The Clownsizing of Radio & Records

I read that Frank Blake, CEO of Home Depot, has discovered something earth-shattering.

In an attempt to help the troubled company respond better to the marketplace he discovered a lot of bad decisions were being made -- by headquarters! You've got to respect him for that realization.

Lawnmowers lined up at Home Depot locations in Arizona when many of the stores considered themselves lucky to sell one each year. Lawnmowers in the desert? Not that big an item. Who would have known? Not necessarily corporate.

So, he could have made some software adjustments and moved toward the kind of smart marketing Wal-Mart is known for but he did them one better. Now, local managers get a say in what to stock based on what they know will sell in their Home Depot stores.

As Sarah Palin would say "Betcha" you know where I'm going with this.

The investment bank that owns Chrysler is trying to merge with General Motors or as Newsweek commented in an article recently -- two wrongs don't make a right. Another reminder that we're living in a world where at best U.S. business knows how to merge but not operate.

What would be the appeal of joining two losing automakers into one? Billions of dollars in cost savings, that's what.

Sound familiar?

Cost cutting. Not product innovation -- that could never spur a merger of this magnitude.

Again, cutting costs seems to be the only thing we do in American business anymore. And where is it getting us?

Plus, we've forgotten who pays the bills.

Starbucks lost its way when it started thinking like a big corporation and not (also) like a cult for java. Starbucks didn't lose its profit edge because they opened too many stores too close to each other as they'd have you think. Starbucks forgot about the product and service that made consumers willing to pay high prices for their coffee. (Dunkin' Donuts and McDonalds helped remind the customer when they got into more reasonably priced coffee -- all it did was shine a light on what was wrong with Starbucks).

Closer to home...

The record industry used to be show business. But it became more business than show when it, too, was driven by some of the less savory rules of the free market. Do you think it will take another twenty years for historians to look back on the record business and easily identify what led to its decline?

I'll bet they won't conclude that the Internet did the labels in.

Or the demise of music radio.

I'm thinking the day the record labels started pulling in the financial reins on finding, producing and marketing new artists, bands and musical trends, they were dead in the water. The labels can't see this yet. They, like other media, think it was a conspiracy between bratty young pirates and that newfangled Internet.

Cost cutting. Not product innovation.

Radio started imitating itself long before consolidation came along. Radio's route to irrelevancy began when owners started finding the wrong ways to save money.

Please forgive me if you've heard me say this before but my old friend Jerry Lee, the multi gazillionaire who owns just one top-rated local radio station (B-101 in Philadelphia) often told me, "I'm always looking for ways to spend more money". His actions back up his words. Of course, he is a privately held company. Lee slammed the door on the consolidators when they whipped their checkbooks out during consolidation in an effort to buy B-101. Whose sorry now besides Connie Francis?

Imagine if one of the big consolidators paid Lee enough to part with B-101. I can't imagine that it would be the station it is today using consol-a-nomics.

An "anonymous" reader of mine wrote the other day that I was nothing more than a mortician -- burying the radio industry. He is, of course, entitled to his opinion which is why it is posted. But morticians don't kill their clients. They bury them after they die.

Radio, records -- and now traditional network and local television -- is killing itself. No one else is doing it except the man (or woman) in the mirror at each company. These are smart people who have made a mockery of prudent downsizing.

I call it the "clownsizing" of American media.

But let's leave the blame game to politicians. Looking deeper into the reason why so many smart people are making so many bad decisions, we can glean the following:

1. The entire U.S. corporate world is built on the benefits of the free market with very little oversight and few DOJ barriers to consolidation. Radio and the record businesses are not atypical. They are, in fact, typical -- just like everything else we do in this country today. Consolidation. Cut operational costs as we monopolize and you see the results -- not just in media -- everywhere.

2. We don't make things any more. Our economy doesn't provide lots of new companies and when we do the Googles of the world become Clear Channel in waiting -- a virtual monopoly. But we could. To inspire startups we have to fund startups.

3. Quality -- and customer satisfaction is all talk. Ask Starbucks. Ask the Friendly Skies. Look no further than our own brethren -- "Less Is More", "fewer commercials", "more variety" -- all lies detected very quickly by the listener.

4. We are separated from the customer and/or consumer. Home Depot has to come up with a brilliant idea to do what Sears Roebuck did in ancient times -- let their managers manage and be rewarded, promoted or fired based on their performances. What a novel idea. Radio has lost touch with the street. We think we are in touch with the next generation but the next generation that I have come to know wants nothing to do with radio and its promises.

5. Gutless leadership is a symptom of what's wrong with American business and the media business. CEOs answer to a higher power -- the board of directors. And the boards of directors in this country are in cahoots with their CEOs. Check out Citadel now trading at 37 cents -- that's right -- after yesterday's 900 plus resurgence in the Dow. And speaking of that -- does anyone think that 936 point advance marks the turnaround of all the other problems?

It's rather simple.

We buy and sell things and don't run them well.

Even when we get to buy the competition, it still doesn't seem to work.

We get an "F" for innovation -- innovative projects don't make the budget because you can't show a return on investment to shareholders in one or two quarters (but it's okay to show them 35 cents a share and blame the economy).

We piss off consumers and drive them away in spite of all our power and might.

And the next generation is going to kick big businesses' ass. They are gaining control of the Internet -- and commerce. They are hurting you at the box office, record stores and in the ratings books.

Corporate America -- meet the next generation.

You could learn a few things from them now -- or wait until later after you've run the rest of what you own into the ground.

It's a new day, but not in traditional media.

For everyone else -- opportunity abounds.

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