Rent-a-Radio Station

McDonald's franchises their local stores.

Many other fast food outlets and providers of goods and services everywhere also do.

It's all-American to be in the franchise business.

Which is why I think I have an out for radio operators who have had a devil of a time trying to run their monopolies since consolidation allowed them to put their clusters together.

There's even precedent for it in radio.

Remember how ABC went searching for crummy little AM signals in big markets and did long-term deals where they supplied Radio Disney content while the owner got checks and kept the license?


Why not now?

Imagine Farid Suleman no longer having to have any expenses. He could work out of his home (and write off one room as an office like the rest of us). Even if he keeps his $11 million annual salary, he won't have to worry about paying for morning shows, personnel, talent, salespeople, health care -- you name it.

Farid's ultimate cutback would be to throw the format off the air, kick the rest of the people to the street and actually rescue himself from the mismanagement that is epitomized by a Citadel stock worth only 29 cents.

Real broadcasters -- the ones who know how to do local radio, provide local content, employ local people can enter into an agreement with Farid to rent a station or two or three and make payments to Farid. Farid declares a profit and then uses the rest to pay down the considerable debt under which he buried himself. And he doesn't have to run anything. How cool is that?

Hey, you other radio groups -- don't laugh. Your stock is in the toilet, too and it doesn't take a college student to see that you're not going to have a comeback when you're cutting programming. Isn't gonna happen. We all know this. You do, too. You're just biding time.

One reader asked what Farid could possible cut next. Citadel, like many other radio groups, have already cut deeply into the bone. But he can always find something -- how silly of us -- he's a bean counter and a damn good one. As far as being a CEO, he's a damn bad one if you judge him by his own Holy Grail -- stock price.

Hear me out.

So a group of your friends decide to invest in a long-term rental of WABC in New York. First, you make sure you include an old ABC hand in this because they actually knew how to run these stations. Then, look at the beauty of this -- Farid just collects his money. After all, he's entitled to his profit, too.

Citadel and the other groups in deep trouble get to actually turn their stations into assets by relinquishing managerial control. This means people who by experience know what they're doing can go back to running the stations. And Farid no longer has to embarrass himself. Left to his own devices, Farid is possibly headed for bankruptcy -- a small detail when your public stock price is about a quarter. Hell, there's not much difference.

Putting radio back in the hands of local people who presumably could run the stations would most certainly be an improvement.

As much as that appeals to me, however, I'm still more optimistic about new media because it is a growth business with very few content providers and marketers who know what they're doing. It's got a lot of problems and is not ready for prime time until some of the issues get resolved (i.e., royalty charges). But it will explode someday.

Let that also be a lesson to radio to heed my 80-20 rule.

80% of your budget should be spent on local programming, sales, marketing and management.

20% (at least) should be spent on podcasting -- new content other than that on terrestrial signals -- with personalities other than the ones on your stations. And hundreds of new and different Internet streams and tons of local content.

Like most of you I love radio and would like to redirect it toward the future but never forget that the future includes the next generation. Gen Y has left and are not coming back.

Still, as strange as this idea may sound, group owners are headed toward bankruptcy or something worse -- continued operation as a wounded entity in a dying business.

These operators are already panicking and heading for the exits. Farid wants to sell a bunch of stations. CBS, too. And just about every group (but not all) would like to unload some stations if the price is right.

But the price isn't right, it's more like "jeopardy" -- announcing that they want to sell and having no one come forward. It's the anti-comp strategy. Not whether radio stations sell for X-times cash flow, but whether radio stations can sell at all.

They need "concentration" before discovering the "wheel of fortune" in which they spin the wheel and hope to avoid -- you guessed it -- bankruptcy.

One of the reasons I'd like to see terrestrial radio get back to its local roots and out of the hands of the geniuses that have turned the business into penny stocks is because...

Terrestrial radio talent is the best resource for building a new business.

A new media business that will overtake terrestrial radio as a revenue source over time as older radio listeners leave us.

New media needs radio talent, managers, programmers, sales and marketers -- the ones who already know the ropes.

Radio needs new media -- where the listeners have gone, the source of all potential growth.

Only a radio group CEO could miss this hole in the market.

Hell, that hole is so big you could drive a big bus through it -- you know, the kind they're now throwing their employees under.

You've had 12 years and you've managed to do what no pre-consolidation manager could ever do -- ruin a great business.

With more layoffs coming, consider laying yourself off.

Or, in the alternative, rent your stations to people who actually know how to run them.

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