Consolidators Again Betray Radio

Clear Channel has just issued an edict to at least five of their stations that they must carry a 30 minute infomercial every morning at 5 am for the next 13 weeks.

The hell with consulting the stations' program directors or for that matter -- local management. Clear Channel is the mother of all consolidators and it manages from headquarters -- not where the individual radio licenses were issued.

The infomercial will be for "gold" -- I guess the value of buying gold in a bad economy. Hell, Mark Mays ought to go on and provide a testimonial of how valuable gold is compared to the stock of public radio companies.

But then again Mays and Clear Channel no longer worry about the public market.

One of the saddest things about the latest John Slogan Hogan edict is that WGST's excellent news and talk station in Atlanta -- the market he used to manage -- will also have to prostitute itself for the same old 30 minute infomercial for three months. Another news/talker KNST, Tucson has also been warned among others.

That's at the start of morning drive -- 5 am.

Guess no one is worried that the same sorry show over and over about the same commercial subject matter won't build an audience for the rest of morning drive.

No problem.

Clear Channel just notifies The Wall Street Journal that it will no longer need the first half hour of The Journal's radio show that has been running in that time slot. And The Journal just sucks it up because, after all, you don't want to get Clear Channel pissed off.

Hogan has a long history of turning on "them that got him there" as local lore will remind you. Some rumors say the failed sales rep Hogan bested a rival GM to get control over WPCH and WGST and then there are some who think Hogan screwed his mentor Randy Michaels at the time the Mays' were having penis envy issues with Randy. Remarkably, guess who wound up replacing Michaels?

You guessed it -- John Slogan Hogan.

Look, don't confuse what I am saying about infomercials. They've always been around as has other forms of paid programming. Venerable stations like WOR in New York took money from Herbert W. Armstrong and then his son Garner Ted Armstrong for decades to carry their religious show weekday evenings -- one of many examples.

It's not that there isn't a place for paid programming, but that's not what's up here.

You're seeing another glimpse of radio's sorry future.

Clear Channel will sell its soul for paid programming. Religious broadcasters do it all the time. And that great radio pioneer Farid "Fagreed" Suleman has pimped out his ABC news and talk stations mercilessly for a little extra infomercial coin.

Radio has a long history of making bad decisions when it comes to their loyal audience. And in recent days when formats were dropped from terrestrial radio, they were made available to angry listeners on the Siberia they called the Internet. (In other words, they thought the Internet was the punishment for a format they dropped).

When years ago, WJFK in Washington had lulled its listeners into a sense of security around Howard Stern and compatible male programming, these same listeners get jolted by Bill O'Reilly's syndicated talk show. Bet no program director in his or her right mind made that pimped decision.

Wonder why NPR has so much audience?

How about because you can't find news on most commercial radio stations and when you do, well -- it isn't that good. Local NPR stations like KCRW have managed to hold on to young radio listeners even while they pioneer new things in the Internet space. Music diversity, local news.

Did you see how broadcasters are complaining because The People Meter is picking up Christian station dominance among teens?

Damn it -- radio CEOs want Arbitron to get to the bottom of this "mistake". But what if it is not a mistake (and I don't believe it is)? Then too much of the same old same old teen music programming may have set the stage for emerging markets. Time will tell once the latest numbers are investigated.

The new iPod announces song information for listeners -- that's more than most radio stations do. So if radio wants to go head to head with the iPod maybe their listeners are saying -- talk about the music and the artists or else -- an iPod is better. No commercials. My music. No Ryan Seacrest.

But the real killer is what is happening in Fargo.

The flood brought out the best in local radio with stations like KFGO fighting the rising tides to stay on the air and serve the public interest.

Serving the public interest is exactly what local radio stations are supposed to be doing 24 hours a day, seven days a week, 375 days a year.

That's who we are -- that's what we do best.

Not just at times of crisis but everyday -- even when it has to do with a small town Easter parade.

Localism and immediacy.

But localism is being replaced by Repeater Radio on phantom radio stations with the number one consolidator, Clear Channel, blazing the way.

Forget localism -- listen to the same pitch about "gold" every day for 13 weeks at the start of morning drive because the client is paying for the time.

The only reason you don't see radio infomercials more in prime time is because it's not cost effective -- for the infomercial company.

But ad rates are coming down and the day could come when these mighty CEOs will find another way to sell their audiences down the river.

So, this is not about whether radio stations can take some paid programming -- preferably programming that isn't the same every day -- to fill some off-hour slots.

But consolidators are signaling all who will listen that they are no longer in the local radio business. You remember the piece I wrote last week about the Clear Channel stations getting ready to go all national programming all the time?

There will be a switcher who can channel these various national programs down the line to individual stations. Clear Channel, as I pointed out in the piece, has already ordered each studio to have a warm body in it in case of a Fargo or Katrina or in case public outrage forces Congress to take a look at why you need to grant licenses to companies that have no interest in fulfilling their obligations.

Will Congress know the difference between a warm body and news coverage?

Not unless you tell them.

The technology is in place to go all-national, all-the-time.

The John Slogan Hogan's of the world are mandating a warm body in each studio but is that radio or is that covering your ass?

Whatever local commercials can be sold will be recorded nationally. That's certainly not new.

Sales will be done by one local team and after that, I couldn't even guarantee you that some markets will have local sales forces. I see national local sales coming -- and it will be awful.

No need for program directors when all the creative decisions are left to suits.

No need for diversity -- what a lawsuit that could be -- when all white men are showing up across the country on radio stations because it's cheaper.

No need for news -- unless you think that warm body is going to anchor coverage of the next flood, blizzard, toxic waste spill or hurricane. I think not.

If you want to know why listeners have been and continue to abandon radio in large numbers (unless you're RAB CEO Jeff Haley who has his own numbers), maybe it's because radio has abandoned them.

To be fair, it didn't all happen during consolidation, but consolidation has done nothing to help the radio business.

In the late 80's radio was imitating itself --- chopping genres into sub-genres. Progressive rock became album oriented rock which became classic rock and many variations thereof. And on and on. We failed to take chances. Failed to innovate.

In the 90's duopoly was all the rage and programming began to be seen as not just one station but a platform that presumably could be marketed as such. Three young male stations, a 25-54 women's station. As if a 25 year old would listen to the same thing a 54 year old would listen to.

After deregulation in 1996, the flood gates opened and owning as many stations as possible (no matter what interest rate it took to finance their acquisition) became the next thing.

Economies of scale came next. One GM for three or four or more stations. Same with PDs. Then market managers and revamping management charts endlessly.

All of this had nothing to do with our listeners.

The Internet, iPods, mobile phones and texting, social networking and the sociological changes brought by a new generation -- it came upon broadcasters without much notice.

Then the recession.

Now, even Thomas Lee Partners CEO (Clear Channel's co-owner) said the other day that he thinks radio is a great business and will come back after the recession ends.

No thanks to them.

It may turn out to be ironic that John Hogan just hired Nice-Pak CFO Mitchell Goldstein, a maker of wet wipes products, to join Clear Channel Radio as CFO. I'm not going to comment other than to say -- finally, a good hire. A guy who knows all about cleaning up a mess.

Unless radio is all about localism and immediacy -- it is over.

Unless it looks to the digital future where 80 million Millennials have migrated, there can be no future when older radio listeners go.

Oddly enough, all radio's problems are not about the economy or amassing debt service they cannot manage or for that matter, iPods or online media. That, too.

Listeners wouldn't abandon radio unless radio abandoned them.

We have betrayed our listeners.

And until local managers, programmers, sales people and talent are put into place to make the decisions on the ground -- there is no chance for reconciliation.

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

This Is Radio Nowhere

Springsteen has it right.

This is Radio Nowhere.

"Is there anybody alive out there?"

The current movement by consolidators to fire their local live talent and move to a nationally syndicated Repeater Radio platform of phantom stations appears to be the final blow to a troubled industry.

We get that consolidators have really had it their way since the enabling legislation was passed in 1996 to deregulate radio ownership.

It's been a virtual monopoly ever since.

Consolidators had carte blanche for almost 13 years.

