Lee & Bain Channel

Clear Channel went private yesterday at long last.

Thomas H. Lee Partners and Bain Capital Partners are in charge now. They are investment buyout companies and their business is buying companies to sell them for greater profit.

Clear Channel -- the Mays version -- ended as a colossal failure when shareholders lost confidence and eventually the founders saw privatization as the better option. Running 1,100 stations turned out not to be as easy or as accretive to investors as originally hoped.

Once $90 a share, the investors walked away with $36 yesterday.

We've all heard and read a lot about what went wrong, but what's worth considering -- and learning from -- is what could have been.

Clear Channel was arrogant.

A bully full of itself.

It failed to realize that the assets it purchased, the stations, were not the key to productivity and profitability. Its real assets were the talented people it inherited with each acquisition and along the way for the past 12 years -- stifling, mismanaging and disrespecting these assets eventually did it in.

Are you other consolidators listening?

Here's what could have been:

1. Clear Channel missed a chance to take the largest group of assets -- not the physical stations, the talented managers, salespeople and programmers -- and build a strong terrestrial presence market by market that would exceed what one owner could previously do. They established the playbook -- buy, close, cut, cut, cut and cut. You see what they got. An asset -- no not the people this time, but the towers, transmitters and real estate -- that couldn't be considered a growth business after twelve years of trying. They had it all wrong from the start. Lesson one.

2. Imagine the Internet possibilities today if only Clear Channel could have imagined it then -- in 1996 or 20o1 or even today. The number one radio consolidator showed the Emperor Wears No Clothes on Internet matters. Instead of shoring up the terrestrial side and methodically using their talented people to establish a beachhead on the Internet, they chose to pander to quarterly earnings pressure. They spend a miniscule part of their budget on new media. And why did such smart people make that mistake? Because Clear Channel along with other consolidators believed they would be able to get away with another round of deregulation. They miscalculated once again.

3. Had the consolidator not been such a big bully, they would have been an industry leader worth emulating. In the later years of consolidation, Clear Channel appeared to become less litigious, but it was too late. They put a lot of people in a bad way by their sheer brawn and power. Instead of being approachable, they became feared. Texas Justice was meted out when the Mays family went quietly into the night after failing on nearly everything they set out to do. These boys were just not ready for prime time. I said it all along. Events proved me right. There is no joy in saying this as the industry has suffered and thousands of talented people have been put at risk.

And let's look at the tragedy of Clear Channel's rhetoric in their own words:

CEO Mark Mays told Reuters “From a listener perspective, I don’t think they will see anything radical or different. This is really a capital structure change rather than a programming change".

Too bad he is right. There will be five more years of John Hogan and the two buyout firms employing him. Yes, Mark is right - no change (other than layoffs).

“The media stocks clearly are still out of favor in the equity markets. When will that be corrected? As soon as the media stocks are able to change the incorrect perception and realize that today’s traditional media, radio, the newspaper, or television, still reaches a mass audience and still gives great results to our advertising customers".

Thank goodness few people believe Mark Mays when he speaks. He's kidding, right? Does he really believe that traditional media has a future without the next generation? If so, I've got some Clear Channel stock to sell you -- oh, not any more.

And, finally, the man who brought us Clear Channel as well as Mark and Randall - Lowry Mays:

"We believe Clear Channel's people are our most important asset. Our teams make the critical difference in how we perform and their skills, talents and determination separate us from our competitors. We also believe people can achieve their full potential when they enjoy their work, so it is a priority to provide a workplace where growth, success and fun go hand in hand".

I'm going to be sick.

Did this man say people cannot achieve their full potential unless they enjoy their work in a workplace where growth success and fun -- did he actually say fun -- go hand in hand?

• I guess you reach your full potential when your budgets are cut endlessly.

• I guess you reach your full potential when you run three or more stations at the same time without the appropriate compensation and budget.

• Do you think people enjoyed their work last Christmas when Clear Channel felt the hot breath of Wall Street down their backs as they handed out pink slips to lots of fine folks?

• Do you think people have fun when they have less control over making decisions -- when they have to watch their bosses sucking up to San Antonio -- tell them how to program, manage and sell?

It's a tragedy -- but not for the Mays family.

For the survivors -- the next casualties -- the listeners who are too frequently getting a second rate service -- warmed over by program duplication from foreign markets.

Mark my words -- Lee and Bain will take a sharp knife to the remnants of what was once the mighty Clear Channel empire. You might be wishing for the Mayses back -- I'm sad to say.

In today's real dog-eat-dog business world, there is little room for entrepreneurship. It's about size, leverage and resale price.

Radio is in a battle for its future -- not the one that has to do with losing the next generation (that one, too) -- but being a pawn in the real world of American business where companies are bought not to operate them but to sell them for the profit of a few with little regard for public interest.

Welcome to day one of Lee & Bain Channel.

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Thank You

Google has released its new page view rankings and Inside Music Media has increased from a 4 to a 5. For those unfamiliar with this standard, a 7 would be a large aggregator of viewers such as CNET. I am blown away as it has all been done virally.

This is beyond our expectations and is possible only because so many of you forward my content to friends, message boards and post them on other web sites – something we obviously appreciate.

After I sold Inside Radio, my non-compete prevented me from writing about radio matters for a number of years. When I was allowed to return, I wanted to do something different. I wanted a larger palate – a more youthful focus. Initially I started Inside Music Media for my students while I was on teaching sabbatical.

The focus is broadcasting, music and new media (Internet and mobile) as they pertain to specific generations.

I receive as many as 100 emails written directly to me every day. I answer all of them as soon as possible. Sometimes readers disagree with some or all of what I write but that’s what makes this site so interesting. As House Speaker Sam Rayburn was fond of saying: When two people agree on everything, only one person is doing the thinking.

Thanks for taking Inside Music Media beyond my expectations -- Jerry

The Music Industry: Nine Inch Snails

So Universal signed the Rolling Stones.

Just great.

It's the latest installment in a sleepy record industry that has no answers and thinks with a calculator. After all, the Stones are a great rock and roll band but they are not exactly the future. The deal was made for the catalogue.

When Trent Reznor has to experiment with ways to sell Nine Inch Nails music in a digital world, you know the record industry no longer cares or no longer has any answers.

Live Nation is not the future of the record business. They sign the likes of Madonna and Kanye to guarantee that their concert venues will be full for years to come. They do so with some risk, however -- even though publicly you're led to believe every monster signing is a slam dunk.

Still, it has nothing to do with the future of the record business.

CD sales -- the labels Holy Grail -- continue to decline sharply.

Legal digital sales are not very impressive even if you like the ring of 99 cents.

Can you say Limewire?

There can be no solutions to the digital music crisis that do not involve developing new singers and bands. You'll note that very little has been done to help develop more musical genres and new acts -- unless forcing artists to sign 360 deals is considered progress.

You can understand how the labels could lose their way in 2008 what with social networking running rampant, the decline of radio as the hitmaker it always was and the labels' inability to prevent pirating music over the Internet.

But what was their excuse in 2000?

Radio was still cranking out the hits then -- whatever hits the labels handed them. The Internet had not yet come of age. The iPod was still a gleam in Steve Jobs' eyes and Napster was still a baby.

In the radio industry these days there is no shortage of news events that could have an effect on the industry -- unfortunately, most of these events are negative. But in the record industry there is no news at all.

And in the case of the record labels -- no news is not good news.

It's time for something radical.

A game changer.

Live Nation signing mega money contracts with old singers doesn't qualify.

EMI losing the Stones to Universal is a mere blip on some accountants calculator -- sorry, it doesn't cut it.

Things are so bad that when artists like Radiohead and Nine Inch Nails have to channel their inner Clive Davis to try something new -- they even fail. After all, they are artists not necessarily entrepreneurs.

The record industry is hopelessly lost.

Waiting for ISPs to charge their customers $5 a month for millions of tunes is not going to happen and even if it did, it's not going to matter because young people don't want millions of tunes the record labels are offering, they want the finite number of songs they like or their friends recommend.

There will be no interesting solutions in time to save the music industry without a new generation of leaders and a comprehensive understanding of what makes the next generation tick.

Suing them? Nah.

Boxed sets? You're kidding.

iTunes? Great for Apple.

360 deals? These deals won't make music better music or sell more music.

