DRIVERS OF CHANGE IN THE MEDIA ENVIRONMENT

Five decisive trends are driving changes in the media environment and forcing media companies to change their thinking and operations: media abundance, audience fragmentation and polarization, product portfolio development, the eroding strength of media companies, and a overall power shift in the communications process.

Abundance is seen in the dramatic rise in media types and units of media. The growth of media supply is far exceeding the growth of consumption in both temporal and monetary terms. The average number of pages in newspapers tripled in the twentieth century; the number of over-the-air television channels quadrupled since 1960s--supplemented by an average of about fifty-six cable channels in the average home; there are four times as many magazines available as in 1970s; 1.5 million new web pages are created daily, and created and stored knowledge (as measured by information scientists) is growing at a rate of 30 percent a year. We used to think of competition among newspapers or competition among television channels, but this media abundance has created competition not only among media but also competition between media and other leisure time activities such as sports, concerts, and socializing at cafes and bars.

The abundance has created fragmentation and polarization of the audience because people are spreading their media use across more channels, books, magazines, and websites. This produces extremes of use and nonuse among available channels and titles. In television, for example, there is a tendency for individuals to focus most use on three or four channels. Increasing channel availability does not create an equal amount of increased use. For example, if twenty channels are received in a household, the average viewed is five. When fifty channels are received, the average rises to twelve, and if one hundred channels are received, the average viewed by all members of the household is only sixteen. Advertisers understand this development and have responded by spreading their expenditures and paying less for smaller audiences. The audience-use changes mean that competition is no longer institutionally and structurally defined but is being defined by the time and money audiences/consumers spend with media, and the competitive focus is now on the attention economy and the experience economy.

The difficulties faced by individual units of media have led media companies to create and operate portfolios of media products. This response occurs because declining average return per unit makes owning a single media product problematic. The portfolios are efforts to reduce risk and obtain economies of scale and scope. These portfolios can increase return if they involve efficient operations and joint cost savings.

Despite the growth of portfolios and large media companies, the strength of the companies is eroding. Today no basic media content companies are in the top one hundred companies in the United States or in the top five hundred worldwide. Moreover, the reach of media companies is declining, even though they have grown bigger. Each has less of the viewers’, readers’, and listeners’ attention than in the past, and their difficult strategic position concerns many investors. As a result, media companies are struggling with their major investors, and all major media companies fear they may become takeover targets.

Underscoring all of this is a fundamental power shift in communications. The media space was previously controlled by media companies; today, however, consumers are gaining control of what has now become a demand rather than supply market. And media consumers are not merely content to be passive receivers any longer, many are now participating in production through the variety of forms of interactive and user generated content. This shift is apparent in the financing of contemporary initiatives in cable and satellite, TV and radio, audio and video downloading, digital television, and mobile media, which is based on a consumer payment model. Today, for every dollar spent on media worldwide by advertisers, consumers spend three. In the U.S., that ratio is 1 to 7.

Media companies worldwide are struggling to understand and adjust to wide-ranging external and internal changes that are altering modes of production, rapidly increasing competition, eroding their traditional audience and advertiser bases, altering established market dominance patterns, and changing the potential of the firms. The need for media managers to perceive, understand, and adjust to the new conditions increases daily because such changes can lead to failure of both existing and new products and, ultimately, lead to the loss of value or collapse of firms.

Radio: Buffett Likes Mom & Pop Operators

Perhaps you saw why the world’s richest person continues to be the world’s richest person last week when Warren Buffett said the country is in a recession but that he will continue to buy businesses.

Not just any business – family-owned and operated companies.

Buffett is on his world tour (via NetJets, which his Berkshire Hathaway owns) to look for new investment opportunities. Buffett is in his late 70's and he often says that he plans to retire five years after he dies!

What’s notable about Warren Buffett’s acquisition and management strategy is the emphasis on buying well-managed German family-owned and operated companies – presumably the growth companies that are worth the investment.

The radio business used to be a conglomeration of mom and pop stores run by some of the most colorful people you could wish to work for.

Some of them were incapable of making a profit – no doubt some of my readers would like to comment on these characters who loved radio nonetheless. To many, just owning radio stations was worth – well, losing money.

Contrast that with Citadel and Radio One shareholders who are losing money today without the love.

Buffett also attacked the investment world in his comments last week – especially derivatives trading saying, “It’s not right that hundreds of thousands of jobs are being eliminated, that entire industrial sectors in the real economy are being wiped out by financial bets even though the sectors are actually in good health.”

Buffet knows there are not adequate controls on the investment banks and that it is not possible to re-regulate them anymore – as he says, “you can’t get the genie back in the bottle”.

The radio industry is not so big, so powerful or so profitable to dismiss this oracle from Omaha.

Here’s how I interpret Buffett’s remarks vis-à-vis radio and records:

1. Mom and pop radio operators were good enough to build the radio sector into the kind of assets that eventually sold for hundreds of millions of dollars a piece – in many cases. The problem was – and is – investors and those beholden to investment banks – have not been capable of operating the assets. In other words, the mom and pop operators had the skills and did a better job than those “better educated” Wall Street types. The investment banks had the money. Looks like the mom and pop operators got away with the best of that deal. They sold high. Now the consolidators are owning -- low.

2. It appears Buffett is telling radio that re-regulating Wall Street – or if I may expand his comments to mean, ownership – will not fix the problem. There is no going back. It’s too late to make Clear Channel hundreds of small companies. But it is probably not too late to run Clear Channel as if it were many different companies. Clear Channel Contemporary – a business that would run the contemporary music stations and build growth for its corporate owner. You get the idea.

3. A company’s ability to maintain the employment of all its people is a predictor of profit and loss. That is, if you keep them on the payroll and manage them capably with the proper leadership, you will make money. By contrast, radio has been reducing its ranks – along with its partner in crime, the record business – since the late 1990s and look where it got them?

After all, follow the lead of the world’s richest man.

He buys NetJets but more importantly buys its outstanding management with the airplanes – lets them run the business and requires only one face-to-face meeting in Omaha each year. No micromanager, this Buffett fellow.

Buys Mars candies and Dairy Queen and eats the profits – so to speak – by enjoying the products personally but letting the management he scoped out and acquired do the work.

Geico – do I really need to say more?

Buffett didn’t come up with Geico’s effective advertising campaigns. He just bought the damn company and its management.

Buffett reads all day – so he says. When he learns enough about a company he wants to own, he buys it.

Then, he lets the “well-managed” company run without him.

That’s right – without him.

No restructuring divisions at the hands of corporate. Geez, how many times has Clear Channel restructured since 1996? Ridiculous.

Are we too blind to see that Citadel’s Farid Suleman and his ilk are not successful because they are the anti-Warren Buffett.

Suleman, known for meddling in local station decisions to channel his inner wish to be a program director, runs a hands on business.

Buffett runs many hands-off businesses.

Hands on.

Hands off.

Which approach works better?

Citadel shares closed at $1.74 yesterday.

Berkshire Hathaway "A" at $132,200.

In the end the most painful lesson that radio and record label CEOs refuse to learn is that the companies they buy are not the most important assets – it’s the management and its employees.

And that people make the asset grow profits.

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The Next Generation of Radio – On-air, Online, on Mobile Devices

At the end of June I am going to teach an interactive session for radio executives at the Conclave in Minneapolis. It will be conducted as I have taught classes for my university students over the past four years – interactive and focused on several main ideas.

My view is that terrestrial radio is now a destination entertainment medium for available listeners – older members of Gen X and the baby boomers.

Radio is still a good business for these demographics – and, for that matter, could be an even better business for the available audience if radio owners could get back to the basics of radio programming, unleash the PDs who still have the ability to program what these available listeners want and invest in ways to increase income knowing that they cannot increase the audience size.

It is what it is – lots of baby boomers, aging but still working, and some of their Gen X children who have a love and appreciation for the medium.

Beyond that – radio has little future as of this moment.

That is, if radio is defined only as a 24/7 terrestrial signal.