They merged with concert companies, bought up outdoor businesses, snapped up all the supporting industries that radio stations relied on. At first they hired consulting talent only to release them later. They have had no oversight. Pulled off a fraud on shareholders. Ran their debt way past their ability to pay. Ruined lives. Ruined assets and ruined an industry.

We know all that.

But when The Boss asks "is there anybody alive out there?" it takes on another meaning beyond the vanilla, Repeater Radio that America's radio consolidators are cramming into the ears of innocent listeners.

Is there any independent group alive out there?

Look, I say this with all due respect. I know operating as an independent has its challenges in this day. And they must live in the wake of the turbulence that is caused by consolidation mismanagement.

Yet, where are they?

In radio as in life we must accept the things we cannot change and the courage to change the things we can.

I hear all the time from independent operators who understand what we're espousing in this space. Yet they continue to roll up losses from operating radio stations that are becoming more like the consolidators who "done them in" than the stations they could be.

Some are buying the same research that almost everyone already knows.

There's not a hair's difference between some independent operators and most consolidators. There are a few, but not enough to turn the tide.

We have a People Meter in some markets -- with more to come -- and yet few substantive changes have taken place to transform radio beyond the hype and foolishness that has finally taken its toll on the industry.

I can tell you -- as an industry -- we know very little about those 80 million Millennials who make up the next generation that is fast coming of age. And why we cannot change how they will get their entertainment and information from the Internet, mobile devices and social networks, we are failing when it comes to getting the courage to enter their space with our talent.

There is no future for us without them.

Is there anybody alive in a market where Clear Channel, Citadel, Cumulus and the others are retreating from local programming?

If so, are you hiring?

Are you running 100% local and live programming?

Cutting spot loads?

Running one-commercial stop sets?

Expanding playlists?

Embracing music discovery?

Doing local news?

Getting more involved in civic pursuits -- the kind that the next generation champions?

Are you taking advantage of the competitive gift radio consolidators are giving you to leave them in the dust?

Your competitors -- these very consolidators -- are so used to dictating the terms of engagement in radio that when they retreat, you seem to retreat with them without a whimper, without a protest, without a counter-offensive.

While there are many broadcasters who still have some semblance of listener focus left to them, consolidators are handing you their audiences on a silver platter.

So, you can keep losing money or take advantage of their many strategic mistakes.

Continue to play nice with the big boys or you could stick it to them on behalf of your radio listeners.

Running live, local radio is not an expense.

It's an investment.

And you can't reinvent on-air when you're unwilling to re-invent radio sales.

Selling spots is a fickle game. But selling relationships that deliver effective and well-defined goals -- well, that is superior marketing.

Is there anybody alive in the Internet and mobile space?

The notion that streaming radio online in and of itself is an Internet strategy is just false. Internet streaming represents less than 3% of all terrestrial streaming audiences and most times, because of restrictions, this 3% doesn't even count in their Arbitron ratings.

Three-percent!

That's not good enough.

The Internet will not be an alternative transmitter for terrestrial broadcasters. It is the transmitter of the future.

Radio operators show little interest in investing in separate (and different) Internet streams using the expertise and talent they can access. They just want to rubber stamp their terrestrial streams online and call it an Internet strategy.

Try to find a major radio group with any money invested in their digital future and no -- HD radio doesn't count.

While they may think they have bigger fish to fry right now, every school year many more Millennials come of age and leave radio further back in the Stone Age.

Independent operators are the ones who can develop the new frontier because they are not likely to do what a consolidator would do -- assuming they even budget for this -- create local streams.

Is there anybody alive in social networking?

Stations keep embarrassing themselves by asking listeners to text in to win drivel. Confirming how uncool they are by directing radio listeners to their websites when the young generation never needs to be told to find what they like online. They're not dumb. They do it all the time.

Radio people are the most qualified talent to turn around a dying on-air business, build the most creative Internet streams and connect people through desirable and addictive social networks unlike any that have ever been done.

After all, Facebook is just a start -- not an end. Even young folks will tell you that.

Tomorrow, another consolidator will probably do something stupid that deserves a comment and some attention. They never disappoint when it comes to that.

But today, I'm calling on the independent radio operators who are the only -- and I mean only -- hope for saving what is left of a great service to lead the industry to the Promised Land of digital media -- a space consumers have embraced.

Time to step up.

Time to stop with the excuses.

Take advantage of the strategic gifts clueless consolidators are seemingly giving you every day and run with them.

There's risk -- financial and otherwise -- no doubt.

But there is also great reward.

Consolidators aren't going to do it.

Outsiders don't want to do it.

Only independent operators can save the radio industry from Radio Nowhere.

Is there anybody alive out there?

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

EVERYONE'S NOT ATWITTER

Journalists and technology writers are enamored with communications technology and tend to portray successful technologies as representing large scale trends. We are regularly presented with news stories and promotional materials about the rise of new technologies and about how their uses create social trend that are significantly altering society.

The release of the new iPhone was recently featured on network evening news, Blackberry has been heavily discussed because its use by Pres. Obama, and Twitter has been featured in numerous television and newspaper stories. The impression given by coverage is that anyone who doesn’t have an iPhone or Blackberry and anyone who doesn’t Twitter is out of touch with the mainstream and being left out of modern society.

These new means of communications offer interesting possibilities, but their consumption needs to be seen realistically. Blackberry, for example, has 14 million subscribers-- about 5 percent of all mobile phone users in the US. iPhones represents about 1 percent of mobile phone users. The number of Twitter users is currently around 1 million, representing only about 3 tenths of 1 percent of the US population.

Certainly those kinds of numbers can create businesses successes for their firms, but we have to be realistic in interpreting their overall impact on technology markets, social interaction, and diffusion of technologies. Not everyone wants to or will be equally wired, communicating, or sharing mundane details of their lives with their friends and the world. Some persons will find communications enabling technologies more rewarding in business and personal terms than other persons.

It is easy to forget the size of market when discussing the impact of diffusion of technologies. Without doing so, however, one gets a warped sense of their role in contemporary life.

Competing Against "Simon Says" Radio

My friend, the great radio programmer, George Johns once wrote to remind me that now is an excellent time to be competing against operators who are cutting back and taking their focus off their listeners.

Indeed, George is right.

Unfortunately, it seems a day doesn't go by that a radio CEO makes another stupid move that hurts their shareholders, staff and listeners.

So imagine -- while Clear Channel is moving toward nationally-produced local programming (or as I call it Repeater Radio on phantom stations), their non-consolidated competitors could be kicking their asses.

Could be.

Because many of them have fallen into a malaise that promotes "Simon Says" radio. You know the kind.

"Simon" (Clear Channel) says use voice tracking to save money. Everyone does it to stay in the game.

Cut sales commissions (after all, we have a recession) -- competitors mindlessly follow.

Clear Channel says less is more -- then, damn it -- less must be more. Even Clear Channel doesn't believe this tripe any more.

But in the kids game of "Simon Says" which requires players to act on a command, say -- touch your toes -- children can remain in the game only as long as they use the command "Simon Says".

In radio, success is being out -- away from this terrible chain of mismanagement and desperate accounting that is making a mockery of a once proud and profitable business.

As Wikipedia points out, "It is Simon's task to try to get everyone out as quickly as possible, and it is every one else's job to stay "in" for as long as possible. The last of Simon's followers to stay in wins (although the game is not always played all the way through)".

Clear Channel, et al. would like to get everyone out of their way so that they can unilaterally run the radio industry as their banker/owners choose. And as we're finding out, it is no reward to be the last one in. It may be an advantage in child's play but not in the real world.

Ironically, in radio -- doing the opposite of "Simon Says" is more beneficial.

No doubt by Monday, one of the CEOs running a radio group will come up with another assault on good radio. But for now -- and in this space -- let's take a look at how Clear Channel, Citadel, Cumulus and the rest of the clueless consolidators have actually made it easier for their competitors to clean their clocks.

Now, you or your owners may not like everything I'm going to suggest, but I promise you your listeners and advertisers will eat it up.

Let's start with sales --

So, if it were my station(s) to run:

1. Increase the sales commission to 30%. (See, I knew you wouldn't like it -- here comes all the recession excuses). From now on, 30% on all new business. No gimmicks. No fine print. And, 30% of old business that exceeds its previous contract levels. No stealing accounts. No give backs if clients pay late. No needless paperwork. Treat them like adults -- turn them loose -- and we get to keep 70% of their hard work. No lectures. No pep talks. 30% - now.

