Digital USA Today – No Way

If everyone knows that the future is digital, then why doesn’t everyone know how to create content for the digital future?

The latest casualty appears to be Gannett’s USA Today where a decision was made last week to cut the work force by 9% on news of declining ad revenues and circulation.

USA Today used to be number one in paid circulation but now News Corp’s The Wall Street Journal has surpassed it with 2.2 million daily readers.

Wait a minute.

Is that the same Wall Street Journal owned by Rupert Murdoch who loves printed newspapers and who is forcing paywalls onto his print operations?

Funny about that.

Whether you agree with Murdoch’s politics or his style, he’s shrewd.

The ultra competitive Murdoch is now trying to rub it in the face of Arthur Sulzberger, Jr., the New York Times publisher who has successfully grown the local New York paper into a position of national prominence. Take note that Murdoch is doing a monthly Wall Street Journal Magazine to compete with The Sunday Times Magazine (at least their advertisers), a local city section to get in Sulzberger’s New York business as Murdoch pontificates about paywalls for the digital world.

My take is that Murdoch is using the paywall to keep subscribers paying for print publications. It’s a strategy not to give away the printed content online. That’s all well and good but Murdoch is not likely to be viable in the future with any of his brands if he cannot sell them to young consumers who don’t even use newspapers to wrap their fish. I don’t think they even eat fish – yet.

Along comes unpopular USA Today Publisher David Hunke who in July ticked his real journalists off when he wrapped the front section covering up the biggest stories in an ad purchased by Jeep.

I love what Neuharth said in The New York Times:

“If such a stupid decision is ever made again, I hope that will be the result. That would leave those who apparently don’t understand what a newspaper is to try to put one out without a news staff.”

So, USA Today is now spinning its failure to create and deliver content to its former audience in numbers that it used to deliver as a call to the digital future.

USA Today says it will now focus on its digital operations and will feature breaking news on its website. Hunke is so clueless, in my opinion, that he actually said that the new online USA Today will aim to post articles of breaking news within 30 minutes of happening.

All together now -- because I’d like to think that my readers know better -- what is wrong with his brag?

Of course, USA Today will be about 29 minutes too late. Twitter is faster for getting the word out. Facebook can do it quickly.

This serves as a great teaching point about why traditional media – not just those klutzes we know and love in music and radio – don’t get it.

Let me spell it out:

1. USA Today was called “The USA in an entirely different way” when it was launched. In color, in sections, inclusive of news from all 50 states, short articles before anyone ever heard of ADD. How does it live up to its mission in its latest digital iteration when any competitor can do the same thing?

2. USA Today was a great paper for under the hotel room door or on the airplane before takeoff. They knew it and developed lots of stories about travel and aviation. Tell me again how covering breaking news online with everyone else in the world will make USA Today be born again? Of course if that's all there is, it will fail.

3. The iPad is the new TV, radio, newspaper, magazine, record store – you get the point. Content must be optimized for the iPad or that content is not likely to find its audience in this growth sector.

4. And, content must be unique, compelling and addictive or else why would anyone need it? I believe in free and also in paid, but if you want readers to pay for digital newspapers, they had better offer something not easily delivered by their competitors. Michael Bloomberg, in my view, gets little credit for how smart he really is. Way back in the day he sold specialized information to business clients that needed his computer terminals. To this day, Bloomberg is a leader in creating great content and delivering it in relevant ways. NPR is another.

Why does this matter?

The digital frontier is not a fallback position for failed traditional media companies.

It encompasses a new set of rules and standards that are separate and apart from traditional media.

For example, and bear with me on this fantasy here …

• Radio will one day be delivered in “shows” ranging from minutes to hours on the delivery system of the day which so far looks like the iPad. They will be heard on-demand. No more morning drive. A listeners “morning drive” will be whenever they want it to be.

• Audio, video and text will be included in every communication so there will really be no radio, TV or newspaper anymore. It will grow into a hybrid.