Monthly packages for cellphone users? Give them iPhone apps instead.

Where are the new ideas?

Not at the big four record labels who seem to be content to move at a snails pace while they business gets away from them.

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The Satellite Radio Outrage

Eighteen months after the Sirius/XM merger was announed, the FCC finally approved it.

The entire process was a joke -- and a not very funny one at that.

In a world where the Justice Department allows almost any two companies to merge, for some reason this merger was held to another standard. It was pure hypocrisy at best.

It's as if federal regulators, lawyers, lobby groups and traditional media executives fail to understand that it's over for all of them if they don't change. The next generation is calling the shots now -- like it or not. They have control of the delivery system -- the Internet -- so displays of public outrage like we saw in the extended ramp up to "D" day at the FCC were non-productive.

Consider this:

1. The merger was approved with some conditions one of which was to require the merged satellite radio entity to make 8% of their total channels for educational and minority-owned channels. This is a joke. There are only 18 million satellite customers who make a conscious decision to pay for what they want. Now they're going to get these extra public access channels whether they want them or not. Talk about taking the government off of our backs!

2. The HD Alliance and iBiquity tried to hitchhike on the satellite radio merger to accomplish what they have failed miserably at doing -- that is, getting consumers interested in buying HD radios. Fortunately no stipulation was included in the merger that would require satellite radios to also offer HD technology. If the satellite industry wanted to commit suicide, HD would be the best way. Remember, consumers are paying for satellite radio -- not what iBiquity wants them to have.

3. The NAB which has increasingly been wandering off its mission for the broadcasting industry not only opposed the merger but is still opposing it now that it has been approved. They are promising more litigation to get the ruling overturned. I don't know about you but I could rattle off (and often do, right here) ten or 12 real problems facing the radio business. Satellite radio is not one of them. Satellite radio has its own problems. It's a small business. The merger is only worth $3 billion and change -- a lot less than, say -- the Clear Channel buyout. The NAB continues to embarrass itself and the industry it represents by strategic decisions to waste time, money and goodwill on Capitol Hill when they ought to be focused on preventing repeal of radio's performance exemption and fighting for fair copyright rates for streaming broadcasters. Keep in mind that today's radio companies will be tomorrow's streamers -- or else they're done when terrestrial radio's existing audience passes.

4. The Commission has hit a new low on this issue. The FCC is requiring the satellite operators to build interoperable radios in the future -- that is, radio's that get both XM and Sirius. Let's see -- what does this mean? The FCC required this of the satellite industry when it gave the green light way back when, but they -- the FCC -- didn't see fit to enforce the provision that would provide consumers with radios that could hear the only two satellite radio services. Now, on the backs of the merger, this impotent body has decided to make one of the conditions of merger the exact thing it couldn't or wouldn't enforce in the first place.

5. Some in the radio industry have acted in a petty way during the arrival of satellite radio. The argument was that satellite had audience figures that paled in comparison to terrestrial radio -- very true. But at the same time the radio industry had a sick obsession with satellite -- knocking it, fighting it and needlessly elevating it to a stature it never earned along the way. That's all well and good in the name of pride and competition but it proved to be another nail in the terrestrial coffin as radio broadcasters distracted themselves from the real issue -- loss of the next generation and failure to understand the Internet.

Sirius and XM chief Mel Karmazin has vowed publicly to close this merger the moment it happened.

And who could blame him -- it should have happened months ago without all the "helpful" parties that tried to derail it or profit from it.

Karmazin has his own hands full trying to make satellite radio work in a world where the essential next generation is inclined to wait for free WiFi.

The DOJ recognized these two satellite companies had greater competition from other traditional and new media -- and boy, will they find out how true it is as the one remaining satellite entity must compete with new technology, a new generation and new marketing rules.

Just a decade ago satellite radio was hailed as new media. Today, satellite radio is in the same boat as terrestrial radio -- maybe worse.

Terrestrial broadcasters ought to call Mel and congratulate him on his victory and welcome him to the fight of a lifetime -- trying to make old media act like new media.

In the end it turned out -- for better or worse -- satellite and terrestrial radio were blood brothers after all.

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The Hannity & Farid Radio Show

While you may be out there worrying about the future of the radio industry without a new generation coming up through the ranks, Consolidation's Founding Fathers have been working diligently on how to work their "magic" on network syndication.

Farid Suleman, Citadel's $11 million man, has found a way to re-sign a talk show host he needs on several of his stations without spending much money -- a bean counter's dream.

The deal with the devil is with Clear Channel's Premiere Radio Networks for Sean Hannity.

I asked my colleague Joe Benson to help me look inside the Hannity deal and you probably won't be surprised to find that it was Farid Suleman at his best -- cutting costs -- not building the future:

• Hannity gets at least $100 million for the next five years (after his present contract expires). But he'll get compensation from endorsements and live reads that will bring his salary much higher. No word on whether Citadel or Premiere pays these added expenses.

• Farid gets off the hook for huge major market affiliate fees as Hannity is certain to keep airing on WABC, New York; WMAL, Washington and WLS in Chicago.

• For Farid's non-ABC Citadel stations, he will still recoup syndication affiliation fees for medium and small markets just as Clear Channel does from its own stations. Incest at best as Premiere goes after Clear Channel stations for affiliate fees as they would any other company. Same for ABC Radio Syndication for other Citadel stations.

• Farid gets to cut his national sales staff to sell Hannity. ABC will go after the money until December 28th and then Premiere/Clear Channel has at it for all stations outside the ABC Radio stations -- including Citadel. The genius of Farid Suleman -- if you'll pardon the expression -- is that most of the $100 million Hannity talent fee is absorbed by Premiere since they will be the ones selling the show and pocketing the sales.

• No matter what sales are done on a national basis now, ABC Radio will be the one to sell it and rightfully claim the commission and the income as long as these contracts last.

This is Farid Suleman at his sharp pencil best -- cutting costs at all costs. It's a Farid kind of deal -- not a lot of upside. True, he gets to keep an important talk show on a few of his critical stations but he has basically sold his soul to Premiere which can make all the profits on the upside.

And "Monkey-see, Monkey do" has just happened again.

Westwood One is forming a partnership with Cumulus.

In plain language, Cumulus is whoring itself out to Westwood for Billy Bush's three-month old evening show in eight Cumulus markets by August 4th and 25 Cumulus-owned Billy Bush stations will air a new weekend countdown show.

Let's see how smart my readers are.

Why would Cumulus want what is tantamount to free programming at night in all these markets? (Hmmm. Of course, I don't need to answer that.)

Why would Cumulus want a weekend show for basically nothing so they don't have to even pay to voice track the time segment? (Oops, I answered it.)

Why would Cumulus, a local small market radio company, want to put more national programs on its stations when it could develop local shows and get ratings? (I forget, radio used to be local -- now it's just an affiliate to any programming that is free or costs next to nothing).

Hey, if radio is going to get out of the programming business and get into the affiliate business, why not do business with Dial-Global which gives their formats away for two minutes an hour of commercials?

Fire everybody, close the office and really cut expenses.

So, there we have it, another week of radio as usual.

While Farid is high-fiving his people on the genius deal he just worked out with Premiere -- the one in which he pays nothing, has no expenses and gets to be a free Sean Hannity affiliate -- here's what he should have done in my opinion to actually build his radio group up in value, say -- to a $2 a share company:

1. Give each ABC and Citadel station a budget. Tell them your expectations and don't call or email them them for a year. Do it on a sheet of paper. If the goals are met, reward the parties. If they are not, feel free to make changes. This way the employees know what is expected and the company knows what to expect of employees.

2. All hiring and firing would then be done locally based on the financial nut that Farid gives each station.

3. Smart move would be to triple the sales team at every station -- not cut back as Farid wants to do. Pay all commission -- raise the commission -- and provide sales training. Sales is not an expense, it's an investment.

4. Mandate local radio. This is not to say local management cannot bring in the odd national show at their discretion -- just not to save costs and turn the station into an outlet for a syndication company.

5. Fire your entire corporate staff -- keep the profits if you like. Put the savings to the increasing cost of aviation fuel, if you like. And, let all the local stations report to one independent executive who reports to you -- preferably not a family member.