2. Hire as many Clear Channel, Citadel, Cumulus, Entercom and other consolidators' salespeople -- you know, the ones they fired (excuse me for not being politically correct -- I mean "laid off"). Hell, go ahead -- hire the ones they are still employing. They're probably coming up with a scheme to fire them, too. Same deal. 30%.

3. Cut the spot load to 10 in morning drive and eight max in other dayparts. This guarantees that your salespeople will get rich with you. Instead of following "Simon" and doing ad blowouts on the cheap, offer fair rates based on ratings, unusual programming and/or other demand factors.

4. Schedule the spots to run alone -- and then beat your consolidator competitor to death at the ad agencies and client offices. On our station, your spots run alone -- better chance to get them heard and your message won't get lost. Make it policy. Practice. Shout it from the roof tops. (Listeners don't hate more frequent commercial breaks as much as you think. We live in an attention deficit world and this approach cooperates with it).

5. Sell results not spots. On our station, we guarantee (you heard me) -- guarantee results based on agreed upon goals or we'll make it right. Go ahead, Fagreed -- top that one. We'll test the spot on the Internet (included in the price), get the best talent -- maybe we won't even put a spot on the radio. Could be Internet -- cell phone, podcast, off-air event. But, we'll guarantee results.

Now, let's move on to programming --

1. Local in every daypart every day. Stick the foolish consolidators with the label "Repeater Radio" and "Phantom stations" -- I'd plaster it around town but not on-air. After all, Lee & Bain are quite proud of their new idea, but they won't be when we turn it into what it is which is a fraud perpetrated on the city of license and the station's advertisers.

2. No promos. Hey, you can't fire me -- I don't even work for you. I'm just sayin'. No promos. Young people can teach us a lot about how radio has gone wrong. In olden days, radio could promo things and listeners actually believed they would come to pass. Today, people in general don't believe what they hear. On our station, we do it first and then shut up about it. They're not dummies. They know when something just got better. You don't have to say, "The New 102" -- My God, even you don't believe that!

3. No one gets on the air unless they are having fun. Another advantage for non-consolidated operators. You can't have fun when you fear for your job. But at our station, we're going to make a commitment to keep our people employed. And they are going to promise to make listening to our station fun again. Young people do not think radio is fun and in fact, I don't think older listeners do either.

4. Bring local news back. News doesn't have to be newscasts. It could be updates so that if you don't listen to our station you feel disconnected -- like you'll miss something. Now in radio, you know that listeners rarely worry about missing anything these days.

5. We're going to make Clear Channel miserable in our market because we're going to do giant promotions and contests. But learn from the emerging next generation. Make it relevant to their lives, the station's format and our society. Make it civic. I know I lost some of you, but the ones I want working with me on this understand what I just said. Clean up the park. Help Habitat for Humanity. Help make your schools green. Environmental projects. And fun ideas -- pay a listener's mortgage payments for a year. Or pay for something that helps during tough times. Don't promo it to death. Do it. They get it.

6. Every one of our live morning shows will help our listeners fix something or get help in their lives. We're going to have a team of off-air part-time (at home) workers help listeners who got screwed by a bank, stuck with a car, forced to overpay for something. We're going to put them on the air -- help make it right -- and we're not going to act like asses running stupid promos all day saying how great we are.

7. All weekends will be no repeat days. Young people, the changemakers who have led the rest of us into the digital future, hate radio music repetition. So I'm going to promise no repeats (even of currents) which will force us to have to go out and find music worthy of airplay. How exciting. And none of those non-believable promos that say "N0 repetition all weekend long on WLIE".

8. Sunday night at 9 or 10 (can't decide yet) -- a local show with a local host knowledgeable in our station's music genre doing all new and all local artists. I can't wait to meet with my salespeople to show them how they can sell the hell out of this one.

9. Create a "Truth Squad" of station people to help prevent us from sounding like a radio station. No pukers. No sweepers. No promises. Just good programming. And this "Truth Squad" will help keep it real.

10. I'm locking my morning talent into a three-year contract. I don't believe in messing around with the moneymakers.

11. I'm creating 30 podcasts in the first six months -- not by on-air talent, but others. We own the podcasts. Will spread the word about them virally. We'll monetize it with ancillary forms of sponsorships. Wait until you see the free money this generates. First, a two-day brainstorming session with my staff and you know who.

12. We'll stop saying go to our website. How uncool is that? They'll go when there is a reason to go.

13. Give our listeners a reason to go to our website. Hint: something they can't get elsewhere. Not a stream of our terrestrial station which usually accounts for under 3% of all listening anyway.

14. Launch the biggest unique online social network in our local market that is so desirable that it could be a business all by itself.

15. Don't take calls from management -- gotcha! Kidding.

There's more ideas where these came from, but for those of you who are not able to have me work with your people directly to further develop these ideas and theirs, I hope this has been helpful. At least something to think about.

We could always just sit around and wait for these dummies killing radio stations to come up with another accretive idea Monday morning.

Or, we can do as George Johns suggests and compete against their own mistakes.

"Simon Says" get lost.

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

Beware of ISPs -- Internet Snooping Providers

The RIAA is still trying to stop music piracy.

Even after it swore that the days of filing lawsuits against consumers was over, they have managed to enlist the support of two more Internet Service Providers (ISP) in waging their continued war on copyright terror.

AT&T and Comcast have now joined Cox to become pen pals with customers the RIAA might accuse of uploading music to unauthorized P2P networks.

Don't worry. Nothing bad is going to happen.

AT&T and Comcast would then send the targeted users a notice informing them their account could be deactivated unless they stop.

See, nothing to worry about. Just a warning.

If the RIAA had to finally give up its hugely unsuccessful lawsuit campaign against music downloaders not long ago because it didn't work, how bad could this little slap on the wrist be?

First of all, nothing can stop music piracy.

The next generation was born and raised on it. They never had a problem with DRM (Digital Rights Management) because they circumnavigated it by stealing the songs they wanted online. Then, they shared them. And only bought what they wanted -- which they quickly discovered was not much.

Gen Y undid the much celebrated record album -- you know, the thing that more often than not had more stiffs on it than hits -- and moved to buying or stealing songs one at a time. Ironically, perhaps, the only big albums that could sell would turn out to be compilation hit albums.

Napster may have been taken from them, but it was just their first volley.

Bit torrent sites made easy exchange of music -- well, easier.

Radio stopped having as big an influence on the next generation's musical tastes -- as their friends and social networks became more important in spreading the word.

The iPod came along just in time -- and in the end, DRM was removed.

See? You can't stop music piracy.

But now it appears that the RIAA in conjunction with your friendly neighborhood ISP is up to something.

I have a hard time believing these conspirators are in it to just generate paperwork -- although you might get me to believe they are in it to generate legal fees. Nonetheless, why would ISPs want to be a conveyor of RIAA accusations and say upfront that their customers will just be warned not harmed?

I'm more suspicious when a Comcast spokesman said "This is the same process we've had in place for years-- nothing has changed. While we have always supported copyright holders in their efforts to reduce piracy under the Digital Millennium Copyright Act (DMCA), and continue to do so, we have no plans to test a so-called 'three-strikes-and-you're-out' policy."

The three strikes policy is the brainchild of those idle minds at the RIAA.

Cox had previously gone further by threatening temporary service disruptions (something they know pretty well) for Internet users who have been found to share music files.

Wonder what temporary means?

Wonder what ISPs are doing in the detective business?

I always stand in amazement when looking at the record business because they've been wrong for so long:

1. They have managed to let Napster ruin their business when they could have bought the file sharing upstart.

2. The labels made the wrong decision on DRM.

3. Wrong on suing its own customers and threatening universities -- the bastion of students with evil on their minds.

4. Wrong on the Internet.

5. Wrong on the CD.

6. Wrong on 360 deals -- they're kidding, who even wants a record label handling every aspect of an artist or band?

7. Wrong on digital downloading -- they were conned by Apple into letting them do it because Napster scared them and then they tried to dictate to Steve Jobs variable pricing. I'll show you variable pricing -- how about zero.

