaming? Sure, it’s successful rivaling Pandora in listener count. However, if local radio is gone and I Heart streams 750 stations, isn’t that really the same station 50 times over?
Okay, not entirely the same due to the local $9-an-hour staffer who gives the weather once an hour for Omaha even though he’s likely sitting in a studio in San Antonio.
KGOR must have been thrilled when morning show host Dave Wingert accidentally utter an expletive on the air (he thought the mic was turned off) causing his dismissle a couple weeks ago. He was probably gonna be on the “hit list” so this saved KGOR thousands in severance pay.
Radio revenue from advertising has been deeply challenged for a decade now, what with music fans tuning out to iPods or satellite, not to mention the fall in ad spending after the financial crisis and you have a recipe for disaster.
Clear Channel has been trying to sell some stations in smaller markets to raise more cash but no one’s buying at the hyper-inflated prices. Some of these stations have been bought and flipped a half dozen times in the last fifteen years inflating their perceived value, just like real estate.
And now we’re left with a big mess. Less local programming (the opposite of what Congress was told would happen with passage of the Telecommunications Act of 1996), less free promotion of worthy local events, less quick response to emergencies like weather, less accountability (Becka brought to light issues otherwise unreported by the biased Omaha World-Herald) and potentially more bias and censorship (remember it was Clear Channel that “banned” the Dixie Chicks).
Mike is the General Manager of Homer’s Records and has been active in the music industry for more than three decades as a retailer, writer, musician and radio deejay. He currently hosts “Sunday Morning” on 89.7 the River, and serves as a board member for the National Association of Recording Merchandisers and the Coalition of Independent Music Stores.