Beware of "partnerships" between syndication companies, networks and radio groups. Their main purpose is to provide free or cheap programming.

It's not about the air talent.

It's about the lack of talent in today's corporate offices.

This corporate partnership will work for Premiere, an outstanding radio network and for Hannity, a proven talent with a following, but it's just another name for failure if you're a Citadel shareholder.

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THE GROWING OWNERSHIP OF PRIVATE EQUITY IN MEDIA

The privatization of Clear Channel Communications ends a 2-year effort to buyout the leading radio and outdoor advertising firm. The $17.9 billion buyout by Bain Capital and Thomas H. Lee Partners allows the new owners the opportunity to pursue strategies with less influence from unpredictable investors pursuing short-term interests. The sale comes amid heavy competition in terrestrial and satellite radio, but provides the new owners more flexibility in deciding how to best operate the 900 radio stations, radio programming services, and subsidy that owns one million outdoor ad locations.

The sale is just one more in a growing trend for private equity purchases of media firms. Their interest in media companies stems from the fact that the market value of many does not reflect the underlying cash flows and asset values or the mid- to long-term prospects of the firms.

The valuation challenge of media occurs in good part because advertising expenditures are not evenly distributed throughout the year and because advertising revenue is significantly affected by fluctuations in the economy. These variations create significant disquiet among stock market investors because they make revenue, returns, and dividends less predictable in the short term.

These realities—combined with unproven beliefs of many investors that new media are displacing all mature media and making growth in their businesses impossible—reduce the valuation of media stocks and make media firms attractive to private equity firms that think about the businesses in terms other than quarterly performance.

Free Listeners

Twenty-one Los Angeles stations have a cume of over one million according to the Arbitron Portable People Meter.

By comparison the diary method reports ten.

Twenty one -- or ten?

Which would you choose?

Don't ask Bob Neil or his band of die-hard diary proponents. They want the People Meter -- their way -- perfect.

And on their timetable - which seems to some as never.

The radio industry is in the tank -- along with other advertising-related businesses. If someone could show you a way to report larger audiences just by improving the methodology, wouldn't you be interested?

You'd think so. But PPM has become an all-too public family feud among radio people.

Arbitron is readying LA for the People Meter and also touts:

• Hispanics with the highest time spent with radio and highest persons using radio ratings

• Audience composition confirms targetability of radio formats

• PPM sample reflects the diversity of the Los Angeles market

The People Meter is certainly imperfect, but progress is being made. I read a comment recently that Bob Neil believes the pressure his supporters have been putting on Arbitron may have helped get their attention. Whatever.

I remember the outstanding strategic radio researcher Bill Moyes telling me that perception is bigger than reality and the perception of radio as an under measured medium certainly makes present ad rates look like a bargain.

That is, unless you're making a federal case out of what's wrong.

I've long been a proponent of doing the arm twisting in the back room and not in front of the advertising community.

There's good reason to be excited about the eleven additional LA stations that made it to the million cume club in pre-testing. This can only be a positive for an industry that has too much bad news to handle.

Radio isn't going to get the next generation listening to a radio -- no matter what ratings system is in place. They're lost to the Internet and mobile space and too many radio executives don't understand their sociological makeup.

Radio isn't going to make local TV go away as a competitor but armed with better cumes and using the Jerry Lee approach to making better commercials for advertisers, radio now has a chance to make more money by eating into TV ad budgets.

HD technology isn't going to deliver more cume listeners to station owners because HD is a failure. So owners must rely on the mothership -- the radio stations they own -- to become a growth industry.

It's not likely radio will become a growth industry again any time soon -- particularly because it doesn't have the next generation coming up to become life long radio listeners. So, getting more audience credit for what radio stations already do is a gift. An expensive gift -- but nonetheless free listeners.

Radio's leaders always seem to be a day late and a dollar short.

But with the People Meter, Arbitron is ready to hand them more listeners for doing nothing different.

They can still screw up their air sound with voice tracking, non-local shows, too many commercials, daffy djs, tight playlists and diminished morning shows.

And now they can get more listener credit for all their screw ups.

Hey, I'm with you on better representation of key demos and ethnic groups.

I mean, hell, next month webcasts and HD multicast (for what that's worth) will be included in the measurements.

Who wouldn't like this deal? Bob Neal?

All radio broadcasters have to do to get higher ratings -- without improving their stations or winning back the next generation is ...

Get out of their own way.

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WBT Radio vs. the Music Industry

I love this.

Greater Media's WBT in Charlotte is standing up to the record industry.

Ever cost-conscious these days, WBT has had it with spending $30,000 a year on royalty fees for one show -- "Boomer" Von Cannon's "Time Machine" oldies show.

Don't get me wrong, I'm sorry to see the show go. Maybe, for now, the show needs to go to a music station in town.

WBT, except for that show, a non-music station, is giving the first indication of what it could be like for the record industry if the labels succeed at winning repeal of radio's performance tax exemption.

A House subcommittee has approved a bill that would add an additional performance tax onto radio station budgets. There could be a showdown in the full House where the NAB has been lining up Congressmen who are friends of radio. This kind of suspense we don't need.

Back to WBT.

So, WBT will save $30,000 annually and the labels lose a mere pittance.

Now imagine this -- and I've been saying this all along -- radio should get away from licensed music anyway.

I know you think I've lost it -- too much time around the next generation, the heat of summer in Arizona, etc. But, the labels think you need their music.

To some extent you do, but if the next generation matters -- and they listen to more things not on a radio playlist than on it, you'd probably be helping your bottom line and your audience if you featured music that is not protected by copyright.

Of course, you won't do that.

So the labels will continue to own the radio industry and eventually impose more charges on stations that are unable to sustain them now. Additional taxes won't come this year or next, but they're possible soon -- just what the radio industry doesn't need.

But an act of courage -- one act -- could send a powerful message.

May I?

1. A national new music day -- featuring artists who gladly give you the right to play their music. Don't have make it a "cause" on the air if you'd rather not. Just new music from beginning to end. Rest the old tired (copyright protected) playlist for a day. Scare the labels.

2. If that doesn't work, do it the following month again. Then, twice a month.

3. If your ratings actually go up (as I'm predicting) because you have finally discovered that listeners in this day and age can get this music elsewhere if you don't want to play it, then you'll get even more courage.

4. Schedule one of these one-day marathons (all unlicensed music in your format genre) on a day the radio industry descends on Washington for a march on the Capitol (wake up, NAB). Then, if you have a Congressman in your district that favors repeal of the performance exemption, make sure their names are on the air (with phone numbers and email addresses) the way you usually do one liners for less important programming elements. Now that's pressure.

Of course, don't be surprised if your listeners actually hope radio's performance tax is repealed because these one day previews will be just what they've been asking for -- for decades.

More variety and less repetition -- not just liners and sweepers saying so.

Hell, you can even throw in fewer commercials that day and really knock them dead.

What radio doesn't get is that unlicensed artists and all types of new music will make their stations sound better and attract younger audiences.

What the labels don't understand is to shut up, take the current ASCAP, BMI, etc. fees and leave well enough alone. Let radio think that they can't survive without playing the same music over and over again.

Thus, the farce.

Radio would be better off with more unlicensed performers.

And the labels would be better off if they dropped the subject of repealing radio's performance exemption.

Imagine the message WBT is sending with their news/talk station but on thousands of stations.

Or, imagine paying more money for the music younger listeners are sick of hearing.

Next move is yours.

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Facebook is the New Radio DJ

By Jerry Del Colliano

(At our regular Scottsdale lunch, pictured from left to right with Todd Wallace, John Sebastian, JD, joined by Scotty Brink and Bill Gardner)

Last week Jupiter Research came out with some new research that pandered to the radio industry -- reassuring it that radio is the most powerful means of music discovery.

They assert that "Even among the 8% classified as trend setters because of their influence over other music users, radio, at 59%, is second only to recommendations from friends, 62%, in introducing them to new music" -- is just plain wrong.

And it's incorrect to think radio drives music sales the way it used to.

Radio still has a significant influence on Hispanic music and to some extent Hip-Hop. Hispanic listeners continue to love the radio and listen to it. Hispanic stations haven't been screwed up on the same basis as other formats -- most are very local. (There's that word again).

