Clear Channel's "Hail Mary" Pass

There is so much coverage of the possible closing of Clear Channel's $19 billion privatization sale to Bain Capital and Thomas Lee Partners, but I'm afraid even the best financial publications are distracted from what's really important.

The Super Bowl is this weekend in Phoenix and this is as good a time as any to invoke the imagery of the "Hail Mary" concept.

In football, the "Hail Mary" is a desperation pass like the one Dallas quarterback Roger Staubach threw to his teammate Drew Pearson who was being covered by cornerback Nate Wright in a December, 1975 divisional playoff. Pearson stopped and pushed Wright as the ball came down -- caught it -- and went into the end zone for a victory over the Minnesota Vikings.

In radio, Clear Channel is getting ready to reach back, close their eyes (as Staubach did) and push as hard as they can to complete the -- deal.

A lot is on the line.

If you put aside the careers of all those talented Clear Channel folks who have played through worse over the past five years (and Clear Channel seems to be willing to put their best interests aside to complete this deal), then it's fourth down in this increasingly dirty game radio people play.

To hitchhike on the notable quote of former NFL Commissioner Pete Rozelle, “On any given day, any consolidator in radio can beat any other.”

It's late in the fourth quarter. It doesn't look good for the home team.

The buyers reportedly dispatched a slew of bean counters to the playing field in San Antonio to help craft the now infamous John Hogan "We shall overcome" email to employees demanding more cutbacks. You remember, Hogan broke it to them that there is no alternative and he even promised to return the cuts to the stations once the Clear Channel sale closes.

Now we hear that Clear Channel is ready to abandon its "Less Is More" play from the game plan. Just put as much money into the stations as possible and cut the expenses.

Things are so desperate this late in the buyout game that Clear Channel is even forbidding its stations to -- well, dare I say it -- advertise! Better hope radio advertisers aren't listening or payback could be a bitch.

In fact, the coach of this team isn't Hogan and it doesn't seem to be any one of the Mays' who have already showered and left the locker room. It's a financial guy sent in by the sellers on the sidelines.

It's so bad that press accounts of the arrival of Lee & Bain minions landing in San Antonio like a hoard of locusts is actually seen by some as a good sign.

A sign that these two buyout companies are still interested in completing the Clear Channel deal.

Still interested in paying $19 billion for a company that is worth ten dollars a share less than when they signed the purchase contract.

Still interested in avoiding the substantial $600 million break up penalty that has to come from Lee and Bain's own corporate pockets.

Still interested in buying into an industry that now has only one analyst covering broadcasting -- that has zero to little growth potential in the years ahead.

Now, you might think these people are crazy.

But they are as crazy like a fox.

Lee & Bain can't buy this thing at those prices and operate it on the decline in a dying business. Not if they ever want any credibility doing other deals in the future.

The field may not be frozen like the tundra of Green Bay but I see whoever is quarterbacking the last weeks of Clear Channel reaching back and letting go one final act of desperation -- a "Hail Mary" pass into the end zone.

But wait.

It's intercepted.

Could it be that the Clear Channel deal must eventually get intercepted by another buyer -- one who thinks they can run and build up the value of the properties.

One who is proud -- maybe too proud -- maybe even still stinging from being cut from the Clear Channel lineup some five and a half years ago.

Yes, it's intercepted by Randy Michaels for the Chicago Zells. He's in better shape now than ever and raring to go.

And what's this? They let him waltz down the field for a touchdown.

How could this be?

The Mays' need their money.

Lee and Bain need to save face now.

Sam Zell's team needs to buy as much of Clear Channel as the law allows -- at their customary discounted market price.

If I'm wrong and it's not Zell, it sure as hell isn't going to be Lee and Bain.

This game isn't over until the fat wallets sing.

(I'm sorry I got carried away with football and Super Bowl imagery. I am a disheartened Eagles fan in a bad mood for the obvious reasons, but still -- I could be calling this Clear Channel game right. Enjoy the Super Bowl because the Clear Channel game is far from over!).

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The $5 CD

I was surprised to find many young people enthusiastic about the prospect of paying $5 for a CD.

I'm sure the record business is not.

I can hear them right now: "We can't make money on $5 CDs" -- like they can make money on free downloading, right?

I put the question to students in my USC class "Music, Broadcasting & the Mobile Future". About 75% of them -- a surprising number -- said they would buy CDs or multiple CDs -- a significant increase over their current spending -- if the labels charged a flat $5 for the CD.

Only one condition: they also want a high fidelity digital version for purchasing the plastic.

On a negative note (and I feel I have to represent what I perceive the labels' response to be): "your students are not representative of the entire market". True enough, but -- how about 50% being willing to buy a CD. Or even 35%. You get the idea.

The record labels have a pricing problem.

For years they've profited from overpriced CDs because -- well, they could.

Now they can't.

The real interest in this issue is that, once again, the next generation is saying they want to own music and they want to be able to hold an actual product in their hands. This smacks in the face of conventional record industry wisdom that charging more for super CDs and enhanced packaging will make the next generation spend money.

When we broke it down, here's why these young people liked the prospect of a $5 Compact Disc (in no particular order);

1. Better fidelity

2. Can use it in their cars

3. The "pot luck" factor -- they may actually like some of the songs on the CD that didn't attract them to buy it and at $5 -- that's a plus.

4. $5 is close in price to buying three iTunes songs.

5. It would then be affordable to grow with music they might not ordinarily listen to.

6. They expect unrestricted use

7. Less risk of paying for bad tracks when the price is reasonable.

8. They want to order the CD on line with a credit card and get the download right away.

As you know, I am not a genius, but the $5 CD provides a lot of hope.

The record industry has a pricing problem. They have stubbornly stuck with yesterday's prices while music has become available for free today to their best customers online.

CD sales continue to decline and legal downloads can't make up the shortfall fast enough.

The $5 price point may be like the 99 cent per song standard on iTunes and the price is right for more spending on CDs not less.

We all know how little it costs to make a CD and since record labels are fast becoming lean, mean record machines they have no excuses not to cut the price to increase the volume.

I know -- I must be smoking something.

But I just can't help believe that some of the self-inflicted music industry problems would respond to a little love -- like a fair price for a CD in a world where music can be stolen so easily.

Ignore this generation at your own peril, but I'm listening.

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Wrong Trax for the Record Industry

There was another abortion in the music industry this week.

QTrax, the startup that promised free music from the four major labels, and a number of indies launched without the music of the four major labels.

This is an advertiser supported project that had been at least a year in the making -- not unique -- just another whack at trying to offer music to the next generation for free.

Unfortunately, either QTrax or the labels scotched the much ballyhooed launch. We've heard that the ink wasn't dry on a number of the agreements. I don't know who launches a business based on four record labels without having the deal signed, sealed and delivered, but nothing surprises me.

I don't know who is to blame but the point is moot from my standpoint because as I have said for years now -- the next generation wants to own their own music (or steal it). They aren't necessarily drawn to QTrax's promo line of "free and legal". Believe me, few care if it is legal. And free? Well, music is always free to them.

In all fairness, Gen Y feels that they support the musicians and artists by paying very inflated prices for live performances. A point well taken.

Young consumers also argue that the record labels make most of the money when they do buy a tune and the artists aren't fairly compensated. This generation is concerned with the fate of artists and bands. And why would they like the record industry -- those ogres who are always trying to sue them for stealing music.

Well, whatever.

QTrax is on the wrong track. And so is the record business.

And when you get into bed with the labels you've got to expect things like -- reneging on agreements (if that's what happened in this case).

Music has been devalued -- like it or not.

Not the artistic part of music, the financial consideration. After all, when the most you'll pay for a legal download is 99 cents and with free downloading so prevalent, you can't argue that the value of music has increased.

This is fortunate or unfortunate depending on where you're viewing this issue, but it's not like we don't know some things that pertain to the future.

1. Ad supported models for free music will likely not take off.

2. Free downloading will not stop in our lifetime or perhaps the next.

3. Consumers still want to own their music either in the sense that they bought it or stole it. Renting hasn't worked on a number of platforms.

4. Consumers insist upon sharing music with others as part of social networking that their generation has advocated.

If this is true, good luck with QTrax -- even should the ink eventually dry on all those deals with the devil.

