Consolidators have screwed employees out of their jobs.
Now, advertisers are screwing radio stations out of previously agreed upon rates.
What do you expect when there is only one rep firm for the entire radio business?
And that rep firm is owned by Clear Channel, the largest radio group.
And Clear Channel is owned by a group of clueless private equity companies named Lee & Bain.
What you get is radio advertising anarchy.
And that's what is happening -- chaos, disorder. Perhaps you've seen or heard.
GEICO, one of the largest radio advertisers, negotiates its lowest possible rate with Katz for station buys across the country.
Then, after the deal is done, the buying service -- Horizon Media -- bullies Katz into giving up an extra 5% discount on top of the agreed upon price to complete the deal. It's like a boxer throwing a left upper cut after the opponent is knocked out on the floor.
What's worse, that squeaky clean Warren Buffett's Berkshire Hathaway owns GEICO and should know better. If anyone would tell him.
Or that Katz should have slammed the door and said, "no further discounts".
Perhaps it has something to do with Clear Channel's own interests. They are operated by a PE group that thinks long-term is as soon as possible. And perhaps by the fact that GEICO/Horizon chose Clear Channel for its Cause Marketing campaign last summer.
Four flights of 10 and 15 second radio spots donated by GEICO that ran in the top 25 markets with an online component and some public service ads thrown in by Clear Channel.
No matter what money, if any, changed hands, Clear Channel obviously has a previous separate relationship with GEICO and again, its rep firm, Katz is radio's only rep now.
Boar's Head tried the same tactic -- except they wanted 10% off radio's best price. That's a lot of baloney.
The RAB swallowed its tongue -- you know, radio's advertising bureau.
Katz has turned a deaf ear to radio executives and group heads who didn't cotton to having their rates beaten up after they were agreed upon. But you don't see any of the victim stations saying or doing anything about it.
This is a seminal moment for radio.
Now that the big cat, Clear Channel/Katz, has allowed its stations to accept double discounting, there may be no turning back.
And there is no getting around the fact that the speed of the leader determines the speed of the pack.
The number one consolidator is deciding for everyone else that discounts after the sale are now on the table. They have less to lose because PE firms are not long-term players.
This is what the demise of competition gets you.
Zero -- that's spelled "0" -- group heads have taken a public stand against double discounting.
We've already told you the RAB sees no evil, hears no evil and does nothing to help the integrity of radio rates.
Now, the law of unintended consequences has kicked in.
No competition.
One rep firm.
No radio CEOs with balls.
Advertisers and their illegitimate cousins, media buying services, sense a dying business and a weak resolve in radio.
Add to that potential conflict of interest by Katz parent Clear Channel and you can see double discounting is the new rate negotiation.
First, take a beating on the price.
Then, take an additional 5% or 10% off that beating.
Bastardizing radio's rate structure is going to hasten the industry's demise.
From now on, how can you charge full rate for any advertiser?
And any advertiser that henceforth pays full rate is a damn fool. Just send your buying service in to negotiate with Katz. Make your best deal. Then, take another discount at the checkout counter. Just like GEICO.
What has radio become, anyway? Macy's.
Consolidators have been looting radio for 12 years now.
But everyone has been comfortable with looking the other way. Well, congratulations -- you've now established a new paradigm for radio advertising.
Less Is More Radio Rate Reductions.
If any of the sorry consolidators who piss and moan all day long had any guts, they would run an ad in the Wall Street Journal and Ad Age -- an open letter to Warren Buffett.
By all accounts Buffett is a decent guy. He probably would respond and make it right. The bad publicity alone is not worth 5% off previously agreed to rates. And that would stop double discounting dead in its tracks.
Hold the RAB accountable -- the problem is if you don't like the way the RAB is handling things don't look in the mirror because just about everybody is on the RAB board. Not exactly an exclusive club. Translation: everybody is the problem.
Never in my wildest imagination did I see the radio industry becoming the mean-spirited employer of as little talent as they can get away with.
Or the unwitting fool that allowed Katz to swallow the buy.
Which leads me to this rhyme based on "There Was An Old Woman". Let's substitute "consolidator" for "old woman". Go ahead, use your imagination.
There was a consolidator who swallowed a 5% lower buy,
I don't know why it swallowed a buy,
Perhaps it will die.
There was a consolidator who swallowed a Katz,
Imagine that! to swallow a Katz,
It swallowed Katz to catch the 5% lower buy.
There was a consolidator who changed the course,
It's dead—of course!
If the radio industry thinks it got away with screwing its longtime employees to cut costs, wait until you see the screwing they're in for when advertisers can cut their advertising rates after the deal.
It's what happens when an industry is run by people without ethics.
Groucho Marx must have foreseen radio consolidators when he said:
"Those are my principles, and if you don't like them... well, I have others."
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