Wall Street "Pimped Out" Consolidators

MSNBC’s David Shuster was taken to the woodshed last week because he made an unflattering comment about Hillary Clinton’s daughter, Chelsea, whom he said was being pimped out in an odd sort of way to win the favor of increasingly critical super delegates.

Shuster was no doubt pushing the boundaries. MSNBC suspended him and Hillary Clinton, a mother no less, is out for blood.

But it got me thinking about the sad state of radio consolidators. I often write about the tragedy of needless cutbacks at a time when radio needs to invest in content, marketing and, God knows, management.

Instead, super managers with impressive track records are being let go. Program directors are doubling up not only in their markets but in other cities. It’s folly. Sales people are being fired – how can that be at a time like this. On-air talent is being let go because their salaries are too high and thus, present a greater opportunity for financial belt-tightening.

It’s insanity.

Important morning show personalities are being fired. Morning teams are becoming solo acts -- lest I remind the consolidators that they are messing with 40-60% of their total stations income. Believe me, they know it.

So, let’s try to put ourselves into their shoes. I’m not pretending to be objective here, but let’s try.

Many of these consolidators – not all – were great operators. After all, they had major roles in building up the assets that Wall Street investors saw as so attractive when consolidation whetted their appetites for a great free cash flow growth industry. Hard to believe today that it was radio that they saw as a comer.

So with the exception of the Mays’ – who really had little experience doing anything but running a small company – some of our consolidators were the pioneers of radio’s growth.

Where did they go wrong?

Most had little experience dealing with Wall Street. They were small time operators who worked for companies that were able to take losses. Hell, I worked for several companies like that. Radio was the business they wanted to be in for whatever reason. Many of the best operators took loses. Or, they didn’t care because radio was not the essential part of their businesses.

Remember when a tire company – RKO General – owned radio stations because they could -- not because their stock price depended on it?

When Congressman Cecil Heftel of Chicago owned a group of stations because he wanted to?

When Rick Buckley took over a group because his father had passed away and he has kept the company privately held to this day?

Not now.

It’s kind of like in those mafia movies. The moment you take the money, they own you. Don’t pay them back and you’ve got a beating coming. You lose your independence. You do things the way you’re told.

Even when it spins out of control and a consolidator knows it, they are helpless to fix things because the rules of the game are stacked against the operator.

Emmis CEO Jeff Smulyan knew that he had to take Emmis private. He tried several times. But the rules of the game make no sense. Shareholders armed with lawyers and threats beat him down. Going private was the solution – at least better than being beholden to a Wall Street that no longer thinks radio is a growth business.

Clear Channel wanted to go private because the principals finally had to acknowledge that they were in over their heads. If they wanted one more pay-day, they had to sell. Thus, the long national nightmare called the Lee and Bain bailout. I don’t call it a privatization move. It is a bailout from the owners’ own incompetency.

The people who radio consolidators looked to for money – very similar to loan sharks where I come from – are moving on to other industries.

Even that nut case Jim Cramer on CNBC’s “Mad Money” socked it to radio the other day saying radio is dead. That it is no longer attractive as a free cash flow business because there is less free cash flow. That when the Clear Channel sale goes through, the trouble is just starting. And the ultimate insult – that every car will have a factory installed satellite radio in it. When a cheerleader for Wall Street so blatantly dumps on an industry, you know it’s all over. Get the lights on the way out.

There is a future. But it’s not for consolidators.

It’s for the people who built the radio industry on their backs – their work ethic, their loyalty and dedication and it’s in the Internet and mobile space. Radio as an industry is over due to mismanagement and a marriage that failed between able radio operators and Wall Street money people.

It’s interesting that the first three letters of consolidation form the word – con.

Radio presidents and CEOs let themselves be conned. Lured by the game Wall Street always plays with its victims. Then, Wall Street pimped them out.

And along the way, radio’s consolidators – some of whom I previously respected – the ones who are firing their brethren now to save their bottoms lines, well –

They’ve sold their souls.

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