Bigger Recoveries for Radio Groups That Laid Off the Least

If we’ve learned anything from watching radio’s consolidators try, try again to reinvent the industry, it is that the radio listener has by and large become collateral damage to refinancing.

Even as I write this, a blatant move is afoot that would allow Citadel to push through a pre-arranged bankruptcy that will enable the emerging owner/lenders to either sell or grow their company by acquisition.

That is, one moment you’re broke and then, through the magic of pre-arranged bankruptcy, you suddenly become an acquirer.

All this doesn’t seem fair in light of the fact that thousands of radio jobs have been eliminated by consolidators under the guise of financial pressure due to the recession. While the recession had a real impact, it turned out to be cover for their real move that was to downsize the assets so that they could put them in play again.

Jobs lost.

Talent expended.

Digital and mobile competition disregarded even as a new generation starts to embrace options other than broadcasting.

All of this would be unthinkable in the world of Apple -- the company that built shareholder value all along during the same recession broadcasters hit behind.

CEO Steve Jobs, not only the master marketer but, the Zenmaster of all generations.

Don’t get me wrong, Jobs is a money guy. But he approaches making money by building products and services that consumers want even if they are not sure at first that they do want them (think iPad).

Jobs snookered the major record labels back when he invented the iPod.

You may recall that MP3s existed before the iPod but they didn’t really take off. Record labels as usual were part of the problem. Jobs went in and pitched the self-serving label execs on a new way to stop music piracy because Napster had reared its head at the time and the labels were fearful.


Jobs played to the fears and egos of record execs and they allowed him to make their music available for the iPod. But Jobs outsmarted them in other significant ways as well. He got them to let him set the price of music downloads at 99 cents per song and that standard, until recently, was the only price for a "tune".

What’s more -- Jobs started the tide away from purchasing albums to cherry-picking songs at 99 cents. The labels have never been able to put this genie back in the bottle again, but consumers instantly liked not having to buy an entire album when all they wanted was a song or two.

You can see what happens when smart people appeal to the arrogance of industry execs who think about how they want their industries to look instead of the way consumers want it to be.

Jobs is still keeping consumers foremost in his marketing mind.

Buy an iPad 3G model and you get to decide on the $15 minimum mobile charge on a month-to-month basis. Forcing the despised AT&T to employ monthly pricing and no contracts is taking care of Apple by taking care of the consumer.

Consumers don’t want another two-year relationship with phone companies. This generation wants as little commitment as possible and Jobs, the more powerful he gets, has been able to deliver it on the new iPad.

Now let’s look to radio.

Thousands and thousands of good radio people were forced out of their jobs when Lew Dickey, John Hogan, Fagreed Suleman and their followers thought they knew how to reinvent radio.

The problem is -- listeners didn’t want their radio diminished into repeater formats, voice tracking and non-local content. The pure gold of radio -- local personalities -- were sent packing. I know of deals where some of your major consolidators are paying multi-year contracts to personalities (and we’re talking well in excess of $500,000 a year) to not be on-the-air.

Let me be clear.

They are still paying every penny not to have popular personalities on their air.

You may think they are nuts, but they think you’re nuts because in some cases these radio corporations are able to report better financial results to shareholders by employing this tactic.

So as Apple is guided by the thought that they must super serve their consumers, radio companies are obsessed with financial shenanigans that allow them to reduce the quality of the product and still charge advertisers the same money. If Apple offered consumers half an iTunes download for 99 cents, their customers would leave them.

Same thing in radio -- give listeners less and they’ll go elsewhere.

Except there are plenty of “elsewheres” to which they can now escape. I can see me spending more time on my new iPad and my time has to come from somewhere. Since moving to the Phoenix area, I first turned to satellite radio, then to auto hard drives. That time had to come from radio.

It’s not all bad news, but there’s not enough good news. When your big companies that set the trends and own the big market stations are seeing bankruptcy as a profit center it makes things hard on the people who actually know how to serve listeners.

Small and some medium market owners.

They have to be linked to the needs and wants of their audience or there literally is no reason to exist.

If a radio group called me in to show them the future, I’d point to learning what their target audience wants and needs. And if that is a 20-minute portable morning show with a big personality and no music -- done. That’s called a podcast.

Then, build 100 of them per city and market them not using commercials but events. But owners know better. Just keep cranking out 24/7 radio even though by the time Apple sells 20 million iPads (probably at the end of 2012 or sooner), even more radio listeners will defect.

Keep attacking Pandora and see what you get.


Pandora is beloved because it responds to -- you guessed it, the genomes of its fan base.

Radio could do this, but not by gimmicky services that force on-air listening.

It certainly isn’t the world of the next generation which is mobile, on-demand and interactive.

The worst time to stop listening to listeners is when you’ve forced them to tune you out.

In a recent and noteworthy Wall Street Journal article, Scott Thurm writes big layoffs decimate a company's chance for a robust recovery. He cited Honeywell as an example.

Ten years earlier, when sales fell, Honeywell laid off fully one-fourth of its workforce, scrubbed plans for new products and global expansion. Sounds like radio in a way, doesn't it?

During this past recession, Honeywell used furloughs and benefit cuts to limit layoffs to keep the workforce in tact -- ready for the recovery which has finally arrived. Only five percent of its workforce was actually let go in comparison to the earlier bloodbath.

Because Honeywell had its workforce at the ready this time, it introduced 600 new products and now sales are up and the outlook is excellent for the year ahead.

To quote the excellent article:

"That's no accident, according to some analysts and students of corporate behavior. They say companies that take a limited and more-targeted approach to layoffs tend to do better in economic recoveries than those that slash employment sharply and across the board.

Enjoy your bankruptcies".

The article is full of examples of companies that approached the recession by going for big cuts when the going got tough and as it points out -- in the months ahead the theory that lesser cuts during hard times means a bigger recovery.

Too often we see radio discussed as the business that it has become. Infrequently do we hear companies concerned with listeners, their likes and their favorite personalities or for that matter the services they expect from a local radio station.

Forgetting listeners is what is bad for business.

And as far as profits without programming, forget that as well.

Over the months and years ahead, radio companies that continued to value its talent and struggle through the recession with a concern for their listeners will likely be robust companies again -- especially if they start spending money developing the separate mobile media business.

For the smartypants who cut their best salespeople, managers, talent and programmers, you may not be surprised that when it comes to profitability -- they have cut off their nose to spite their face.

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