The consumer has spoken once again and as usual the music industry is not listening.

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Clear Channel on Jenny Craig

Tom Taylor broke the news of John Hogan's "draconian" first quarter contingency plan in his Taylor on Radio-Info publication Monday.

It's bad -- all bad.

Hundreds of additional jobs are in jeopardy -- this from the industry leader that has been cutting jobs at a record pace in preparation for what they hope will be the completed sale of Clear Channel to Bain Capital and Thomas Lee Partners within a few months.

Clear Channel has a problem. It isn't making budget for the first quarter and revenues are down.

In the movie Airplane, Lloyd Bridges who played the character Steve McCroskey said "Looks like I picked a bad day to give up sniffing glue". In this uncertain economy, it looks like Clear Channel picked a bad quarter to give up making a profit -- or at least breaking even.

Why?

Because Lee and Bain are overpaying for Clear Channel stock -- $39.20 a share to be precise and yesterday CCU closed at $31.42 -- off some 7% in one trading day. The arbitragers are going to make money on the spread -- that is, if the deal ever closes.

I have said all along that if this deal closes it will either be because the $39.20 price will be renegotiated downward or Lee and Bain have a new buyer (can you say Sam Zell) to which they can sell all or some of the Clear Channel properties. That theoretical sale would also be subject to a lower, more reasonable sale price.

Let's just say at $39.20 Clear Channel is overweight and needs a diet. The cutbacks are symbolic of calling 1-800-597-Jenny because to do this deal either to Lee and Bain or to Zell, Clear Channel needs to lose weight.

Hell, even Larry Craig could help because Clear Channel needs a wider stance if it is to unload its public company, allow the Mays' to escape in exile with millions more and for the poor folks running these properties to eventually return to a position where they can actually do their jobs.

Right now their most important job is to cut back expenses. That says a lot.

Here is what Tom Taylor is reporting from the Clear Channel website as the expected reductions to be implemented immediately:

“Expense reductions: All research monies after 2/1. All Advertising and Promotion monies after 2/1. All new sales hires not already implemented, effective immediately. Any new hires budgeted but not hired, effective immediately (do not hire any additional new employees). Any/all discretionary monies (i.e., travel, meals and entertainment, etc.) for your market. If you can save it, do so. Additionally, you are not to replace any departing personnel without specific approval from your EVPO.”

Jenny Craig says "Join Jenny and lose 2o pounds for $20 plus the cost of food". To continue the analogy Clear Channel seems to be saying "Join Bill Hogan and lose at least 4% (the budget overage) plus the cost of losing more of your audience".

I assume the Mays' private jets are included in this draconian cutback. Southwest has some great fares these days out of San Antonio.

What?

Isn't losing private jet service the definition of draconian?

No, of course not. Cutting your content, marketing and sales is the ticket, right?

Here's Hogan's thinking as Tom Taylor reported. Read it and then I will give a quiz:

“It will make your job more difficult and have some long-term affect [sic] on your overall performance. It goes without saying that leading through these reductions will be challenging. If there were another, better alternative, we would not be requiring these reductions be implemented. Unfortunately, there is not another alternative. It should go without saying that at the earliest opportunity, that is when revenues begin to stabilize and increase, we can reverse the expense reductions.”

Question: does anyone believe these expense reductions will be reversed in their lifetime?

The radio industry wanted to be a Wall Street player.

It got what it wished for.

So the public companies that have done their part to help with the demise of terrestrial radio must continue to play by the rules of the Street.

To get this deal done at an inflated stock price negotiated more than a year and a half ago, Clear Channel dare not show losses. The sellers are in it to get out. They must make nice.

If the Clear Channel sale does not go through, the entire industry could be toast. The worst punishment would be for Clear Channel to have to keep operating the stations they have gutted and pillaged in their attempts at one more big pay day.

For the good people who try to do great radio without adequate money, support or strategic planning, it's time to get on your knees and pray for Lee and Bain and Lowry, Mark and Randall. Turn the other cheek.

If this deal blows, Sam Zell who only buys undervalued properties can ride in on his Harley.
That would be an improvement over this desperate group.

But if somehow even that fails Clear Channel in the hands of principals who don't want to own it -- in a bad economy -- is a disturbing thought for everyone.

Hogan's severe cutbacks at this late date are like putting Twiggy or Nicole Richie on a diet.

There's no dead weight left to lose -- only muscle -- and the patient's life would be in peril.

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The HD Alliance's Satellite Radio Agenda

The HD Radio Alliance has gone and done it.

It has officially opposed the merger of XM and Sirius Satellite Radio.

That tells me enough that if I'm at the DOJ, I'm going to approve the merger immediately -- which they're likely to do anyway.

You may remember that iBiquity, the designated manufacturer of HD radio, unofficially asked the FCC to consider mandating the manufacture of new satellite radios so that they would include the HD subchannels. Exactly, what satellite subscribers want, right?

Wrong.

Now the HD Alliance which riled the terrestrial radio business with its "creative" commercials that arguably took a slap at terrestrial radio is squarely opposed to the Sirius-XM merger.

The radio industry has a hard time knowing who the real enemy is.

It is obsessed with satellite radio when the real enemy is themselves.

But you can understand why these stumblebums at the HD Alliance are opposed to satellite radio. They lost the in-car game to the satellite operators who pay dearly to get their radios installed in automobiles. The HD Alliance wants to do it on the cheap after the satellite business has set the pricing standard. Failing that, they line up against the merger.

There is no reason this merger shouldn't go through.

You can't argue that it will cause a monopoly because you'd have to go back and look at a lot of other mergers the DOJ allows in modern times.

And satellite radio really doesn't compete with terrestrial radio.

Satellite radio has its own problems.

Costs are a big one. The merger reduces the unbelievable duplication in running two satellite networks. Satellite radio never hurt a flea -- or a radio station. There is no evidence -- zero -- that it ever will because satellite radio has the same major problem that terrestrial radio has -- and neither one has dealt with it.

It's the next generation -- or better put -- the lack of a future without the next generation.

Gen Y isn't going to pay for satellite service -- they steal music -- why the hell would they pay for something they can get for free?

And satellite radio sounds a lot like terrestrial radio and the next generation grew up without a strong and enduring attachment to radio.

The HD Alliance -- well, they're doomed by their own failed strategy. Why create more stations when the terrestrial stations listeners now have too many? Even the consolidators seem to know this. They put little investment into putting competitive programming on HD subchannels.

So, we can conclude that there is no public interest reason for anyone to oppose satellite radio.

There's no business reason for radio to oppose satellite radio.

No reason for the HD Alliance to oppose it except...

Like everything else that has been done under the HD banner, you can't bully your way into Detroit's autos -- you have to pay your way.

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Lost.fm

There is quite a controversy building around whether CBS-owned Last.fm is an eventual replacement for terrestrial radio.

The Motley Fool investors publication says Last.fm could mean the end of radio.

Kurt Hanson, who I respect more on these issues, says wait one minute -- Last.fm isn't even radio.

It's an interesting prospect either way. To bring you up to date the four major record labels have cut a deal with Last.fm to get a penny or so for every time a young consumer goes to Last.fm and requests a song. Hanson points out, "Going to a website and saying “I would like to hear ‘You Know I’m No Good’ by Amy Winehouse right now and then being played that song is not “radio” by any stretch of the definition that I’ve ever heard."

The Motley Fool is enamored at the prospect of free online streaming of music from the major labels and a host of indies.

One problem.

Young people have voted again and again in this race that they want to own their music not rent it or listen through a glorified subscription or ad-supported service.

The labels -- a group that would cause me to do the opposite of what they do -- is simultaneously selling music to cellphone companies so their customers can have a phone full of music included with the price of the phone. That's a loser with young people.

Last.fm -- now with the ability to play what you say instead of what terrestrial stations like "Jack" want to play -- is also a non-starter.

These ideas and concepts are the creative result of older and in some cases out of touch people who do not understand the young consumer. These products are what they think young people should listen to vis-a-vis their dying record businesses. They are not, however, what young people want. In the months ahead, the painful truth will become evident even to them.

