Radio -- Podcasting That Makes Money

Many of you have asked me to tell you when the podcasting client I have been writing about goes "live" with their new age approach to morning “radio”.

Now I can share some details about how we are building a franchise for them to make money.

I’m proud to tell you about two great talents and exceptionally nice people – Dave Jagger and Geri Jarvis who started their Grand Rapids morning podcast about two weeks ago.

We’re all excited because I am sure I drove them nuts trying to get a non-radio approach to what they used to do to well – radio. But Dave and Geri were eager to learn.

They are shaking up the city in which they have been top rated for 18 years -- most at Regent.

That is, until their most recent employer (of about one year), Citadel, decided to end their careers at WHTS-FM and deprive loyal listeners of their favorite personalities – and these folks are local personalities.

The Punch and Judy show at Citadel ended it – to save money for Fagreed.

Too bad.

For Citadel.

Dave and Geri are up and running with the most unique franchise that is growing virally as I write this.

Local traditional media – TV and newspapers – have featured them in a “Dave & Geri is back" splash that helped us regather some of their lost listeners.

You know me, I wanted Dave & Geri to go back to their former Citadel station and get them to sell some ten-second spots to announce their little old podcast.

But Citadel apparently isn’t in that much financial trouble.

The refused.

I guess they are afraid of a podcast that has to start with nothing except the goodwill of their former morning show.

Nothing but talent and new media savvy.

So, Dave & Geri went on-the-air Monday, June 15th a day that we're hoping Citadel will note for future reference.

This is a work in progress, but since so many of you have inquired about what we were doing, let me give you some highlights. I am often asked for good news and Fagreed, Tricky Dickey and John Slogan Hogan don’t give me much of a chance to indulge in "happy talk", but today you’re in for a treat because there is life after a consolidator axes you.

Just some brief context.

Dave, Geri and I met at a Conclave session I was doing for Tom Kay last June on new media, the next generation and podcasting. They persisted until they got me to agree to weekly telephone work sessions (that to their credit they financed even being out of work).

You think they're not committed to success?

At the Conclave session, I told the attendees that radio people are the most qualified folks in the world to do new media. That anyone can do podcasting, but a real pro must learn new skills to build a podcasting franchise.

Here’s what we built:

1. A 35-minute daily podcast available on iTunes or on their website.

2. No music – none. Dave & Geri didn’t make it big in their market because of the music. Sometimes, they did in spite of it.

3. We analyzed what the three best elements of their act were and we captured it.

4. We didn’t do the first test podcast for at least four to five months while we learned about generational media.

5. Much of our time was spent making the transition to new media and understanding the differences between radio and podcasting. Of course, consolidators don’t know. That’s why their personalities often do leftover radio on their podcasts.

6. We worked on formatics – after all, I am a program director. But the format doesn’t resemble radio. We never call it a podcast during their 35 minutes of visiting with fans.

7. We made Dave & Geri a Grand Rapids podcast – just because it is available on the world wide web doesn’t mean that Dave & Geri want to be number one in Bangladesh. Okay, maybe they want to be, but the money comes from Grand Rapids.

8. Speaking of money, they got the Fifth Third Bank, one of their former sponsors, to sponsor their podcasts. And in our world, a sponsorship contract doesn’t mean commercials. A second client is deciding on which financial option they want – all in the first two weeks. Several other (additional) prospects have contacted us to ask if they could be part of this.

9. We developed a pretty strong 30-minute ad presentation that is unlike anything a radio salesman would do (at least what they are being forced to do by their bosses right now). It effectively uses the time to present possibilities. Oh, by the way, Dave & Geri are getting awfully good at doing solutions based sales presentations, Judy!

10. Once the ads are added, within the next few weeks, you may not hear them on the podcast because a lot of our business is off-air ancillary income (sounds like I am reading my own blog – ancillary).

11. Dave & Geri are finding their former listeners through traditional media, Facebook, Twitter and viral strategies we’ve developed. Each day, more and more people find their favorite morning team again.

12. Dave & Geri emphasize that their “show” (which is really not a show) can be consumed any time of the day -- on demand. It encourages fans to decide for themselves when they like to listen or for that matter are able to listen. Good students of generational media, aren't they?

13. The acquisition of new listeners will continue as the podcast develops so former listeners and new ones may enjoy this unique and talented morning team.

There’s more – much more.

We’ve only just begun to develop the content and advertising possibilities. These two have always worked at delivering satisfaction to their clients and they are committed to doing it in their podcast.

Additionally, they can never be fired by Fagreed or Judy.

They may actually be the beneficiaries of their past good will provided to listeners and advertisers in this new media iteration.

There are off-shoot businesses that revolve around the 35-minute podcast and we have plans to fine tune the current approach in the future as we read generational media trends.

I’ve always said consolidators will rue the day that they let all their talent go.

The only reason it hasn’t bitten them on the behind so far is that new media is under development – not sitting there ready to absorb all the talent discarded by terrestrial radio mismanagers.

But I wanted to share this note of optimism with you this morning because as new media and podcasting (the new “radio”) develops, happy days will be here again for those who want to go back to school and learn about new ways to use their great talents.

What consolidators don’t understand is that radio as we know it is changing.

An entire new generation carries their jukebox in their pocket or on their phone right there -- next to their text messaging.

It may be – it may very well be – that the missing link, entertainment, will be delivered from your mouth directly to their ears.

iPods for music.

Podcasting for entertainment.

I’ve believed this from the first day I started working and interacting with the next generation and today, with the encouraging start to the Dave & Geri podcasting franchise, I know it.

Congrats to two great people who conceived, believed and achieved.

I'm very proud of you.

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BRAINSTORM WITH JERRY. One or two-day "Solutions Labs" to solve problems and to discover new opportunities based on Jerry's work as a professor at the University of Southern California where he helped radio companies, music industry businesses and new media ventures develop creative, revenue-producing ideas. You supply the "goals". Choose the participants in a private setting. Leave with an easy-to-implement "action plan".

Radio -- Inaction Jackson

Michael Jackson is still dead and radio is still voice tracking.

Back to reality this morning.

Late last week when Michael Jackson died suddenly at his Los Angeles home, the radio industry was caught with its pants down and voice tracking up.

This is not to say that some stations did not respond -- the ones programmed by real live individuals and/or those who actually had control of their company's voice tracking did the right thing for their listeners.

For too many, radio was caught sleeping while new media was feeding the need of the public to know, mourn publicly and appreciate the talents of this great iconic performer.

TMZ broke the news and owned the story from start to finish.

That's TMZ like in gossip website -- no matter that it is owned by Time Warner.

CNN, New York Times, LA Times and other more "legitimate" news publications hedged in the name of caution (which is not on its face a bad thing) but then dropped the bomb on a public that had already been able to do what they couldn't do -- confirm a breaking story.

Thank you cell phones, Blackberries, iPhones, the Internet, social networking and the services that are growing up in or around them.

Radio stations really didn't see this type of thing coming.

When John Slogan Hogan, Lew Tricky Dickey and Fagreed Suleman embraced voice tracking and syndicated programming to help them save money, they apparently gave little thought to what happens in an emergency. I mean -- this was the death of a major performer.

What happens, God forbid, if a world leader dies or if North Korea actually fires a missile at Hawaii or if Iran attacks Israel?

I know... I know -- everyone goes to ABC (or is that Citadel? Whatever).

AP and Metro for everyone!

The good news is that the remaining employees left standing at radio stations saved the bacon for these and other consolidators by eventually regaining control of their voice tracking (however temporarily) so they could do the right thing.

I know of program directors who put in plenty of free overtime to do the best they could. And some of the programming turned out to be damn good. I heard from market after market that someone in radio eventually took the challenge.

Eventually.

I also talked with many frustrated program directors who were embarrassed that they were hog tied by corporate bean counters. As I have said many times, radio people know what to do. It's their bosses who seem to have forgotten.

Maybe they are shell shocked by the prospect of bankruptcy.

And by the way, your monthly paid radio service known as Sirius XM that just raised its rates did an awful job of responding to Michael Jackson's death. If you wanted news and tributes, you wasted your money for a satellite radio subscription. You got the minimal Jackson programming for the maximum price -- late.

It is nothing new that consolidators are stripping radio stations down to the basics and turning them into transmitters that broadcast cheap national programming or cheap voice tracking in an attempt to "fool" listeners into believing that it is, in fact, as good as local.

The keyword here is "cheap".

