The Repercussions of Banker Radio

Yesterday, Randall Mays stepped down, fell down or was brought down from the in-over-his-head position as CFO of Clear Channel.

That’s two Mayes down – one to go.

Lowry is retired.

Randall is now getting the old corporate heave-ho.

And Mark Mays takes on Randall’s job temporarily (that’s scary) while he finds a new Randall (scarier still).

One of my readers put it best:

“Let me see if I have this straight…

The Whiz-Bang corporate Wizard whose financial acumen helped 'steer' a broadcasting leviathan, which once owned 1200 American radio stations, directly into the path of a Force Five hurricane that Ray Charles could've seen heading their way is being given some time off but will stay to provide the corporation with his proven business acumen and he'll continue to receive his obscene salary and benefits "through 2013".


That's the kind of thinking that's caused Clear Channel and its shareholders to become the 21st Century Titanic desperately looking for a major iceberg.

De-regulation. What a concept!”

The departure of Mays is getting headlines today, but it is a rather meaningless event. Just another step toward the complete takeover of large, financially-troubled radio conglomerates by investment banks.

Lee Capital Partners & Bain Media don’t need Randall Mays.

They are Randall Mays.

Clear Channel is the biggest radio group in the world and if you want to see the future of the industry, just look closely at what is going to happen within the next few months:

1. Lee & Bain, Clear Channel’s owners, will stop playing radio and start playing a very long game of Monopoly. Except they may turn a Park Place company into Broadway in Camden, New Jersey, one of the most blighted cities in the U.S. What a comparison. Camden’s city government was taken over by the state of New Jersey and Clear Channel’s fine stations were taken over by the state of Lee & Bain. Camden is ruled with authoritarian power and Clear Channel is … well, you get it.

2. It will be all about “real estate” for radio companies controlled by investment banks and by “real estate” I mean radio stations and what they could be worth when the economy gets better.

3. The three largest radio companies will be under the control of investment banks in 2010. They are, of course, Clear Channel and soon, Citadel followed eventually by Cumulus.

4. Banker Radio will spare no one from further cuts. The dream of reinvesting in on-air talent and program content isn’t going to happen – at least not at groups that sold their equity to pay debt. Keeping costs low while maintaining the licenses will be the overriding goal.

5. The FCC is going to allow J.P. Morgan to bail out Citadel and all their stations will be run the way investment banks hold all their assets – for resale, hopefully at higher prices.

6. If Clear Channel is playing Monopoly then Cumulus is playing Chutes & Ladders with their personnel being bandied about like board game pieces. Yet there is no real way out for the Dickey family as their debt is also burdensome and much of it will have to be converted to equity for their investors.

7. Dickey, Citadel’s Farid “Fagreed” Suleman and the dynamic duo of Mark Mays and John Hogan at Clear Channel will have one job going forward – save their asses. I believe they all will because it is better to have Mark Mays in charge of writing corporate email memos to the staff than having him run the company. These four have been effectively neutered and they, too, are simply pawns of the banks they sold their souls to.

8. Reduced multiples of four or five times streaming cash flow are critically lower than the inflated 12x plus standard the industry used to get when a station was sold. That’s because no station – even the best – was ever worth 12x cash flow. The banks propped it up and gladly paid those prices in an industry it had invaded. If you’re waiting for these stations to become available, I don’t think the investment banks are ready to sell the good stuff at these lower multiples. That’s my long winded way of saying – I think the bankers are going to be in the radio business a long time. Sorry.

While the industry should be working on a digital footprint and preserving personality radio, it will continue to embrace the concept of turning radio into iPods.

Back when Schafer Automation was introduced, station ownership once again salivated at the thought of a machine running tapes and playing music with few people involved. Never did such stations win audiences that could translate into real revenue.

I inherited a station like that in Philadelphia and couldn’t wait to talk management into ripping out the automation and going live. We did. The station went on to be a real money machine with live personalities.

Just before the automation was hauled away, one of the minimum wage announcers called me in a panic at home and said he couldn’t stop the automation from doing time checks. It was time checks gone wild. The geniuses who invented automation were damn proud that they could have an announcer do "even" and "odd" time checks over the automated music tapes. But this automation clicked and sputtered and the time checks just kept going and going and going.

What I told this poor automation babysitter is – pull the plug.

He did and Humble Harve stopped with the constant time checks (that were all incorrect by then anyway).

Here we are today – voice tracking is the new automation – with the same results.

The wrong weather. Wrong pronunciations. Lower ratings. Less local programming. But cheap to operate.

The only difference is then was the industry came to its senses because the owners – cheap bastards as some of them were – were actually lovable in hindsight because they wanted to get ratings and make money and discovered automated radio wouldn't get them there.

Today, the big three consolidators fired their personalities, went to voice tracking and syndication, then cleaned out their sales staffs during a recession.

They would love to make money – and radio has very few expenses (even fewer without people) so it’s hard not to make money.

Unless your debt is so high even all that “Free Money” has to go down the debt drain.

So – follow me here – with the debt gone and investment banks able to make a profit running low cost repeater facilities all over the country – they can now afford to do what they do best – wait the market out.

Or, as I like to call it, Banker Radio.

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