On the other hand if radio content providers, marketers and sales people can embrace alternative ways to entertain Gen Y – not as easy as it sounds – terrestrial radio operators could be the fortunate drivers of mobile, Internet and WiFi entertainment for a youth generation that rivals baby boomers in population.

I am very excited about radio’s ability to cash in on this opportunity even though there is little evidence that existing major radio companies really understand Gen Y or for that matter the mobile, digital and Internet world.

Among the things I will address at the Conclave – that I’d like to mention to you are:

1. The future of broadcasting without the next generation -- options, strategies, challenges. There is no better content provider on planet earth than radio talent for producing content. But there is no need to produce 24/7 programming online. I am not saying that there won’t be streaming stations on the Internet to replace radio for Gen Y – there will. But the radio station of the future may only provide three hours of programming a day – that’s right, a day – and deliver it on a cell phone or mobile device. And, yes, there will be ancillary ways to monetize this concept.

2. Opportunities for radio on the Internet and in the mobile space. Podcasting will be the new radio for Gen Y. It can’t happen now because there are rights issues pertaining to the music and delivery programs without universal WiFi, WiMax or some other mobile enabler, but you can bet the old transmitter and tower on this – podcasting is the future and existing radio companies can own it if they can understand its challenges and opportunities.

3. Ways to better understand the elusive and quirky next generation. How to read the consumer more like Apple CEO Steve Jobs does. If radio companies think they know Gen Y because they have Gen Y children, then it is hopeless. Our children are not always the best indicators of a generation – it’s also our best work with lots of our influences considered. The successful content provider in the future will have to unlock the genius of Steve Jobs in understanding a generation they are not in – and Jobs, arguably, knows Gen Y better than they know themselves. There are ways to get started.

4. How radio stations can best program to the available audience for the terrestrial signal. CBS has dealt with this reality straight on. You can’t program to a generation that would rather not listen on a radio. Or a generation that increasingly would rather start, stop and time-delay their listening rather than tune in to a 24/7 broadcast. Never has the radio business done such a poor job programming to its base. This can be fixed in the short term and long term.

5. The role of social networking, mash-ups and viral marketing in content creation. Too many radio owners think social networking is MySpace or Facebook. It is that, but more. Record labels think radio stations break new music. They are, but increasingly less. The next generation has the ability to spread the word like no other generation and without a deep understanding of how they do it, you are not likely to benefit from this most efficient way to do promotion. And mash-ups – user-generated and influenced contributions to sound and sight are not a flirtation, but what many young people now see as their right.

6. Developing the kind of skills that radio companies looking to survive by being new media outlets will have to possess in order to compete in a changing world. In the past, a radio station had to be on-air, all the time and doing the same format over and over again. But in the future, new media will require radio broadcasters who want to play in this arena to be many things for which it does not presently have skills. But they are attainable and can be taught to others.

I’m hoping at the Conclave to help each participant draw up a list of action steps customized to each individual’s interests and needs and hear some excellent ideas.

The future is exciting and could be profitable for traditional broadcasters who can do two things at once – program better content for available terrestrial listeners and acquire the understanding and skills to participate in new media – not just technology but sociology.

Of course, I will continue to write about these topics for those of you who are not able to be in Minneapolis for the Conclave because traditional media can do new media once it isolates the opportunities for change.

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Clear Channel vs. Tribune

There isn’t a better soap opera developing than the fight that’s a comin’ between Clear Channel (the spurned lover) and Sam & Randy (Zell’s) Tribune Company (the new love interest).

Clear Channel did what it does best last week – it sued Tribune Company.

Back to Federal Court – Clear Channel’s home away from home – to accuse the Chicago-based Tribune Company of stealing trade secrets because it hired Andrew Friedman, who held a VP position in online.

Clear Channel wants the courts to stop Friedman from revealing secrets and even starting his employment with Tribune until his present contract runs out at the end of the year.

Oh, and while they’re at it, Clear Channel is also seeking to stop Tribune from hiring any other employees where they would have to break an employment contract.

Just so you know Clear Channel hasn’t lost any of its warm and fuzziness lately, they are also suing Friedman as part of the action.

Tribune says the whole thing is worthless – which it is.

One thing is for sure, former Clear Channel Radio President Randy Michaels is messing with his former employer’s head – his specialty.

What a show!

Of course, keep in mind that Michaels has also drained the brains of some other key Clear Channel people. In all of radio, never have so many joined a newspaper company that owns so few radio stations.

That’s because someone other than me thinks Zell and Michaels have an encore coming in the radio business once Clear Channel completes its sale to Lee and Bain.

Hell, what do Lee and Bain know about running a radio company – even less than Clear Channel. But they are smart enough to know who might be able and willing to run some of these stations – and that they could stand to profit from the deal.

So, I’m still stuck on – Randy will be a radio operator again. And for the first time, it appears Clear Channel agrees with me or else why would it care if Michaels steals some of their people away to become – well, newspapermen. And, it took Clear Channel long enough to complain.

Before I go to bed at night I conjure up the image of my long-time friend Lee Abrams (and new Tribune recruit) with a newspaper reporter’s hat on – sleeves rolled up – I can just see the ink on his hands. Yes, Lee crossed over to get into a business that is dying more than radio. No, Lee is not that dumb.

Neither are the other recruits. Michaels will continue to recruit. He may even target Clear Channel more now that he knows he’s getting to the Mayses – a family that did him dirt when he was at the pinnacle of power at Clear Channel.

This soap opera is not about sex – other than some people may get screwed.

It’s about revenge – something with which Michaels is quite familiar.

So, if you believe Randy & the Rainbows are gathering to bring Woodstock values to salty old newspapermen, then have a great time. It will be fun conjuring up all those vivid images in any case.

But if you see the latest Clear Channel legal farce for what it really is – the return of the Big Bad Wolf just as his nemesis – Clear Channel is on its way down – then welcome to “As the World Turns” and “General Hospital” all rolled up into one.

They say soap operas are the same story told over and over again.

What were you expecting from Michaels, Zell and Clear Channel – a new plot?

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Radio’s People Meter Death Wish

I don’t know what it is with the radio industry and the future, but I have never seen so many smart people hold onto the past for so many awful excuses.

That’s one of the many reasons why radio companies – in spite of their talented and dedicated employees – are working full time to remain a horse and buggy industry when the rest of the world has entered the digital age.

Take the Arbitron Portable People Meter (PPM) – please!

This technology should have been adopted ten years ago, but the geniuses who have run the major radio groups into the ground couldn’t let their own hatred of Arbitron get out of the way.

The result: radio audience ratings are still compiled from entries made on paper diaries.

I emphasize paper -- in a digital era.

Anyone in radio knows all the disadvantages of the diary system, but to hear them speak they would apparently rather embrace the enemy they know than the potential enemy they fear.

Radio is arguably under measured because of this antiquated listener reporting system. The People Meter is showing consistent signs of crediting stations with larger cume audiences. This is not without concerns – some of them admittedly major – but it appears the godfathers of radio are not even going to allow the prospect of bigger audiences drag them into the future.

Take Bob Neil, the otherwise able head of Cox Radio.

He's at it again – this time trashing the People Meter in the name of waiting for Media Research Council (MRC) accreditation. Cox in a trade ad it sponsored with ICBC Broadcast Holdings (Inner City) last week argued, “Arbitron’s PPM system in Houston is accredited, but Arbitron wants to make significant changes to the system in all other PPM markets. The MRC recently announced that Arbitron had failed (they underlined failed in their ad) to gain accreditation of their new system. Just as the FAA recently grounded out of compliance aircraft, this should (underlined again) have grounded the PPM rollout, until the new system 'passes inspection'."

Cox is not alone in airing radio’s dirty laundry before the nation’s advertising community.

Spanish Broadcasting has gone public with its gripes. SBS hired the same firm that won in an effort to thwart Nielsen over its Local People Meter to develop what it calls an educational campaign to describe its concerns about PPM pre-currency rates.

Beasley’s CEO Bruce Beasley has been quoted as saying he did not want “broadcasters to go through what we’re going through now in Philadelphia”.