As the weekend started, PDs who could, negating the voice tracking as much as possible. However, some were stymied. Their stations actually sounded on Sunday like they did last Sunday -- as if Michael Jackson had never died. Of course, I am talking about stations that lived in the general genre of Michael Jackson's music.

Could you imagine that happening when Elvis died?

Or when John Lennon died?

Or what if Sinatra had died in his prime? I'd like to think radio would have gone into national mourning.

One of my readers told me she was in The Bahamas when Michael passed away. That locals were gathered around their radios (remember that image?) to get the latest, hear the music and try to believe that this super star was actually gone.

Back in the U.S. endless numbers of people got the first news from their phones or the Internet. Word passed through social networking and although traditional media doesn't want to hear this, some excellent tributes have been taking place in social spaces without them.

As far as TV, BET did a clunker of an awards show that was supposed to be a tribute.

VH1 rose to the occasion but listeners remember MTV as being the place they first saw Michael Jackson's music videos.

But the Internet buzzed and those who carried smart phones got smarter.

For radio, it was Inaction Jackson.

But for new media, it was Thriller.

I want to say this a second time so as to be clear about my point. It isn't that radio people lost the skills to be the first source for news and special programming. It is the skimping on talent by consolidators. Nonetheless, many stations managed to snooker their bosses by working around voice tracking.

Some stations were stuck in Ryan Seacrest hell or lulled to sleep with John Tesh when at least some news coverage would be appropriate.

When I taught at USC my students were not given enough credit for being smart.

So what? They didn't read newspapers. Neither do we.

They get their news from the Internet. More and more people do.

And they didn't like to read textbooks.

They hated PowerPoint (don't we all?).

And they always challenged their professor (isn't that why we send them to school -- to learn how to think?).

These young people could process information at the speed of light. I welcomed when they had their laptops on in class and phones actively engaged because they could shout out breaking news or pinpoint info critical to a class discussion.

If schools everywhere had been in session Thursday, don't think for one minute that the place to learn the most about the Michael Jackson story would have been right in the classroom where students are in touch with sources they trust to keep them abreast of their world.

Radio is not one of them.

Sorry.

With each passing day, radio CEOs are working toward the early demise of an industry that need not die at all -- except for the unfortunate circumstance that radio CEOs are caught in their own time warp.

Somehow they know when Standard & Poor's issues their stock ratings, but they've lost that lovin' feeling for their audiences.

A friend of mine -- an outstanding major and medium market PD -- reminded me that voice tracking in and of itself is not the problem.

Listen to this:

"I envisioned voice tracking as a tool for stations to increase the productivity of their talent by allowing them to record their airshift in “microtime,” eliminating the many minutes spent waiting for each song to be over before doing their next on-mic appearance. I saw air talent being able to record a four or five hour airshift in about an hour, enabling them to work in the building doing commercial or even imaging production for the station or cluster while their airshift played back.

This would also allow the talent to go on the air live for contests and to record and air phone calls from listeners during their airshift, by simply walking into the air studio at the appropriate time, or by switching the automation to directly feed the transmitter while using the board for production, then switching back to go on live as needed, eliminating the expense of building additional studios for the additional production work that could be accomplished. I saw the talent nearby and in the building while their ‘show’ was on the air.

Had Michael Jackson died unexpectedly under my proposed scenario, the talent who was already on the air would have seamlessly gone live to report the details, discarding the voice track recordings made earlier, in the same way they would have done a live weather forecast or a contest".

Spoken like the outstanding program director he is.

Technology to enhance human commitment to the audience.

Consolidators will have none of it.

That's why this morning, it's "back to life, back to reality" for consolidated radio and the words of the Soul II Soul song by the same title echo the spirit of radio programmers who want to end the foolish game of voice tracking:

Back to life, back to the day we have
Let's end this foolish game
Hear me out, don't let me waste away
Make up your mind so I know where I stand

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Radio -- The Day Michael Jackson Died

The music industry lost an icon Thursday.

A very big one.

Apparently Clear Channel’s John Slogan Hogan, Citadel’s Farid “Fagreed” Suleman and Cumulus' CEO Lew Tricky Dickey forgot to plan ahead again.

1. We know they didn’t look beyond over-paying for their radio stations to see if it was possible to service the considerable debt in good times as well as recessions.

2. We see that they just assumed radio would continue to grow and that kids would always be available to listen to radio (not ever imagining the Internet, iPod, file sharing, social networking – anything—might be a competitor).

3. Their actions prove that firing employees has left their stations threadbare but they keep acting like local radio doesn't have to be done locally.

4. They neglected to factor in news and weather emergencies when conjuring up grand schemes to build various repeater radio platforms. That’s why during this Spring’s tornado season, a radio station would be your worst choice to remain safe and sound.

Now, Michael Jackson, one of the music industry’s biggest stars and a huge ingredient to many radio music genres gave tribute to the Man in the Mirror by offering the most unfitting tribute of all.

Voice Tracking.

That’s right, at the majority of stations the hits just kept on coming – just the way Central Command demanded it.

Some stations didn’t even break for news of Jacko’s death.

News? What’s news.

The local PD and jocks couldn’t respond fast enough, well -- because there aren’t many local PDs and jocks.

Hogan’s heroes were busy feeding tripe down the line so stations could repeat it.

Ladies and gentlemen, Michael Jackson died Thursday.

And radio died right along with him.

Most radio stations just kept John Tesh rolling, Ryan Seacrest babbling and voice tracking mindlessly ploughing through the playlist.

By comparison Elvis died way before consolidation and within ten minutes most stations were broadcasting on-air tributes, news accounts and playing wall-to-wall Elvis. Not so easy when your local program is coming from national headquarters.

People not only remembered where they were when The King died, but which station they were listening to.

Not yesterday.

For most of the day before it could respond, radio was at best forgettable. Hell, if it can’t jump on the death of one of its A-list music performers to an audience waiting to soothe their shock, what could it do?

One of my readers checked in and said:

“Are there any radio tributes?

Only one I could find is on a local CBS station that is usually Hip-Hop/Rap. I sat in my car and scanned from Miami to West Palm. Only heard one other distant MJ song”.

A major market talent told me:

“I think THIS is the kind of thing that makes me MORE angry and saddened than EVER about radio. The real point of my message to you is this:

I know of many local stations that are VT’d from 10AM – 5AM!!! So I wonder if their audience will have to wait until 5am local time to find out from their station they THINK is on the ball?

I am furious.

Those audiences were served REALLY well huh? Local my ass”.

By late in the day and into early evening, many more stations were reacting to their original misjudgment and started to ramp up on Jackson programming. Better late than never, I guess.

Still.

Stations went from voice tracking to backtracking when they felt the backlash.

Traditional media also missed the boat on reporting Jackson’s death.

TMZ, the Internet gossip and news site did all the heavy lifting.

The LA Times was the first traditional media outfit to report Jackson’s death with any certainty but the rest of us already heard it through TMZ which continued to provide updates and even a live streaming camera at UCLA Hospital.

CNN was clueless. It seems like they were more interested in Farrah Fawcett's death -- I'm just sayin'. Just an opinion. Anyway, long before yesterday's events CNN lost its soul.

The New York Times was just as bad.

The Times eventually reported Michael Jackson was demise – according to other sources.

Brilliant.

No wonder newspapers are dead.

Why television is so lame.

Why radio is just a free iPod programmed by John Hogan’s pals.

A disappointed Brock Whaley of Honolulu checked in:

“Clear Channel Hawaii was the first to break in with Michael Jackson music and live phone calls from distraught listeners. Across all of their music formats, including their alternative outlet. They did good.

One station, owned by a national chain, announced the news, and then played music from a totally unrelated artist.

Another local station group was very slow to respond with both news of the death, and the appropriate musical tributes even though it fit several of their formats.

On the other hand, we have an NPR affiliate that clears "All Things Considered" in real time. Even NPR had the story, and played a Michael Jackson song, before the aforementioned local chain had broken any news or dumped their voice tracking”.

To be fair, a few stations did it right.

Tribune's WGN in Chicago. My friend Bruce St. James was on-air at Bonneville's KTAR telling MJ stories. And of course, CBS-FM in New York. (Forgive me for not mentioning all of those who got it right).

Most, however, did not.

Until the pressure became immense. I'm sure by the time you read this, the stations caught with their pants down will be trying to convince many people that they're on it now.

Look, I’ve never liked the effects of consolidation. Somehow, the demise of radio has been documented on the pages of our trade publications and even then the writers didn’t make it seem that all that bad.

Now, we’re beginning to see in real-time and in real ways the effects of running a radio station like an investment banker.