Here's what the entrance and exits polls -- so to speak -- are telling us about the next generation, the record business and new forms of listening:

1. They want to own their music (I use the term own loosely to include paid and stolen music). Rental services like Napster and Rhapsody have not resonated. The labels want young consumers to rent. Cell phone companies can't see why adding a few extra bucks to the monthly bill for all the music in the world won't be a winner. I'll give you two reasons: one is the iPod -- the choice of the next generation and it isn't going away any time soon. And, two, the next generation can steal music without a problem. Who needs rental?

2. Young listeners don't like radio because they have alternatives, but radio has sucked since the 80's -- at least that's when the term "radio sucks" emerged. No one says, "iPods suck" -- at least not yet. But young people show signs of iPod fatigue. Properly read, this means they are not giving up their iPods, they'd just like to be entertained every once in a while.

3. Internet radio will be the smash hit we all think it can be once it can be received everywhere on every device. It's beginning to happen now, but most people don't listen to Internet radio on the go. And by Internet radio I don't mean terrestrial radio "lite" or another version of an HD subchannel. I mean real entertainment. Internet radio is the killer app.

4. Keep an eye out for some form of mash-up music sharing. We're seeing this in video where users can take pictures and send them along to a friend to add music or whatever. Control freaks like record and radio execs will do just about anything but enable a generation to fool with their artists rights. Admirable? Not when their customers do it anyway.

5. Young consumers have iPods -- they have hard drives loaded with music bought and stolen. They also want to be entertained. Instead the labels and their cohorts keep trying to invent the next thing but this generation is going to tell you what the next thing is. And what is it? Entertainment. They want to be entertained. They want to participate in the entertainment. If I'm in radio reading this I am jumping for joy -- that's a core radio skill -- but it will have to be transfered to where the next generation lives and it's not on the radio band.

6. Radio (whether Last.fm or terrestrial) cannot compete with an iPod for playing favorite music. An iPod is a storage device that plays back music. Radio entertains -- or should. Subscription services or ad driven services like Last.fm will be more popular with record labels than with young consumers.

The Motley Fool says:

“Last.fm, bought by CBS… is providing on-demand delivery of its growing digital library for free...Naturally, this is also bad news for other companies selling digital tracks, like Apple, or music subscription services like Napster and RealNetworks".

I disagree.

Terrestrial radio doesn't have to worry about what Last.fm is doing.

It needs to worry about what radio isn't doing.

If radio broadcasters want a prominent piece of the future, they are going to have to provide entertainment content for the next generation where they live -- on the Internet and through portable, mobile devices -- not over the airwaves.

The one thing terrestrial radio has going for it is that it is free.

Free works just fine with this generation, but if there is a lesson the labels, Last.fm and everyone else will soon learn it is that iPods are storage devices and that young people prefer to own their music.

That radio is about entertainment and in the future radio will be Internet-based, readily delivered on mobile devices and has some component of social networking or interactivity built in.

Last.fm is Lost.fm if they try to make it the newest version of a "free music" service that masquerades as an iPod.

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The Ghost of Christmas Radio Past and Future

The post Christmas radio ratings are in for the two People Meter markets -- Philadelphia and Houston -- and you should not be surprised to observe that the two bellwether Christmas stations lost half of their huge ratings gains acquired in December.

Jerry Lee's WBEB (B-101), Philadelphia slid from a 29.6 share in women 18+ during the week December 20-26 to 12.8 when the station reverted to its adult music format.

In Houston, Clear Channel's KODA lost 47% of its women compared to those listening during Christmas week.

Significantly, both stations remained number one in the 6+ average daily cume.

Are 29 shares in the prime 18+ women demographic a ghost of Christmas past or an indication of future success?

Well, not so quick.

Here's what's significant in analyzing all-Christmas music, the People Meter and the future:

1. Thank retailers for the huge boost in women listeners. In the People Meter world an 18+ woman who can hear radio in a retail store is logging listening time for the Christmas format that is playing. Going forward -- whether it's Christmas music or not -- radio should rethink its strategy for getting played in public places. That's a whole separate story and it involves a major shift in focus and money to cooperate with the People Meter.

2. Number one ain't bad after the huge surge in listening credited by the People Meter to these two watershed Christmas stations. The owners know what they're doing during Christmas and it's temporary. A bad station isn't going to be better after switching to Christmas music for six weeks, but a great station remains great when the holiday music ends.

3. Other music format deviations might be considered elsewhere on the calendar. All love songs for the week up to Valentine's Day. The key is to develop week long music concepts that also cooperate with retail sales seasons. Retail establishments are your best friend when People Meters can "hear" radio in public.

4. Not switching to all Christmas music may not be as fatal as some broadcasters think. You know the ones, they are hell bent each year to go all holiday music even before Thanksgiving. Again, after Christmas the ratings results tend to be restored to pre-Christmas rankings so switching out of fear is not prudent.

5. Buyers should be smart enough to consider the Christmas bump for what it is -- a temporary increase in listening that does not have legs after the holidays. But all-Christmas stations should also be smart enough to jack the rates up for that period of time. Say, double the station's usual rates for double the audience during that period. Oh, and cut the spotload (that's where I lost you, didn't I?).

6. Some stations switch to all-Christmas to lead up to a regular format change. I'm not wild about that based on what we're learning unless the format you're switching to is adult music and you've been rehearsing it simultaneously in studio B during the six weeks the Christmas format was airing. Getting only one chance to make a good first impression still applies.

7. The morning show is the "x" factor because what adult music stations should consider following every holiday season switch is to do something major in the morning as a carry over from all the longer listening and increased cume. These music stations miss adding a major element to their morning shows as a residue of, say, a doubling of their audiences during the holidays. I'm not talking about contests and the usual radio fare that has worn out its welcome. If I were programming such a station -- careful now -- I would have promoted during the Christmas blitz that my station was going to pay a lucky listener's mortgage payment for the entire year starting when the Christmas music ended. And I'd choose a listener every week -- but getting to the winner would be an ordeal like American Idol. It would be theater, competition, high production values and prudence (after all we're still a music station). Imagine that with the post-Christmas economy sinking as it has. Imagine me getting fired as PD or consultant as I would likely be. This is crazy. Spend that kind of money? Hell, it would cost as much for production as it would to pay the mortgages. Somehow I suspect Jerry Lee is crazy enough to do it.

8. Then that post-Christmas morning show event needs lots of TV advertising.

Well, it looks like I've gone and done it again.

I've embraced the People Meter.

I've spent everyones money when they should be cutting back and impressing Wall Street -- you know, the people who can't manage their own investments.

I've dared to make the morning show the station's top priority -- morning show rehab must happen across all format lines in 2008. No more excuses.

And, I've illustrated one worthwhile way to prolong the efficacy of terrestrial radio among adult listeners in an age of consolidated defeatism.

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Radio's "Recession" Started A Long Time Ago

The Fed further cut interest rates by three quarters of a point in an emergency move that is designed to help the U.S. economy avoid a deep, dark recession.

The market lost 465 points before greed saved the day and buyers took advantage of lower stock prices and bought back in.

The housing market is one of the major problems and the subprime mortgage mess goes along with it.

As the vaudevillian comedian "The Old Philosopher" used to say, "is that what's bothering you, bunky?"

The radio industry actually started its "recession" early.

After spending record amounts of their investors' money to put together groups of radio stations -- allowed for the first time by their friends in Congress -- it wasn't too long ago that stock prices of radio issues began their eventual steep decline.

A friend put together this list of key radio companies before yesterday's roller coaster ride on the Dow. Look how well they have built shareholder value for their investors.