All of this – although it may be offered in the spirit of getting it right -- is a public affront to radio’s efforts to get into the 21st century.

Cox and other complaining companies have signed long-term contracts with Arbitron for PPM services. Talk about mixed messages.

If they are so principled, why not hold off on voluntarily committing finances and prestige to the People Meter rather than jump on board only to keep screaming bloody murder after the ink is dry?

Cox could have used it’s clout to stay back and fight on principle.

Instead, it signed on and now leads the public criticism (right or wrong) against the very company it is supporting -- with its long-term commitment of cash. Maybe they see it as supporting the PPM, but it sure doesn't sound like it. It sounds more like a misguided, public holy war that no one can win -- as advertisers, who want PPM, watch from the sidelines.

Threaten to pull out – but do it in private. Stop raising so many questions about audience ratings publicly at a time when advertisers have their own doubts about radio – period.

Cox and Beasley have had relationships with the consultant Randy Kabrich who appears to have never met a People Meter he likes. He’s vocal in public and behind the scenes. Two companies who have employed one of the most vocal critics of PPM.

CBS Radio President Dan Mason has it right. I don’t care that some will dismiss this because “you like Mason”. Yes, I do. I also like Neil and Beasley. And I have been tough on CBS for its unfortunate decision to fire so many talented people to cut costs.

Still, Mason is right when he says “MRC accreditation is not currency” arguing “When you look at all these facts, do you really want the radio industry to be behind the television and outdoor industry over an accreditation fight?”.

Precisely.

So the fools on the hill continue to run their radio group share prices down, make bad decisions about radio in the digital era and think a food fight over a principle they have previously been unwilling to stand up for is a good use of valuable time.

It’s a joke.

But in the end the joke is on a radio industry that lets the obstructionist attitude of Cox, Beasley, Spanish, Inner City and others get in the way of using their heads.

The People Meter – ten years too late – is a no-brainer now, but don’t expect the radio industry to lead the industry into the future when its public record is all about embracing the past.

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For CBS Online – Les is More

CBS CEO Les Moonves took out his checkbook last week and agreed to pay $1.8 billion in cash for CNET.com.

CBS is a TV and radio company but increasingly you can see how Moonves is not going to be left behind the way Tom Freston was when he disappointed their boss – Sumner Redstone – leading to his dismissal.

CNET has 160 million users across many sites including Game- Spot, MP3.com, TV.com, ZDNet, News.com, UrbanBaby, Search.com, MySimon, and TechRepublic.

Put that with 40 million users on its current holdings like CBS.com, CBSSports.com Last.FM and CBSNews.com and you can easily see that CBS is going after eyeballs and advertising.

Moonves didn’t exactly sit back. CBS is paying a 45 percent premium to CNET shareholders above the $7.95 closing price when the deal was announced.

Because of the Internet the acquisition also gives CBS a foothold in China. Some think that CNET revenues could grow ten percent or more in 2008.

This is a smart move because to get a bigger footprint you have to acquire. There simply is not enough time to do start-ups.

The one area of caution, I think, is not to expect a great effect from synergies with other CBS companies. Some crossovers are expected but it is going to be hard to merge traditional media with new media going forward.

One reason is that the next generation doesn’t really want traditional media delivered by Internet. They want content created for new media. That is, while traditional thinking has it that streaming 24/7 stations online will be the next step for old guard companies, the next generation seems to defy this wisdom.

Gen Y has a shorter attention span.

They like to start, stop, delete and most importantly time delay their listening experience. They seem ripe for podcasting rather than broadcasting although royalty issues hold podcasting back from its true potential.

The CBS acquisition will work best if it is not tied to synergies with its other traditional content companies. This may sound strange but trying to fit a square peg into a round hole could make the CNET acquisition look less attractive or accretive in the years ahead.

CBS is wise to get into the online future.

It is a hedge on a space they and other traditional broadcast companies have long ignored.

What’s still left is innovating new content for new media created by its traditional media division. This takes time and vision not to mention corporate commitment. But it is out there waiting for its day.

The CNET deal and the Last.FM acquisition before that buys CBS time to become a start-up company in what I think is going to be a very important space.

I say start-up company because no one is doing what I envision. Some broadcast company is going to have to do it.

It could very well be CBS.

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The Labels: “Mission Impossible” or “Get Smart”

Record labels just can’t get it right.

Recently, Universal licensed its library to QTrax, the startup company that did an aborted launch a couple of months ago because it somehow forgot to get the majors to sign off and give permission. Now with Universal on board with this next iteration of a way to get young people to buy music.

When you download music the advertising on the site helps compensate the artists and the labels. Not all the labels are on board and even when they are, I've got bad news for the major labels.

QTrax will lay an egg.

Not worth it. I'll bet young people don't embrace it.

One bad move down, and plenty more to go. Next?

Just last week some 200 plus Congressmen announced their opposition for what Clear Channel correctly dubs a music industry “bailout” by seeking to force radio stations to pay additional fees above and beyond its current licensing tariffs.

The NAB will have to stay on it because even if the legislative move to repeal the exemption fails this time, it will be back soon to try again.

Rep. Howard Berman (D-CA) and his buddies have constituents who must not be denied – the music industry and Berman et al are going to carry their water.

It’s a stupid idea – at the worst time in radio’s history – to think that a dying industry could bail out another dying industry.

Self destruction.

Eagles singer Don Henley has been running his mouth again -- this time in Rolling Stone -- about the unfairness of radio getting to play and promote music without being charged for that service. A sample:

"When you hear a song on the radio, the singer doesn't get a performance royalty unless the singer also wrote it or owns the publishing," Henley says between spoonfuls of tomato soup. Encyclopedic on everything from global warming to high school textbooks, he can deliver opinions like a volcano delivers lava.

"The United States is the only country in the free world where the performer gets nothing. And consequently, other countries don't pay American artists a performance royalty for radio either. They say, 'We're paying our citizens who are artists but not you. Why should we treat you fairly when your own country won't?' Which they get away with because the National Association of Broadcasters is so powerful in Washington. The NAB says, 'We're making you famous.' What they forget to mention is that multibillion-dollar empires have been built on the content that artists provide free so those stations can sell advertising."

The labels need only to look in the mirror -- not to radio.

They are producing too much music that is unremarkable. In an era when music is stolen and shared routinely, the labels need to focus on polishing up their best acts.

They also need to be out there finding new acts across all genres.

But if there was ever a last ditch option for a record label it is to prepare professional music and acts as no one else can. The music industry critic Bob Lefsetz says why not produce one good album a year for fewer artists. He has a point.

Free is the new radio and the labels either don’t get it or don’t want to get it.

Just as radio stations used to influence the record buying public by playing music for free over the air, free filesharing serves that role today. Back then, consumers could have recorded music off a radio station on, say, a boom box – at lesser fidelity and with dj patter included, but most opted to go to Tower Records or Sam Goody.

The record business is not going to survive by selling all music but some music very well produced, done and packaged.

The RIAA campaign against record label customers has one foot in the grave and the other on a banana peel. The labels find it hard to stand down even though piracy increases ever year in spite of the threat of lawsuits. The situation just gets worse for labels. I give it a few more years and then even they will throw in the towel.

The question is: Is the record industry “Mission Impossible” or “Get Smart”?

Only they can change the channel -- and time continues to run out.

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The Radio PD of the Future

I received a very inspirational email from a long time friend that has prompted me to put together the essential qualities of the next generation of program directors for terrestrial radio.

In doing so I am taking into account that radio today isn’t what it was 15 or 20 years ago and that, like it or not, radio is now consolidated. That many of the CEOs and COOs are clueless about content and even marketing, but still – I think I’ve got the PD of the future for you.

It’s also a lesson on how consolidators should handle a talented program director:

1. Give your PD enough rope to either do some great things or hang him or herself. That’s what a leader does. Budget cutting doesn’t make for great programming that you can monetize and throwing money at programmers is no more of a guarantee. Make the PD sell you the idea as if his or her neck is on the line and then say, “let’s do it”. Keep in mind that in the hey day of radio there really weren’t any budgets. You spent what you thought you had. Sales went and sold and hopefully somewhere expenses and income met without getting the owner too concerned. Somehow it worked better than what we’re seeing today.