Tornadoes that don’t get broadcast.

Dangerous news events not aired.

Flood waters not warned (at a recent Clear Channel outdoor event with 60,000 people).

Loss of connection with our local communities.

Separation from the local personalities that once made radio great.

No wonder this day has finally come, where one of the most prolific artists in radio’s history became a footnote to voice tracking.

This is the sort of day that made one of my readers say this about non-local radio, "we deserve whatever we get".

Michael Jackson sang about the “Man in the Mirror” and the message could easily apply to the consolidators who are ruining radio.

Listen.

And No Message Could've
Been Any Clearer
If You Wanna Make The World
A Better Place
(If You Wanna Make The
World A Better Place)
Take A Look At Yourself And
Then Make That . . .
(Take A Look At Yourself And
Then Make That . . .)
Change!

To quote my Hawaiian friend:

“North Korea has a missile aimed at us. Better keep your iPhone”.

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Radio One and Emmis Staring at Bankruptcy

Radio consolidators are lining up for their long goodbye.

Clear Channel is teetering on the brink with lenders who are standing up to The Evil Empire’s demands for more favorable loan repayment terms. In the end the lenders will probably relent, but not before putting a scare into the entire radio industry.

To lose the number one radio group to bankruptcy would be terminal for the industry.

Citadel is the next best candidate for bankruptcy.

Its CEO, Farid “Fagreed” Suleman is a bean counter who understands that his role is to take care of business – and that does not necessarily mean effectively operating the group of Citadel and ABC stations he has assembled.

Citadel could file Chapter 11 in the next six to nine months.

Citadel may win a reprieve but it would likely be under even less favorable terms to repay their over-leveraged debt. So, that would be tantamount to a stay of execution.

Cumulus is sinking fast as well.

Local revenue can’t be generated quickly enough to pay the debt. As with the other groups the recession isn’t helping, but recessions happen. Cumulus apparently never factored that in when they paid big bucks for Susquehanna or tried to become one of the big boys.

As with the others, a stay of execution would be under draconian terms that could eventually lead to their bankruptcy.

And just yesterday, we see signs that two more radio groups are preparing for the worst case scenario.

The nuclear option.

Emmis withdrew its ratings from Standard & Poor's.

When Citadel did this recently, it was only weeks before they retained Lazard Freres to explore “strategic options” (which means no options) other than a Chapter 11 bankruptcy filing.

One analyst interpreted this as “another sign of acute financial distress on the part of Emmis, and a possible precursor to a filing, or even default event”.

An Emmis bankruptcy filing really stings because Emmis CEO Jeff Smulyan is one of radio’s good guys. He has a record of treating his employees well and has not been selfish about being a radio group operator.

Nonetheless, the pickle that the other consolidators have gotten themselves and our industry into, is affecting Jeff. His stations rely on a few large markets and business is really hurting in large radio markets.

His board wouldn’t let him take the company private in past attempts.

It’s too late now.

In addition, yesterday saw Radio One and Done (as I call them) put at high risk of default on their debt by Standard & Poor's.

Another symptom of the financial distress caused by the recession and resulting in advertising downturn is having on radio groups that owe too much debt.

Here it is in Standard & Poor’s own chilling words:

• We believe that Radio One could violate its leverage financial covenant toward the end of the year if trends do not improve… We are lowering our rating on the company to 'CCC+' from 'B-'.

• The recovery rating on this debt remains unchanged at '3', indicating our expectation of meaningful (50% to 70%) recovery for lenders in the event of a payment default.

• Still, we are concerned that if trends don't meaningfully improve in the second half of the year, the company could violate covenants in the fourth quarter...

• Radio One may not be able to absorb a potentially significant increase in interest rates, as well as fees, which could accompany an amendment under current credit market conditions.

As an analyst put it, "radio bankruptcy club is getting a lot of members".

The real question for the rest – the people who are working at radio stations that may be ready to go under is – what is likely to happen?

As I said, bankruptcy can still be avoided, but the resulting time bought does not necessarily ensure the company’s return to solvency.

Here it is in real and simple terms.

Bankruptcy may not be automatic.

Creditors always have the option to re-negotiate.

But a covenant violation does tip the scales in the creditors’ favor at the negotiation table. They can severely restrict the company’s ability to manage its own cash, as we’re seeing with Citadel.

It gives the creditors greater influence in company affairs.

If you didn’t like the way Fagreed was running Citadel before, adding these additional creditors “two-cents” into the decision making process won’t be any better.

If you assume more firings and budget cutbacks, you would be assuming correctly.

Senior creditors can also take steps to protect their interests at the expense of junior creditors. The pecking order becomes apparent when resources become scarce.

Citadel is a good example of a company on a short leash with creditors.

Even if Citadel is lucky enough to find excess cash, it is now obligated to stash it into an escrow account for its creditors. That means fewer funds for capital expenditures and other operational needs. It bodes poorly for stockholders.

Even radio people severely burned by radio consolidators – fired, salaries cut, benefits dissipated, etc – can’t be enjoying watching Ebenezer Scrooge squirm so much.

The future of the radio industry hangs in the balance.

Consolidators have over-leveraged themselves.

They have participated in a system that rewards bankers by paying them fees – and these same bankers then get to turn the screws when their clients cannot generate enough cash flow to pay the interest back on their loans.

Radio boards are a joke.

The directors are wimpy. There is little oversight. Power grabbing schemes are in effect to allow failed CEOs to remain in power even as they fail over and over again.

I have written about the demise of radio from the earliest indications that occurred to me – back in 1996 when I never believed for one minute that the fast-growing radio groups could ever service their debt.

I have hoped and wished for things to right themselves over the years.

Maybe, Fagreed takes a powder and someone who knows how to operate radio stations gets to run the group (like any one of his ABC general managers or former managers).

Now, I’ve concluded that the best thing for the radio industry and its remaining employees is for these groups to fail.

Bankruptcy takes Clear Channel, for example, out of the hands of Lee & Bain and John Slogan Hogan and puts it in the unpredictable hands of a bankruptcy judge.

Why is unpredictability better than certainty?

Because consolidators are certainly killing off everything good about local radio to please their debt holders.

And unpredictability might scare unsecured creditors in bankruptcy court, but it would certainly put hundreds if not thousands of radio stations back in the hands of people who love the business, know local radio and have a proven record of operating them.

Without overburdening debt.

Therefore, we’ve arrived at a time when bankruptcy may actually be the best option.

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User-Controlled Radio

CBS Radio is doing an interesting experiment at KITS-FM in San Francisco with the help of a user-controlled web service called Jelli.

I’ll say this for Dan Mason and CBS Radio – while other groups only cut expenses, he manages to cut expenses and innovate especially in the Internet/mobile area.

What matters is that CBS is trying.

I thought I would take a subjective look at user-controlled radio through the eyes of the next generation as I have come to know them in my academic work. Perhaps there are some beneficial observations for all those interested in this approach.

User-controlled radio will only be on-the-air in San Fran (at first, at least) for two hours on Sunday nights. The problem here is that if CBS attracts positive attention from listeners who control the station, it may make the rest of the station's programming seem like corporate controlled radio.

I don’t remember knowing which companies owned the stations I listened to when I was in college. But students (and we’re not talking about communications majors here) absolutely know the name Clear Channel. They don’t like corporate radio.

Still, CBS is right to take the chance, recognizing the downside, and proceeding with the experiment.

Of course, I would never do this if I didn’t have in mind converting the entire station 24/7 over to user-controlled radio if it became more than a Sunday night passing fancy. I’m sure CBS is thinking about it.

The Jelli service allows audience members to choose in real-time what is played on-the-air.

There is also real-time voting.

Plus, song rating features before each tune. Reminds you of the days when stations did “Hot or Not” through primitive telephone call-ins except now the online community can weigh in seamlessly.

Yes, the record labels can vote.

KITS listeners can even vote to pull a song off the air instantly.

Sounds like a computer programmer came up with that formatic. I don’t like it but I know that young people frequently don’t even listen to their own iPod music all the way through. They have short attention spans and may not dislike having a song pulled in progress.

Again, I'd try it.

On the other hand, KITS may piss off more people than they impress with this stunt. If I’m taking a serious look at user-controlled radio, I’m hiring a Coleman, Edison or one of the other many sound radio research groups to get me some answers.

KITS is the perfect station for this experiment. They had the guts to try user suggested playlists in the past and while the idea didn’t work, trying is the virtue.

Success is built upon the lessons from failure.

The only time you really fail is when you stop trying – as most of the other radio groups have done.