Spanish Broadcasting
High 42.00 -- Recently 1.54 -- Loss of 96.33% (1.50 yesterday)

Emmis
High 62.34 -- Recently -- 2.47 -- Loss of 96.04% (2.62 yesterday)

Radio One
High 31.33 -- Recently 1.77 -- Loss of 94.35% (1.68 yesterday)

Citadel Broadcasting
High 22.79 -- Recently 1.69 -- Loss of 92.58% (1.52 yesterday)

Regent
High 14.19 -- Recently 1.49 -- Loss of 89.50% (1.32 yesterday)

Salem
High 33.65 -- Recently 4.63 -- Loss of 86.24% (3.93 yesterday)

Entercom
High 67.75 -- Recently 11.00 -- Loss of 83.76% (11.00 yesterday)

Cumulus (Private buyout in progress)
High 22.70 -- Recently 5.90 -- Loss of 74.01% (5.43 yesterday)

Saga
High 23.44 -- Recently 5.90 -- Loss of 74.83% (5.97 yesterday)

Beasley
High 19.34 -- Recently 5.05 -- Loss of 73.89% (4.48 yesterday)

Cox Radio
High 34.67 -- Recently 11.10 -- Loss of 67.98% (10.89 yesterday)

Entravision
High 20.31 -- Recently 7.27 -- Loss of 64.20% (6.03 yesterday)

Clear Channel (Private Buyout in Progress)
High 91.50 -- Recently 34.42 -- Loss of 62.38% (32.14 yesterday)

CBS
High 35.50 -- Recently 24.00 -- Loss of 32.39% (22.28 yesterday)
(New issue missing most of the loss).

I am using the term "recession" loosely here to describe the receding radio stock prices, however the real recession -- the one we're sinking into deeper and deeper every day -- isn't going to do much to improve the sorry performance of radio's consolidators. Their stations are directly affected by the local economies. Now, it is no longer just Emmis that must deal with softening in their major markets such as New York and LA. Now it's Main Street USA.

I can just hear all those Apple haters out there. Apple's profit rose a whopping 58% in the first quarter compared to last year but its forecast going forward wasn't enough for analysts to stop running scared -- the stock price fell to $155.64 (off 3.4%). Imagine if Apple can't beat this market, how can Citadel?

It's getting ugly out there.

The usual way public companies deal with recessions is to layoff, cutback, slice and dice. Hey, radio has been leading the way on this, too. The radio industry still can't see the connection between reduced expenses and reduced earnings.

What bothers me is that radio industry professionals know what to do to make their situation improve. Even a few of the consolidators get it. What they can't do is ignore Wall Street. After all, they owe Wall Street investment banks for everything and when I say owe I mean owe. The Street is in no mood for radio to spend money to make money.

One of two things is going to happen.

Either someone in a leadership role decides to make some hard and tough decisions to grow terrestrial radio (to the extent it can without the next generation listening) and get into the Internet and mobile content business beyond simply doing websites and outsourcing text messaging tie-ins with radio formats.

Or?

Radio companies will continue to become devalued with the sale of assets and more economies of scale.

In that case, it will be a long farewell.

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RECORD COMPANIES SURRENDER TO CONSUMERS ON DOWNLOAD DRM

A quiet victory of music consumers has occurred now that Sony BMG Music Entertainment has become the final major recording company to drop digital rights management protection on its digital downloads.

Major recording companies starting placing protection software on downloadable files in 2005 and 2006 to protect the music files from being passed on to other listeners. The digital rights management software, however, often blocked consumers who had purchased downloads from moving files to portable music players or even to new computers and from making compilations discs of their favorite music.

The software incensed many consumers because it forced consumers to purchase multiple copies or forced them to illicitly bypass the software if they wished to use music they had purchased on more than on platform. Many felt it was unfair that one did not “own” the download in the same way as a CD, a book, or a DVD and voiced their frustration in blogs, music forums, and to the record companies.

Opposition grew so strong among consumers that consumer rights and competition authorities in both the U.S. and Europe soon began to investigate and question the practice.

In 2007 EMI and Universal Music Group dropped the DRM measures and Warner Music Group and Sony BMG Music Entertainment have now followed suit in 2008.

Although the recording companies would still have preferred that consumers only be able to "rent" music and never own it--giving them the possibility to limit the number of times a download could be played before an additonal payment would be required, they ultimately gave in to consumer oppostition and are recognizing that consumers view music purchased in whatever form as substitutable.

Peer-to-Peer Radio

One of the more startling things to traditional broadcasters is that today's young audience wants to sometimes be their own program director.

The iPod is an example of how a generation decided to program their own "radio stations" with the music they choose to buy or steal online. And their stations really do have fewer commercials and more music unlike the promises we've made and broken to them for decades.

Broadcasters do what they have always done -- broadcast. When radio programming got more specific in the 70's we used the term narrowcasting to reflect how the broadcasting service had adapted.

But one thing never changed -- broadcasters made all the content decisions. Radio may have flirted with research and focus groups but in the end a PD made the call.

Music, news, weather, traffic -- whatever was being offered started as an idea from radio's vast and talented group of program directors and found its way to the transmitter, the tower and into the ears of an appreciative public.

I've written about the great divide between all previous generations and Generation Y -- the next generation. I understand why they reject record companies that dictate how these young people must consume and enjoy their music and why they are abandoning radio -- the one medium almost every modern generation grew up addicted to -- until now.

There's a new worldwide study by Nokia, the cellphone manufacturer, about the topic of "circular entertainment" -- that is, content produced, edited, contributed to and adjusted by peer groups. Nokia estimates by 2012 up to 20% of entertainment content will be created, edited and shared within their peer circle rather than coming out of traditional media groups.

This is how circular sharing works:

1. Say someone shares video content taken on their mobile device -- let's say a picture of a family member or friend doing something interesting.

2. The friends or family members then add an MP3 file soundtrack before sending it along to another friend.

3. The next friend edits the footage and adds more pictures before sending it on to another person and so on until the life of the event ends naturally.

Now, this example is one that uses video, but I can promise you that audio and text applications will also be included in "circular entertainment" -- the concept of user generated content being edited, supplemented and forwarded without a formal broadcaster.

We see an early example of this trend now in YouTube which does act as a de facto broadcaster but the content is absolutely user generated.

The next step could cause a tremendous problem for traditional broadcasters who even to this moment cling to the hope that they will remain the decider.

That is, of course, unless this concept excites you as much as it does me. I don't think traditional broadcasting is going to go away -- after all, most folks still like to be entertained from time to time. But traditional broadcasting will never be a growth industry again unless it wraps its arms around these new sociological changes.

One good start is to get your content and marketing people to brainstorm the idea of incorporating user generated content into your traditional format. By the way, I'd even encourage Gen X and baby boomers to participate.

Since any two or more users can create and edit their own content without a broadcaster, how can you be of help?

How about offering prizes and stage competitions. Think of the marketing possibilities.

In five years maybe we'll stop looking for the next Woodstock and create a virtual competition in Second Life of user generated content. The Super Bowl of the people's content, if you will. Want a piece of that?

Traditional broadcasters have the ability to lead as well as participate in new trends -- even radical ones that terrify them.

In the future, radio stations are no longer transmitters and towers. They may be Internet based, podcasted or otherwise distributed to mobile devices.

Someday soon broadcasters will assume the role of aggregator and stimulator -- fanning new trends and encouraging participation. (Isn't that what radio did in the 60's when it started putting real people on the air for call-in shows?)

The radio company that might eventually show vigorous growth might be the one that pulls together broadcaster-prepared content with user generated content and makes a conscious decision to push the content through to every new technological invention.

If this new age of "radio" or "records" disturbs you, you won't like it any better in another few years.

Record labels are stuck in the manufacturing warehouse because that's what they've always done -- manufactured things -- vinyl, plastic. The action today is digital and they've missed it.

Radio stations keep obsessing over getting their groove back after ten years of distraction at the hands of consolidation and unprecedented technological breakthroughs. The real action is in content -- not the transmitter or towers.

And even without catching up to this exponential movement, we see a glimpse of what's beyond.

User to user generated content.

If we learn from our past mistakes, now is not too early to get involved.

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Radio is King for a Day

Today is the commemoration of Martin Luther King's birthday. In our lifetime we can count on the fingers of only one hand those who have meant more to our society. Yet we feel it more appropriate to honor such icons with a day off and 50% off sales at the mall.

In the radio industry, we suffer from a similar abuse.

While some stations commit themselves to add meaning to the King holiday, it's often no more than another day for an industry that would be better off if it actually translated King's message to help a troubled industry.

How so?

Radio has even fewer Black owners of consolidated radio groups that you can count on the fingers of one hand -- and an embarrassingly small number of women and other minorities in ownership positions.

