Mark Mays is stepping down from day to day operations by the end of the year although he will have a sweet "work 20% of the time for $1 million in pay" contract for several more years – not to mention an option to buy Clear Channel’s Gulfstream private jet.
Mays gave a hint that he’s stepping down so that Clear Channel can hire a CEO proficient in new media. After all, only Cumulus is in denial that new media is going to have to be a more viable initiative if terrestrial radio is to remain a growth business in the years ahead.
I’ve been thinking this over.
Clear Channel is one of my favorite radio companies from the standpoint of the talent they employ. Even after purging so many good people, it is remarkable that they have been able to retain so many excellent managers, sales execs, programmers and talent (where they are still allowed to be on the air locally).
I’ve never been wild about the Mays family vision for radio and Lee and Bain – in my opinion – operate like the investment bankers they are. That is, clueless about the business they are running and in which they will owe $18 billion in debt payments a few years from now.
Here is what Lee and Bain are likely to do compared to what they ought to do:
1. Look for them to hire someone who is blessed by Wall Street as a real certified CEO. That $18 billion debt repayment is no small thing for a company that throws off about a billion in income annually. I’m thinking Lee and Bain want a guy (yes, probably a guy) who understands their language. That language begins with the words, “yes sir”.
2. I’d be shocked if a bona fide new media executive took over Clear Channel as Mays has hinted. In fact, there is no need for a new media executive to run this radio company. Just the mandate of an experienced radio exec who can learn new ways to create content in digital places where consumers spend time (i.e., mobile phones, new car entertainment systems, the Internet, WiFi locations, video spots, social networking, etc).
3. There’s a 50/50 chance John Hogan remains when the new "suit" becomes CEO. Look, you may want to start over without Mays but I’m not sensing that Lee and Bain want to. Often the investment banks that become business operators in this country want to keep the very people who underperformed in the first place. They are more comfortable that way. Think Citadel’s new owners keeping Farid Suleman and giving him an even better contract after he tanked the company.
4. As much as I frequently say radio must get into the digital future, it also has to simultaneously get back into its local roots. Radio can’t be an iPod. Will not be Pandora. No need to ever become YouTube online – we’ve got one. You get the picture. Local radio is what companies like Clear Channel killed off using their new corporate downsizing model and if that continues, the industry’s ownership leader will fail at its terrestrial radio mission.
Now, here’s what Lee and Bain ought to do:
1. Hire an experienced radio exec who understands new media. That wouldn’t be Mel Karmazin, by the way. I see the trades have speculated about that scenario. Mel’s a great salesman. Clear Channel needs a leader with vision who is devoted to making all their stations local terrestrial radio stations.
2. Then I’d retire John Hogan and hire two new people. See, you can tell him it will take two people to replace you, John. One, the best local radio operator currently within (notice I said within) Clear Channel. Do not hire outside for this post. Second, hire the sharpest digital media executive and give her a chance to create a three-year plan to develop non-radio digital content.
3. Sell one-third of Clear Channel’s stations over the next three years. Lee and Bain are not going to get 7 times cash flow or more like Les Moonves wants to part with some CBS stations, but think of it this way – at least Lee and Bain get to make all those fees. I’m saying Clear Channel is too big to be profitable because no one can run a platform that large and no one has to. Sell and reduce.
There’s my advice and it’s worth exactly what Lee and Bain are paying for it – nothing.
If Lee and Bain do not aggressively move to build a local radio company and hire an expert to develop the promising new media potential, all they will have left is one big mess.
Which, they will refinance in two years for higher interest rates than they are paying today.
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