When he revealed Cumulus cash revenue is off 21% for the quarter, he waxed eloquent about all the reduced operating expenses.
By turning attention to EBITDA, he’s patting himself on the back for cost cutting. This amounts to an “atta boy” -- a self-serving tactic employed by public figures to win kudos for simply doing what is expected of them.
Dickey's job is to grow shareholder value and in one day he turned Cumulus into a "gold mine" that had been trading for about two quarters and a dime and then skyrocketed to one piece of paper money with George Washington's picture on it and two quarters.
Lew Dickey has failed at growing shareholder value by allocating capital appropriately.
What Tricky Dickey should be doing is drawing a map for shareholders on how he plans to recapture that lost value.
I didn't hear that.
Nor did you because all he talked about was cutting expenses -- his forte.
Great EBITDA margins are meaningless to shareholders if all that cash flow is being diverted to debt service. Capital structure matters.
And Cumulus has been irresponsible about piling up debt like there would never come a time when their cash flow couldn't adequately cover its loan covenants.
If you want to paint EBITDA numbers in a more realistic light, Lew, just look at the trend of Total Debt/EBITDA for the trailing 12 months. This is a more accurate measure of a company’s ability to service its debt burden. Trend higher = bad news. Above 6 times is approaching distress.
Cumulus is way above 6 times.
As usual, what Cumulus says is not at all how it performs.
And get this -- since Dickey's only redemption is that costs declined at a faster rate than revenues -- he's already taken his next step to do what he does best.
Cut more costs.
And he promised to do just that in his Quarterly Conference call.
But you won't believe how Tricky Dickey is going to do it.
By cutting skilled and seasoned sales management's commissions.
That's right -- sales are down so Tricky Dickey cuts sales management.
And it's not likely to be a little nip and tuck here and there, we're hearing that this is a massive Cum-u-mess.
A company with strained employee relations at best is getting ready to put the screws to more of the very people it needs to overcome the 21% financial deficit it just posted.
In fact, in our ongoing poll of the Best & Worst Radio Groups, Cumulus is way ahead of even The Evil Empire as the worst -- check the up-to-the-minute results here.
Dickey is hiding behind his EBITDA numbers but financial people know better. The press and laypeople may not fully understand, but -- you do, now.
Here's what I'm hearing about what The Brotherhood of Evil Mutants is inflicting upon what's left of its company and its shareholders investments:
1. Agency accounts have been pulled from local sellers. To some senior account executives that's a 50% decrease -- in some cases 70% decrease in income. I hear this is effective immediately!
2. The agency business either goes to the "house" or in some cases The Brotherhood of Evil Mutants will choose a local account exec to handle all the agency business. Of course, that local account executive loses their local accounts to the "house" in most cases but they will make, I'm told, a 4% to 6% commission for turning states evidence -- I mean, for taking the Tricky Dickey challenge. But as those huckster's say on TV's infomercials, "but wait -- there's more" (or should I say less). All these deals will be reviewed by the benevolent Dickey Family Dictators when the 2010 budget is assembled. Translation: don't look for commissions to go up. Some people familiar with Payuless -- I mean -- Cumulus say it could actually go down to 4%. Gotcha!
What the Dickey's are telling their able employees is to invest in Vaseline.
It's almost like the boys are at odds with the old man (Lew, Senior) and they are panicking into doing the one thing they actually do well -- sell less advertising and fire more people.
But, to continue with our huckster imagery, "you don't just get one screwing, Cumulus gives you two for the price of one if you buy into it now".
3. Account executives will forego the usual pat on the back and will be sent to the street to find some new local direct billing. If they want a job, they have no choice -- but after all, that's what the Dickey's do that good companies don't. That's why I call them Dickey Do and the Don'ts. In some small markets successful account execs hold lists that are 60-40 local/agency. Under the Dickey Do Sales Commission Act of 2009 this is a significant loss in business that cannot be replaced even by The Fairy Godmother. This move to put the squeeze on local account execs even at a time when the company's ad revenues are in free fall is tantamount to a mean-spirited, misguided and self-destructive ploy.