Instead, well into the 21st century the radio industry has only managed to promote people of color if they are green -- that is, giving or taking Wall Street money to build what is now becoming evident as meaningless monopolies. Nowadays -- to borrow a phrase from Sesame Street -- it's not easy being green.

It's not about the reality of consolidation that happens in a regular circadian rhythm -- it's about doing the right thing.

Had we taken a different course -- one pointed out to us by Dr. King -- we might be looking at a thriving growth industry epitomized by the diversity of local radio.

Had the FCC and Congress really understood Dr. King's life's work, they would have made it possible for minorities and women to become significant owners -- not just under-financed operators who never got to own the Clear Channel and Infinity caliber of stations.

Had Congress expanded the ownership rules to not only include the number of stations one company could own but expanded the real opportunity to guarantee minorities a chance to get into the game, radio would be better off.

Had this happened, radio and its listeners would have many, smaller, diverse and local companies acting as fiduciaries of the people's airwaves. Not what we wound up with -- Lee and Bain putting thousands of employees in pain at the thought of another investment group working around the rules that benefit the few, the shameless and the mean.

Layoffs -- virtual voice tracking, longer shifts, no creativity -- just business and what's worse, it's not even local.

The best the radio business has been able to do is become King for a day -- with tributes (or no tributes), MLK holiday shopping commercials and the same old same old. King for a day -- in that their dominance of the medium arguably lasted for 12 years. The consolidator's "dream" has become a nightmare.

Imagine a radio business that could never have been hijacked by Lowry Mays and his ilk because so many varied and different people existed as a system of checks and balances.

So if you're thinking that Martin Luther King's birthday is a Black issue one day a year, well -- it's not that black and white so to speak.

To me the real meaning of Martin Luther King's influence is about opportunity and the great wisdom of diversity.

Tomorrow, it's back to a dying radio business that stacked the deck for a handful of the same animals.

Imagine what we could have had had we only listened.

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Walk The Talk -- Grant the Grant

There is a controversy brewing in the industry and on the major boards such as Radio-Info about how the R&R Talk Conference has rescinded its planned Lifetime Achievement Award to Bob Grant -- the always and still equal opportunity offender that he is.

In the interest of full disclosure, I know Bob Grant from his Philly talker days and I've always liked him as a person. I never let his views affect me for one minute on that.

R&R is feeling the heat from minority interests who consider Grant a racist. I feel their pain. Here's how R&R tried to handle a very difficult situation they found themselves in: “R&R is sensitive to the diversity of our community and does not want the presentation of an award to Mr. Grant to imply our endorsement of past comments by him that contradict our values and the respect we have for all members of the community.”

I'm nauseous. What corporate gobbledygook.

Look, R&R is and always has been a fabulous industry treasure from the Bob Wilson days through Dwight Case's stewardship to Erica Farber's outstanding management. I didn't always feel that way about R&R because -- hell, I had to compete against them. Bob Wilson and I weren't in a mutual fan club for years. We had it out many times. Our egos, you know. Later in life we grew up and appreciated what we had both accomplished. This doesn't sound like Erica's work, either. I may be wrong, but this mishandling of an honor may be coming from VNU-Nielsen, the corporate owner.

Ironically, it is causing them, the community that they say they want to protect and radio more embarrassment.

I can't stand today's talk radio.

I know it is still a very viable part of a dying radio business but it is buffoonery of the first order. The most successful are big blowhards that remind me of those bigger than life hot air balloons that barely make it through the Macy's parade in Manhattan. Too often -- not always -- these shows pander to the lowest common denominator -- the mentally challenged who believe every conspiracy, look for every opportunity to wave the flag and exhibit hatred toward people. They lie. They will do anything for ratings (oops, now we're starting to indict me and other programmers).

Today's talk radio is embarrassing.

I saw Rachel Maddow from Air America on Keith Olbermann's MSNBC show the other night and just like her conservative counterparts she never shut up. They all talk over people -- they think the whole world is as easy to drown out as their listeners.

But I'll tell you this -- I will fight to the end for their right to say what they want on the air. I don't care if it's from the lunatic fringe right or the knee-jerk liberal left -- whether it's Lou Dobbs pandering to a new kind of racism (and that's my personal opinion) or Glenn Beck.

We need to fight for their right to make asses of themselves.

WVOX, Westchester, New York's legendary owner Bill O'Shaughnessy welcomed Grant back on the air this summer by writing, “He once called me a ‘stooge.’ And that’s when he was in a really good mood! But I am among those who take special delight that Bob Grant is coming back to enliven New York’s airwaves".

O'Shaughnessy hits it right on the head, "He (Grant) not only deserves a ‘Lifetime Achievement Award.’ But our great gratitude for being a feisty, provocative, outspoken, confrontational broadcaster. I’m reading Freedom for the Thought that we Hate: A Biography of the First Amendment by Anthony Lewis. I’m sending a copy to Greg Farrar, the president of Nielsen Business Media.”

We in radio talk a good game.

The phrase "talk the talk, walk the walk" has special meaning for us. We rail at anyone trying to compromise our freedom of expression -- even the right to be a racist or make a fool of one's self.

One of the best friends justice has is to actually hear injustice in its unabridged, unadulterated form.

Many of you have written to me expressing outrage over the R&R-Bob Grant abortion (did I use the right word here?). Some have asked me to weigh in.

Talk radio succeeds not only when it hits the highest virtues but when it sinks to the lowest level of humanity -- it airs the best, the worst -- it makes us think, learn, respond, take action.

I'm all for political and social correctness if it will benefit society, but in this case -- its time for the radio industry and those who write about it to come together and agree that it's okay to honor Bob Grant without putting an imprimatur on his words.

We are big enough to dislike the deeds and not the person.

Time for talk radio to walk the talk.

After all, you've hired Grant for the best part of his 79 years -- now all of a sudden you don't like him?

That's hypocrisy.

This is no way to end the golden age of talk radio.

Have we not learned a thing? We champion free speech above everything else -- with a wide latitude of forgiveness in between.

To dishonor a radio icon who some may think of as a racist is to indict the stations, owners and executives of those who have employed him for decades and continue to give him a microphone in the world's greatest city -- not to mention dishonoring the many Bob Grant listeners who kept him on the air.

Grant the Grant award and hold your head up high or disavow his service and repudiate all that we stand for.

May I have the envelope, please?

And the winner is ...

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The Killer Morning Radio Show

A week or so ago I mentioned I had an idea for building a killer morning show. The theory being -- terrestrial radio is not likely to attract new young listeners but if it snags more listening from the available audience in the mornings then it will ring the cash register.

Radio stations are fighting the first effects of a recession and fighting themselves at the same time.

There is little they can do about the economic downturn, but there is a lot they can do about maximizing free cash flow.

There are the traditional ideas: cut the spotload and raise the rates. I like it. But radio executives don’t have the guts to do that even in good times.

Cutting staff, cutting expenses – no, don’t like it. You don’t cut to grow. You cut because you can’t grow your business and eventually you pay the price. (Can you say consolidated radio?)

A radio station’s morning show is responsible for between 40-60% of its total revenue and I am always surprised at why owners, managers and programmers miss a critical opportunity to build a killer morning show – one that breeds loyalty, gets consistently high ratings and maximizes the stations cash flow.

When morning powerhouses are built, it is not surprising that it is done on the back of edgy, outrageous behavior. I’m sensing that this type of morning show has run its course. You can only get so outrageous in a world with few boundaries. (Remember when Howard Stern talked about breasts on the radio? At first it was outrageous. My college students now yawn).

Stop!

Don’t say “there you go again with your students – they are not our audience”.

I know that, and they probably will never be devotees of a terrestrial radio morning show in the future. But we as an industry are very shortsighted when we look to our target demographic for all the clues on how to program.

Look beyond.

Gen Y is changing society faster than baby boomers are today. Don’t believe me? Watch some TV commercials and see how they're built for short attention spans. You may be a baby boomer with a much longer attention span but you’ve adapted to the fast-paced needs of the younger generation whether you are aware of it or not.

Mean is out.

Edgy on radio sounds old and, well – tired. Morning shows are missing a few key ingredients that you may want to think about.

Here’s the element that I think can build a compelling morning show for any target demo:

Make dreams, wishes, fantasies come true.