2. Demand great ideas that you can use now. It ought to be obvious that programming stations that lose more talent every day and get cut to the bone in resources is not going to ever earn your station a return on investment. No investment is being made. Ask your programmers to present great, actionable ideas – this in contrast to edicts like – get by with no live jock from 10 am to 3 pm. A good PD can come up with great ways to make good radio for the available listening audience if you make them present ideas to you and then fund them.

3. Never disrespect the owner. A manager who has to cut expenses should warn his or her programmers not to get into it with the boss. There are plenty of forums in which to do that. Corporate should give true autonomy to the manager and any complaints go to him or her. George Johns of Fairbanks fame tells a story, “I remember once when Mr. Fairbanks (owner of Fairbanks Broadcasting), after learning that our station had a limited commercial load policy, which of course had been in place for several years, was outraged. He said, ‘you mean to say that we run fewer commercials than the law allows? And not only that but I have just found out we actually turn business away because of it? I want to know what idiot came up with that stupid policy?’”

That “stupid policy” was the work of brilliant programmer Jim Hilliard upon which these items are based.

There was always programming interference in radio – not just now in the wake of consolidation.

There were always budget constraints – as I said, often programmers didn’t actually know the budget.

True, most PDs only programmed one or two stations at the most and the pressure of being a public company was not felt on most radio programmers because there were a lot of Fairbanks-type owners out there.

And George Johns, the outstanding programmer from Canada, who partnered with Hilliard and shared some of this wisdom with me, had another excellent strategy that worked then and I believe would work now.

It was when Fairbanks took over KVIL and inherited the legendary Ron Chapman. But how to get free-wheeling Chapman to do Johns’ format?

Listen to him explain:

“What I had was a tape I had produced in Indianapolis. I had two of our best news guys from WIBC do me some "personality" type news. I had our afternoon jock, and production voice Chuck Riley, who later went on to become one of Americas biggest voice over guys, do some promos and ID's. I had some unbelievable great jingles already cut from Hugh Heller in LA, I had all of WIBC's best commercials and I also had a concept of music that had never been heard in America before. Now the final thing I had was some raw stereo tape of Ron Chapman”.

Johns put it all together laying Ron’s own voice in over the records with the production the way Johns would have it. After a nerve wracking 25 minutes without interruption and played back in perfect stereo in a production studio, Chapman said, “I can't very well say I don't know how to do this kind of radio, because there I was doing it.....Do you want to start it tomorrow?”

The magic began immediately between between George and Ron, the station and Dallas.

So, the next suggestion:

4. Illustrate and demonstrate your ideas. This one is on today’s PDs. Too frequently they ask for money from serial budget cutters without going through the pain (and George Johns will confirm how hard it was to pull off the Chapman project) necessary to win support. Budget cutters above all need to hear it, see it and feel it. Hey, they still may be on a mission to cut at all costs, but where that’s not the case, demonstrating your programming ideas in a way they can actually hear is a necessary investment in winning support.

There is no doubt that it was easier to do good radio before consolidation.

Bottom lines and good programming don’t always go well together.

While radio has changed, one thing hasn’t – the tried and true obligations and responsibilities that come with managing and programming a terrestrial radio station to today’s available audience.

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What Citadel Could Learn From Paul Harvey

Look, I know Paul Harvey is old.

He is a remarkable throwback to another generation – a style still appreciated today on many stations but out of sync with new age talk programming (WLW in Cincinnati reluctantly opted to drop Harvey for similar reasons).

The man is an icon – still gets consistent ratings and still earns Citadel – the company that bought but has since shamed ABC Radio – lots of money.

Paul Harvey’s contract is up soon and he had previously let it be known that he is not ready to hang up his microphone.

Citadel apparently does nothing to re-sign him.

Harvey’s wife of many, many years (and one-time contributor to his shows), Angel, died of leukemia in the past month.

Citadel does nothing to re-sign him – a comforting and appropriate gesture he has earned. Is that going to break the bank?

But Citadel CEO Farid Suleman doesn’t have stars in his eyes. He sees only dollar signs. What could he save if Harvey wasn’t replaced? Don’t think that hasn’t occurred to this boy wonder.

These days there are fewer dollar signs for Citadel which is precisely why its stock is in the toilet – around $1.70 a share when it closed Monday.

ABC took care of Paul Harvey and in fact spent the last 20 or more years trying to find a suitable replacement for him when the inevitable day finally arrived.

They couldn't find the next Paul Harvey. Even Harvey’s son, Paul, Jr., knows he’s not his dad – although an able newsman and outstanding writer.

The Paul Harvey tragedy is symptomatic of how FaGreed Suleman is gutting Citadel like a dead fish.

Too many firings of talented people that would lead one to think Suleman still needs to turn around his $1.70 a share company. And more firings likely on the way as FaGreed takes his money ($11 million last year) and runs.

Suleman is the genius who recently said he’s considering cutting salespeople because as much as half of Citadel’s business comes to them automatically – no need to pay commissions.

This is the sign of a really out of touch CEO.

No, the business will not come to you. You go get it – as in relationship selling. Radio is not Google.

This is part and parcel of radio’s silly notion that things like Google’s AdSense (that I call AdNonense) will eventually let radio advertising sell itself and save the greedy few from paying sales commissions.

If the CEOs who brought you consolidation could point to even one thing that they’ve done in the past 12 years to keep radio as viable as it was in 1996, maybe we’d listen.

Automated radio sales?

Fewer salespeople?

Only a bean counter could get off on that – and that’s where I ask – where does FaGreed Suleman get off thinking you gut the fish to help it live another day.

The only analogy I can think of that has to do with fish as it pertains to Citadel is “the fish stinks from the head”.

Back to Paul Harvey and the lessons his handling should teach his CEO.

1. Have the class Paul Harvey has. Appreciate the experience. Work hard and reward people who make your company money. It sends a powerful message that you’re committed to people who get the job done for you. I know Paul Harvey’s act may be getting old for some programmers but he still has a large market. Be his syndicator. Part with the money. And may Paul Harvey live to be 100 while still doing his newscast. FaGreed: give him a lifetime contract. NBC gave one to Johnny Carson just in case he wanted to come back. Show some class.

2. Loyalty matters. Paul Harvey can boast the largest radio audience as a 90 year old because he has been loyal to both his listeners and employer and the listeners and advertisers have returned their loyalty to him. Take another lesson from Paul Harvey: show some loyalty to someone other than the man who put you into your job – Teddy Forstmann.

3. ABC is not an inconvenience – it’s an asset, remember? You’re the one who wanted to own ABC so badly. You were wrong. It drove Citadel shares down. ABC pulled one over on you, FaGreed. You don’t know how to run it now that you own ABC. But it is nonetheless an asset loaded with talented people who know more than you do. You’re making former ABC Radio head John Hare look like Warren Buffett. Value ABC and the potential it can bring if you let ABC people run it.

4. Nothing succeeds like success so reward good ratings, good billing and good management company-wide. Name a company that realized its full potential at the hands of a chainsaw massacre. Years ago Sunbeam appliances hired a cost-cutter who ruined Scott Paper Company – a guy the business press dubbed Chainsaw Al Dunlap. He failed. You build up, not tear down your assets.

Oh, one more thing.

Learn from Paul Harvey when he closes each show in his inimitable way – “Paul Harvey (big pause) – Good Day! (with his voice rising at the end).

Make your sign off:

Farid Suleman (short pause), Good Bye!

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CBS Radio and Racial Parodies

All too often lately the major broadcast groups have been firing able and talented people to save money.

Last week CBS pulled off a double firing of a PD and morning personality with surgical precision.

WYSP, Philadelphia morning jock Kidd Chris lost his gig because of a March 21st in-studio guest named Lady Gash who sang the song “Schwoogies” to the tune of Blondie’s “Call Me”.