This from RBR:

For all of the groups in the JupiterResearch/Ipsos Insight Music Consumer Survey of 2,134 online music users, radio was the #1 method of discovering new music. And it was pretty uniform, from a high of 65% for paying downloaders to a low of 62% for music aficionados – and 63% for all those surveyed.

If this study makes you feel better, enjoy yourself. But it couldn't be further from the truth.

Young listeners -- the record buying (and stealing) public -- rely on each other through social networks to communicate what's hot -- I mean, what's cool.

They look with disdain at radio DJs who many believe don't choose their own music, don't even like it in some cases and aren't that knowledgeable about it. Only radio thinks it's still doing a good job helping young people discover new music. But it is the Internet -- and the many social networks contained therein -- that matter more and more.

You don't have to be on a college campus to know this. Check with your sons and daughters. You may work at a radio station but they use their own means for discovering new music -- not the ones you used.

The radio industry is in its denial stage.

According to the Kubler-Ross Stages of Grief, denial is the second stage after shock.

Next comes anger where the industry lashes out at everyone including each other for their incompetence. Aren't we beginning to see more of that?

Then the Bargaining stage -- you promise the radio gods anything if you're just allowed to keep living as a terrestrial radio station of old.

And depression also occurs in the bargaining stage.

Followed by acceptance that radio is a pretty damn good entertainer run by pretty damn bad operators in a time of great social and technological change.

The only thing left to do is -- move through every stage of terrestrial grief and get to healing right away. There is a big media world out there waiting for new content and great marketing ideas.

Radio programmed to the existing audience can be a good free cash flow machine for many more years -- if operators invest in the kind of "appointment" programming they will need to keep this audience listening. They are not doing this. In fact, as you know, they are doing quite the opposite -- cutting back and squandering talented people and managers.

The Internet is the future delivery system, but now owners should be creating new forms of radio. If the Drake format is the last major format that had significant implications on radio, then it shows you how the industry really has had a mental block about innovation in, let's see now -- forty years!

Now is the time to develop the next format -- for online.

And kick the butts of the NAB -- they should be fighting to get Internet streaming rates down and rate stability realized. It's in radio's best interests because radio operators who want to remain in business five, ten years down the road will be in the Internet business and right now their trade association is sitting on its hands on royalty issues.

And mobile content is a natural for radio. Become a mobile provider. But first, find out what the next generation wants and what attention spans you have to work with.

Music discovery is taking place through word of mouth and to deny it or take solace in a "research" report that says everything is just peachy is not an effective way to deal with radio's grief nor a good way to move on to the future.

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The Radio Voice Tracking Conspiracy

I was just blown away when I saw the front page of Inside Radio Friday in which they described the results of their special survey on voice tracking.

Now, you know I love Inside Radio.

But the results are from another planet. I know they are telling it like it is so I have to assume that the participants in the study are not really being honest.

Let's break down the findings:

• No explosion of voice tracking.

This is contrary to anecdotal evidence that we see almost every day that stations everywhere (large and small markets) are going to voice tracking to -- well, -- save money. Some respondents said they use voice tracking to cover vacations.

• 54% say their station isn't doing any more voice tracking than a year ago.

Some 45% think they have seen some increase in the practice. Don't you love the word "think"? Only in radio can a manager not know for sure whether there has been an increase in voice tracking on his or her station.

• 47% say it was a local decision to save money.

Let's see -- no one from corporate would be breathing down their backs to cut costs, would they? Just asking.

• 21% say it was a local move to improve the station's sound quality?

They must be kidding. Voice tracking may save money and it may feature a nice voice but it isn't real local entertainment. No sane listener ever calls a station and requests more voice tracking. They do respond to morning personalities and jocks who are allowed to entertain. Geez, 21% say it was a local move to improve the station's sound quality? Unbelievable! Think an iPod's sound quality is great in a compressed MP3 format? Maybe it's not the sound quality that attracts listeners -- maybe it's -- oh, never mind. You know.

• There is a split on whether stations have too much voice tracking (47%) and just the right amount (48%).

There's no such thing as just the right amount of voice tracking. See, here's the problem. Voice tracking is never better than a live personality -- unless you're an accountant working for a radio station. Don't take my word for it. Ask a listener. If the radio industry can actually -- even for one minute -- think that they don't have enough voice tracked programming, then you can certainly understand why ratings are declining and the industry is in trouble.

• 5% say their station does too little voice tracking.

I'm not making this up. Too little?

• Six in ten respondents still think their station still sounds local thanks to customization.

And another 29% think it's "not bad" since people from sister stations voice the liners. By now you know that no one is in touch with realty. Reality is that voice tracking is a compromise that may please the bottom line but doesn't please listeners. Evenings, middays and all-nights are supposed to be the most popular voice tracking time periods and 21% say they do it to cover summer vacations (maybe your listeners will take a vacation from your station when you do).

The dictionary definition of conspiracy is a secret plan by a group to do something unlawful or harmful.

I rest my case.

Oh, one more thing.

Just 11% of those surveyed in the Inside Radio study said they weren't happy with voice tracking thinking its either too "canned" sounding or too little local information.

Hunt this 11% down.

And hire them.

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COMCAST FORGETS THE BUSINESS IT IS IN

Sometimes companies forget what businesses they are in and Comcast seems to be the latest media and communication company to do so.

The problem evidenced in the dispute between the FCC and Comcast over its traffic management policies blocking or slowing BitTorret and other files in violation of FCC network neutrality rules requiring open access. Without addressing whether regulators or Comcast are right in the dispute, it is clear from the company’s response that it has lost sight of it core business.

Comcast argues it was engaging in reasonable business practices by limiting the flow of BitTorrent files (often used to download large video, audio, and text files) because they push up the flow of traffic and slow the system. In Comcast’s view, the system and its integrity are its raison d’etre and represent the business it is in. It is easy to understand why the company and its executives might think so.

Comcast spends the majority of its effort and personnel creating and maintaining its system and infrastructure, tackling issues of system capacity and capabilities, and working to ensure system reliability and speed. It provides video, Internet, and voice services via 575,000 miles of wires serving 15 million cable subscribers, 13 million Internet users, and 4 million digital home providers. In the last three years Comcast has spent $13.6 billion in capital expenditures on the system.

Unfortunately, the extraordinary network it operates and maintains—the lines, switches, head-ins, Internet and telephone connections—are not the business of Comcast, they are just the requirements for conducting the business. Its real business is providing customers access to the video, audio, text, and voice communications they desire.

Its central purpose is serving the needs of the end users, including those who want to acquire capacity-eating BitTorrent files. It is the purpose that its executives seem to have forgotten when they decided their network management practices were more important than the wishes and desires of their customers. Their absent mindedness is not completely surprising, however, because the company has long had one of the poorest records of customer service among media firms. Lots of problems develop rapidly if you think it would be a good business if you just didn't have to deal with bothersome customers.

An iPhone Is Not a Radio

The radio industry gets excited at even the mere thought that radio will be included in the Internet and mobile future.

Remember the high-fiving over HD radios that dock an iPod and allow music heard on HD sub-channels to be purchased by listeners on iTunes? It was going to be the next big thing.

It wasn't.

Now that Apple CEO Steve Jobs has introduced iPhone 2.0 with applications that enable a consumer to easily dial into AOL (powered by CBS) or any other station through other apps, many industry execs think this will mean new life for terrestrial radio.

Not so fast.

We're leaving out the sociology -- as usual, always a mistake.

Existing and available radio users might like to listen to radio on their cellphones but not the next generation.

Gen Y wants to be in control of their music.

Start.

Stop.

Listen when they like.

Delete.

Previous generations who listened to radio on a Walkman or before that, a transistor radio, might just assume that today's youth generation would also like to hear their radio in real time on the go.

But that's not the case.

They don't even like radio. I'm sorry to say that but my experience working with Gen Y makes me believe it is true.

There is no debate that the formatics, content, personalities (or lack of them), commercial loads and senseless clutter don't resonate with Gen Y. The radio industry must be smoking something to think that an iPhone will make this demographic return to what they don't like and have already rejected in its present form.

As Tim Westergren, the brilliant founder of Pandora, the Internet's customizable radio channel that actually plays what they want says:

"I think the key is the question. Do they listen to radio at all? I’ll bet the car is the only place they still listen to radio, and that’s because they’re captive. It’s a whole new ballgame if they have control over it, and they like the songs coming out of it".