Take a dominant station like B-101 in Philadelphia. If they had a powerhouse morning show with the monster billing that station does all day, it would be an even meaner money machine without having to fish for new listeners.

Of course music stations have to get the music right – no getting around that. B-101 does pretty well there.

Then instead of hiring a guy and a gal to be just another morning team with traffic and news and oh, I’m getting so bored already—how about hiring a strong, compelling personality who is a direct link to the audience and the heart and soul of what I'm about to describe.

So I am suggesting creating a feature that eventually becomes almost as big as the format -- a radio station in and of itself.

The killer feature is to grant listeners wishes, needs and fantasies every day – in different hours of the morning show. These pieces can run as long as a song because they are worth it.

Now, it gets ugly.

You’ll need a staff of off-air people. Don’t do this on the cheap or it will sound like a contest instead of the heart of your station. Top production people who work with investigative reporters and others who can go through and filter the many requests you will get. This is about production. Watch how Oprah's TV show does production. Listen to how radio does it. See why radio is dying and Oprah is growing?

Your listeners will be invited to email, write, text, call -- whatever way they'd like -- and pitch their request.

Say you choose a request from a listener to help them keep from losing their house until they get a job. The recently fired person is interviewed. The station writes compelling copy. Does interviews -- high quality audio. The morning show host is the voice of the feature. Custom production music is important (my friend Jim Long, former TM production and imaging genius, is looking at the Malibu beach right now saying, "I've got just what Jerry's looking for").

Think Extreme Makeover, Extreme Makeover: Home Edition, Supernanny, The Last Contest, Christmas Wish, the Investigative I-Team Unit -- all rolled into one.

I kept my radio stations and my publication Inside Radio successful for a long time living by two words -- addictive and unique. What I'm saying is that we in radio are doing the same morning shows over and over again and when we stray from the music we get burned. That is true because when we stray we are doing things that are not unique and addictive.

And I'm not only talking about an adult contemporary morning show -- I'm talking all of them -- from hip-hop to oldies. It doesn't matter.

First station in wins.

One to a market.

Only the strong survive.

The feature never ends. It goes on forever and it will likely work forever.

But, let's learn from B-101, Philadelphia owner Jerry Lee.

Buy TV spots -- lots of well placed ones -- and promote the hell out what you're about to do. Sorry, I lost my head, TV spots cost a lot of money. So maybe we should just complain and watch him make all the money.

Listen in:

1. GI returning from Iraq but his parents don't have the money to fly her parents in for the reunion. You get the plane tickets, the hotel, the dinners, the gifts, the videographer and on and on. Create the magic. Capture the emotion.

2. A couple was in an accident -- they survived but are without a car now -- you fix it, give them a rental, pick them up in a limo, have the morning show host take them to dinner, etc. Radio used to do this stuff well -- create theater of the mind.

3. A retailer cheated your listener out of money and they contact you for help -- since you have an investigative reporter on staff, he alerts the appropriate authorities, seeks pro bono legal counsel --- fights to help them -- the on-air piece is dramatic, sometimes tearful -- the online followup is addictive.

You increase billing by increasing your morning ratings then raising rates.

You don't trade out some tickets to Nine Inch Nails and give them away -- that's what radio does and radio is losing.

But you might arrange a private mini-concert or an entire section of the Staples Center. You think big. You do the unexpected.

And you sell product placements or use them to defray the cost of the prizes.

You do not sponsor this component of your morning show. It is a station feature and no one advertiser gets to sponsor it. But they do get to buy high priced commercials in your morning show and during other dayparts when you deliver more audience.

You have online connections where your listeners can actually see the people who benefit from your station -- and do regular followups. Stream your station. Video clips. Sell ads. Sell pre-roll commercials. Invite others to help -- contact the people who are the focus of the event. Create a social network around something positive. And drive the listeners back to your terrestrial station. Never stop playing the music.

If I'm reading it right, to do compelling content on a radio show you'll need to break the mold. If a morning "zoo" works for you, fine. But if you want to build a morning franchise as big as your entire station, you've got to make your morning show unique and addictive.

Imagine the possibility for names?

This project is big and expensive as I envision it. You should only pray that a competitor does it on the cheap -- radio style. Forgettable and average.

The better for you to start building step two, step three and step four that will never attract the elusive Gen Y -- remember they're on their cell phones and laptops -- but it promises to be as addictive and emotional as, say, Extreme Makeover: Home Edition.

Please don't believe anyone who says, "we doing this already"? Just like radio does in almost every area -- it programs cookie cutter morning shows.

One thing is for sure: radio has to change and the morning show is a great place to start.

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Radio vs. Laptops

Apple CEO Steve Jobs disappointed our Wall Street friends yesterday when he made some new product announcements. Apparently some of them expected more. One thing that I thought was noteworthy was Apple's foray into slim, lightweight laptop computers.

The new Apple Air is as slim as you can make a computer with a full keyboard, iPhone touch technology so what's not to like.

I've learned to watch Jobs very carefully. This new lightweight laptop is not just another product in his portable line of computers. He's making this move for a reason some in the media business may not fully appreciate.

I polled one of my USC classes Monday -- as I frequently do -- to find out what is precious to them. What do they desire. What can they not live without.

The findings may or may not surprise you, but I thought I'd pass them along. (And for those of you who feel compelled to remind me that these students are a mere slice of humanity of privileged students, no need to say a word. It still has significance).

I asked, "how many of you by a show of hands cannot live without a radio"?

No hands went up.

"How about TV -- how many can't live without a television"?

No hands went up.

"How many can't live without their cell phones"?

For the first time, seven people out of 40 raised their hands. I challenged them -- "I'll bet you can't do it". The seven -- to a person -- insisted they can give up their cell phones. It was the first time I have had more than one person say they could live life in a world of texting and calling without a cell phone.

How about laptops or PCs -- "I realize that you need a computer to do your school work, but putting that aside, how many of you can't live without your computers".

All hands went up.

Suddenly the laptop and PC have become indispensable -- more valuable than even their cell phones.

Why?

The next generation uses their laptops for everything. Computers are fast becoming a TV and while the baby boomers among us would rather watch a nice flat screen for viewing, the next generation is happy to cozy up to their laptops and insert a DVD. Or watch a TV show in time delay (but turn the sound off during the commercial pre-roll).

Their laptops are the home of their iTunes library which they visit a lot more often than let's say an on-campus book library -- I can tell you that for sure.

Of course they have email, more texting and special programs available on their personal computers -- their gateway to the world.

Jobs knows this.

It didn't surprise me then that he is now making it possible (at a minimum $1,700 plus asking price) to cut the size of a computer in half and allow it to travel light as air. Which is why he named it Apple Air. For those of us who are on planes every week, maybe Apple Air means not having to say hernia buster when we stuff our briefcases into the overhead stowage bins.

Computers have been getting smaller and smaller as have cell phones and iPods. They will eventually converge on the right size for how we like to live. My iPhone is exactly as big and light as I want it. Any smaller and I'll have problems holding it in my hand to make calls or take advantage of the beautiful screen.

All of this is very important to content providers -- yes, that's you radio, television and print.

If they had the technology to invent a laptop back in the 1920s when radio was being developed, we'd all have grown up on laptops. There would have been no need to invent something you just listen to and can't see.

When TV came along, we might have liked a larger look, but we likely would have expected text, audio and video -- again, assuming that a computer was invented instead of radio and then television.

The lesson may be that today's consumer -- the largely populated Gen Y - expects to hear things when they want to hear, see video when they want to see and read when they want text.

You can't make them own a radio if they don't want or need it (That goes for HD, too -- need I say that? I guess I must because the HD Alliance is still trying to get them to buy HD radios).

You can't make them watch a flat screen for their TV needs because you think bigger is better.

You can't make them buy a newspaper -- even if you trim it down and make it easier to hold -- if they want to get their own news when they want, where they want.

The laptop and the mobile device are potent two delivery systems of the future.

Apple has recognized it and the music-related media must never forget it.

If you want to take a quantum leap into the future and start cooperating with the inevitable -- think content.

Delivery systems change. Content adapts.

Just because radio companies paid billions to consolidate radio stations does not mean that future generations will want to listen to content on radios.