Here are the offensive lyrics (according to an account May 16th on Philly.com):

"Coloreds steal your wallets and coloreds have pink feet. Coloreds are loud and obnoxious, when they watch movies. Sticky fingers, what they are, Always try to jack my car, Schwoogies! Or shines, you can call them anything you like. Schwoogies! Watch out, jigs will rob you, day or night. Schwoogies. Mookie doesn't like to work, Just rolls blunts all day long. But there's one job he can do, hold a lantern on my lawn. If someone else has your watch on, you can bet it’s a moolignon. Shwoogies! All Around, there's Sambos, monkeys, knuckle draggers, So much brown Mandingo, Go Mr. Bojangles (unintelligible). I have no problem singing about the Negroes."

The song was repeated several times subsequently.

That helped get PD John Cook canned. A good man, indeed, but nonetheless responsible for the stations content.

CBS acted swiftly when “senior management” discovered the offense. Why it took so long to discover considering the clip was on YouTube begs the question – who is listening to WYSP in “senior management”. CBS will likely eat the last three years of Kidd Chris’ contract or take a lawsuit or settle. To borrow a term from Phillies baseball announcer Harry Kalas, he’s “outta here” one way or the other.

CBS, which had a much more publicized firing of WFAN, New York morning man Don Imus for racially insensitive remarks over a year ago moved swiftly and deliberately this time.

Cook is an outstanding program director. I just know CBS didn't want to lose him. Firing both the offender and the person responsible for the offense sends a message to the station, the radio division and – if they are smart – other radio groups that this type of offensive material on free, over-the-air, federally licensed radio stations has no place.

There’s another point here – and it’s no small point, either.

Radio audiences are increasingly over this type of content. Even Public Offender #1, Howard Stern, has changed the way he offends – albeit it on subscriber-based satellite radio.

And if you’re wondering what the next generation thinks of these types of racist parodies, consider that Gen Y is a very social generation. They tend to work within the system and see things in one color instead of racially defined preexisting stereotypes from the past.

Radio, you’re showing your age again.

The young people I encountered on the college campus had never heard of Don Imus when he insulted the Rutgers women’s basketball team – not one – even though you’d think Imus would be known to them as he is a national figure. But these young folks don’t really listen to radio and when they do listen, pulling racial punches or, as Stern does, talking about boobs is of little interest.

They like NPR.

Check out the ratings of NPR stations where the People Meter is coming online and in Seattle – as pointed out by Tom Taylor in a recent Taylor On Radio-info piece.

In other words, yes -- stunts like Kidd Chris aired are offensive but it is also stupid programming if you’re even in touch with the younger end of your demographics. True, terrestrial radio will not likely pull Gen Y away from the Internet or their iPods but there is no upside to being outrageous at all costs even to older demos.

So, the obvious lesson is don’t tolerate racially insensitive programming on free radio.

The real lesson is: when some of your programming is in effect a parody of the past, change it – fast.

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The Big Four Reckless Labels

By Jerry Del Colliano

(On the road with the Flyers NHL playoffs in Philadelphia pictured with my daughter, Daria and wife, Cheryl).

A few weeks back the RIAA was dealt a blow in a music piracy case. Perhaps you saw it.

A judge in the Atlantic vs. Howell case ruled that the sole act of making a music file available in a "shared folder" does not violate copyright laws.

The RIAA had been arguing that a sound recording that is ripped to a computer and stored in, say, a shared folder, constitutes unlawful use. Even the RIAA doesn’t consider ripping illegal but putting it into a shared folder that can be accessed by peer to peer software is – in their view.

The judge in the case denied the RIAA’s appeal for summary judgment that would render a quick and favorable ruling on its face. Instead, he rejected the RIAA’s theory of file distribution where digital files didn’t change hands.

This simple ruling could make it harder for the RIAA to proceed in other suits and make it more difficult to prosecute file-sharers.

A good question is -- why are the labels even trying to win these cases. It's a reckless policy and doesn't solve as much as one of the many problems the music industry currently faces.

The record industry will certainly lose even if they win every court case – and now, that’s not even assured.

On a college campus you don’t have to look far to see that young people take great pride in finding ways to steal music. Some – I estimate half of the ones I’ve polled – know that it is stealing and that it hurts the record labels. Many have a Robin Hood attitude that they are not hurting the poor artists, just the labels who they rationalize also don’t have the artists’ best interests in mind.

Good or bad, right or wrong – programs to deliver free music to the computers of a new generation are proliferating. These young folks want for nothing when it comes to music.

Should the music industry even be trying to dissuade young people from stealing music since they cannot control the delivery systems?

These are not like the Sam Goody days when if you walked out with a CD you didn’t pay for you likely got caught.

There is no way to safeguard the integrity of music recordings that I know of. Everything can be hacked. Everything can be shared.

It may be wrong. It may be unethical, immoral and maddening, yet it is the reality of the music industry today.

Why don’t the big four reckless labels simply declare victory and withdraw their lawyers.

It might look like defeat – like leaving Vietnam or Iraq without accomplishing the mission – but there really isn’t an alternative. At least a good one.

I have come to believe in the past few months that musicians and artists really do need the record labels, but not as they are defined today.

Look at some of the recent evidence:

Radiohead gives up on its tip jar approach – an admission that it is better as a band than a band of rebel record execs.

Paul McCartney having sold only 100,000 CDs in his much ballyhooed Starbucks deal, is now reverting to giving them away – Prince style – in the pages of London tabloid newspapers. Maybe he will sell more concert dates. It worked for Prince. Neither sold records.

Madonna is doing a deal with Stub Hub to get a piece of the second-hand ticket trading that goes on with her concerts. This has got to rankle music fans who already hate the high cost of going to live events.

Now Madonna is scalping the scalpers, wonderful!

Live Nation doesn’t look like an alternative to a record label to me. It is a concert venue that is locking up classic acts for expensive long haul deals. Lots of luck. Even Bono and U2 did an extended Live Nation deal and kept the distribution part separate – for their record label. You can’t fool a global warming theory advocate like Bono, can you?

One of my gifted students, Meredith Jung, wrote me recently with some good ideas that I think ought to be considered:

1. Albums done on the fan's dollar. Rabid fans would be willing to pay a couple hundred dollars toward their favorite artists' new album in exchange for a private performance or an exclusive ringtone or something cool and of value.

2. The other possible future she sees is like Amie Street. For $25 a fan/investor gets $50 to spend on Amie Street. Nothing costs more than 99 cents and most is cheaper. Once a fan/investor owns a song, they can recommend it to anyone and everyone. If everyone and their brother decides to buy the song after it is recommended, the person doing the recommending gets money they can spend on music. At some point, you don't have to put money into the system. The system starts covering a good chunk of a fan’s music purchases.

3. This is a great way to sell music to a generation that a) loves the opinions of others and b) feels 99 cents is too expensive for music. It doesn't feel so expensive when you're not spending your own money but the money you make from sharing your opinion (which Gen Y loves to do) about the music they’ve bought.

4. Bonus: they recommend new music to you and put the new music on sale for half off on Tuesdays. There's really no other way to go.

Even if you don’t like Meredith’s ideas, you have to admit – at least they have more potential than suing file-sharers in a hopeless attempt to stop piracy.

Only a lawyer could like that strategy.

Then, again, who do you think runs the record industry. Case closed.

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The Weird Channel Deal

Did you see how Clear Channel began saying publicly that the Lee and Bain bailout may never happen? Then, a few days later brinksmanship brought the banks and Clear Channel together to arrive at a lower, more realistic purchase price at $36 a share along with other considerations. Now their fate is in the hands of the shareholders once again.

Leave it to the largest, storied radio group to come up with one of the weirdest sales that has ever graced our industry.

First, Clear Channel honchos do a gut check and find nothing there – so they decide to sell – that’s, what, about two years ago now?

Then, they audition investment bankers – taking their own good time – trying to milk every dollar from the buyout. I guess you can’t blame them for that, but it was almost a regal setting. Investment bankers, kiss our rings and tell us what you have for us.

It’s a far cry from that today.

