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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