Radio: Bluff It or Buffett

It's hard to know for sure how the Oracle of Omaha, Warren Buffett, would run a radio conglomerate.

You might point out that Buffett has resisted the temptation of buying a radio group.

Certainly, stations were overpriced when consolidation came along (post-1996) and Buffett likes a bargain. Owning radio stations still is very expensive even without a future beyond Gen X and Baby Boomers. If and when Bain Capital (which got $1.5 billion in concessions from Home Depot recently) shaves some money off its Clear Channel purchase price, Clear Channel principals will still be seeing a lot of profit.

Assuming the banks still want to fund the deal in the current funds crunch.

And that's the point.

Regular shareholders must ride their favorite stocks up and down and know when to sell.

Warren Buffett's Berkshire Hathaway shareholders only know to hold the stock while the company makes them more money and builds true shareholder value. One share is worth around $119,000. They were only trading in the $30,000 range in 1996 -- the year that brought radio consolidation.

I know this is not a fair comparison, but not for the reasons you might think.

Berkshire Hathaway owns many different companies. Its unique and talented leader has been at it a long time. He has an uncommon skill. Who else would buy soft drink companies, ice cream companies and other personal favorites?

But look at Clear Channel stock in 1996 when it was trading in the $30 range -- approximately where it closes today -- as it awaits its fate from shareholders on okaying the privatization bid.

Even in 2000 when Clear Channel stock price topped out over $90, investors had to know when to get out because after that it has been downhill all the way. I'm not picking on Clear Channel, but they are the market leader. The other consolidators also have similar sorry histories of building wealth for their shareholders.

Why?

Radio bluffs it and Buffet holds it.

That's why our radio genius' are running at the mouth on all the little issues of the day -- promising analysts and shareholders alike a brighter day tomorrow.

Never mind that major markets are tanking.

Never mind that audiences are shrinking and radio is now paying the price for the switchover to electronic ratings.

Forget that there is no plan for the digital future of these analog companies even in a digital age. No plan to get the next generation happily involved with their products and/or services.

The only prerequisite for being the CEO of a public radio group these days is ability to look at life through rose colored glasses.

Well, Wall Street is apparently not buying it and I know in my heart of hearts that a lot of these very bright gentlemen aren't convincing themselves either.

Meanwhile, back to Omaha.

Buffett buys companies at the right price and I don't think he'd be concerned about radio's analog only platform -- if he saw radio as a necessity for consumers.

The way Buffett runs his various companies is by not running them himself.

No micromanaging. Can you imagine radio execs giving up that "skill".

Buffett meets with the head of each company once a year for a few hours. That's it.

Do you think radio managers could be trusted to do the same thing for their presidents and CEOs? Think they'd run their franchises in the ground or make them profitable?

Dwight Case who ran the RKO Radio group like this in its hey day operated his group with such autonomy. I'm not saying Case is Buffett but he's not Mel, either.

So you wonder why the once mighty radio industry is on its heals.

Why so many talented people can't come up with a suitable first response to the digital generation.

And you don't have to look very far.

Their leaders bluff it.

To Wall Street.

To their staffs.

To their listeners.

They operate in the vacuum created by Wall Street greedy people who have hijacked another entire industry to play short-term "Price Is Right". But not without the help of the radio owners and executives at the top.

Radio has many problems but one of them isn't a lack of talent.

Do as Buffett does.

Let your individual managers manage their entities.

Hold them responsible for the results.

Don't micromanage.

If they are good, they will adapt to the changing marketplace.

If they are allowed, they will find the digital answer to the next generation one market at a time.

I'm preaching to the converted. I know.

But I can't help wondering if the radio industry, left to die by Wall Street, might not find ways to rejuvenate its traditional business and invent some new digital ones that appeal to the generation -- a generation they need to grow.

I have one word for it.

Buffett.

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