Then, you may remember, Clear Channel tried to push through a buyout price that made shareholders up in arms. That’s hard to do unless you are screwing them in public – which is what Clear Channel did. Eventually, they wasted more time and had to up the buyout price to quell the shareholder unrest.

Meanwhile the industry continued to declined. Only arbitragers could love the CCU share price spread.

More time passed.

Then, while investment banks started getting jittery, the economy started tanking, Wall Street got nervous, the real estate market took a dive, gas prices went up, radio competition increases and a recession started, the investment side of the deal didn’t even think to renegotiate the price.

Until, that is, the wheels came off a few months back and the banks that were supposed to fund the Clear Channel deal balked.

Then the matter was in Clear Channel’s tried and true territory – the courts.

The deal could get done as it goes for a shareholder vote again. Or, it may not happen at all.

How weird. Clear Channel, used to getting its own way, may not get its way this time. And if it does, Clear Channel may be lucky to get out of Dodge (on a private plane, of course) to ride into the sunset with one more payment -- by compromising.

Did I mention the part about what happens to an industry when the largest (by far) operator is running on empty with an eye toward the exit sign?

It isn’t pretty. The pride and professionalism of Clear Channel employees, station executives and talent is what is going to make the final Mays paycheck possible.

Ironically, the same people the Evil Empire routinely abuses, underpays and restricts is the group that will get them rich one more time.

And it is time that is of the essence here.

The sooner the Clear Channel stations are redistributed to owners who are willing to invest in them – the better it is for the employees and the industry.

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Radio and Airlines

The radio business is really the airline business.

Flying back to Philly for the hockey playoffs this week, it occurred to me that the similarities are so striking.

Radio and airlines crave consolidation and each has failed miserably as consolidated industries. That doesn’t keep them from lobbying for further monopoly, however. See, they are birds of a feather.

The airline business blames high fuel prices for not being able to make a profit. The radio stations of America blame just about anything that can be called entertainment. Those damn iPods are killing us. The Internet is siphoning off radio listeners. Just about everything but newspapers gets the blame.

What’s killing aviation and radio is mismanagement and lack of leadership.

The airline industry is cutting inventory – running fewer planes to pressure inventory so they can charge more. Okay, I lied – radio isn’t like the airlines here, but they should be.

And, there is one other difference – radio execs fly private and poor airline execs fly – well, on their own dirty, under-maintained planes. At least they’re in first.

But there are a lot of other legitimate similarities.

Airline customers are unhappy because the airlines have forgotten or are unwilling to treat their fliers with respect and even dignity. You have to pay to check an extra bag (costs more for extra fuel, you know). More for an aisle or window seat – once a perk for many frequent flier programs. Food – forget about it. I used miles to fly first from Phoenix to Philadelphia. I’m writing this onboard. I was just offered a sandwich. Salad? No, we’re out of them. I lost 150,000 frequent flier miles for these two tickets! At least the seat is wider.

And that’s another similarity – CEOs in both businesses have so many perks they live the good lives and have wider seats!

Radio’s younger listeners are unhappy with the repetition their parents have hated but accepted for years and years. Playlists that are tiny. Too many commercials. Bland programming. No fun. Geez – why not turn on your iPod?

Both the aviation and radio industries live by the mantra – less is more.

The airlines live for the next merger.

The radio business – well, you know.

The airlines are run by a group of maniacal CEOs who think they know everything.

Radio? No comment.

The aviation business is a monopoly that can only be challenged by startups from future mavericks like Southwest and JetBlue. Very costly.

Radio – available for free – can only be challenged by the Internet which is why radio is not interested in seeing new competitors thrive as 24/7 streaming stations thus the cavalier attitude about copyright fees for Internet streamers. Very costly.

Airlines and radio stations make their money traveling through the air.

Both have turbulence in their businesses.

And, as always, a crash landing would be catastrophic for either.

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Randy & The Rainbows

I saw a video of Randy Michaels speaking to a group of newspaper people at the Allentown Morning Call.

I’ll say this – he hasn’t lost much. He’s the same old guy. Still able to leap tall buildings in a single bound.

Seated next to wackadoodle Tribune owner Sam Zell and some poor exec from the Morning Call who looked like, “what planet are these guys from?”, Michaels rolled up his sleeves and went to work.

Randy called for honesty. More ideas. Hard work. He talked about the reality of today’s newspaper business.

It’s a good rehearsal for what he’ll have to say if and when he and Zell acquire some of the Clear Channel properties from Lee and Bain – assuming the banks finance the deal and it closes. The Clear Channel shareholders are not the only ones crossing their fingers while the parties try to reach a compromise on a $36 dollar reduced purchase price.

You may have read that Randy rankled the Los Angeles market recently when he made some untrue claims that the LA Times was bigger than almost the entire radio world out there. He raised the ire of Mary Beth Garber, the outstanding radio advocate who represents the Southern California Broadcasters Association. She’s so good she could even sell CDs to an 18 year old.

Garber skillfully disputed Michaels who was loose with the facts, but it is still classic Randy Michaels. You were expecting a change?

What doesn’t change is his passion to do almost anything to win – a quality an ice hockey fan like me kind of appreciates in some ways. Today, he’s wearing the hat of newspaper publisher. Tomorrow, could it be radio group head?

Zell has again promoted Michaels to in effect make all the major decisions now on running the newspaper and TV company.

Those poor newspaper guys must be thinking a cup of hemlock must be looking awfully good right now.

Plus, they see this band of desperados ride in from the radio business.

Lee Abrams – now that’s a real newspaperman if I’ve ever seen one.

Jerry Kersting – never met a newspaper he didn’t like to read. But acquire more newspapers for Zell? Doubtful.

The usual retinue of Michaels followers are in the house. Bobby Lawrence, Pam Taylor, Frank Wood and a small group of Clear Channel defectors.

I call the entire group -- Randy & the Rainbows.

They have arrived on the scene to create a new age Zelldom for a group of troubled businesses – local TV, newspapers and maybe – just maybe – radio.

This is a corporate statement if there ever was one – a Shirley MacLaine mindset – that through means yet defined something cosmic is due to happen over the rainbow.

Hey, I’m a believer.

While it’s hard to comprehend newspapers doing anything more to become popular in a world that doesn’t need printed publications, Randy & the Rainbows just might do it. Maybe sell the papers as fish wrappers with a code to access the real news online.

Local TV is at a crossroads – it’s main profit staple, local news is being cutback and the available audience is getting older – Randy & the Rainbows just might reinvent television – maybe as a log burning static picture like the ones we see at Christmas time except this one can actually warm the room and save on fuel costs. Who knows?

And radio – well, isn’t that why Randy hired such good radio people to cross over to the dark print side for a while. They are awaiting the arrival of tons of troubled radio stations, the way the medical residents on Grey’s Anatomy await ambulances full of potential surgery patients.

Randy Michaels is having fun again.

And he’s doing it the way he always has – a hard fighting competitor who won’t accept anything less than winning.

And when he tweaks the broadcasters in LA, one of radio’s largest markets in the country, some see a turncoat – a modern day Benedict Arnold.

I see – a calling card.

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Radio One Dollar

Radio One CEO Alfred Liggins doesn’t understand how his stock has plummeted to below one dollar a share.

While’s he’s pondering that question, he has accepted a bonus, a nice salary and it's business as usual – for him.

Many radio people are wondering how a once mighty business can fall this far with so many talented and capable people still on the payroll of the major broadcast companies.

Radio One Dollar is not alone.

You know about Citadel – or should we call it Cita-Sell -- where a $1.50 a share stock earns its CEO Farid Suleman $11 million a year. By contrast, Radio One Dollar shareholders are getting a real bargain.

Do I even have to mention Clear Channel – the largest consolidator and biggest trendsetter for the radio industry? Papa Mays and his two sons have been escaping with large compensation packages for many years. Their shareholders must be scared to death. The share price only trades at the mid to upper $20 price because greedy Wall Street money people and investors want to make a quick buck. But if the Lee and Bain deal doesn’t get done, Clear Channel shares will take a further dive and it will be ugly in San Antonio.