CBS – at least publicly – thinks that the KITS experiment is a chance to engage the terrestrial audience with the online audience.

I’m not buying that one and I don’t think anything I have seen in generational media supports this claim.

There are 80 million people coming of age in the next generation and you can see for yourself that it is not radio that is stuck in their ears. I know CBS and Jelli are touting this benefit but it appears overblown.

If anything, the KITS user-controlled programming concept sounds at best like a potential Internet streaming format and at worst, a poor alternative to an iPod.

Many of you know that I like Sunday nights for different programming – radio has a long history of using that time period to enhance its formats, image and even make money. They also leave a lot of radios tuned to the morning show. (Hopefully, there’s a live and local AM drive show waiting for them when they awaken).

Another great time for experimentation is all-nights.

Radio's all-night shows are now predominantly voice tracking and syndication.

To a listener, it’s not a lot of choice -- and nothing unusual. The same few talk shows city after city. And boring music programming that leaves a listener lonely – certainly wishing for more.

While I like technology as much or perhaps even more as the next person, I also like personality on the radio.

That’s it.

That’s the one way to commute consolidation’s death sentence on AM and FM. I’m not talking about the kind of personality radio that Bill Drake’s format cleaned up in the 60’s. But meaningful authorities on something – fun people, interesting people, communicators.

So while experimenting with user-controlled radio (which, again, I endorse as a meaningful learning experience for corporate radio), it reminds me of what young people say when they talk about iPods, music and radio.

Have a seat. I don’t want you to have an accident.

My impression is that young people are bored with their iPods – by their own admission – but are not likely to give them up anytime soon.

Certainly not for terrestrial radio – even user-controlled radio.

My sense – for what it is worth – is that they want to be entertained.

There, I’ve said a consolidation dirty word.

They already have control.

Young folks engage in filesharing to feed their need to discover music.

Their iPods are their generation’s personal radio stations with no commercials, no clutter, no sweepers and voice tracking nonsense.

They have Pandora to discover music and few in the next generation don't like Pandora.

You see, what young (and probably older) audiences want is to be entertained. Morning shows with personality that relate to them and where they live and work.

Entertaining people who connect them to the crazy music scene.

Authorities on music – something radio programmers poo-poo but that I hear over and over again from youth. Listeners don’t care if the jock has a voice so low that they have to carry their balls around in a wheelbarrow. They want knowledgeable people who actually know the music, the artists and their city.

CBS user-controlled radio is something Clear Channel is not doing.

They have Repeater Radio controlled by San Antonio (and a few command centers).

But young listeners – the ones radio owners will have to find a way to attract if they want to remain in this business five years from today – want more.

In a way, they already have user controlled-radio.

It's called an iPod.

Now, they want to be entertained – and the last time I checked, the radio industry used to do a pretty damn good job in this area.

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Refresher Radio

I taught the Dale Carnegie Course for 11 years and one of the requirements for instructors was that they go through a refresher – one or two-day seminar – once a year to stay sharp and stay up.

This concept is not exclusive to teaching. Many physicians work to reeducate themselves to stay fresh on new procedures, research and information.

Within the past few weeks Apple refreshed its iPhone software introducing system 3.0 that included many improvements such as search and the ability of some 3G phones to give turn by turn directions using GPS. Of course, Apple’s independent developers can then be energized to use the changes to further improve the iPhone experience.

For example, on some 3G phones, consumers will be able to listen to radio (terrestrial, Internet, iPods, podcasting, etc) while they simultaneously do other things – surf the web, answer email, text. This is not likely to be a feature that will endear terrestrial radio to iPhone users.

Why?

Because iPhones are not radios – they are many things – a fun center, email provider, text messenger, access to the Internet, video source, iPod and on and on. No Walkman ever had that capability.

Still, I’ll take the radio presence on the new 3G phones, but I would not confuse it with direct access to young consumers. That is very unlikely.

The idea of refreshing our products, our skills and our services is an important thing to consider.

Often, it costs little or nothing and brings many benefits.

We live in a world where the British airline RyanAir is trying to force passengers to use a credit card to use the lavatory in flight.

Where the Arizona Biltmore (a high-end resort) is slapping guests with a blanket $50 fee that includes Internet (which is a ripoff in and of itself if you stay at the less expensive Marriott and get it for free) and now adds in a new charge for pool services whether you take a dip or not.

They are taking a dip alright – into your pocket.

Airlines charging for blankets.

Eliminating food for hungry passengers herded onto their planes like animals and yes, don’t forget shrinking leg room so they can add more seats and offer fewer flights – a real money saver.

How do we come up with these screwy ideas?

And if you think the media business doesn’t make big consumer mistakes, just look at SiriusXM – passing along RIAA licensing increases with the blessing of federal regulators so they can help those poor starving musicians – right!

The reason we have poor starving musicians is because of the record labels not radio stations.

Sirius XM with one of the biggest attractions it has to get new subscriptions, refuses to make Howard Stern available on its new Apple app. Eight million new subscribers since Stern came to Sirius and some genius decides to offer an app without their star franchise.

Oh, and what makes them think anyone will pay several dollars a month to turn their nice, cool, useful Apple phone into a satellite radio receiver?

Then there is the concept of burying commercials in six or eight-minute clusters as if anyone really listens to them. Yet we call that a business model that endears us to advertisers.

If ad agencies weren’t so selfish, they’d would have held buys back and convinced radio stations to stop running commercials as if they were garbage.

But, buyers don’t care about advertisers any more than radio stations do because if they take a stand, they lose commissions.

Enough already!

It’s time to think different.

I’d like to believe – in fact, I know – that radio people are up to the task of solving some of the thorny issues that stand in their way. That is, if their employers care to see a solution.

So, instead of migrating toward Repeater Radio where voice tracking, syndication and networking are employed to save local costs and salaries, turn it over to your programmers and managers.

Let’s have Refresher Radio.

Radio formats – even when they were wildly successful – tended to imitate their best rating periods.

Have you ever noticed that almost all radio innovation happens in the first six months of developing a new format and even at that it’s all cookie cutter?

Get new sweepers, liners, imaging production.

Change the playlist. Put it into the computer. Make sure it's tight -- short playlists get ratings.

Presto! You have a new radio station.

No you don’t.

No wonder radio is losing listeners and has lost the next generation. Radio hasn’t really been refreshed since the 80’s. Even without consolidation and poor financial management by consolidation CEOs, radio was headed for a meltdown. Except few could see that everything would fall apart at the same time.

Back to Apple.

You own an iPhone and every year you get a new operating system – with cool new things to make your life easier and more fun. This time, the search feature itself was worth waiting for. The long overdue cut and paste makes a user get excited about the mobile phone they bought – keeps them from falling out of love with it. Maybe even helps make up for having to sign a contract with AT&T.

Radio doesn’t come with refreshing.

In fact, we do the opposite – we take things away.

Imagine if you owned an iPhone and Apple decided to take away the apps or remove the ability to get email. You wouldn’t like it.

But radio does this kind of thing all the time – taking away morning shows (or diminishing them through cost cutting), removing live jocks, adding voice tracking, employing nationally syndicated shows to save money, eliminating news (and even weather alerts in tornado country). You get the picture.

But let’s turn this around.

What if stations actually planned “new operating systems” or as we would call them, tested format enhancements on an annual basis.

What if radio stations actually fixed a few things that were wrong – that listeners don’t like before that annual format enhancement.

At Apple their engineers and programmers meet constantly with innovators to develop new things that will make their computers, phones, iPods and operating systems better.

If CEOs could get out of the way (I know I am dreaming), institutionalize the annual format enhancement strategy with real benefits.

To do this you’ll want to bring in engineering (those poor guys were kicked away a long time ago, bring them back), marketers, IT (if any), sales people (if any), your jocks (if any) and news people (if you have them) and your PD, GM and GSM (if they are not one person).

Require all of them to innovate.

Come up with a list of ten improvements that each could provide and then work together as a team to develop one or two in each area.

So, say your PD wants to offer a mix of music every hour that is not customarily done in his or her music genre, they would develop, test and rework the concept before the stations 2.0 operating system ever goes on the air.

In that way if you can be certain that the things you are developing are in fact audience enhancements, then it makes sense to advertise it.

Same goes for sales.

If the sales department is going to offer free testing of commercials or a better, stronger guarantee (both of which would go over big with advertisers) then the year before implementing the new procedures, the station would develop, test and rework it until it was time to roll out the new features.

You get the idea.

Radio people are not stale.