8. Wrong on the notion that consumers will pay a monthly fee to fill up their MP3 players with millions of songs.

9. Wrong that companies like Spiral Frog can monetize free music through advertising thus generating a replacement revenue stream for declining CD sales.

To paraphrase a political advertising attack ad slogan: "and wrong for America".

If you think that the RIAA and ISPs (two groups that deserve each other) are standing up for the forces fighting copyright infringement, well -- you would be wrong again.

Today's reality is that music has been devalued by the labels themselves, the decline of radio, new and emerging technologies, changing sociology (i.e., social networking and bit torrent sites), as well as the fact that record labels forgot why they are in business.

To make great music -- lots of it. Help artists monetize their efforts as well as the label's own financial needs. They seem not to know how to do this in the 21st century.

The one thing everyone knows -- except maybe the RIAA and some major ISPs -- is that music piracy is here to stay. Like it or not. Illegal or unethical.

That's why the news about ISPs that came out of a panel session at the Leadership Music Digital Summit in Nashville this week is so fitting.

The ISPs are willing to cross the fine line on behalf of the record industry with no obvious gain for either.

On the contrary, it's not the RIAA -- they've already been neutered. It's ISPs seemingly warming up to the task of compromising the free speech and access rights of customers.

They're not fighting for truth, justice and the American way.

These ISPs are up to no good.

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

ANALYSIS OF THE NEWSPAPER REVITALIZATION ACT

The Newspaper Revitalization Act introduced by Sen. Benjamin Cardin, D-Md., would permit newspapers to operate as not-for-profit entities under the tax code and is being heralded by some observers as a means of saving newspapers, much as was the Newspaper Preservation Act of 1970. Good purposes aside, it is useful to study the act to determine whether it will actually accomplish the goals that are stated as its rationale.

The bill is a small bill, about 435 words, that would amend the IRS Code of 1986 to permit newspapers to be given 501(c)(3) status, thus obtaining tax exempt status and the ability to accept charitable contributions. Currently tax laws do not permit newspapers to be operated tax exempt, but they do have mechanisms that permit foundations to own them or support them financially.

Paragraph (b)(1) of the bill would allow general circulation newspapers “publishing on a regular basis” to establish themselves as tax exempt organizations. The language does not limit periodicity so daily, bi-weekly, weekly, monthly, and other combinations would be possible. It would thus permit a range of neighborhood and community non-dailies, as well as dailies to use the mechanism.

Paragraph (b)(2) stipulates that the newspaper contain “local, national, and international news stories.” This section is somewhat problematic because non-dailies, particularly neighborhood and community papers, do not typically carry national and international news and nationally oriented dailies do not typically carry local news. The bill contains no provisions that require local creation of content, thus allowing publishers to fill a paper only with syndicated material or other content produced elsewhere.

Paragraph (c) permits advertising, but limits it “to the extent that the space allotted to all such advertisements….does not exceed the space allotted to fulfilling the educational purpose of such qualified newspaper corporation.” This provision is apparently intended to ensure advertising does not dominate the content and effectively limits advertising to 50 percent of the content. This provision, however, is problematic because daily newspapers and most non-dailies currently contain two-thirds to three-quarters advertising. Indeed the regulations governing Post Office (USPS) distribution limit advertising to 75 percent.

The bill does not require that newspapers have paid subscriptions or even requests to receive the paper, as do USPS regulations, so it would apply free circulation papers.

By giving not-for-profit status to newspapers, the bill would also make the paper eligible for USPS not-for-profit rates, which would permit lower postal delivery rates for such papers than those afforded for-profit papers. This might raise issues regarding the fairness of competition if commercial publishers exist in the market

It should also be noted that the bill makes no provision to limit payments to publishers and editors. This creates the potential for some abuse. A small commercial publisher could use the mechanism to become “non profit” to avoid company taxes by not taking compensation from profits but taking a higher salary instead—effectively letting tax payers subsidize his/her income.

One drawback of using 501(c)(3) status is that entities are not permitted to engage in direct political activities, such as endorsing candidates for local, state, or national office or possibly even taking positions on governmental proposals. This would somewhat limit the scope of content and could lead to IRS investigations if complaints were made to the IRS that a paper was taking sides, was too conservative or liberal, or evidenced some other kind of agenda that was deemed political activity.

It appears that the overall effect of the bill would be limited. It will be appealing to very few dailies and most neighborhood and community papers will have difficulties complying with its content and advertising requirements. Even with tax exempt status, the costs of creation, publishing, distribution of a newspaper probably can not be covered by many publishers with a 50 percent ad limit, unless they are especially effective at raising charitable contributions over time.

The bill appears to be well intentioned, however, it can not solve the problem it purports to address in its current form and creates potential for some abuse.

Clear Channel's New Phantom Radio Stations

It has been my belief that the end game for Clear Channel (and eventually the other lesser consolidated radio groups) is to run phantom radio stations.

Lee Capital Partners and Bain Media overpaid for the once mighty radio and outdoor company fully expecting that they could initiate economies of scale and eventually turn the properties around for a nice profit.

Without a Plan B, Lee & Bain are initiating one of the largest and perhaps deadliest cutback plans that promises to reshape the radio industry.

Last week, the other shoe dropped.

While you were being fed happy talk about the gigantic size of the national radio audience and while RAB CEO Jeff Haley was bragging about radio's survival, the brain trust (sorry about that description -- brain and trust in the same sentence with The Evil Empire), Clear Channel was busy implementing its latest "I shrunk the radio industry" strategy.

Here's the inside story.

In company-wide emails by each one of the five corporate executive vice presidents -- some distributed as early as the end of February -- market managers were told in blunt, no-nonsense terms to make arrangements to have a person on duty 24/7, 365 days a year in each studio location.

Now, if you're thinking "this is great, Clear Channel is hiring again and acknowledging that they need to run local stations", don't get too excited.

The directions do not quibble over what qualifications they are seeking for this warm body job description other than to park their butts unceremoniously at the various studios in spite of whether they are capable of running a legal unattended operation.

The market managers were not told why all of a sudden a live body had to be at every studio site. Each EVP communicated the mandate in their own language but the message came through loud and clear as market managers scurried about to comply.

Here's an example of one email said to be widely circulated throughout Clear Channel:

Effective immediately, you are to staff each of your locations 24/7/365. I am reviewing the plans you’ve sent me and will advise how you are to proceed in a cost efficient manner. Meanwhile, take steps to cover immediately. Night/overnight personnel must be able to communicate emergency situations to station management clearly and concisely. Ideally they will do other important work such as production, affidavits, and similar work.

This commitment is being made by us to guarantee provision of services to our communities that they rightfully should have, in case of a civil or weather emergency. To review: take appropriate action and get coverage in place immediately. I will be reviewing your most cost efficient long term solution and will get back to you fast.

So, I know what you're thinking -- Clear Channel just wants to get ready in case another blizzard or toxic spill hits one of their markets.

That, too.

I'm thinking Clear Channel is setting the table for expansion of its Repeater Radio concept that will allow corporate to make the music while their sticks become repeater stations under the guise of serving that local community.

You heard what the man said, didn't you?

"you are to proceed in a cost efficient manner" and " immediately".

That means no new hiring and JFDI -- John Slogan Hogan's motto "Just F#%king Do It". Didn't Clear Channel fire a slew of part-timers last month?

Are they going to make their veteran weekday talent come in on a Saturday or Sunday to do a weekend shift live? Well, a live airshift on the weekend would certainly be a novelty!

Of course, this is only speculation until it happens. And I believe it is going to happen.

Lee & Bain and their knee-jerk Clear Channel radio CEO John Hogan have to whip that operation into a moneymaker. They can't defy the troubled economy or the advertising bust, but they can cut costs.

They have already eliminated thousands of jobs since the start of consolidation in 1996 and many recently.

But, as incredible as it may seem, those cutbacks are still not enough.

You've seen me coin the phrase "Repeater Radio" and you see Clear Channel's move to ram Ryan Seacrest and mini-Ryans down local manager's throats so they can save on salaries and become a virtual radio network.

But there is one small problem.

Congress.

Two, maybe.

The FCC.

But I think Congress is the reason this group of suits has come up with the live-studio afterthought.