They love Pandora, the customizable radio. I can back that up from anecdotal evidence.

I'm not certain this love will translate to streaming over the cell phone although Westergren tells me the Pandora app is one of the most popular on the iPhone applications store. He claims the average listener listens about an hour over their Pandora-enabled iPhone.

One of my students at USC wrote:

"Well, I don't know a lot of people my age with smart phones (most kids only have a phone that calls and text messages and there is something about a Sidekick that just doesn't qualify as "smart"). I also don't know a lot of kids clamoring to have radio anywhere. If anything, they wish their car just knew what music was on their itunes or ipod and continued the soundtrack. So I'm guessing no one's jumping out of their seats to get radio on their phone--smart or dumb."

The Opera browser allows streaming terrestrial and satellite stations on the AT&T Tilt.

Again, no threat to the younger generation where satellite radio is a non-starter.

I was surprised to find that when I downloaded the AOL app on my iPhone, I was happy to hear WCBS-FM in New York and KYW Newsradio in Philly but I don't find myself listening on the iPhone the way I used to listen to a Walkman. (Betcha the radio execs, programmers and employees have similar experiences).

So, if there is anything we can take from the easy addition of radio to smart devices like iPhones, it's that:

1. The next generation wants you to create shorter content for them to consume on a phone.

2. They will decide if, when, where and how long they will listen.

3. Bringing terrestrial radio to a smart phone is like inviting Bill Gates to a frat party -- so uncool.

I agree with terrestrial operators to try and make their programming available everywhere possible. That's just smart business -- smart, as it pertains to their older, available listeners.

But be careful not to confuse radio on the iPhone for a new opportunity.

It isn't.

Gen Y wants new programming. Shorter. Preferably not programming that has been condensed or repurposed from terrestrial radio -- with mashup potential. They go against the grain of traditional radio programming philosophy -- to play the hits and win.

Consider five, ten, 30-minute "shows" not done by radio personalities -- breaking all the formatics of traditional radio, monetized in ways radio people can't bring themselves to do and linked to major league merchandising opportunities -- and they may get into it.

Now that sounds like a business to me.

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Radio, Internet and Mobile Game Changes

By Jerry Del Colliano

I've got some ideas for broadcasters, new media companies and record labels with regard to the growth industries of Internet and mobile content.

1. Don't confuse a terrestrial radio station's Internet stream with Internet radio. Young listeners aren't confused. There is certainly nothing wrong with a branded commercial radio station distributing their signal via Internet radio. It's helpful for at-work listening where FM reception may not be strong. But it is not Internet radio to many in the next generation.

2. Internet radio could be the radio of the future but not without a stable and fair royalty agreement with the record labels. You'll note (or maybe not note) that nothing significant has been done since the labels won the right to overcharge streamers for playing their music. Streamers can't afford to innovate. Popular music services such as Pandora may not even be able to stay in business having succeeded at finding a market but failing to gain a fair royalty deal. If and when such a fair rate is established, there will never be another Clear Channel again. No one will monopolize or sanitize radio programming. In the meanwhile, any terrestrial broadcaster without the ability to field a game plan for that day will be caught flat footed.

3. Record labels should stop trying to win repeal of radio's performance rights exemption and go into the "radio" business themselves. After all, they have the content. I've talked to record labels about this idea. They think I am talking about creating radio stations like the ones consolidators own. I'm not. I'm talking about the kind the next generation would listen to. They may have a personality or jock. They may not. But if the labels had any guts, they'd be radio. Short of that, they'll lose in their efforts to repeal radio's performance exemption even if they win the right to impose it. While radio is not as influential as an opinion maker for new music, this is no time to repeal the performance exemption.

4. Try on an iPhone and see the cool new apps that are available for it. My iPhone is a lot more fun than a radio. I can do a tweet on Twitter. Check Facebook. See the front page of the New York Times at a touch. Keep track of my weight -- always good for an Italian who loves pasta. It's never ending. Now I know what you're thinking. One of those little icons can be added to listen to Pandora and other services that will let consumers hear radio stations on the fly. Game changer: the smart phone has killed the radio star. But consumers, you may find, don't want their phones to be a radio even if they do want it to be an iPod. The difference: they control the iPod (start, stop, delete, listen when they want) and don't have time to hear "radio" in real time.

5. Podcasting will eventually be the new radio. It cooperates with all that young people require of their mobile devices -- all together now -- they start, stop, delete and time-delay their programming. Plus they can subscribe to lots of podcasts. The problem is there are too many problems -- things like lack of royalty agreements to use the music, not enough seamless ways to integrate a mobile device into a car (at this point, at least). But anyone who wants to have a mobile strategy should be all over podcasting. I can promise you most companies will get it wrong because they will fail to study the sociology of technology. We tend to adopt the technology and guess at the sociology. Not true of Steve Jobs. True, of radio and records.

6. One last thought -- radio can no longer be audio without pictures. If you want to start thinking about a strategy in the next entertainment millennium you're going to want to keep in mind that today's youth listen when they want to hear, see when they want to watch video and click when they want to read. So, we can call it radio or call it television or call it newspapers going forward but don't fall for the nomenclature. It's media -- new media.

7. Television will increasingly be challenged by the YouTube mentality. Many of my readers write to me every time I mention that young people watch "Lost" or "Grey's Anatomy" on their laptops not a flat screen TV. And they like it that way. Mobile and portable will be everything. Since technology alone will lead companies to the brink of failure, get at the reason why the next generation would rather watch on a computer screen right on their lap than on a traditional television set. (Hint: then can multi-task, stay in touch, be in control).

8. Five or ten minute "TV" shows may be the future someday. From a sociological perspective, Gen Y has attention deficit like never before. They are smart. Great people. Very social, but they just (as a group) have a shorter attention span. So, study technology all you like, but the reward goes to the company that can understand how to deliver meaningful content to this attention challenged generation in short clips. YouTube is just the beginning.

The most qualified people to be Internet streamers or mobile content providers are radio broadcasters. It's actually in our DNA. Radio people produce performance quality shows on over 11,000 stations every minute of every day (when they are not wimping out and duplicating shows from other markets or from synidicators to save money).

This we can do.

The question is -- is the Internet and mobile space, an unknown black hole to broadcasters -- of interest to us. Enough interest to stop talking and start investing.

We'll have to wait for that answer -- but not too long -- because the next generation has already overwhelming given us their answer.

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THE FAILING STRATEGIES FOR DRAMA ON NETWORK TELEVISION

The announcement of the finalists for the 2008 Emmy drama nominations shows how weak major television networks have become and the feeble program strategies they are now employing. AMC’s “Mad Men” and FX’s “Damages” became the first series ever produced by basic tier cable channels to become finalists for best series and they were joined in the 6 nominee list by Showtime for “Dexter”.

The results were even worse for networks in the major acting categories: Only 1 of the five Emmy nominees for lead actor and 2 of the five for lead actress went to network programs.

Overall, 24 cable network programs received nominations and 7 cable channels received 10 or more nominations. HBO received 85 nominations—beating out all the broadcast networks, Showtime received 20 nominations, and AMC received 20 nominations.

Drama is a bellwether of the health of television programming and networks continue to fair poorly. It is a particularly important genre, socially and culturally, because it allows explorations of beliefs, attitudes, norms, aspirations, and fears better than other program types. However, success is unpredictable and good drama is expensive to produce. Historically it was the province of the well funded dominant networks, but that has now changed.

The decline of quality in network television programming is directly related to the increasing number of channels available in households. As the number of channels increases, the average number of viewers declines, producing declining advertising support, and thus reducing resources available for program investments. The responses of networks have been predictable. They offer more game shows and reality programs that are less expensive to produce, avoid productions that are edgy and innovative, and rerun programs as much as possible.

Network prime time filled with shows such as “I survived a Japanese Game Show”, “Wife Swap”, “Nashville Star,” and The Bachelorette” and the networks wonder why they have trouble capturing audiences and gaining financial resources. When they do provide drama it is all too often formulaic and a spin off from an already successful series. There are strong tendencies for network drama to have a criminal or legal practice oriented or take a prime time soap opera approach, such as “CSI”, “Law & Order”, “Desperate Housewives”, and “Grey’s Anatomy”.