There will be no more radio.

No more TV.

No more newspaper.

Just audio, video and text -- adapted for the delivery systems that consumers crave.

Stand back and see it happening before our eyes even now.

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Britney and Unfitney (The Big Four Labels)

The world is worried about whether Britney Spears is going to off herself eventually and Dr. Phil McGraw got himself in trouble for allegedly reaching out to Spears and her family for the purpose of furthering his top rated TV show.

So who should the record industry call when they can't call ghostbusters?

Dr. Phil, of course.

The record industry is suicidal. Unsafe at any speed. It's long overdue for an intervention. Please, Dr. Phil --it needs your special brand of tough love.

Let's look at how Britney and Unfitney (The Big Four Labels) are alike.

1. Britney has been seen in public without her panties and the record labels are the emperor with no clothes. The labels are losing share in CD sales, legal downloads are declining and artists are circumventing the major's like never before. So what do they do? The world's largest label, Universal, refuses to renew its long-term contact to allow Apple's iTunes to sell its music. In other words, a pissing match is more important than gaining market share.

2. Britney had a meltdown at her MTV awards performance and the labels are having one right now with Apple. Apple -- not the labels -- has control over iTunes pricing. Thank God for that or else these self-destructive labels would force them to implement variable pricing which will really cause a nose-dive in legal digital sales. (Check with the record buying public and you'll wind up kissing Steve Jobs on the lips because 99 cents is the high end of what they are willing to pay for legal downloads).

3. Britney holds her children hostage and the labels hold their customers hostage to an ongoing pissing match it has with Steve Jobs. The big four labels have agreed to sell their songs free of digital rights management (DRM) on Amazon, but only EMI does the same on iTunes. See what I mean about suicidal? There is no rationale that can defend making DRM free music available on Amazon while the company that owns a 70% stranglehold on the digital music market is ignored. The labels are more interested in getting back at Steve Jobs than selling music -- the biggest digital music resource they have.

4. Britney married K-Fed and the labels married the RIAA. If your customers hate you already -- and increasingly refuse to pay for your products -- why not piss them off further by suing them for ripping CD they legally purchased on their hard drives. The RIAA bullied The Washington Post into issuing a correction to a story they ran about the topic. RIAA argues the tunes were made available to public files that can be shared but they won't unequivocally say that consumers have the right to copy legally-purchased CDs to their hard drives. Good PR at RIAA is like good PR at Guantanamo. No such thing.

5. Britney exhibits self-destructive behavior in trying to win back visitation rights with her children and the labels show self-destructive behavior in trying to get radio's royalty exemption removed. If CD sales have been declining for all but one of the past seven years and even digital sales are declining, you can't get along with Steve Jobs and your artists are bolting to play record executive, why not try to get radio's royalty exemption revoked. That sounds like good psychology. Everything is going so badly, why not take everyone else -- even loyal friends and business partners -- down with you.

6. Britney refuses to have herself committed and the labels refuse to commit themselves to helping their artists win in a digital world. When big name acts like Radiohead and Nine Inch Nails decide to give their music away in what's tantamount to an auction, it's time to go on medication. When Prince decides to give away his CDs by stuffing them into newspapers -- tabloids at that -- you've got problems. Maybe one-sided contracts and not enough attention has caught up with you. These tactics are not the new record business, they are symptoms of how artists are now joining consumers in losing confidence in you.

7. The last thing that Britney needs is a diet and the same is true of the record labels. Cutting back and trimming staff or doing one more big merger isn't going to solve anything. You've lost me at "How Low". Growth companies grow. Underachievers cut back.

Today, Steve Jobs gets up at MacWorld for his much anticipated preview of new products that his customers have been waiting for. Even though Jobs is not on TV, he will be on YouTube and Apple.com. Typically 35% of my college students have seen Jobs' speech within 24 hours. Most of the rest are familiar with what he has said at such events.

No television show.

No radio broadcast.

No record release can create this much anticipation.

Is it any wonder, then, that the winner and still heavyweight champion of the music media business is Apple CEO Steve Jobs.

What does Britney Spears and Unfitney (The Major Labels) have in common?

Both are time bombs waiting to explode.

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The Inconvenient Truth About Radio

Is it too late for radio?

No.

Yes.

Can't say I'm not direct. I am asked this question constantly -- not by my young students but by people working in the media business. The students represent Gen Y and they really have no meaningful connection to terrestrial radio.

They have their own means of finding, storing and listening to music and they don't care about news and talk on traditional stations. An exception would be NPR stations that many in this demographic seem to like. And as I have written previously, my students have told me they don't think of NPR or KCRW as radio. God forbid.

Terrestrial operators love talk radio. My experience with Gen Y is that they are social -- non confrontational. When I first arrived on the college campus over four years ago I was expecting protests and buildings on fire. That may have been the way it was when I went to college, but not now. These folks work through the system. And the blowhards on talk radio are exactly the opposite of what they would want to hear. There could be no Don Imus of Gen Y -- they don't think its funny to call anyone a nappy headed ho. So don't even bother to appeal to them. You're better off pandering to the older listeners you already have.

This generation doesn't have the race issues older generations had. They are more accepting. And while illegal immigration fuels radio windbags, this generation sees it from a polar opposite point of view.

I'm just telling you what my experience is with the next generation and the reason I bring it up is because to answer the question "Can radio be saved?" the industry will have to deal with these young folks one way or the other.

Currently, radio is blowing it.

That's why Dan Mason has it right -- the available listeners to terrestrial radio are Gen Xers and baby boomers. He's restoring classic hits and rock stations -- blowing up ill-conceived fantasies that were to be Free FM talk stations aimed at younger demos. Plainly put, the next generation is not inclined to listen to radio now or in the future.

So, no -- radio can't be saved as a growth medium, but yes -- it can be a damn viable free cash flow machine for the foreseeable future if it can rid itself of a few inconvenient truths:

1. Get over HD -- the audience already has.

2. Start spending on content (this isn't likely to happen). Growth companies like Google and Apple hire and invest. Chrysler cuts back. You get the point.

3. Don't even think about more voice tracking -- it will only save money and never attract listeners -- not even if you paid a person carrying a People Meter to stand in front of a radio blaring your station 24/7. Voice tracking must go if you want to entertain. We report, you decide. Or should I say you're investment banker gets to decide.

4. Don't start me on using the morning personality as an afternoon voice tracker as Clear Channel is apparently considering. Call me exorbitant but Bill Drake had it right again --three hour max for air shifts. Four on the weekend. Ask any of us if we can entertain for more than three hours a day six days a week. Good PDs know. (This, too, isn't going to happen so don't tell me it's a fantasy. I know it.)

5. Program directors should be given a budget, be required to propose a plan (each year) and then you must leave him or her alone. If they fail, you can have your way with them. But they will not succeed when Wall Street runs you and you run them.

6. Return to a code of good production values for your station. If television programs had radio's piss poor production values it would be -- well, YouTube. Oh My God! That's what TV is becoming -- YouTube! I mean don't step on vocals. No dead air. One spot per commercial cluster. You know, the stuff we know works. Do it while there is a glimmer of hope.

7. Cox is right. Cut the spotloads. I'd go to eight units an hour and raise prices. It isn't helping radio to run every spot they can sell for low prices. This, by the way, has been a problem in radio even in the good times. Too many cheap spots.

8. Invest in a killer morning show. Every good PD knows that a morning show can be worth 40-60% of a station's billing. Then tie that person up to a long term contract. The NHL Philadelphia Flyers just signed 22-year old future star Mike Richards to a 12-year contract. So far he seems to be the real deal and worth the money, but the alternative to operate on the cheap causes your most important day part to be underrated and under billed. Hockey has a salary cap just like radio. Oh, you didn't know radio has a salary cap -- an unofficial one. In sports it would be called collusion.

9. By the way, I have an idea for a morning show once you hire and lock in that unique talent that will build a large following for years to come. It's a bit complicated but I'd be happy to share it in a future piece if there is enough interest. It builds loyalty.

10. Play to the available audience because the next generation is busy on their cell phones and iPods. Don't try to aim for the generation you need so badly -- the one you let get away by doing nothing to fill their needs for the past ten years. The result: Gen Y has no strong attachment to radio and isn't likely to get one.