After all, Clear Channel could be liable for blatantly not serving their communities. How will they be able to defend against accusations that may someday arise that their LA radio content didn't fulfill their license requirements in Anytown USA?

Oops.

And don't think Clear Channel isn't serious about this one-format-for-all-markets concept.

Just recently, Clear Channel program directors found a new virtual ‘Classic Hits’ station called “CCFL Format Labs 6” in their NexGen system. The songs on the log are now in the library so they are ready for voice tracking a shift or two on a future "Phantom Station".

There’s a log, with voice-track holders, songs, sweepers, empty spot break holders, and a place to insert “local sweeper close.”

And a check around the country has unearthed three of these "Phantom Stations" in the Philadelphia system and two in New York.

New frickin' York -- the nation's (and world's) number one radio city.

You should know that these are not actual automation servers that can go on the air on any one of Clear Channel's local stations -- yet.

But the server is based in the Cincinnati market. And it appears, I am told, that it is mapped so someone can voice track a shift to be used somewhere else.

These latest developments raise a lot of questions.

• Number one -- Clear Channel appears to have been less than forthright about their intentions if I am correct.

• The mass firings are consistent with the march toward Repeater Radio.

• Someone at corporate or legal apparently has had second thoughts about Clear Channel's exposure in all of this. After all, it is unthinkable that the largest radio group could single-handedly take 800 licenses and rip up the local responsibility part for financial gain.

• Radio is sounding as bad as Wall Street but it hasn't stopped the new masters of radio from pissing all over radio listeners -- you know, the 234 million that Jeff Haley brags about. Hope they like voice tracking. Hope they like generic programming. Personally, young people have it right -- iPods, the Internet, NPR and file sharing.

• Will the GM or PD even remember to turn his or her cell phone ringer on for the night while this scam is perpetrated on the public?

• Will they have a way to get on the air on all their stations to get the word out? Will they have a way to find out what the word is?

• How will the minimum wage attendant be made aware of a public emergency in the middle of the night or at any time? Will they have a phone code to dial out? Or even a phone list of five or six management people she or he can call? (Come on, CC corporate, we have questions here!)

• Is the program director or air talent of today capable of sounding cogent for hours on end, talking about an emergency? Or is it all for show -- to justify the screwing that consolidators are about ready to give to Jeff Haley's 234 million best friends.

Look.

A Democratic senator just yesterday introduced a bill to allow newspaper companies to restructure as nonprofits with a variety of tax breaks -- of course, they are intending to restrict political coverage by forbidding candidate endorsements. But what do you expect from politicians?

Nonetheless, Congress seems to have an appetite for even bailing out our newspapers that have been dying for decades.

Clear Channel and John "I'm No Peter Drucker" Hogan have just handed you a gold plated, fool-proof, guaranteed way to speak up for radio listeners and loyalists who want their local radio back.

In fact, they've bent over and showed you their -- well, Achilles heel.

Unstaffed Repeater Radio.

That's why they are trying to fix it in private -- at least, until now.

So, if everyone who has ever been screwed by a radio consolidator got ten of their closest and even powerful friends to contact their local U.S. representative or Senator -- my math shows that friends of real radio would have more than enough support to derail the latest bad plan to make a national treasure a national embarrassment.

It's up to you.

There's the phone.

Here's your laptop.

Tweet.

Act.

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

The Prince of Target

Here we go again.

The record industry still has no answers about the digital future and is just as clueless as ever.

And you can't only blame the big four labels.

Look at some of the non-starter ideas that major artists are coming up with. One can only conclude that no one wants to give up selling plastic CDs even though consumers got over them years ago.

Take Prince.

His new three-CD "album" called LOtUSFLOW3R (WHAT! You expected better spelling on a Prince album?) is the latest example of how lost artists are without their record labels.

And we already know how lost the record labels are.

Look at Prince's blueprint for a rock star at age 50:

1. Prince is selling his album exclusively in Target. (Guess he never learned from Guns N' Roses in Best Buy, and Springsteen and the Eagles in Wal-Mart).

2. Target heavily promotes the Prince album -- whatever heavily promotes means today.

3. Target agrees not to return unsold copies.

4. Target forgets to mention that it uses the Prince CD (a lot cheaper than most 3-CD sets) as a loss leader.

5. Prince goes on Jay Leno and performs for three consecutive nights-- refusing to play anything that an audience may want to also hear from his "catalog". (Apparently Prince is unmoved by U2's five-day consecutive flop promoting their new album on Letterman -- 484,000 copies in the first week).

6. Prince rejects being interviewed by Leno so Leno is betting his talk show gets better ratings without the iconic Prince actually speaking. Leno is right.

7. Prince kicks off a new website Wednesday to rip off -- I mean, market the album to his fans who are really not interested in buying music -- just looking for a chance to get better seats to his popular concerts. His new site, Lotusflow3r.com will charge an annual fee of $77 for access. Sounds like the salvation of the record industry to me. Lots of luck.

8. Prince fails to acknowledge that he has been working feverishly to drive down the value of music by other ill-conceived promotion strategies. In 2004 he bundled "Musicology" with tickets to his 100 shows artificially boosting his album sales to over 2 million. Last year Prince's "Planet Earth" was stuffed into British newspapers (you know, newspapers -- the thing you wrap fish in) and pimped out 3 million copies thus pissing off Sony who canceled the albums release in the U.K. Is Prince selling CDs or driving down the value of recorded music?

9. And when all else failed, Prince showed up at the Super Bowl -- America's biggest live music venue that doesn't help artists sell CDs after all is said and done.

What's wrong with this strategy?

Haven't we already seen this before?

These iconic music acts die hard, don't they? You have to admire the record labels. They don't even try.

At least Prince is trying to save his career even if he isn't helping his fellow musicians much.

And speaking of the record labels, you may or may not have heard that the much-ballyhooed Spiral Frog was eaten alive by bad planning and finally just gave up and died. Guess the next generation was right when they first heard of Spiral Frog. Offer them free music in return for advertising and guess what -- they'll continue to choose free music obtained online.

They knew it was a stiff -- all the music industry had to do was ask.

The radio industry is killing itself with one unworkable strategy after the other in their all-out attempt to avoid cooperating with the inevitable -- which in the case of radio is -- the digital future.

The record industry -- including artists-turned-record exec like Prince -- hasn't had a major new idea since the CD was foisted upon a public that had no alternative but to go by new players and repurchase their favorite albums.

That's precisely the difference today.

Young consumers don't have to buy anything.

The labels and artists can't control security in the virtual record store called online filesharing. Back at Tower Records or Sam Goody in the day, you could get thrown against the wall or frisked if you tried to steal music. Today, inevitably, the music is out there and it is free whether that is right or wrong.

Basing a business on selling plastic or even cheap digital downloads will get you exactly what it has gotten you so far -- a fizzle.

I don't even like the 99 cent iTunes concept.

Don't get me wrong. I like it for Apple. It sucks for everyone else.

To think that the supposed record buying public will pay for music is insane considering that so few (by comparison) buy music at all.

Shoot me if you want.

But the message is -- get another business plan that doesn't involve selling the music or continue to go down with the declining record industry.

In the meantime, catch Prince on Jay Leno Wednesday and enjoy the record business like it was 1999.

(By the way, Clear Channel is getting ready to implement a secret plan for running the radio station of the future that has industry-wide implications. Even the stout of heart may have trouble with this. More coming soon).

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

Stupid Consolidation Tricks

In spite of the fact that radio consolidators think voice tracked programming is just as good as local programming, you still can't fool a listener.

Oh, well -- maybe some listeners don't know or don't care about the local jock. That's unfortunate. It's in radio's interest that they should.

But the future of Repeater Radio is going to be built around the grandiose ideas of underachievers like Clear Channel's John Slogan Hogan and his proposition that local radio is so -- Nineties.

We already know what happened five years ago in Minot, North Dakota when the toxic spill from a railroad car derailment occurred and no one was at any local radio stations because all the local stations were owned by the consolidator Clear Channel.

Thousands of gallons of toxic chemicals were released into the air but the hits just kept on coming. One person died and hundreds were treated for immediate health problems. Clear Channel never aired one warning for local residents.