They just need inspiration and support from their owners. Radio has it all backwards. The CEO and a few of his biggest suck-ups do all of the thinking and well -- you see what they come up with.

I’m half tempted to do a brainstorming session for a terrestrial radio station or group on Refresher Radio. Then roll out the improvements just as a new updated operating system is deployed in the digital world.

That is, if there are any owners who will allow their talented people one year to innovate and test the next generation of their brand.

Apple pleases a lot of people like this.

Just sayin’.

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Radio’s Latest Believe It Or Not!

Ripley's Believe It or Not! is a franchise that deals in bizarre events and items so strange and unusual that readers might question the claims.

What a perfect way to introduce Radio’s latest Believe It Or Not! -- programming, sales or management practices inspired by cutbacks, firing and Repeater Radio so strange and unusual that you, my readers, may be tempted to question the claims.

Just as Ripley’s TV show claims "If you see it on Ripley's, you can bet that it's real", we say if you read it here, it is real -- or unreal if you're wondering how these whacky things could happen to a great industry.

So here we go, Radio's Latest Believe It Or Not!

Cumulus Tracks Employee Access to the Station

You already know that Cumulus is burning up valuable cash to install two-way video conferencing via Skype in their meeting rooms so that Atlanta headquarters can participate, lead or run local sales meetings.

Then Atlanta tells local sales people what they are going to be pitching and when even if their best salespeople have their hands filled taking renewals.

But you may not know that Cumulus employees are increasingly uncomfortable with expanded spying as one reader explains:

“You don't know the half of it at Cumulus. Yes we have cameras in the sales offices and sales training rooms (it's strange that executives have time to punch in and watch a small town sales meeting). We are tracked in everything.

Entry into our buildings is by door code. They run a monthly report to see what time and what people enter the building. They track how many times and for how long each person logs onto the CSOS (Cumulus sales operating system...which we call C-shit). We get reminded if we don't log on at least daily to gather wisdom from fathers Lew and John.

Our management (small case they have not earned caps yet) runs reports on our phone use. How many calls and to whom did you really call during that phone out session? Big Dickey knows. A regional VP inspects our weekly sales plans, planned meetings with clients, and our "greensheets". And, oh yes, they run monthly reports on who printed how many pages at what time on the office printers”.

This obsession with top down management has been repudiated in management textbooks for years.

In the 1960’s Rene McPherson took over Dana, a small auto parts company with many divisions. Previously, Dana attempted to run everything from headquarters with no success. McPherson came in and let each business unit make their own plans and talk to their own, direct customers. He cleaned out the corporate office and made each business unit accountable for making and selling what their customers wanted.

Productivity, sales and profits soared.

Lew Dickey is a Harvard grad. Harvard teaches business by utilizing case studies therefore Dickey should know to let each market be charged with being profitable so it can grow its share.

Most Terrestrial At-Work Streaming Gets Blocked

Here's another dirty little secret.

You know all those streaming stations that promote listening at work?

Well, most of their proprietary players get stopped dead by just about any corporate firewall.

Which stations do make it through?

Usually small town stations that use common codexes and keep their bandwidths low -- proving once again that the gods smile down on local radio whether it is delivered via towers and transmitters or via the digital information super highway.

But their firewalls hate corporate radio, too.

Blacklisting Artists Happens

We all know boycotting artists is something that small-minded radio people have done because theirs is bigger than yours, right?

Lew and John Dickey must really be the John Holmes of radio, by that standard, because they ran a radio group that mysteriously, for some reason or another, presided over the disappearance of Natalie Maines and the Dixie Chicks after they criticized the Dickey’s favorite president, George Bush.

I guess corporate thought the Chicks were un-American for mouthing off about politics.

Of course, their fans can think for themselves and have the ability to separate Dixie Chicks politics from their music. Apparently Dixie Chicks won some Grammy’s a few years later, someone appreciated their music.

We call that – their audience.

Now one of my readers told me:

“Let's see...you have a beef with recording artists, so you don't play their music? What does that accomplish bedsides driving your audience to a station that WILL play (new) music by artists they (the audience) wants to hear? This is not a new situation…I can remember having a beef with artists/labels in the past when I was Music Director of this station or that. But withhold airplay? Nope. We just didn't report to any trade or promoter that we had added the track.

That way we didn't cut ourselves off at the knees. I suppose that's the way REAL programmers act(ed) in situations like this, and while the consolidators have once again proven they are not real programmers".

Clear Channel's “National Local Radio” Preempts Real Local Public Service

From another “happy” local Clear Channel employee:

“We now have announcements for local artists to send MP3s to the stations for posting on the websites and "possible" air play...we are installing silence sensors to report to the "Command Center" (CC's name, not mine) in Cincinnati...the first big PSA dictated campaign comes down … (we will have to cut back local PSAs for the national)...and yesterday we got the two weather alert radios that they are sending all stations that will alert the Command Center if there is severe weather in a local area. (We are the primary EAS station).

The Command Center is not even aware of what counties to program into the weather radios they are sending out...consequently, they will go off at every frog fart. Transmitter, audio, and local emergencies will be monitored from The Command Center to let most stations go unattended outside of regular business hours”.

It’s one thing for Clear Channel to say, we’re losing money and can’t afford to offer the same level of local programming we promised in our license renewal, so bear with us.

It’s quite another to call national programming local. To run critical services from places that cannot possible know the local market and threaten to fire anyone who doesn’t readily agree that this travesty isn’t repeater radio, it’s local radio.

Citadel Makes Employees Pay Their Own Disability

Citadel wants its employees to pay a lot more toward their long-term disability coverage.

Add that to Citadel’s decision to stop matching 401 (k) contributions and you realize that this company is not just refusing to reimburse for necessary parking expenses in some markets but they’re going for the real killer cuts that affect take home pay.

Hey, Fagreed thinks you should be happy to have a job so stop complaining!

Fagreed's compensation is below $10 million a year now so you won’t be getting much sympathy from him.

In all seriousness, the reason these failing empires are able to get away with mistreating and under compensating their employees is – may I be blunt here – where are they going to go?

We’re in bad recession.

Radio is declining and not likely to ever become a growth industry again.

And there is virtually no – like in “zero” – market to drive compensation or benefits up.

In other words, Citadel and the others are competing against the unemployment line and that means they don’t have to offer spit.

Some Cumulus survivors tell me their fellow workers are just hanging on and working second jobs in hopes of quitting. But for now, they are making less for more work.

Cintas Uniform Company is the Management Training Company for Cumulus

Tricky Dickey steals another employee with no radio experience away from the Cintas uniform company. Hey, if you wear uniforms maybe you could also sweep the stations.

They've hired another Cintas Uniform person to be GM, this time in Fayetteville, NC. Alan Buffaloe is out of a job now to the Cintas guy. Even the local paper seems incredulous.

As one of my readers put it, "If you can sell uniform rentals/cleaning services you sure as hell can manage a radio cluster...oh wait...Atlanta manages the stations, all this guy has to do is scorch the market with more cold calls".

So, let's see if I get this management strategy.

Fall all over yourself firing seasoned radio pros. Hire inexperienced people. Look outside the industry to non-radio people. Sounds like a winning formula.

So there you have it – another edition of Radio’s Believe It Or Not!

Just as in the original Ripley series, a freak show with commercials.

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Barry O'Brien Joins Inside Music Media

I am happy to announce that Barry O'Brien will be joining Inside Music Media.

Effective this morning, Barry O'Brien & Company will be handling all sales opportunities offered by our company which will initially include one-day Brainstorming Seminars, training and advertising opportunities.

We're planning to do a one-day Media Solutions Lab -- the first of which will be held in Scottsdale, AZ. He'll work with sponsors for very unique opportunities -- after all, you know me.

Barry will also handle my private brainstorming seminars that are offered for radio groups, entrepreneurs, new media and music companies or individuals.

When Inside Music Media started out two and a half years ago, it had barely 100 readers.

Today, Inside Music Media through the website and daily email is read 85,000 times a month (not counting pass along readership). Barry will sell the ad that appears at the ah-ha moment of each of my daily posts (where the "brainstorming" ad now appears).

Because of my background in radio, television and music industry as well as the time I served as professor of music industry at the University of Southern California, I am anxious to not only share my view of challenges and opportunities facing traditional and new media, but to do seminars, private coaching, and brainstorming for those who want it. Barry is the ideal person to represent what we do.

I'm hoping there is a great interest in this as my readers tend to be forward-looking realists who want to actively engage the future.

I've long admired Barry who is best known for his 20 years as VP/Sales for Radio & Records, working out of their Washington, DC office. For 10 years prior to R&R, Barry was in radio sales in Boston (WVBF) and Washington (WRQX).