The program challenge has been growing worse year after year since the development of cable television channels in the 1970s. I don’t want to be interpreted as saying the networks have produced no fine drama, but the amount has declined precipitously.

This raises the question of why cable channels are able to follow an opposite path, increasing their production of drama and gaining more acclaim for their work. The simple answer is money. Having additional sources of income other than advertising frees programs from the necessity of seeking audiences linked to interests of advertisers and from the content influence of advertisers. It allows producers, writers, and directors to employ greater creativity, to address controversial subjects, and to take the time to ensure quality in the production.

Subscriber-supported HBO has the longest and most distinguished record in producing original drama with highly rated and acclaimed series such as “The Sopranos”, “Angels in America”, “Six Feet Under”, “Deadwood”, “Band of Brothers”, and “Sex and the City”. HBO is premium channel financed by subscriptions from about one third of American households, a clear example that many viewers want and are willing to pay for innovative, quality programming.

In recent years there has also been significant growth of drama from cable channels receiving both subscriber and advertising revenue, thus giving us programming such as USA network’s “Monk” and TNT’s “The Closer”. Original television drama is now being produced by other channels, such as AMC, Lifetime, and Showtime, as well.

One of the side effects of the increased production of drama by cable channels is that they are now playing significant export roles and their programming is regularly appearing in prime time on national channels, especially public service channels, in Europe and elsewhere.

Network executives need to seriously reconsider their programming strategies, particularly where drama is concerned, or they risk become secondary channels in the years to come. Unless they find ways to develop and support quality drama, it will increasingly become the trophy programming of cable channels in the years to come.

Live & Local Radio Sunday Nights

Recently I spoke to the broadcasters who attended my teaching seminar at the Conclave in Minneapolis that young listeners want to hear new music -- and that they wished that djs would play their own music.

This corporate record list stuff -- the fabric that runs through all of us -- is overrated.

We know what's best, right?

The playlist must be controlled by a program director. After all, ratings are a factor, aren't they? And what insures against payola like a program director in charge of the playlist?

While radio was out regionalizing and nationalizing its music, the next generation won control of today's technology and they have become the djs. Where a radio jock might have told their listeners what was "hot" in previous times, they have no credibility with the next generation.

Gen Y has Facebook, MySpace, Pandora -- and, of course, Limewire -- the better to steal music.

But, radio had it right in some ways back in the payola days of the 50's. DJs playing their own music. Now young people are demanding djs who actually know something about the artists and music.

Otherwise, an iPod will do just fine.

My suggestion to the Conclave audience was to take a time slot that wouldn't hurt them -- and do the unthinkable -- put on a dj to play his or her own music in the general genre of the radio station format.

The rules:

1. Stay out of it.

2. Don't program it -- 9 pm to 1 am sounds nice. Keep the PD away from this show. (And if you're a PD, I am cringing as I write that line).

3. No playlist.

3. Let it be free flowing. Include nterviews. Recently I wrote about the success Bob Dylan was having with his XM radio show by just playing records and talking the way Bob Dylan talks.

Next, watch the audience gather. If the show is good, listeners will tune in. Then take the show to local ad agencies and sell some ads. But, it would be a mistake to accept produced commercials. Sunday night djs -- music experts -- would have more street cred if they would simply talk about the product and/or service.

One of the knocks on radio is that it is so vanilla. Okay, I'm being nice -- it's boring. The consolidation cutbacks don't sound good on the air. There are fewer reasons to be drawn to a radio.

The truth is that too many radio operators have already sold their stations to the devil after 7 pm at night.

Hell, 5o stations have sold their stations to the Premiere syndication devil for Ryan Seacrest -- before 7 pm at night!

The devil, you ask?

Yes, syndicators. Barter deals. Cheap programming.

You may find that your listeners don't have to be under 30 to become addicted to an extremely knowledgeable local personality who knows best what the audience really wants to hear.

This cooperates with what I think terrestrial radio should become -- appointment listening rather than what it is right now -- 24/7 jukebox playing the same 30 songs.

Radio people really are very brilliant.

They've done world class programming on a dime for years. I don't know about you but I programmed in a top four market and no one ever gave me the budget that I needed (and in some cases, even the signal).

So, if you're open to new (old) ideas -- and you're not already running a music-picking dj doing a Sunday night show -- take a programming hint from the next generation.

Your station may be born again of necessity in a world where radio has lost its way and lost the crucial next generation of radio listeners in the process.

I saw that Jupiter study showing radio remains the power in music discover. I just shook my head.

Have a child? A teen? A college student?

Young people turn to the Internet, iTunes, iPods, Limewire and each other through social networking to find out what's cool. Not radio.

And that's because radio people are content to believe bogus studies that minimize the impact of new media on radio.

If you want to be known for music discovery -- discover Sunday nights at 9 pm -- and take a step into the future.

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Terrestrial Radio Game Changers

By Jerry Del Colliano

Yesterday I wrote about the coming of flash drives and factory installed hard drives in automobiles as yet another threat to the radio and record industries.

I asked at the end of my piece (scroll down to read it, if you like) -- game over? To which I answered - game changer.

So, let's build upon this latest "opportunity" disguised as more bad news to see if we can come up with a list of action steps that might be helpful.

1. Try not to confuse terrestrial radio with new media. Terrestrial radio was damn good for many years and, although it has suffered from corporate budget cutting and lack of leadership, could be a very good free cash flow business for another five to ten years. But terrestrial radio is not a growth industry. It can't be because there is no next generation to keep it growing. Radio took its eyes off of Gen Y while it consolidated and many technological and sociological factors changed everything. So rule one, in my opinion, is to separate terrestrial radio for existing and available audiences from new media that broadcasters will have to get into to remain in business.

2. Invest in morning shows, don't cut them. You don't necessarily need a duo on in the morning but you do need a local, compelling and very likeable entertainer. Sign him or her to a long-term contract. Then, find another personality for afternoons. Terrestrial radio must become a destination medium -- a reason for listeners to go to radio every day -- and I'm not talking about young people now. Radio should regain some of the excellence it once had. Some of you may be challenging the term excellence, but that was a standard that was used in the past when radio developed into this awesome medium. Cut the morning show -- and fail to put a personality on in the afternoon -- at your own peril. You become easy to not listen to.

3. No voice tracking. No dimwit djs who say nothing when they jabber. No syndicated or network programming. Repeat after me -- radio works best when it is local. It may be cheaper when you run it national, but this is not the time to turn transmitters and towers into repeaters of content from elsewhere.

4. Cut commercial loads to 12 units (If I competed against you, I'd make it eight and charge more and then I'd get fired when the owner told me I'm either going to add a ninth unit or I'm -- you know. It's probably happened to you). A unit could be a ten, 30, 60, whatever.

5. Live-reads -- do them. Young people prefer them. Betcha older folks do as well. All those nice production libraries to bury lousy copy in a commercial are worthless. Oops, I'm not going to make friends with statements like that. But it's true. Uptempo, sincere, live-reads by smart djs. Hire good personalities -- they know how to do it.

6. Test your commercials -- make them better. Jerry Lee is on the right track at WBEB in Philly. Make them good and get existing advertisers to reapportion their budgets by taking revenue away from TV. TV gets three times the commitment of radio -- lots of room for growth -- the kind of growth that will make commercial radio be a great business for another decade. Lee will share his information with anyone -- have you asked?

7. Work together as an industry to pitch a big tent called "Radio". That's what the NAB and RAB fail to understand. Radio is big enough to fight for Internet streamers because we're going to have to get into that business to have a future. The next generation will not be denied. And work with competitors -- the stations across the street -- to present a better face to advertisers. Don't get greedy -- work together -- and help advertisers succeed instead of bleed.

8. It's bad business to trash the People Meter. Your mother was right. If you don't have anything good to say don't say anything at all -- at least in public. This applies to PPM. Go behind close doors and take off the gloves, if you must. Threaten not to renew. These are strategic tactics that are better than airing radio's dirty laundry in front of radio's freakin' advertisers, for God's sake. And the next time Bob Neil opens his mouth on this issue, threaten to force him to listen to his consultant Randy Kabrich's radio stations for an entire day! (Just kidding. But you get the point. Muzzle that man on this issue in public).