When consolidators talk about their role in local markets, they always argue that radio is the one source to turn to in an emergency or crisis. Except, when Clear Channel is doing voice tracking.

With Repeater Radio coming to a town and city near you, it is critical to understand the importance of local radio to available radio listeners.

Of course, anyone younger has the advantage of not relying on radio for anything.

Not music.

Not news.

Not staying connected.

Got a crisis? Go to your cell phone and find out what you need to know.

In this way, radio is really working overtime to make itself even more irrelevant to the public. And it doesn't have to just be a train wreck (I'm referring to the toxic spill not Clear Channel now).

Just this winter in Philadelphia, Clear Channel's WISX (My 106.1) was doing a pre-blizzard out-of-market weather forecast that said "cloudy tonight and snow showers tomorrow".

As the comedian Don Knotts once said in a TV skit , "the wind is coming from the window" so all a local operation would have to do is look outside or go outside. In reality, the Philadelphia area was under a National Weather Service Winter Storm Watch. Overnight, that Watch was upgraded to a Winter Storm Warning. The National Weather Service was calling for 8 - 12 inches of snow while Repeater Radio was calling for snow showers.

Nothing?

Not unless weather forecasts are of no use to the audience. But if they are, this foreign forecast was dead wrong. Hell, if Clear Channel wanted to voice track a weather forecast, how about the 70 and sunny we had in Scottsdale. That would at least be fantasy instead an embarrassment.

You know, that great radio pioneer John Slogan Hogan coined the term JFDI (Just F#@king Do It) when he spoke to a managers meeting in San Antonio. Yes, a very classy guy. I guess Hogan's warning applies to cutting costs -- not weather forecasts and train wrecks.

Voice tracking will be the death of local radio.

One of my readers reported that last year, an Entercom station fired a mid-day announcer and replaced him with -- you'd better sit down -- a voice mail box!

They played promos asking listeners to phone in and vote for the songs they wanted to hear. Can you imagine if this had worked?

Radio consolidators don't get that the game is over for them. And those of us who know radio can do better are in denial that this is the end. It's too sad and unnecessary to accept. Nevertheless these sellouts are killing a great industry.

As any of us know who had to do an ascertainment for license renewal, it is a bitch. A paperwork nightmare that took our attention away from programming.

However, lately, I've been thinking how nice it would be to require consolidators to have to ascertain community needs and assess why they deserve to win license renewal.

In the era of consolidation, license renewal is a foregone conclusion.

It shouldn't be.

Making a broadcaster fight to keep their radio license that they hold in the public trust would solve a lot of mismanagement problems and cockamamie ideas to save money.

Stay with me here.

Can you imagine if we had a real FCC and Clear Channel had to justify serving the community needs in Minot during the toxic train spill? How do you make a case for license renewal when you're never home in Minot? How is that serving the community?

Three to five-year renewals.

Let others try and compete (sorry to use a work like compete as it relates to radio, forgive me).

Let the best owner get the license. I know a lot of broadcasters -- present and former -- who could transform some of these embarrassing stations into great radio.

And it doesn't have to be all about news events or weather. How do you serve the public interest when the only interest that matters is Lee & Bain -- because they own the company?

Yes, you could solve stupid consolidation tricks by requiring each owner to prove how they served the public interest, convenience and necessity and what they plan to do if they are granted a renewal.

You'll see a lot more local employees.

You'll see voice tracking held to a minimum.

You'll see local focus instead of national Repeater Radio.

Had the FCC done its job, consolidation might have worked. Just as in the overall economic downturn, radio needed oversight as the financing and banking industry did (and hell, radio relied on the financing and banking industry to grow).

Greed helped drive American businesses down even as oversight was eliminated. Now we hear talk of watchdogs to watch watchdogs when all we need is for someone to justify a company's reason for being -- and monitor the way they do business.

Enforce the current laws.

When I taught at USC my students were amazed that I cared about radio. They don't.

Technology has given some 80 million young consumers many new options for news, entertainment and social connection. And frankly, they are in better shape than most radio listeners.

But consolidators have done more to drive the next generation away because they apparently never read their fiduciary responsibilities as licensees of the public trust.

Serve the local market.

Young people have moved beyond radio.

Available and loyal radio listeners are now being shortchanged by cheap programming tactics.

There's no one left to hurt but the remaining radio employees and the consolidators themselves who continue not to get it.

That's why their stock is worth pennies.

Why ten years of cost cutting has never worked.

And why they will keep taking their excessive compensation and benefits as long as they can get away with it.

If you want to save radio, go to your Congressional representative and ask -- no, beg -- for enforcement of local radio licenses.

This is not re-regulation. It is what should have been done all along when federal regulators decided to get into bed with consolidators instead.


For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

Citadel Braces for Bankruptcy

The stock market has already spoken.

Citadel stock is worth four cents -- and less than a dollar for long enough to be booted off the New York Stock Exchange.

Because the market has already priced in for the worst case scenario, the situation for equity holders is no doubt a lost cause.

The market is saying Citadel stock is worthless.

The NYSE gave up on them.

Now Citadel CEO Farid "Fagreed" Suleman has departed from his earlier optimism as his mismanaged company filed an 8-K form with the SEC quietly on Monday in effect admitting the risk of violating its debt covenants.

It sounds like Fagreed knows Citadel's goose is cooked as witnessed by the fact that he in effect used Citadel's woes as an excuse for filing the corporate 10-K late.

You can feel the financial distress at Citadel by viewing the Monday filing. Citadel is working with lenders to obtain waivers to avert default. But Fagreed admits that default is very much a possibility.

It's chilling and real.

See for yourself in Citadel's own words (from the 8-K filing):

“As of December 31, 2008, the Company is in compliance with its debt covenants under its senior credit facility. However, the expected continuing decline in radio revenues in the first half of 2009 and the resulting projected decline in operating profits creates uncertainty regarding the Company’s ability to continue to comply with its debt covenants under its senior credit facility through 2009. As a result, the Company is currently working with its lenders to obtain a waiver of or amendment to its senior credit facility; however, there can be no assurance that the Company will be able to do so. In the event that the Company does not obtain a waiver or amendment, then the Company will likely be in default of its senior credit facility.”

The company is clearly at risk of technical default -- sees trouble ahead -- and seeks to do something, anything, to avert a calamity.

I suppose it is still possible to restructure the debt, but it's not easy.

Such refinancing of debt will likely cost them more to dodge the bullet -- an ominous sign for shareholders.

Just a few short months ago, during his November conference call, Fagreed was singing a different, more optimistic tune that you can pick up in this statement from that call:

“The company has no liquidity issues….We will be generating over $120 million of free cash flow this year and probably around the same next year. So, no liquidity issues, no payment issues….We’re totally focused on paying down debt, and we will continue to do that. I think in terms of our bank covenants clearly we’re in compliance in the third quarter. We expect to be in compliance in the fourth quarter. And we will continue to watch this very carefully, but I think the combination of all of the cost cuts, all of the improvements that we’re expecting next year and we really are in a mode where we are using all of the free cash flow to pay down. That should help us through next year. And again as I said we’re still generating over $100 million of free cash flow.”

Boy, have times changed in a few short months. Either that or Fagreed had no other legal choice but to come clean in this SEC report.

Well, you didn't have to wait until last Monday to know Citadel was in big trouble. All you had to do was talk to their employees -- the ones they didn't "lay off".

Fagreed has earned his title as CEO -- Chief Execution Officer -- by firing his assets.

And his "radio wife" Judy Ellis may be tough to some, but her results in re-engineering the stations have been unremarkable.

You can only run a station into the ground so far with the economy as an excuse -- and a four cent stock -- well, that's on Fagreed and Judy.

As one of my readers pointed out: "You can work with a downturn, and survive. You can also work in a decent environment with inexperienced managers. What you can't do is work with inexperienced managers in a bad environment."

Fagreed Suleman did the impossible -- he vaporized ABC Radio, the costly acquisition that only made sense for Disney to sell -- not Citadel to buy.

What really must stick in his craw is that Fagreed is a bean counter -- first, fast and foremost. And look at the mess he has presided over. Oh well, guess you need to be more than a bean counter to run a successful, growing company.