4. Look for sales recruitment that will either make you cry or laugh -- Cumulus is looking for hunters (are you laughing or crying yet?). Hunters? Are they kidding? Uniform companies like Cintas which are supplying a lot of untrained labor to Cumulus is their only hope because if anyone in broadcasting went for their bait, they've been taken away to the insane asylum in a straight jacket. The only way Dickey Do can get away with this is to inflict it on the people who are already in bondage and need a job in a bad economy. Only outsiders who don't know better would want to work for a company that will do Instant Training and Motivation by the Three Blind Mice -- and all this under the watchful eye of spy cameras and corporate over-involvement in local selling.
5. Putting all the Cumulus corporate bullshit aside, we're talking about people's lives here -- let's face it and say it. Fine people who were making $80,000 or more a year will be lucky to make $50,000 -- and all this inflicted by a group of brothers that probably don't know what a car payment is or what it is like to be unemployed. Time to show solidarity with our fellow radio people. This is not radio. It's legalized torture.
So now we have Dickey Do turning capable salespeople against each other.
As one Cumulus employee (apparently not scared of the wrath of the Dickey's) says, "The announcement was made this morning (Thursday). Now we have reps attacking each other like rabid dogs vying for one of only two positions available... Kind of reminds me of the scene in the "Dark Knight" when the Joker breaks a pool stick, throws it in front of three goons, and says last one standing lives".
Cumulus is the US Airways of radio.
Always in debt.
Pissing off employees and customers and not caring about what anybody thinks.
I'm told the initial announcement will take place in almost all markets today (Friday).
The Dickey's dicking with sales now -- when they're down over 20% year to year and 21% for the quarter almost makes you think they've gone off their rockers.
You don't risk losing qualified salespeople by cutting commissions when you need to increase sales.
And Lew was puffed up in the trade press recently saying the radio industry needs to grow a backbone in dealing with advertisers.
Huh?
What the hell does Lew Dickey know about selling or -- a backbone for that matter?
Everyone makes these guys look like model managers -- saying, in this case, that salespeople have to stop the bid/acceptance process from this buyer's market. I'm not willing to give them a free pass.
Lew even said radio people would have to learn to say no and walk from business.
I'd like to see where he got that sales wisdom -- from years of selling?
I'd like to see when Cumulus walks from any business.
Lew's gone off the track.
He's a man I knew for years as a nice guy, but you'd never know it from the brutal way he's handling his best assets -- his employees.
People inside Cumulus tell me Jon Pinch and/or Other Brother John are behind this smashmouth, in-your-face management style.
Forced sales meetings every week via spy cameras.
Local sales procedures dictated from Atlanta.
Recruiting ads going on in a company that is laying off -- to fuel employee paranoia.
I have an idea.
Lew, get a job where you're not working for pop.
John, get a job where Big Brother is not watching your back.
Find out what it is like to work for a company that puts threats on corporate email to gag and threaten employees (other than family members and chosen minions) with immediate dismissal if they mention Cumulus to anyone else (presumably me).
Hell, even Clear Channel doesn't do that.
Here's it is for all to see. I'm trying to help you keep your mismanagement secrets in the family -- if you know what I mean.
PLEASE NOTE: This message contains confidential information and is intended only for the individual(s) named. Employees of CMI and CMP (and their subsidiaries) are prohibited from forwarding this email or otherwise disclosing the contents of this email, or any portion thereof, to any third party, including any non-employee of the respective companies. Failure of an employee to comply with this policy will result in disciplinary action up to and including immediate termination of employment.
Whoa! Does that mean Lew Dickey gets fired because he sent me an email a few months ago? Just askin'.
Three consolidated radio companies have ruined it for everyone else.
Clear Channel -- first to put the screws to its employees and make a living out of it (two paydays for the Mays family). Hell, at least they made a profit for themselves before they suckered Lee & Bain into taking it off their hands.
Citadel -- The radio company that can't shoot straight. History will remember them as the radio group that reduced one of radio's best assets (that they overpaid for) -- ABC -- to rubble by its not ready for prime-time management.
And, Cumulus -- Lew Dickey, Senior's Excellent Adventure -- planning the world around his children -- the ones he hopefully didn't treat the way they treat others.
One of my readers and a former employee told me recently that USA Today once wrote an article about "successful family businesses". The most memorable quote from John Dickey was "Anyone who works for someone else is stupid".
He said it way back then, but maybe it gives you a hint as to what Cumulus thinks of their employees.
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