After leaving R&R in 2000, he opened Barry O'Brien & Co., and has worked with a variety of companies in sales and business development on a consulting basis, including New England Cable News (NECN), Pro Media, Inc., John Bayliss Broadcast Foundation, Radio Hall of Fame (Museum of Broadcast Communications/Chicago), In3Media (Taylor on Radio), Effective Advertising Seminars, Inc., CN8, CLTV, Texas Cable News, Northwest Cable News, Marquis Jets and Broadcasters Foundation.

Barry is a member of the Board of Overseers of Emerson College (Boston), and is on the advisory board for their student run radio station, WERS. He was a board member of the John Bayliss Foundation for many years, is a huge Jimmy Buffett fan, and is a mediocre golfer.

Barry lives in Plymouth, MA and West Palm Beach, FL with his wife of 10 years, Nancy Ryan.

To congratulate Barry, you can call (508) 224-4262 or email barry@barryobrien.com.

RIAA Loses Minneapolis File Sharing Case

By Jerry Del Colliano

The Recording Industry Association of America lost its $2 million lawsuit in a retrial against Jammie Thomas-Rasset even though a jury handed them the verdict they wanted.

Guilty.

The RIAA originally won a $222,000 verdict several years ago but the judge in the first case called a mistrial. Rather than settle as over 30,000 others have done, the defendant then known as Jammie Thomas went back to court.

This jury didn’t believe her when she argued that maybe her children used her computer to share files on Kazaa. In the first trial she testified that a file sharing hacker stole her WiFi connection – and, well, you know the rest.

Despite suing 30,000 people over the past five years, the RIAA has not stopped illegal file sharing.

In fact, file sharing has increased and continues to proliferate at a rapid pace.

That’s why the record labels and their legal arm, the RIAA, by and large lost in court yesterday.

The labels are certainly not going to collect on Thomas-Rasset’s judgment.

File sharing continues to elude the labels' ability to control it.

And all those poor artists are still going to get screwed by a record label near them someday.

What the big national headlines shout out is that the label’s can win in court but that file sharing is unstoppable. Even if you factor in the recession and all those poor lawyers who are unemployed and underemployed, the RIAA can’t argue that this scorched earth strategy was worth it.

I may have mentioned this before, but I once had a student when I was teaching at USC who had been sued by the RIAA. I know that because one day I invited an RIAA rep to speak to the class.

The snagged student was nervous. His classmates openly spoke about stealing music. They certainly were not afraid of the big bad wolf. No matter how the RIAA rep spun it, most of the young folks admitted the next day (when the RIAA was not present) that they were going to continue pirating music.

That was major because this one young man who was still shaking in his boots was very apologetic. Turns out his parents got hammered with the $3,500 settlement and he was not about to steal another tune. I believed him.

So what I observed is that if the labels want to stop file sharing dead in its tracks, they need to sue everybody under the age of 30.

Everybody.

Once you touch the fire, you know how hot it is. But I am convinced that unless everyone is sued and obediently settles, all the court victories in the world aren’t going to get the labels to stop music piracy.

The reason?

The record industry cannot control the front of the store, so to speak.

You know, when you go to a brick and mortar record store you can’t just walk out with whatever you want. You’ll wind up getting arrested.

But there is no way for the labels to stop people from walking out of the virtual record store with whatever they want.

Oh, there is one way, but the labels reject it. We’ll get to that in a moment.

Label execs have their heads so far up the legal system that they just can’t see the end game. I’m sorry they lost control of their music but unless you sue everyone, the RIAA just isn’t going to scare the next generation.

Business execs may cheat on their taxes, steal from the company or otherwise be a greedy executive, but consumers cannot steal music.

I often engage young people in discussions about ethics and file sharing and it may or may not surprise you to know that many do not steal music for ethical reasons. Most, however, admit to it. Some even use the Robin Hood defense – stealing from the rich (the labels) to help the poor (the students).

Ethical considerations are worth an open and honest discussion, but speaking solely in the realm of business – it seems odd that the labels, which are dying each day, fail to realize that the one thing that has made them famous – suing customers – doesn’t work.

What does work is a bitter pill for them to swallow.

You probably wouldn’t want to give up $8 billion in annual CD sales despite the fact that record sales have been dropping almost without exception since 2000.

But the reality is that the labels cannot stop stealing.

They can’t slow it down.

They really can’t even make a future file sharer think twice before they click.

What’s amazing is that the labels, like their brethren in the radio industry, are going down the toilet without a plan B.

No alternative to what happens if they can’t scare their potential customers into paying for music.

Aah, and why?

Because the price of music is the problem.

Not its easy availability on the Internet.

Not a generation of bad dudes.

The labels refuse to enter the digital 21st Century where music is worth nothing when it is stolen in large numbers and somewhere between five and ten cents when you factor in 99 cent legal downloads.

If the labels make music not worth stealing – by offering it in both a convenient and intuitive way on the net at five to ten cents – they can become bulk resellers.

$9.99 is not the going rate for an album even if iTunes charges that price.

Zero is the price.

99 cents is not the prevailing price for a single tune in spite of the fact that Apple has established that price.

Zero is the price.

Label execs don’t want to give away music for next to nothing, I get it.

They apparently would rather give away music for -- nothing – as they are doing now when more music is stolen than purchased.

So Jammie Thomas-Rasset may have to clean Clive Davis’ executive bathroom for the rest of her life (or his) to help repay her debt to society.

Proving once again that the labels got out of the record business nine years ago.

Would you buy music from a label that can't tell a hit from a flop?

Suing customers -- a flop.

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BRAINSTORM WITH JERRY. One or two-day "Solutions Labs" to solve problems and to discover new opportunities based on Jerry's work as a professor at the University of Southern California where he helped radio companies, music industry businesses and new media ventures develop creative, revenue-producing ideas. You supply the "goals". Choose the participants in a private setting. Leave with an easy-to-implement "action plan".

iScrewedUp -- Radio's New App

I don't know how radio CEOs can be so wrong so often.

It is about to happen again as Sirius XM is set to launch an Apple app that they hope will revolutionize satellite radio.

Oh really?

Here's the latest misread of the media consumer.

You'll be able to get Sirius XM on your iPhone for free.

That is, of course, if you subscribed to the webcast feature.

It's $3 a month for everyone else.

Look, did anyone tell Mel that he's not the only one having a recession? Can't he see that people are not lined up to pay for satellite radio that is arguably not much better than what they can hear for free on terrestrial radio?

In fact, as consumers feel the pinch, what would make these SiriusXM execs think that charging more monthly fees for the same old "not exactly free radio" is a good business strategy.

You can expect this new SiriusXM app to be a flop just like the free version of Clear Channel's iheart Radio which received a few million downloads and a great number fewer fans once they listened.

Nothing personal, but consumers don't think like media executives and you can be damn sure media CEOs don't think like consumers.

A few years ago, one of my USC Solutions Labs did a project for XM Satellite before it merged with Sirius. These young folks came up with lots of ideas for satellite radio -- none of which they were doing and few of which they adopted. The ability to listen to streaming satellite radio on a cell phone was not one of their recommendations.

I understand SiriusXM's enthusiasm to get into new media because in today's media world satellite radio technology is as ancient as a wagon train.

But they are getting it wrong -- so wrong.

Satellite isn't the only radio organization to do their version of iScrewedUp.

Terrestrial radio wasted broadcasters money and got a false sense of security in pushing HD which in effect was an excuse to create more channels on a radio. This would be great if the radio were a hot consumer device.

It isn't.

Even in a car, radio is a mere part of the automobile's entertainment system with growing competition from new media. No young person these days (or many older for that matter) buys a car without an iPhone jack.

The HD concept of adding more channels than the federal government would let consolidators have was fatally flawed when it turned out radio groups couldn't operate all the stations they bought. And now we've seen that they can't pay the debt on these acquisitions, either.

It would have been so much better to check with the consumer first -- not iBiquity, the NAB, auto manufacturers (oops) or radio makers.

Lesson: Consumers want variety where they live -- on mobile devices not radios.

Radio screwed up when it tried to bilk the record industry into paying legal payola to get airplay. They deny it but before then New York Attorney General Eliot Spitzer started his holy war, big radio groups and record labels were settling for seven figure penalties.

This was a screw up because radio is nothing without the music industry and the record business is proving that it is nothing without a vibrant radio industry. Maybe the heyday of consolidation factored into it but it is no accident that radio has declined in direct proportion to the music industry.