9. Don't laugh at Randy & the Rainbows because they are -- at least temporarily -- in the newspaper business. I don't think there is much they can do to rebuild print newspapers for a generation that gets all they need online. I don't even think they can retrofit newspapers to work online. Newspapers are not likely to get their much needed classified advertising back from Craig's List -- ever. But, hear me out. There are a few newspapers that are becoming radio stations online -- with music and entertainment. Newspapers have valuable content (at least until they fire hundreds more reporters -- as they will most certainly do). The online newspaper as a radio and TV station has a better prognosis than a radio station as a -- well, radio station. Be like detective Poirot from the Agatha Christie detective series -- a good observer. This idea has merit.

So, there you have my latest thoughts on doing something positive to change terrestrial radio.

After we've done them, there are more specific things to change to entertain the available audience (baby boomers, older Xers). Build better ad campaigns to steal more advertising dollars away from television. Develop an Internet and mobile plan -- not 1% of your budget, 20% -- if you're serious about being around when the last baby boomer attends a Hy Lit record hop just beyond the Pearly Gates.

Radio can't get young listeners to abandon their new media by making these changes, but stations can make listeners and advertisers happier now. A sound investment for a medium that could still have some life left in it yet.

To reach the next generation, radio content providers will have to develop new content -- not presently on the air -- and distribute it where they live.

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Radio: Jumping Jack Flash Drive

Young people tell me they love two things that we should keep an eye on:

1. Cars that have large hard drives built into their on-board entertainment center -- allowing them to download music from other sources for personalized listening.

2. Portable flash drives that hold whatever they want -- use your imagination. In fact, the students from one of my labs last year brought in a flash drive that looked like a guitar and held lots and lots of entertainment. Very cool.

Then, a few days ago, one of my readers wrote:

Recently I met a man who frequently travels to China and attends trade shows. He told me the Chinese are building everything around flash drives. Building them into phones, ipods, you name it. He even purchased a combination DVD / Flash machine, which he equates to our DVD/VCR machines (still available in the USA) but is antiquated technology in China and no longer available in that country.

He contacted me because he wants to see if there is a market for a radio station to do promotions involving giveaways of ipods / mp3 players filled with content, whether that be music, information, advertising, etc. He sees this as the future of radio promotion. And his idea lends itself to lots of other applications, such as promotions featuring mp3 players at concerts (filled with that artist’s music), NASCAR races, (race information), sporting events (stats).The players can be set up to last a day, a week, a month, based on the number of hours of content loaded into it. It is endless in his eyes.

In light of the anecdotal evidence I witnessed with the next generation, this email resonated. I am not a big believer that hard or flash drives will be a worthy radio promotion.

On the contrary.

It's just another competitor for radio.

Unless radio stations plan to offer content for these flash drives and hard drives, giving them away as promotional tools would be like offering listeners an iPod for winning a radio contest.

Radio is faced with a real dilemma.

Continue being mono-dimensional or face the music (ouch) because the next generation prefers just about everything but radio. Remember we need Gen Y -- there are more of them than baby boomers. Keep in mind, also, the startling fact that there are no more members of this Gen Y age group being born. We've already moved on. So while Gen Y has not yet come of age, they are now coming of age to be a potent force in everything from consumer goods to entertainment.

And the record industry is fighting with them -- suing them for stealing music. The next generation has control of the Internet. You can't stop them from stealing unless you can regain control of the technology -- which you can't.

Any other ideas?

Apparently, no. Record labels are going down with the CD -- the record, if you will.

The radio industry is ill-prepared for the next generation. We think that all we have to do is come up with a new format (without the benefit of research, a consultant or a program director who can do it) that will make Gen Y compelled to return to -- analog radio.

Any other ideas?

Apparently, no. Radio companies are spending nothing or next to nothing on an Internet strategy or mobile content delivery. They are startled that podcasting for the next generation would be more desirable than listening to the radio. Luckily broadcasters don't have the money to commit to Internet and mobile projects anyway, because they also don't have the vision to pursue the future.

Time to go to school on the next generation.

Both the radio and record industries are inbred. We live in our world with the same people, same ideas and same vision of the future. That's the problem.

Now the world has changed as never before.

The next generation dictates the delivery system.

Is anyone home?

Only a computer company (Apple) responds while the industries that should be leading are retreating deeper into the past.

So, consider this for a moment.

Portable flash drives -- cool ones, at that -- will be another way for the next generation to do something other than buy music from record labels or listen to music on a terrestrial radio station.

Massive hard drives installed in automobile entertainment centers are devaluing the radio that also resides in that unit. Someday the radio may not be necessary equipment to future generations.

WiFi is coming.

WiMax is being tried in major cities. Streaming Internet radio in the car is getting closer -- thousands and thousands of choices for young listeners.

My parents, old Italian folks, would never subscribe to cable because they truly believed television should be free. After all, they installed antennas on their rooftops for most of their lives. Who would argue? They wouldn't pay for more choice.

Now young people are saying they don't need to pay for more choice -- they are demanding it for free.

And they are prevailing -- to the disdain the radio and record industries -- because they have managed to wrestle control of the technology that constitutes the delivery system away from the program suppliers.

Game over?

No, game changer.

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Grading the Radio Groups

By Jerry Del Colliano

There is a military term for a situation caused by too many inept officers -- clustering -- referring to the insignia worn by majors and LT. Colonels, oak leaf clusters.

In Clint Eastwood's 1983 movie about the invasion of Grenada (Heartbreak Ridge), Eastwood, who played Gunnery Sergeant Highway had this dialogue with a colonel during a readiness exercise.

Col. Meyers: What's your assessment of this situation, Gunny?

Highway: It's a cluster f@#K, sir.

Col. Meyers: Say again?

Highway: Marines are fighting men. They shouldn't be sitting around on their sorry asses filling out request forms for equipment they should already have, sir.

Talented radio people shouldn't be sitting around trying to find ways to shave more expenses off their programming. They should already have that ammunition ready to fight competitors, new media and mobile.

The problem is not the Internet -- it's a challenge (albeit a big one).

The problem is not the next generation -- after all, radio virtually ignored Gen Y while owners were stuffing more stations in their clusters and the next generation simply moved on.

It's not mobile media -- although mobile media could have had a radio in it, but not without a strong affinity to what was on the radio. So, this is not simply a technology issue that escaped us.

It could be that there are some inept officers running some very influential radio companies.

These COOs and CEOs make cutbacks in order to live from quarter to quarter. Yet they are paid millions in compensation and benefits -- the fruits of power that has been bestowed upon some, frankly, inept "leaders" for the better part of a decade.

They do it all in the name of shareholder value.

Don't get me wrong, there is some good talent atop some radio groups, but you be the judge as to who is earning their keep and who is hurting their shareholders, employees -- and the entire industry.

I'm just saying, compare the standard they set for themselves -- the Holy Grail, shareholder value -- and see how they've done:

CLEAR CHANNEL

$35.42 and only because their buyout price guarantees $36 or else, who knows what it would be worth today. Maybe $9-15? CCU was $91.75 on February 4th, 2000 and after that date the share price was never higher. This is the bellwether stock for radio -- the largest owner with 1,100 stations. No wonder the founding Mays family can't beat it to the door fast enough for one more paycheck. Their legacy may very well be that they single-handedly helped lead the radio industry into the doldrums through inept management and lack of vision.

CBS

$17.17 at closing on Friday. CBS was as high as $88.70 in winter, 2004 although it has paid dividends recently and has been reconfigured away from parent Viacom -- all factors that make it difficult to judge apples with apples. It also includes television -- another dying business with the next generation. CBS Radio President Joel Hollander didn't know what he was doing and when his successor, Dan Mason, showed up, he was smart enough to understand that CBS needed to program to the available radio audience and has tried to rebuild stations while corporate pressures forced him to make cutbacks -- not good.

COX RADIO

$9.95 and beginning to worry Wall Street. Cox stock had been in the $30 range in 1998 and never got higher. Cox President Bob Neil, like CBS' Mason is smart. But Neil is increasingly distracted with the holy jihad he is conducting against Arbitron's People Meter instead of keeping his eyes on his fries. Neil is also wise enough to cut spot loads -- a battle worth fighting publicly. Neil knows radio must tighten inventory and charge more. He should be leading on these issues and not conducting food fights with Arbitron over PPM.

