All Access was reporting over the weekend that Clear Channel President John Hogan will be returning for at least another five years -- longer than either Barack Obama or John McCain will serve their first term as president.
You can't just sit dispassionately by when the largest radio group goes private because what they do still matters a lot to everyone else.
There are lots of folks out there who think the two buyout companies Lee Partners and Bain Capital are all of a sudden operators, but that's not realistic. Buyout firms don't make their money off of free cash flow -- not in the long-term. Buyout companies typically invest, take over, cut costs, reinvest where they see they can improve value and then ultimately sell parts or all of the entity.
Unfortunately for Lee & Bain it has taken so long to get the Clear Channel deal done (almost two years) that they will be taking over in the midst of a serious economic downturn.
There is also a presidential election this Fall which will determine the future of the country and the business climate for years to come.
The radio business has been on the decline for years and shows no signs of improving unless it can find a way to get the next generation to give up their new media for radio -- not likely.
No one can know for sure what will happen once Lee & Bain take over, but there are some clues. Here's my take:
1. Retaining John Hogan is the perfect move for the new owners. He has a multi-year record of presiding over a declining Clear Channel. It's nothing personal, but some people think Hogan has no game when it comes to running the largest radio group. If the Mayses hadn't chosen the obscure Hogan from Atlanta in the first place not too many other radio companies would have picked him out of a lineup for the big job.
2. If Hogan is anything, he's a "yes" man. That is the "how deep would you like your budget cuts and I'll see that they are done" kind. Lee & Bain are not likely to want a real tiger in that job because they are likely to dictate the flow. Remember what I said earlier -- buyout firms cut back and fatten the asset up for a potential buyer. No need to let an operator get in the way. Hogan is no operator. He's a caretaker -- not to be confused with Jimmy de Castro or Randy Michaels, two name two.
3. Sam Zell and Randy Michaels are candidates to buy some of the Clear Channel assets when prices get down into Zell range. Zell buys nothing at a premium -- he buys it off-price. Ze;; and Michaels aren't going to buy everything -- that wouldn't even be good for Lee & Bain -- but they are ready made operators with lots of radio talent working for Zell's Tribune Company. Former radio people with newsprint dirtying their hands waiting to get a crack at radio.
4. You're likely to see more defections to Tribune from Clear Channel once the closing occurs. The Mayses are just getting emotional now when they sue to keep a long time loyal employee like Carolyn Gilbert from rejoining her mentor, Randy Michaels. And while we're on that subject, why is Clear Channel coming down so hard on Michaels? He has kept his mouth shut for four or five years after his demotion at Clear Channel. Not a word from the original noise you can't ignore. He played nice and now he gets this.
5. While some of the Clear Channel stations may be sold immediately, buyout firms have a routine that could take a year or two. There's no rush. The market isn't exactly brimming with buyers -- that is, buyers who can find financing at favorable rates to borrow the necessary money.
6. It's going to get ugly at Clear Channel stations. The real layoffs are coming. Stations will be operated more centrally. People's lives will be at stake as the meanie buyout firms will do what everyone knows they will have to do -- cutback further. Deep cuts.
7. Expect another classic Clear Channel reorganization. I'd like to have money for every time Clear Channel has reorganized over the past ten years. They're just going to do it until they get it right, I guess. This time, look for one person holding more than one job -- the gold standard. A few honchos who answer to the big guy with a new contract. Local radio -- Fagettaboutit!
8. Rumors persist that Clear Channel stations will soon be implementing regional music playlists for their stations -- another move away from localization. (You remember local radio -- the kind that works best and built the stations that consolidators thought were worth so much money). What a bonehead move. In an era when the music buying public wants more variety, Clear Channel is going to give them more regional control. Not good.
9. Because there is no other consolidator with the critical mass to challenge them, this group of clueless suits will be setting the pace for the other lemmings that are presiding over their radio groups. If, as the old saying goes, the speed of the leader determines the speed of the pack, the radio industry is in deep trouble.
Our long national nightmare will soon be over.
The Evil Empire could be leading us into The Dark Ages of Radio.
To experience a Renaissance for the radio industry, we would need the creativity that spurs a revival.
Just as in the Renaissance from the 14th through 17th centuries -- the one we think of when we conjure up the work of Leonardo da Vinci and Michelangelo -- radio would need rebirth on a major scale.
This Radio Renaissance would encompass a revival of learning, reform, intellectual stimulation and a real transformation from the upheaval that was brought about by consolidation to a new age of prosperity.
John Hogan is not a Renaissance man.
So, the hoped for revival of the radio industry is still on hold for the foreseeable future.
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