You know things are bad when the labels still -- in 2009 -- sue their customers and then turn on their radio partners in trying to win repeal of the performance tax exemption.

Lesson: Radio and records should have joined forces to create new delivery systems and content and launched the iTunes store before a computer company kicked their butts.

Radio is screwing up in the sacred area of news, information, talk and localism.

Repeater Radio to save money on personnel lives up to the term I use to describe it -- a no-brainer.

But before radio groups decided to sell out programming to save money, they misread the marketplace again.

Take Iran.

Please.

Have you witnessed how news from the disputed Iranian elections and the riots that followed is driven by Twitter, Facebook and the Internet?

Not TV.

Not radio.

Not newspapers.

In fact CNN here in the U.S. has been busy defending its initial non-coverage of this world news event while their worldwide audience was taking matters into their own hands -- literally.The many pictures are shot from eyewitnesses via their cellphone cameras and uploaded to YouTube.

When Westinghouse/CBS used to say "you give us 22 minutes and we'll give you the world", the consumer now says, "give us 20 seconds and we'll give you thousands of photos, reports and commentaries".

Events like 9/11 and Katrina may be the last traditional media coverage we'll see.

Certainly, you can't rely on a radio to cover a tornado down south or a crisis in markets where Repeater Radio is babbling on.

The marketplace is telling media execs that they are no longer the gatekeepers of news and entertainment.

They think finding the next Rush or Hannity is going to save talk radio -- especially when you can mindlessly syndicate it across the nation. But today's audience doesn't need a lecture, they already have a town meeting with unbridled access to people and places that radio cannot duplicate.

To survive, it would take a sharp radio executive (an oxymoron) to start delivering content with new means and in new ways.

Lesson: Your new boss is the listener. They have taken control of your radio station and redefined how news is distributed. And before you start with, "but they are not trained journalists", I ask "how many radio stations employ trained journalists"?

One more example of iScrewedUp.

Terrestrial radio streaming.

Media execs love duplicating the same content that they air for free on the Internet. Why? Because they think they can make a fortune selling different cheap commercials on the stream.

But there has been precious little evidence that streaming is even wanted by their audiences.

Yes, if you're in a building and want to listen to a terrestrial format, of course, it comes in clearer online. But even with all that factored in, terrestrial radio listening delivers not quite 3% more listeners to the station's format. By any standards that is a screw up.

Because a smart radio exec would listen to their audience and find 1,000 ways to program niche content that listeners absolutely could not easily get anywhere else and find a new model for Internet radio. They could also build Internet radio stations for local businesses and rent the stations to their sponsors. No biggy. No great expense. The music rights issues will eventually be resolved and they'll be sitting there owning many franchises.

But no.

Radio execs missed the point.

Lesson: You can't cram analog mentality into the digital space. If you do, you'll get just 3% of the available audience.

Okay, I lied -- one final point.

The People Meter.

You know, the one Cox CEO Bob Neil railed against publicly for years and spineless consolidators put down while they were secretly signing PPM contracts.

Turns out iScrewedUp applies to this as well.

I can't tell you the number of apologists who gleefully remind me that radio's total listening is up one million people.

Wow. Imagine that.

And how do you think tired old radio, with thousands of talented programmers and air personalities fired, is accomplishing this feat?

Can you say People Meter?

Finally, the diary system that broadcasters love because they can easily manipulate it is now reporting the real audience.

But radio CEOs and association execs drunk with spin are using this as proof that radio is alive and well.

What they don't get is that the People Meter means a major redesign of radio programming.

I don't know about you but even after all their meetings, conferences, research and consultants -- radio still sounds to me like it's built for the diary.

Lesson: The People Meter allows radio stations to know what listeners want every moment of the day and enables them to deliver it. But they are listening to each other again and not the audience.

So, there appears to be an endless stream of major screw ups that radio and record industry CEOs have made -- enough to inspire a developer to design their own Apple iPhone app.

iScrewedUp.

Unfortunately, just like other radio apps, it would be downloaded by millions but I am afraid few people would listen.

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What If Advertisers Do Their Own "Radio"

I was at dinner recently with an ad agency executive who got me thinking about whether advertisers really need the media business in the coming digital age.

I know what you’re going to say – why would they want the expense, the grief? And do they really have the expertise?

And, that in some small ways, advertisers have tried to do directly to the consumer with mixed results -- targeted magazines, niche programming, infomercials.

I thought the same thing.

But then again, this great digital beyond we always talk about in this space makes many impossible things seem possible.

Is it likely?

Let’s take a look.

Today you don’t need the expense of printing a magazine, if that’s the business you want to be in.

If it’s television you want to dominate, there is the new cellphone TV coming out soon that will be the next thing beyond mobile YouTube.

As Spots and Dots reported last week:

“Back in January during the annual Consumer Electronics Show, we reported on the plans of the Open Mobile Video Coalition to start testing live broadcasts to phones later this year. 63 stations in 22 markets, covering about 35% of all U.S. TV households, have been announced as starting digital broadcasts to phones and other devices before the end of the year.

Having been available in some other countries for several years, many observers
expect this to become a major factor, one that if rated accurately by Nielsen, could add a lot of viewing to stations’ numbers. “This is one of about six or seven or eight things people are going to use their phones for,” Rob Hyatt, executive director of content for AT&T said” .

You want to be in radio?

You can build a great sounding Internet radio station done the right way in about a week (one commercial per stop set, the right music, talent, excitement) and even get some good talent from radio to do it.

Want to be a podcaster?

I can see Miller Brewing Company starting its own version of “Men’s Health” instead of doing moronic beer commercials for sports television and radio. Once a consumer is hooked on this podcast, they’ll access it through an Apple app that will provide even more depth – stories, coupons, links, social networking.

Who needs only traditional television, radio and print?

And getting back to the original stated objection of why Proctor & Gamble would want to staff up to actually become the medium in which they promote their own products, I’ll take you back to before our time.

The Golden Age of Television where the Lux Radio Theater sold soap.

The Hallmark Hall of Fame sold greeting cards.

The Texaco Star Theater sponsored Uncle Miltie -- Mr. Television.

And don't forget TV soap operas were called “soap” operas because soap companies sponsored them.

Today, the advertisers can easily do more than sponsor or influence content, they can provide it because they don't have to own the expensive infrastructure to play in that arena.

There are two compelling reasons.

One, digital technology allows everyone to access the public. You don’t have to spend hundreds of millions of dollars for TV or radio stations to do so.

Two, there is so much talent on the street right now – discarded by financially failing media companies -- that the learning curve would not be steep.

The biggest hurdle would be to make sure what content was created did not sound like a big blatant commercial. No small thing in a day and age when we shout from the mountain tops to make people buy -- buy -- buy.

But assuming some shrewd consumer companies exist out there – and we all know they do – what has changed is that advertisers increasingly don’t need the content created by the media.

They don’t need to worry about whether TiVo viewers are skipping their commercials or recording the shows they sponsor without even watching them. (I wouldn’t do that. Would you?).

Advertisers don’t have to get squeezed into the same six or eight minute commercial stop sets because radio station CEOs think two long music sweeps gets them better ratings.

It doesn’t make any sense.

What good are the better ratings when an advertiser's commercial is buried knee deep into six minutes of competition?

Radio, TV and print executives won’t buy this theory for one minute which is another reason I’d take it to the bank – now. They don’t have a very good record of seeing trends.

In radio, putting aside all the other problems they have, the secret, silent and shameful issue is that radio stations on the whole do not even know what their advertisers do let alone what their goals are or how radio stations can help them.

Radio is “in-ear advertising” kind of like billboards are outdoor advertising. If you hear them, you hear them. Run a million commercials maybe it will get through eventually -- maybe.

The radio industry could solve a lot of its problems if they decided to be more solutions oriented.

Instead, they send their overworked salespeople to the street on “Pets and Vets” week. These salespeople have no clue what veterinarians do – but armed with some info from the RAB they are expected to forge excellent relationships and ring the cash register.

Try this.

Train salespeople to have many tools available to solve advertisers’ problems.

If they find out that broadcasting at their spending level is not efficient, then why not start a Fido podcast. Charge $50,000 a year for it (based on market size) – the pet store or vet group brands it. Your station owns it and provides the content and helps with the messages.

It’s a renewal from heaven every year.

Help make Fagreed rich again in spite of himself!

Maybe advertisers don’t need any commercials in their $50,000 a year podcast – and that’s what I would advise, by the way – then just the fact that year after year they will be building a growing audience for their hints, help, emergencies, breeds, warnings, fun stories, events, etc will be enough.