Yesterday I wrote about innovation as the answer for radio's decline. Unfortunately, when your stock is worth nothing, and you're warning the SEC you may not make it, you can understand how low on the priority list innovation becomes.

And to be fair to Suleman, the other consolidators are just as inept. They are all fools and they have this in common:

• All miscalculated that radio could fall this far this fast.

• None had a Plan B -- as we often discussed in this space. In other words, everything had to go according to the investment bank's plans or the groups would fall. You see how far that got them.

• All became enamored of economies of scale even well before the economy tanked. They got a thrill, it seemed, by being able to squeeze out a few pennies of profit for their Wall Street captors, even as they were putting their assets at risk.

• Every last consolidator cut loose top management, sales, programming and support personnel as their crises got out of control. In essence, they could find no other way to cut operating costs but to weaken their own stations by such firings. This was my clue that they would not succeed. I understand why they thought they had to do it, but the fact they actually weakened their own companies was an act of desperation.

• No consolidator has succeeded -- every one is in some jeopardy. Only a handful of operators can survive because their debt is under control. The consolidators hit their credit cards too often and for large amounts digging themselves into a hole they cannot get out of.

Sad to say but Citadel would have done better with Bernie Madoff.

If they were first in with Madoff before he got caught, they at least could have made money.

With Fagreed handling the finances, Citadel never had a chance.

Citadel may be first to file for bankruptcy -- or they could win a temporary stay of execution. With a four penny stock, what difference does it make. In the end, it appears several of radio's top consolidators will eventually default.

One more thing.

When we talk about bankruptcy we generally mean that the companies are in default of their loan covenants.

But what do you think it is called when a company pays out more than it makes?

You guessed it -- bankruptcy -- which is where radio is at this moment (technical default or not). Hell, it doesn't take a genius in finance to know that the stock market votes every day and when it says Citadel is a penny stock, I guess it knows something.

What's going to happen in the months ahead is the comeuppance of arrogant radio CEOs, but you won't find anyone who loves radio celebrating.

The thing that made radio such an attractive business to Wall Street investors in the first place 12 years ago was all the free cash flow stations threw off. But after buying radio stations that were overpriced (and for which you'll see lawsuits in the months ahead), these little stations that could could not generate enough cash flow to make up for the single most fatal mistake that ever occurred in the age of consolidation.

Buying stations for prices that made the debt payments unserviceable in all but boom times.

The boom times are long over for radio.

Now it's bust.

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

Innovation Is Radio's Answer

Daily, we hear about the usual solutions to the radio industry's problems.

Cutting expenses.

Staying positive (or as I call it, drinking the Kool-Aid).

Waiting for the economic downturn to end.

Unfortunately, you never hear the word innovate as it pertains to radio.

Of course, I am speaking of the people who control the business. The CEOs, their lemmings and the industry lobby and trade groups that they prop up.

You may not know that when Cumulus shut down its interactive department, John Dickey moved like lightning to squash innovation. He wasn't the only group executive to do so. That's how decisive these radio execs can be when it comes to cutting expenses. After all, who needs interactive when you can save a few dollars?

And why?

Cumulus has a problem. It's called Susquehanna, a $1.2 billion company it bought with the corporate credit card and now can't make the payments.

Remember Susquehanna?

An outstanding company run by an outstanding individual name David Kennedy. Dan Halyburton, another Susquehanna exec was also a quality guy. If you spent $1.2 billion for Susquehanna's 33 radio stations, you'd think someone at Cumulus would have thought to keep two of the company's brightest executives on board to keep running it.

So, Susquehanna became Cumulus and the end results weren't pretty.

Same for Citadel.

You can lead a Suleman to water, but you can't stop him from drowning in debt when his bean counter eyes got so big all he could see were three letters -- A, B and C.

And, miraculously, with the help of Teddy Forstmann's ability to run up debt, Suleman thought he would become Disney overnight when in the end he turned out to be a mere shadow of the Disney empire -- Mickey Mouse.

The ABC stations were flushed down the toilet with Fagreed Suleman's other best work -- the group he inherited from Larry Wilson and turned into a four cent stock.

Take Clear Channel.

Clear Channel was once a $90 stock -- hard to believe it today because at the start of consolidation it was a major company. When the Mays family saw that there was no way they could run a 1,100 station radio group, they stuck Lee Capital Partners and Bain Media with the debt. They escaped with another pay day and left John Slogan Hogan to be the man of the hour for what was once a mighty and awesome group of stations.

Again, the big and powerful somehow had their way with these Cinderella assets and turned them into -- well, a slipper. The ball was over. The prince was gone. And the expenses were stuck on their Black card.

In each case, major assets with talented people were run into the ground by a small handful of pretenders who have not even earned the right to run one radio station.

Stay with me here.

Suleman, Markie Mark and Randall Mays and the Dickey boys have about as much experience running an actual radio property as, say, NAB CEO David Rehr has in running a broadcast lobby group.

But I digress.

Every day readers have good ideas that could be useful to a radio industry hurt by the economy, crippled by the lack of new listeners and technologically challenged.

Read the press and you still see the establishment hawking HD radio and streaming terrestrial content -- that's not the future.

It will take innovation to secure a place for radio in the digital future.

By innovation I mean new, fresh ideas.

Different ways of doing things. Different ways of deploying talent. Taking chances based on the experience of those who know how to program content -- not the other way around -- CEOs who know nothing about radio.

I'm seeing an unsettling period of time coming up over the next few months where some groups will be bankrupt and more jobs will be lost, more chances to innovate -- lost.

Perhaps you might be interested in what happened and what I learned working with college students in a brainstorming situation. Remember now, they did not have the experience of, say, a radio executive, programmer or talent. But they researched that which they did not know.

Here are a few things about innovation that may turn you on -- and turn the consolidation CEOs off. We worked with broadcast groups, satellite operators and several record labels.

• The first idea is the worst idea. That means that most people never get a chance to come up with a second or third idea because someone intimidates them, tells them it's too expensive, cannot be done or whatever. Instead we learned to encourage each other to come up with outrageous, useless ideas if that's what it took to eventually arrive at a brilliant one.

• Everyone is treated equally. It takes a hell of a manager to do this. Never grade an idea ("Hey, that's a great suggestion to do no repetition weekends"). Someone else may say, "Repeat the same song every hour" and once the group rejects that idea, all innovation grinds to a halt.

• The facilitator does not go first in proposing ideas. When was the last time you attended a meeting where an agenda was circulated in advance asking you to propose solutions to a problem? The facilitator may participate but only after others have had a chance to suggest new concepts.

• Anyone suggesting an idea should be able to do so within a minute -- and then it goes for discussion. I actually run a stopwatch. The thought should be, "How can I help Susie build that idea to be even better?" Once the participators get into this, they get real sharp.

• Look for people to pair off and further develop ideas that the group likes. Again, no grading the final product until you have a final product. The energy in the room will drive some fantastic new ideas.

• Don't hold a brainstorming meeting unless you're truly open to trying new ideas. I once attended a meeting in academia where the leader was begging for new ideas. But once such ideas were proposed by the invited guests, nothing became of them. Nothing was enacted other than the ideas the leader brought into the room. In that case, save time and money and don't meet.

• Set time limits on developing the ideas (away from the brainstorming room). Have them put into writing. Consider a wiki-type arrangement where all participants can have access to the body of the group's work.

• Vote on the ideas that got the most traction then empower the participants to enact the plan. Set a timetable. A review process.

Of course, you can imagine the experience in one radio station alone that would inspire such creativity. But in radio these days, ideas come from the top down.

"We need to cut x number of dollars" and at Clear Channel they even have a cockamamie formula for who gets fired and who stays.

I can't get the image out of my mind of Fagreed Suleman on the phone with Mickey Luckoff, ABC's KGO longtime moneymaker. I mean, what can Fagreed say? What can he add? He never ran a station. And now GMs like Luckoff get to play monopoly with a man who happens to run the game.

It's silly.

Which is why you'll hear me call out the stupidity of today's radio CEOs when they think they have come up with all the answers they need at their stations.

The good ideas come from the ground up -- you know, the people being "laid off".

But the survivors need inspiration. A mission. Support.

With all due respect to the rich and powerful radio CEOs, you've done a lousy job.