But...

Can radio be saved by becoming a content provider for the Internet and for consumption on mobile phones and devices?

You bet.

And that's why I am so optimistic about the future of radio-produced content away from the terrestrial signal. But radio people hardly know about the preferences of this elusive generation. I get emails every time I write about them from angry broadcasters who think Gen Y is the enemy. No, you are the enemy -- you've proven to be your own worst enemy.

They are not. They are your future business because terrestrial radio will never again be a growth business.

One reader slapped me and said go and understand what Clear Channel is doing in interactive. Yes, I understand. Everything will be alright. Now, try to understand that no matter how much Clear Channel tries to get into the heads of Gen Y, it can't. And I'm not convinced they are trying all that hard.

Again from my vantage point -- and please note this is personal -- nothing traditional radio or for that matter the record business is doing is of great appeal to the next generation. So lull yourself into thinking you've got the future figured out without them. I'm betting you don't.

Is it too late for radio?

Yes.

Only companies like CBS that understand how to program to the available listener can operate for as long as they will listen.

Is the terrestrial signal the only option for radio's future?

No.

I spent the better part of the last four years in effect going back to school. And to the radio industry I respectfully say, I'm afraid it's now your turn.

There is no future for a radio industry that keeps imitating itself -- and doing it on the cheap.

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Cheaper Channel

Inside Radio is quoting sources as saying the FCC is going to approve the Clear Channel sale to investment bankers Lee and Bain.

Department of Justice approval would likely follow.

Then, sit back and enjoy the action thriller.

You read the headlines. You know that the radio industry is posting declining revenues. Most analysts say the best radio could hope for in 2008 is a flat year. Not exactly a climate that will attract investment capital.

How would you like to be Lee and Bain? If you believe they will actually close on the purchase to take Clear Channel private, they are guaranteeing shareholders $39 a share. CCU closed at $35 yesterday. The buyers are overpaying.

As you know I think one way or the other Clear Channel winds up in the hands of Sam Zell and Randy Michaels, but not before shaving the price down some more.

Sam Zell doesn't pay retail. If he's got his eyes on Clear Channel -- which is what I think -- he's also looking to trim back the price. Perhaps Lee and Bain can do it before they actually decide to close. Imagine their argument: Clear Channel is not worth what it was when they agreed to pay $39 a share. And they would be right.

What they might not say is that they want to flip it to Sam Zell and he isn't going to go for $20 billion. Zell buys discounted investments. That's his M.O.

Hell, it would be worth it to Lee and Bain to flip it even if they had to take the haircut. In the investment market you're only as good as your next deal. Imagine trying to buy other businesses when you've been snookered on a $20 billion embarrassment. Let's just say Lee and Bain have the motive to get out of this very bad acquisition if they want.

And as I've said before, flipping it to Sam Zell -- in total or part -- gets the job done. Zell can also make it worth their while and Lee and Bain live to buy companies another day.

Radio stocks are in the toilet and ready to be flushed.

The industry is losing audience and has no plan to win the next generation.

Cell phones and the Internet -- now they're growth industries.

Radio has no plan to become part of the Internet revolution.

So, what to do?

Sell to Sam Zell after discounting the sale price even further.

Keep your eyes and ears on events surrounding the sale of Clear Channel in the months ahead. I'd like to think that Clear Channel, Lee and Bain and the CCU shareholders are smarter than they look right now. Smart enough to know when to exit stage left.

The only way you could run a business that has seen its finer days is to hand it over to an operator who can't see straight -- looking for the ultimate revenge.

That would be Randy Michaels and Sam Zell.

But first -- time to take a haircut.

Clear Channel may soon be giving new meaning to the words "cheap channel" and it's nothing to celebrate.

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Ch-Ch-Changes

It's all becoming evident now that the revolution begun by the next generation is dramatically changing the world and, along with it, the music media business.

David Bowie sang "Time may change me, But I can't trace time".

Change is everywhere.

Ironically enough, one of the few things I could do within my core skills when I served my four year non-compete with Inside Radio's new owners was to teach. Who would have thought? And what a gift it was. Over four years ago when I first arrived on campus I quickly understood that something major was happening among the next generation and that folks in traditional media had no clue. I had no clue. Today I see things quite differently regarding the future of the music, record, radio, TV and mobile/Internet businesses.

First look around and you'll see clues -- lessons.

1. Traditional media deciding what is news and pontificating their interpretation of events. That's why so many pundits (almost 100% of them) lost their objectivity and proclaimed Hillary Clinton dead on arrival in this week's New Hampshire primary. Even when she won and they lost they were scratching their heads trying to figure out what went wrong. Most blamed the pollsters for lack of appropriate introspection. There are many reasons for this -- not the least of which is that the media business is used to building up and tearing down public figures to meet their own news cycles. But there is another reason: increasingly the next generation does not like to be told what to do, what to think, or what is going to happen. New Englanders have been that way forever, but we're getting more sensitive to big media telling us what's news and how to think.

2. The next generation -- and by extension older Internet users -- prefers to get their news on their terms -- when they want it, where they want it. They don't need someone to broadcast to them any longer. They seek out what they want to read, watch or hear. So instead of waiting for CNN or Fox News Channel to report to them, they research the things that interest them. Therefore, they see many sides of a story not just how news organizations see it. The Fox adage "we report, you decide" could arguably be replaced by "we research, we decide" among Gen Y.

3. Radio owners think that listeners want stations to entertain them. Increasingly young people want to participate in their own entertainment. Mash-ups. User generated content and what I think will be all the rage next -- collaborative user generated content that can be passed around social networks and altered as if it were a Wiki. If I'm right, this sure puts another nail in the radio coffin. Radio stations think they are playing the hits. What fools. Their future listeners want to make their own hits -- with each other.

4. TV Networks think that racing to the Internet with short-form programming on YouTube's of their own creation is the future. Let's see if I'm getting through here -- all together -- what do young people want from their content? You got it! They want to make their own. The popularity of YouTube goes way beyond posting clips from traditional media. Some of the best stuff is user generated content. Oops -- if we're right, the networks are toast.

5. The record industry thinks they are the home of the hits. My readers know that young artists and consumers want to decide what is hot and what is not. In fact, go to MySpace and see all the music that record labels don't have anything to do with that is being publicized, heard and even sold to the general public by individuals. I've got some talented music students at USC who could be superstars -- hey, I'm an ex-radio PD, you'd think I know a hit from a stiff. So where are the labels resisting change? They want to control the process like in the old days. They discover the bands and artists. They arrange and produce them. Tell them how to dress and own their souls. And when they can no longer sell product, the artists and bands are out. What a way to inspire new trends. Maybe that's a reason why the music business is so boring and in such trouble.

6. The Internet business thinks that the holy grail is streaming 24/7. But what if I told them that the next generation can't and won't sit for streams the way older listeners enjoyed, say -- radio. What if the future of the Internet goes way beyond being a radio frequency on steroids. More of a delivery system that everyone has access to -- no FCC, no censorship, no gatekeepers -- and content could be five minutes or 45 minutes. Every day or once a month. Only your imagination would limit you. The next generation demands change because they want to listen when they want to listen -- to what they want to listen to -- for however long they will pay attention. Oh, and they want to be part of it.

7. Newspapers think that moving their antiquated publishing ventures to the Internet will be a replacement for the printing business, but what if I told them that even the Internet can't save newspapers. Look at Facebook. It's a newspaper (And by the way, if you don't know what Facebook is, click on my Facebook icon on the blog and join the fun). Facebook tells me when all my "friends" do all sorts of things. When my students get engaged. When my friends take a trip. I know. I know. That's not real news. But imagine when news starts being delivered as a social network. Blasphemous from a J-school grad? No. It's exciting. We finally have a cure for the liberal media and the right wing wackos who pretend to control the flow of information to the rest of us.

The Chambers Brothers song Time Has Come Today sums it up:

Time has come today
Young hearts can go their way
Can't put it off another day
I don't care what others say
They say we don't listen anyway
Time has come today

It's important to understand the problems and opportunities facing the music media business today.

Change is your friend. It's a precious opportunity.

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