And don’t worry. The Clear Channel management team -- very concerned about security issues hired consultants to tell them that the Mays family needs to fly private. So what else is new?

These three companies are not alone in their you-not-us cutbacks. But they represent the companies most blatantly spitting in the faces of the employees they have fired or even retained on a shoestring – not to mention the almighty shareholders.

I have little sympathy for the shareholders who let these guys get away with murder and have failed to demand better corporate financial compensation oversight.

So how do major broadcast entities – loaded with free cash flow potential – manage to scrape up the bottom with poor performance and clueless answers for how to turn it around?

That’s what is so frustrating – it’s all needless.

Even if you don’t like consolidation – and I never have and never will – it didn’t have to turn out like this.

Take Chancellor, the company that was once run by Jimmy de Castro that later morphed into AM/FM before it wound up as collateral damage for Clear Channel.

I know. I know. It was a different time. Things were better. Radio had less competition. It still had young listeners. The record industry was still vital and Steve Jobs hadn’t developed his killer app – the iPod.

But.

Study de Castro. His New York market stations could drop a fortune on a party – one party – for advertisers and no one questioned it as long as they performed. And did they.

Try that today and Farid, Al or the Mays would have your head. It wouldn’t be prudent – unless that money went into NetJets and inflated fuel charges.

Another quality missing in many radio operators today is motivation. I always said de Castro was the Tony Robbins of radio. He was so charismatic you could understand why his managers worked so hard to deliver. Hell, even when I had differences of opinion with Jimmy – and I did – I still liked the guy.

The ability to spend your own budgets.

Someone who believes in you and makes you want to kill for them.

How about foresight?

Don’t you like to work for someone who is up on technology? I hate to mention de Castro again – but – he was one of the first radio execs I know who carried a Blackberry.

Jimmy’s wasn’t the only one who knew what he is doing.

Randy Michaels was as good a competitive programmer as existed back then. He made Jacor what it was on the back of loyalty, aggressive marketing and programming.

Mel Karmazin is another guy I liked. His bean counter, Farid Suleman, should have learned more working by his side at Infinity for all those years. Mel may have thrown nickels around like manhole covers but even today I get emails from his former programmers who say Mel is no Farid when it comes to giving programmers what they need. Of course, Farid is no Mel, either.

Emmis is a radio group paying a horrible price for being good in a bad industry. We forget Rick Cummings was the architect of the Power brand that sustains the company to this day and his boss Jeff Smulyan is one of the most people-friendly operators there is. Jeff tried to buy back his public company and take it private – the right thing to do. Shareholders prevented him in an ugly public fight. The wrong thing to do. Smulyan was acting in their interest. Check the Emmis share price today.

As much as I dislike consolidation, even I will admit that consolidation alone did not bring the radio industry to its knees.

The people who took the groups private did – and they are all still securely in their jobs while the talent around them is paying for their incompetence.

What if the Mays family didn’t didn't grow Clear Channel into an 1,100 station behemoth – what if Smulyan did? Who could argue that the Evil Empire would at least not be that evil and Emmis might have done a better job.

What if the Mays boys had chosen Jimmy de Castro to run radio – even though they surely felt the hot breath of Jacor’s Sam Zell down their backs before Zell agreed to the merger and assured the appointment of his man, Randy Michaels.

Okay, what if Clear Channel kept Michaels in charge instead of elevating John Hogan back in 2002? Is there anyone who would argue that Hogan couldn’t carry Randy’s Blackberry?

Then Joel Hollander at CBS – the wrong man for the big job. Les Moonves fixed that with his skillful hiring of a good radio man – Dan Mason. But still, Mason is still cleaning up the mess and a lot of time, good will and money has been lost.

Entercom is a closely held company of the Field family and it hasn’t really met or advanced the fate of radio under its control.

What if Michael Eisner bought stations instead of passing on consolidation? It’s hard to argue that Disney was not a better operator than Citadel or a lot of other big radio companies.

What if some of the smaller groups got to buy ten or 20 more significant properties that instead wound up in the Clear Channel or CBS portfolio?

What if. What if. What if.

So perhaps the reason we have a Radio One Dollar and a Cita-Sell today is because the fathers of radio’s consolidation movement were not and still are not ready for prime time.

A new day is coming for the media business, but it is not coming for radio until new blood deals with the harsh reality of 12 years of mismanagement and lack of leadership.

That’s the only cure – not cutbacks. Cutbacks are the excuses of CEOs who don’t have what it takes to compete in today’s world.

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Farid Einstein: Half is More

No, the CEO of Citadel is not talking about his company's stock price -- that's much lower than half.

At about $1.50 a share, what's half -- 75 cents?

Farid Suleman, the bean counter loosely disguised as a wannabe Jack Welsh, is considering cutting his sales staff.

Brilliant.

And you wonder why this hapless radio industry can't get it turned around.

He believes as much as half of revenues would come in with or without a salesperson. That's right. Open mouth, put foot in. Suleman as quoted in Inside Radio added "why are we paying commissions for that revenue?"

Note that he did not say why Citadel is paying him $11 million (including his tax bill) for driving the company into the penny stock arena.

Here is the genius idea he is kicking around: employ a salaried staff (imagine that pay grade) who would handle "service or fulfillment" of the ads he thinks in his delirium would come to Citadel by magic without salespeople.

Then the Mad Man Ad Man would pay higher commissions to those poor suckers who would be left to attract and develop new business. I presume that includes free Nexium for heartburn and tranquilizers for the pressure their boss would put on them since obviously the problem with Citadel is everyone other than the boss.

Farid has already waved his magic wand to consolidate one national sales manager per cluster -- after all, he isn't going to lose his job -- only everybody else.

Someone stop this guy.

He actually believes -- and look at the quotation marks here -- "We have to re-evaluate how we do business. You can't continue to invest in programming and sales if you can't get revenue for that?"

What?

He's investing in programming and sales? Who knew.

I now officially apologize to Clear Channel Radio President John Hogan. I used to think he was the biggest empty suit in the business but now it just has to be Farid. Hogan is not dumb enough to think up Farid's cockamamie nuclear option. And I mean that.

Farid has been slicing, dicing and damaging his company because he just doesn't know how to run a radio company. He is poised to lose Sean Hannity on Citadel-owned ABC because as Einstein puts it, "the era of doing stupid deals is over".

Well, Farid better hope it's not. Because his board of directors pays his $11 million a year for him to drive their share price down and everyone including Teddy Forstmann has swallowed their tongues. Executive compensation oversight? Not at Citadel. Talk about stupid deals.

And he's promising more cutbacks: "Every programming decision has to be evaluated in the light of the daypart and to make sure that it is profitable".

Huh?

Hey all you great programmers out there -- is that how you do it? Create programming by daypart so it is profitable or do you program by daypart to gain the maximum available audience and then your sales professionals go out and sell it.

Oh, sorry -- I forgot. Under Suleman half the business gets called in and the other half gets developed by underpaid people who get a slightly higher commission.

Alright. Enough of Suleman's logic. Let's help him out. I know he has never really worked on the air or in programming. I don't think he ever sold anything. He was Mel Karmazin's bookkeeper -- that was his ticket.

Remember that this article you are now reading on Inside Music Media -- is blocked from corporate distribution so Citadel employees can't access it at work. So I will have to rely on my network of elves to send the following antidote to Farid's self destructive plan to jam the spam.

Ready, Farid?

Forget reinventing the wheel.

Just dial 610-667-8400.

That's WBEB radio in Philadelphia. Ask for Jerry Lee, the owner. He has your future all tested and ready to give away for free. I'm serious -- call him, he wants radio to get bigger and is willing to help anyone who will understand that you spend money to make money.

Yahoo cuts budget and loses money.

Google spends and makes.

Dell cuts.

Apple spends.

You get the idea.

Jerry Lee will tell you to cut your inventory, raise your rates, spend on promotion (lots of TV), test your music and your ads as a service to your advertisers. Let your sales manager get rich a la Blaise Howard, his capable sales genius. Let your salespeople make more money not less -- the best salespeople want commission-only not salary and commission. You don't see any of WBEB's salespeople going anywhere.