Again, you own it and they brand it.

Back to my salesperson – many of whom I’ll bet would love to work like this.

So they leave a prospect meeting without ever selling a radio ad -- but they sell a podcasting franchise or an Internet radio station customized for just them that the station runs and licenses.

What do you think is going to happen when advertisers roll their own – programs, that is? You won’t sell them one radio ad.

But you could sell them other solutions -- digital solutions that you can develop for them at next to no cost.

Radio may work for the masses when a GM dealer is blowing out every car on the lot for up to 40% off – then this salesperson is qualified enough to build a solutions campaign around this need for terrestrial radio (and smart enough to get payment in advance).

Radio has but one tool and it is in need of sharpening.

Owners have let their assets lose their edge.

Going into a client’s office with only terrestrial radio as a solution will be leaving a lot of money on the table.

Competing digital media hasn’t been that impressive in their attempts to lure advertisers – thank goodness for radio.

But salespeople selling only radio is like a men's store selling only belts.

Today’s marketplace wants solutions and if radio consolidators weren’t busy playing Hangman for the past 13 years, radio talent and sales marketing would be on the cutting edge of selling solutions.

Terrestrial.

Social.

Digital.

Video.

Online print.

And while the train has left the station on this one, radio execs had better run down the track after it to get aboard.

I’m sensing that over the next few years, advertisers will become shrewd content producers independent of radio, television and publishers -- maybe even some Internet media entrepreneurs.

They have the ability and they’ve even practiced in one-minute small steps.

That’s called Super Bowl Sunday.

The big marketing story of the next five to ten years will be the redefinition of Marshall McLuhan’s term “the medium is the message” referring to hot and cool media.

Instead, the medium will become the content supplier with solutions for advertisers or else advertisers will simply do it themselves.

Digital media makes it possible and doable.

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Six Flags Over Radio

The amusement park Six Flags went belly up over the weekend.

One of my readers immediately sent me a very thoughtful narrative of how the fate of Six Flags and the radio industry parallel each other.

For example – Six Flags carries more debt ($3.4 billion) than it has equity. It cannot make a $288 million payment now due thus the Chapter 11 filing.

In radio, consolidated groups are over leveraged up to their Yin-Yang with debt for which they appear unable to make their next payments to lenders.

Six Flags has $3 billion in assets but banks like HSBC, Mellon, Citigroup, Barclays, hedge fund Renaissance Technologies LLC funded this magical mystery tour without regard to the usual and predictable cycles of economic downturns.

Ditto the Wall Street lenders who pumped money into radio for acquisitions in spite of unrealistic multiples that were paid to acquire stations and without regard to whether the debt they were accruing could be managed.

Six Flags lenders made a fortune on fees while they were wearing their rose colored glasses.

You know how lenders cleaned up while driving suckers like the Lee & Bain, Teddy Forstmann at Citadel and the Dickey family deeper into debt.

Six Flags was a great business.

It operated 21 properties, hosted 25 million guests, bagged $1 billion in revenue and actually made a healthy $283 million in operating income before interest, depreciation and principle payments. That’s a whopping 23% margin, but not good enough to keep up with debt payments.

Radio is still a good free cash flow business with little overhead except for – debt. Many stations throw off positive cash flow but radio companies don’t generate the super huge numbers they need to clean up their debt obligations.

Many radio companies have previously refinanced their debt at terms favorable to lenders in order to avoid judgment day --- the day that is coming for sure at a radio consolidator near you.

Six Flags management has been working together for the past four years – a plus.

Radio’s upper management has been together for most groups since the start of consolidation or before 1996. Management stability is a negative for radio because the handful of CEOs who wound up with all the power (and protection of super stock voting rights) is pretty lame. These are not the top execs a successful board of directors would pick out of a lineup – for sure.

Six Flags previous management is the group that dug their company into a grave with an eight-year run overpaying for theme parks.

Sound familiar?

Looking ahead, the Six Flags scenario provides those interested in radio with a view of what is ahead.

In bankruptcy, Six Flags parks continue to operate and debt holders take a big write down. Loans are converted to equity at, say, 40% on the dollar. As far as original equity holders are concerned, sorry about your luck. You’re wiped out.

The banks peddling financing get to keep the fees they generated from these suckers.

Radio will be worth pennies on the dollar as well should Chapter 11 be filed. Some lenders will be totally screwed –- some partially screwed – if that’s even a good way to put it.

The fees earned are untouchable.

Lee & Bain went through with the $20 billion acquisition of Clear Channel and they had a chance to get out when banks balked, but they marched right on collecting the fat fees in return for owning a failed company. Now Lee & Bain will probably be shoved aside in bankruptcy, but business goes on in the world of Wall Street investors.

Six Flags will likely get a new team of managers.

Radio needs some, but if the courts appoint caretaker types, that is likely, then it will be only for the purpose of dividing up the remaining crumbs not with the hope of reemerging from bankruptcy once debt is restructured or dismissed.

The newest Six Flags bank-chosen management team will be, as my reader suggested, “passionate about the return of bank debt converted to equity. Money losing parks are quickly closed without regret or prior contractual obligations now voided by bankruptcy. Capital spending is reduced. Operations expenses reduced further with less employee training, less supervision, less maintenance, lower marketing/advertising. Rides are dirty, prices higher, and short-term profitability improves”.

The new radio management team chosen by banks with court oversight may be scarier than seeing John Slogan Hogan running the largest radio group in the world. I don’t think banks even know who good operators are. You and I do. We could suggest names, but the very type of radio manager needed to fix the mess created by consolidators is not likely to be chosen to serve.

Two years from now, the banks will clear their balance sheets of the converted equity. Wall Street will help Six Flags with a new public stock offering. The banks will cash out. Wall Street will make more fees.

Two years from now in radio, stations will be in the process of being returned to their rightful owners, local operators and individuals, who will need – you guessed it – more financing to buy these properties even at 4 times cash flow or less.

More fees for the lenders – even when they lend to the good guys.

Then, somewhere down the line, you can set your clock for Six Flags management to grow the theme park business again. Never mind, the recession is over. Bankruptcy a thing of the past. So, they will take their newly found strong balance sheet and take it to Wall Street banks for another round of fee-based loans.

After all, you’ve got to grow a business to be profitable, right?

In radio, while the consolidated groups will likely be broken up, smaller groups will emerge and once they derive revenues from new media (a must, not an option for future performance), they will be marching back to Wall Street lenders as a new age media company.

Please, invest in us. We’ve bridged the gap between terrestrial radio of old and new media of tomorrow.

Much if not all of the above scenario is likely to play out in the months ahead.

Even the consumer can’t save American companies from the crack they are addicted to – huge loans at unfavorable rates.

This reminds me of the loan sharks that navigate the streets of South Philadelphia looking for people down on their luck with money they need but can never pay back.

Like the Hotel California, you can check out but you can never leave.

American business thrives when it is diverse and small.

Large companies can acquire but can’t seem to operate. Don’t believe me. Believe Peter Drucker.

We’re entering a new period of entrepreneurship where small groups of people can do big things without Wall Street.

Steve Jobs and Steve Wozniak invented Apple in a garage. And while you may argue that they needed Wall Street loans to grow, I would respond that Apple has almost $20 billion in cash reserves. Apple even thinks different when it comes to loan sharks – investment banks.

One Harvard drop out invented Facebook (although Mark Zuckerberg still hasn’t figured out how to make money with it).

A handful of young folks invented YouTube in a garage and made $1.6 billion when Google, the big company with all the money, couldn’t come up with that innovative idea.

Big companies and their lenders are devoid of ideas, strategy and can’t see the future ahead.

Troubled companies – such as radio consolidators – turn to legal loan sharks.

A Mafia loan shark usually will charge 6-10% per week compounded weekly. At first they will give you two weeks to repay, for example you borrow $2000 you will owe them $2100 in 2 weeks. If you can only pay $600 then you will owe $1500 plus the 5% interest per week until paid, so if you make another $600 payment in 2 weeks you will still owe around $1100.

Sounds like Wall Street banking hasn’t strayed far from this model.

So with Clear Channel, Cumulus, Citadel and a handful of other radio groups likely to default on their loan covenants in the next six to nine months, if you want to see what their lives are going to be like, refer to Six Flag’s scenario – it’s how it’s done.

Of course, if you were a victim of consolidation, I can’t think of a better time to get thee to a garage and think different.

Innovation can be sold to these suckers all day and all night.

Just don’t be one of them.

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