By your own "Arbitrons" (share price), you've turned in a 0.5 share consistently in the stock market. You'd fire a PD who did that in programming. I don't imagine you'll fire yourself as long as you can get away with looting the treasury, but...

How about letting some of your people gather together and show you some innovative ideas -- better than the pap you get at an RAB or NAB convention -- and good enough to maybe one day save your bacon.

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

THE OVERBLOWN JOURNALIST EMPLOYMENT CRISIS

Journalists keep raising the crescendo of the chorus that journalists are losing their jobs and journalism is suffering. They point to the fact that about 10 percent of journalists have disappeared from newspapers since the millennium when U.S. newsroom employment reached a peak of 56,373.

It is true that cutbacks are pandemic these days, and that these employment reductions hit close to home for journalists, but some context is usually useful when considering the numbers and their impact. Let’s take a look at the U.S. numbers.

The American Society of Newspaper Editors has conducted a newsroom employment census for 3 decades and it presents a telling story. According to the latest ASNE newsroom employment figures, there are 22 percent more journalists in newspapers than there were in 1977 (43,000 in 1977; 52,600 in 2007). Even granting employment losses of 2,000-4,000 since the last census, employment is still about 18 to 20 percent higher than it was in the 1970s. That doesn't seem like an industry employment CRISIS, except for those who unfortunately lost their jobs.

If mere numbers of journalists are considered an indicator of quality, the growth of journalist employment from 1970s to 2000 should have made journalism extraordinary in the 1980s and 1990s. No one should have been surprised by the savings and loan debacle, the Soviet Bloc collapsing, the international debt crisis in developing nations , U.S. aid to governments in central America and the Iran-contra affair, child labor in the developing world, the explosive growth of Chinese economy, or rising domestic and international terrorism. But we were surprised and journalists didn't forewarn us. Obviously, the attention of the rising number of journalists was turned elsewhere.

If you look at newsrooms you can see the problem. Most journalists in newspapers do everything BUT covering significant news. They spend their time doing celebrity, food, automobile, and entertainment stories. Look around any newsroom, or just the lists of assignments or beats, and you soon come to realize that 20 percent or fewer of the journalists in newsrooms actually produce the kind of news that most people are concerned about losing.

It is not the mere number of journalists that matters; it’s the choices that editors and publishers make about how to use the journalists available to them. Journalists are a crucial resource and how they are utilized has a significant influence on quality. Few newspapers have cut sections or types of coverage, choosing instead to cut throughout the newsroom and not to reassign journalists to the kinds of journalism that matters most to society.

It should also be noted that decisions where to cut employment in newsrooms have not been equally spread among employment categories either. According to ASNE statistics the number of newsroom supervisors has declined only seven tenths of one percent since 2000; copy editors 1 percent, photographers and artists 10 percent, and reporters 11 percent. There may be reasonable rationales for that, but the numbers seem unusually lopsided to me. If there are fewer reporters and photographers to be supervised and edited, one would expect that fewer editors and supervisors would be required and warranted.

Maybe it’s about time that journalists stop whining about their troubles and initiate some internal discussions about how their own newsrooms are structured and operated.

Cumulus Is Radio's AIG

Okay... okay.

AIG took government aid and then paid $165 million to a handful of executives to retain them -- eleven left anyway. Great use of taxpayer money as the government props up the financial sector.

But Cumulus (and other consolidators) took their shareholder's money, delivered sub-par results, ran the stock into the ground ($1.02 as it closed yesterday) and -- continues to pay its top executives for failing.

If that's not a great example of radio's AIG, then I have another one for you.

Citadel.

Or Clear Channel, Regent, Radio One, Entercom -- the list is seemingly endless.

Morningstar, the stock rating service, issued a bankruptcy warning for Cumulus for their mismanagement. Seems like their appetite exceeded what they could eat when Cumulus bought the outstanding Susquehanna chain for $1.2 billion in 2005.

I get it.

Cumulus was a small time operator and wanted into the big time. And 2005 was light years ago when debt was real easy to accumulate.

Seems like shareholders keep propping this company up and there is much danger to beware of. According to Morningstar analyst Tom Corbett, a radio man who crossed over to the financial side, Cumulus isn't in immediate danger but profits will have to stay within a certain range of its debt or it won't be able to spend money to compete and rebuild.

So, let's get to the heart of the problem -- The Dickeys.

Look, it's not personal. Lew Dickey has always been nice to me. It's about Lew and brother John's stewardship over Cumulus.

For example:

Both of the Dickeys together own just 18 percent of Cumulus' common stock, but having dominant power when it comes to shareholder votes.

And as a recent article in the Toledo Blade pointed out:

Lewis Dickey, Jr., owns all 1.1 million shares of a special Class C stock, which for shareholder voting purposes counts as 10 votes for each share. Together with his brother John, who has 6.9 percent of the voting stock, and their father, Lewis Dickey, Sr., who has 13.2 percent of the voting stock, the Dickey family controls 51.1 percent of the company's voting stock.

Lots of luck getting a management change.

But radio is just a microcosm of what is wrong with American business.

The Cumulus debt is $700 million. Revenues are declining. Cumulus' fourth quarter revenues were down 11% and Cumulus was lucky to get away with a 5% decline for the entire year.

Lew Dickey came up with the idea to fire 260 of its 3,700 employees but never looked to his own salary as being exorbitant.

Think AIG -- bonuses to retain employees that totaled $165 million of taxpayer money while they are begging for money.

Radio's version of AIG -- Cumulus "imagineered" an $8.5 million contract signing bonus last fall, in the form of deferred shares, that was retroactive to the firms money-losing 2007.

Then recently the shameless and tricky Lew Dickey was "awarded" a $500,000 cash bonus and 320,000 shares of common stock for his 2008 performance as CEO. We're still waiting to see what his other compensation was for the money losing year of 2008.

Bet Lew Dickey didn't lose money.

So let's look to Morningstar's Tom Corbett to crunch the numbers just in case anyone is feeling sorry for the poor consolidators: "His base salary went up by 9 percent in 2007. With stock awards, his compensation went up by 102 percent".

Obviously, Tricky Dickey's compensation managed to go up -- if you will agree that a 102% increase is up -- while his company's performance under his control went down. He received a base salary of $901,250 in 2007, and an $11,500 automobile allowance and $1,476 for a life insurance policy.

His brother, COO John Dickey earned $570,000 and a deferred stock bonus worth $590,400 in 2007. Last year, John Dickey received a $165,000 cash bonus and 70,000 shares of common stock. And yes, we're still waiting for his other compensation to be disclosed.

The only dumber people are the Cumulus investors who are making all of this possible.

For some reason or another radio people like to think they live in their own world.

The Internet isn't killing them. Who needs those Gen Y kids anyway. It's the recession that's killing radio -- not the several years of decline that occurred when the economy was still healthy.

Radio is simply a reflection of what is wrong with American business and finance.

• Lived high off the hog for a long time.

• No oversight.

• Powerless boards of directors.

• Running their debt up to afford the riches of the day -- in Cumulus' case, the billions for Susquehanna's 33 stations.

• Cutting back and blaming it on the recession.

• Failure to fund the very innovation that can lead them out of the hard times.

So, while RAB CEO Jeff Haley tells the sales executives at their annual meeting, "We're still here", it's no thanks to the shenanigans of what has come to be accepted as the American way of doing business.

AIG is just CumeYouLess -- less money for your investment dollar with shareholders getting screwed instead of taxpayers.

Shitty Bank is just Clearance Channel -- less is more like what the company will be worth next year.

Morgan Stanley is Citrucel (aka Citadel) -- it helps you become more regular and makes your investment "go".

Look, we've been having a little fun at the expense of the aristocracy of radio.

There is no denying that the radio industry is mimicking the greater economy in all the wrong ways. I've been kicking around some ways the radio industry could actually come back and would be happy to share them with you in the coming days.

It's not by putting up more Internet streams of terrestrial programming and paying through the nose for music royalty fees.

Not by firing local staff and moving towards nationally-run Repeater Radio.

Not by cutting the sales force when they badly need more revenue.

Not by refinancing an already burdensome debt by paying even higher interest rates on the borrowed money.

No.

Radio can come back by innovating -- the one word you never ever hear mentioned and without which there can be no future.

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.