WBEB outperforms a bad economy, a dying industry, incompetent management at other stations in the market and does nothing but make money.

Let me repeat that -- make money.

So, assuming this message didn't self destruct before it got to Farid's corporate email -- let's make it real simple.

1. You don't cut people. You add them.

2. Sales will not come to you on their own -- this isn't fantasy land.

3. Salespeople need to get rich -- and when they do, you get rich.

4. Programmers are not salespeople -- they don't program by profitable dayparts. Anyone who asks them to doesn't know what radio is.

5. If you can't stop the brain drain from Citadel, make sure you're the next one to go. Betcha someone else in the executive suite could do better. How could they do worse than $1.50 a share?

6. Call -- no drive down the Jersey Turnpike to Philly -- to see Jerry Lee. Kiss his -- well, ring. Ask him to forgive you for making a mockery of a great industry. Your penance is to say two Our Fathers, and two Hail Marys and hire someone who can run a major radio group. You can still fly private. Just don't touch anything or make decisions.

I wish this was all made up -- that I could say never mind -- and it would all go away. But it won't because Farid Einstein is actually proposing these changes in public -- another dumb move.

Farid is a danger to himself, his company and his once proud industry and he should be replaced by -- anybody.

There is a reason Citadel is a worthless stock -- look to its leader -- the one who comes up with worthless ideas like the ones I am sharing with you today.

The speed of the leader determines the speed of the team -- and until Suleman is gone Citadel is stuck with a CEO who keeps proving he is not ready for prime time even though his employees are.

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New Technology Is Already Replacing Radio

My longtime friend Dan Mason, the CBS Radio President who is leading the dramatic turnaround of the company made a statement the other day about technology and radio.

Dan reportedly told his new media road show in New York that "$1 billion in ad dollars were telling you that the iPod or satellite radio will lead to the death of radio. That's a myth. To say that an iPod or satellite radio, with little or no human connection, will ever replace radio is absurd." (from PaidContent.org).

Well, maybe not satellite radio, but iPods have already changed the dynamic for radio. Just ask a young person who is not listening to a Walkman and is listening to an iPod. Not radio. But an MP3 player.

CBS is moving in the direction of trying to get radio into new technology. It revealed a new media player that will feature several radio stations at once including Internet brands. They've jumped into the personalized radio business with Last.FM. Have a deal with AOL. Their own individual station streams and so on.

My experience with the next generation does not bode well for any strategy that proliferates traditional radio onto new delivery systems.

The next generation doesn't like radio.

Not the stations. Not the concept. There's simply less need for it in their lives.

New technologies will not only replace radio among the next generation, they already have. And this generation is huge -- with as many Gen Y'ers as there are baby boomers.

I agree with Dan that the idea that new technologies will replace radio is -- to use his word -- "absurd" if you're talking about older Gen X'ers and baby boomers. This group loves radio and will appreciate receiving something they already like on their computers or mobile devices.

But that's as far as you can go.

Without the next generation the radio business will continue to hit the wall. Once the present economic downturn ends -- still a long way off -- there won't be enough new young listeners to help radio continue to grow. It becomes a losing proposition. More radio listeners die and fewer new radio listeners use traditional radio.

The next generation wants to stop, start, time-delay and delete its programming.

This generation wants to mash it up -- have a say in what it sounds like or how it is used.

They want to deliver it to each other -- share it -- at will.

They want community (what we used to call local radio) through social networking online.

One of the hardest things for me to deal with in my years of working with the next generation is that they don't like radio and don't understand what I like about it.

When I describe it, they say what I am describing is not what they hear on the radio.

We're an industry in denial that technology has changed the game. But only radio people have the power to adapt and create new content for a new generation and on the devices they use.

But to begin, we have to understand that more has changed than how to deliver radio programming.

It's not about the technology.

It's the sociology.

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Radio's Salary Cap

Radio groups that have been chopping away at expenses are beginning to see the ratings repercussions of their actions.

Morning shows -- down and in some cases out.

Total ratings down (especially with a weakened morning show).

The decision makers decided they had to cut to the bone and their companies are getting ready to pay the price. You can't get top rates for declining shares. The economic downturn is prompting some advertisers not to buy as deeply in the top ranked stations for their desired demographics. Where they might have bought four or five deep, soon it will be three. After all, these are hard times for the media business.

Lower revenues mean the necessity of lower expenses. And, I guess you could understand how the many radio groups that have been forced to lay off people and drastically cut budgets had to do something.

But they are going about it in the wrong way.

Just as in many professional sports, the radio industry now has a de facto salary cap.

And while some CEOs are trying to be the Billy Bean of radio (Billy Bean, the Oakland A's GM who fields a competitive team on a shoestring budget), the answer is in capology.

Capology in football and other sports such as hockey requires executives to look at the total amount of revenue -- in their case -- that the league will allow them to spend on players. The teams then have to decide whether locking in a long-term contract for, say New England Patriot's quarterback Tom Brady, is a strategy they can build upon.

That's an easy one, right?

Obviously these teams don't have the money to pay whatever they want for whatever they need.

Nowadays, neither does radio.

Except radio managers are letting their Tom Bradys go (morning personalities) and replacing them with cheaper second or third string talent. This is why you won't have to look too closely to see their pain as the ratings continue to reflect such reckless moves.

If the group mandates a budget cut, then the manager must be responsible for making the right decision or -- as I'd like to put it -- assembling the best talent within the dictated salary cap.

Here's where managers have been failing.

They are rightfully nervous that the next axing will be their job so they are dutifully making the cuts that they are being forced to make.

The problem is -- they are making the wrong cuts.

Example: look at the stations that fired morning personalities in the last six to eight months. It's hard to find many that have maintained the fired personality's numbers. Worse yet, the overall station ratings are declining and they have made it more difficult for their salespeople to get their best advertising rates.

The result: financial disaster -- the opposite of what group managers wanted.

So, where to begin?

The GM is the general manager as well as head coach.

He or she is directly responsible to corporate for the stations profitability, ratings and operation. They must fight harder for the budgets they need -- that is, the top limit of the de facto salary cap. I think a lot of managers -- not all -- have been wimpy about fighting for the money necessary to deliver results. Ironically, in the end, they could pay with their jobs.

The morning show is a number one priority because it typically can generate 40 or 50 percent of the stations total revenues. This is where panicked managers are cutting first because of the high salary expense, but because the first cut is the deepest doesn't necessarily mean it is the most prudent.

Instead, the morning show should be fully funded and performing talent locked into long-term contracts. I'll write more about this separately because I think there are innovative ways to pay less for morning talent by giving them the one thing station's either overlook or refuse to do.

The program director is a critical component to ratings success. Put him or her on the air to save money if necessary, but pay for the best you can find. The PD is your wide receiver -- without whom your quarterback is useless. You must have a morning show upon which the PD can build the station's ratings all day.

Sales managers shouldn't see cutbacks -- they should see more sales incentives. Instead of forcing them to take accounts away from successful salespeople or upping the ante on commission rates after salespeople have achieved some success, help them get filthy rich as they make you filthy rich.

I read recently that my old buddy Randy Michaels was critical of print salesmen in his new job at Tribune for leaving money on the table. He was calling for the extra effort to bring in the extra revenue. He is right, but the rewards system needs to be tied directly and fairly to the production of the sales staff.

There are lesser players at most stations these days. Where once the afternoon drive show was highly personality based, many stations have gone bland to -- repeat after me, please -- save money. Afternoons are a great place to develop talent (refer back to a good PD). It obviously won't cost what a morning personality will cost, but it will cost more than voice tracking or paying a rent-a-jock to attempt to play personality radio.

Each team needs as much talent as it can bring in -- under the salary cap.

So, as you're shaking your head at the ratings that are now coming out wondering -- how did we get ourselves into this fine mess -- remember, this --

Budgets are one thing, but good judgment is then again something totally different.

From now on if radio groups would embrace capology when taking into account budget cuts necessitated by declining revenue, then their managers wouldn't have to give away the franchise in order to save their own jobs.

I'm just sayin'.

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