SAGA

$5.62 at the bell Friday. Saga shareholders were no doubt happier in 2002 when its stock priced at $23. Since then it has never been higher. Downhill all the way. Saga chief Ed Christian never strayed from his plan to run a consolidated small market radio company and he deserves credit for that as analysts agree radio is somewhat healthier in smaller markets. Christian surprised at least one of his employees when he joined Cox's fight against Arbitron's People Meter -- some perceiving it as a personal crusade. Misguided to say the least -- as long as more important issues are on the table.

ENTERCOM

$5.18 Friday -- a far cry from $65.88 in Feb 4, 2000 then down you go. Shareholders must have had great faith in Entercom to value it with the big boys but it languishes today through lack of vision and ordinary operating strategies -- a big fall from grace by radio's preferred judgment standard -- shareholder value.

CUMULUS

$2.73 -- a $50 stock in 2002 and then steadily down. Another small market strategy that went awry. Even with the benefit of small market economics Cumulus is getting too close to becoming a $1 stock. This in spite of the fact that the Dickey's knew they needed to get out, but were not able to make a buyout happen in the current financial atmosphere.

EMMIS

$1.56 at the end of last week -- $56.56 in January, 2000 and then never above that high. CEO Jeff Smulyan runs an honest company with excellent assets (I'm speaking about the employees here). But he has a problem -- too much dependence on New York and LA which has been a roller coaster ride -- particularly down lately. Smulyan has tried several times to take the company private and has run into opposition. In my opinion, he was willing to overpay to go private. Guess shareholders aren't that smart. Selling at $19 sounds better to me than closing at $1.56. Nonetheless, even good people with a good leader can't muster more value than a buck and a half.

RADIO ONE

What a great name for this stock since it is worth around one dollar -- $1.05 on Friday. Radio One had worked its way up to $23.30 in May, 2002. The Liggins family has not been able to show vision that has been any better than their peers as this company flirts with being delisted.

CITADEL

83 cents -- you read that right -- 83 cents. Citadel was $22 ten years ago when the ABC merger wasn't even a glimmer in anyone's eye and Citadel has been declining ever since. Citadel is a particular disgrace as a public company because its shareholders see fit to compensate their CEO, Farid Suleman, at the $11 million a year level -- and they pay the taxes as part of his deal. This spits in the face of the Citadel employees who are working at a great disadvantage -- minus a leader who knows the way out of all this trouble. Suleman's accounting background leads him to default to cutting expenses and dismissing talented people rather than investing in a company that could have a digital future.

So, there you have just a few of the reasons the radio industry is in the toilet. There are more. Believe me, I didn't leave out any success stories -- at least from the stock price perspective, their own barometer for success.

Which brings me back to my original premise.

Radio is being run by a few inept people in very influential places.

But even if they are forcing talented managers, programmers, on-air people and sales executives to carry out their budgetary orders, well -- let me quote Eastwood's Gunny Highway here -- "Just because we're holding hands doesn't mean we'll be taking warm showers together until the wee hours of the morning".

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If Steve Jobs Ran Clear Channel ...

By Jerry Del Colliano

(Pictured left, front, then clockwise next to John Sebastian, Bill Gardner and Todd Wallace)

At our monthly lunch out here in Scottsdale, John Sebastian, Bill Gardner, Todd Wallace and I kicked around a lot of topics as is our custom. But the one that I'd like to share with you today is what the radio industry could have been if Clear Channel had not become the largest owner and radio's default industry leader.

What a day for this conversation!

Citadel's stock closed at just 87 cents! I mean, that's not possible. You'd have to work at making a company with so many assets and talented people worth less than $1 a share especially for a company that panders to Wall Street about shareholder value.

87 freakin' cents.

It was a day when Emmis, an excellent company with outstanding people in my opinion, reported a 3% decline in same station (U.S.) revenues in the fiscal first quarter doing a bit better than everyone else's 4% decline. Decline being the operative word here. This is a well-run company. They treat their people well. God knows Jeff Smulyan has tried to take the company private. Emmis stock is down 26 cents to $1.74. That's a great company worth less than $2 a share.

Unthinkable. Really.

CBS is down to $17.47 as of closing yesterday and it includes radio and a lot of other things. It's tough out there. Radio is just one of their challenges.

Clear Channel?

Glad you asked. Their stock closed at $35.40 -- very near the buyout price and just waiting for that agony to be over.

The vaudevillian comedian The Old Philosopher used to say, "Is that what's bothering you, bunky?"

That, too.

What's worse, Citi Investment Research analysts yesterday predicted radio revenues will fall 5% in 2008 as advertisers spend less. Radio groups face higher debt as interest rates rise and credit conditions remain difficult.

Citi downgraded Cox and Entercom from "hold"to "sell". Cox is down to $10.28 -- off a dollar just yesterday. Looks like Bob Neil has more pressing issues than fighting the People Meter, doesn't he?

Entercom is worth $5 and change - down over a buck at closing yesterday.

Citadel is rated by Citi as a "sell" -- ya think?

STOP!

It didn't have to be this way.

You can't do anything about interest rates or a soft economy, but you could have positioned yourself to be in a more competitive position.

So we got to thinking, what if Steve Jobs ran Clear Channel instead of the Mays boys.

Automatically you get the feeling radio would not be as bad off as it is today. That somehow he'd have a plan because -- well, Jobs is an operator. He may not be any nicer than a radio CEO, but he sure sees the future and gets things done.

Well, for one thing Jobs would have a nicer Gulfstream jet than the Mayses and no one would care because Jobs actually knows how to make money and they wouldn't likely begrudge him his private jet. Jobs did it at Apple once. Again, a second time. Then at Pixar. Again, when Disney bought Pixar and Jobs became the single largest shareholder of Disney.

So let's continue.

• Jobs would probably recognize that radio needed to be local. Only people who take their eye off the prize could buy a local medium and try so hard to make it more regional or national to save money. Jobs would do local radio. No doubt.

• Jobs would take on long-term projects that could eventually contribute to the bottom line while radio CEOs just focus on the next quarter -- basically, cutting expenses and maximizing profits. Jobs would grow Internet (of course) and mobile and would probably undertake projects that took more than three months to pay dividends -- unlike Farid and his ilk.

• That Jobs would hire and not fire people. You can say what you want about Apple (or Pixar for that matter) but Steve Jobs has a history of adding assets not deleting them. This one thing could have strengthened radio's hand now that things have gotten tough. Instead, for radio today it's like playing baseball without a third baseman and left fielder. Why? Because radio CEOs would figure the shortstop can also play third -- he's that close -- and the center fielder can cover left. And the team saves two salaries! Ridiculous.

• Jobs would make radio a brand that just happens to be delivered over a terrestrial tower. But I'd like to think he'd consider himself a content provider always looking to put content into new technology. He'd reject HD as the joke that it is. And I'll bet Jobs wouldn't include a traditional radio signal on his iPods and iPhones if he still ran Apple. He knows that 24/7 radio doesn't translate to Gen Y, a generation that can do 24 different things in seven seconds but not listen to radio for hours at a time (okay, I'm exaggerating, but you get the point).

Remember, it didn't have to be this way.

As long as radio is being run by the same people who consolidated their stations and failed to build the shareholder value they promised investors, future prospects are dim.

Today, Apple will begin selling its new 3G iPhone -- you know, the one still on the worst cellular system (AT&T), with very few areas currently able to even receive faster 3G service -- with greatly diminished battery life -- but cool applications, and added refinements.

No one wants to buy an HD radio -- even with the 30% discount they were shouting about on the front page of Inside Radio the other day.

But they'll line up to buy the next iteration of an iPhone.

They want products and services that meld with their lifestyles -- cool, intuitive, useful.

Put a guy like Jobs in charge of one major radio company and you'll see the end of making local stations national, the end of the talent brain drain, the end of cutting sales staffs back because the money finds its way to the stations without them (right, Farid?). The end of declining ratings. The end of the fight to commit ratings suicide by trashing the People Meter in front of the advertising community. The end of no mobile or Internet strategies.

But...

It could be the beginning of the end of $1 stock prices and bean counter mentality that has led this one proud industry into such a terrible mess.

I'm just sayin'.

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