• Music discovery will be done by consumers who become the new age disc jockeys transferring files to friends and recommending new acts. This isn’t so bad. There will still be a demand to own the music once it has been consumer-tested. However, you can see that record labels do not believe my last sentence.

The only reason all of this hasn’t come to fruition right now is because technology has not caught up (like in seamless WiFi) and royalty rules (as in fair priced licensing to streamers and mobile content providers) so it is acting as a deterrent.

Maybe that’s good because executive management hasn’t caught up or caught on, either which is why you and I have a better chance of succeeding with a new age digital business than the traditional media companies who have access to all the money.

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Radio’s Apple Store Solution

Every time I go to an Apple store, I spend money.

Don’t even ask.

I always find things to buy there and I am so willing. I'm spending down my Apple stock profits.

But I also observe a culture and an approach that is so fascinating that I got to wondering what would happen if the troubled radio industry would look up and learn.

Okay, I was actually not in the Apple store Saturday, but Sunday as well and I don’t know why I am amazed but the place was crowded both days. I mean these are the dog days of summer in Arizona and it is over 100 and, yes, very humid. Monsoon season when smart locals try to take a vacation if they can.

Still the place was packed both days with demographics we in the media business can really appreciate. Young, very young, middle age and old. All there getting involved with Apple products.

On this trip something registered that I would like to share with you. Not just the Apple store as a great and prosperous retail operation – it surely is that – but also as an approach to people, customers and the company.

While I was at the Genius Bar, a young man walked out from the back of the store in North Scottsdale. It looked like he was going home, but no, he was in fact leaving for good to go back to school.

Spontaneously, his fellow associates broke into an enthusiastic and loud round of applause led by store managers as well. The applause was so sustained, I don’t think you or I have experienced such clapping even after making a freebie personal appearance for our radio station employers.

Then, the customers joined in and clapped. It was too noisy to even talk to my Genius, but the real genius was the Apple leader who understood how feeling appreciated is the best motivator for employees.

Not money which costs companies money, but appreciation which is free.

I thought of radio employees who have lost their jobs during consolidation over the trumped up excuse that their employers could no longer afford them. And of those poor Cumulus employees who write to me privately even under threat of execution by the Dickey family that they hate their company and can’t wait to leave.

Not so at Apple.

Employees love to work there perhaps in part because they get a heavy dose of appreciation as an on-the-job benefit. I am not naïve about all of this. I am sure there are unhappy Apple employees out there, but they are harder to find than unhappy radio people.

The young man who helped me Sunday was interested to learn of my relationship to the radio industry and proudly whipped out his iPhone to show me an iHeartRadio app. I was very impressed.

He loves JohnJay and Rich at 104.7. Couldn’t identify the call letters but then again no foul, he didn’t have a People Meter on either. I learned that he only listened in the car and didn’t care for the station the rest of the day. What this young man wanted was what radio can’t seem to get rid of fast enough – personalities.

He tuned in for the personalities that radio is firing.

Would he be surprised to learn that his favorite Phoenix-based morning show was syndicated elsewhere putting other local personalities on the unemployment line? I didn't have the heart to tell him.

When he flipped through iHeartRadio for me this nice young man said he likes to listen on-demand which he reminded me he can do. But without JohnJay and Rich, he’s pretty much out of listening to radio unless he had to.

An Apple employee knows better than anyone that as long as WiFi is not consistently available while he is in the car and while mobile carriers charge or threaten to charge more for using the inferior 3G, he can still be a radio listener.

Unfortunately, if and when he can get an Internet signal consistently without additional cost, he’d probably leave his favorite radio personalities unless they follow him. And he is through with 24/7 broadcasting – like his generation, he wants on-demand.

It reinforced my belief that morning drive is whenever consumers want it to be and radio companies are killing themselves by letting personalities go. In fact, they should be hiring more for that day when seamless Internet follows this on-demand generation around.

This Apple employee told me that he can spend an hour and a half with me because his job is to show customers what Apple has to offer – not to close sales. It is a different mindset. In fact, I wondered why we don’t go back to that in radio – showing solutions (online, on-air, on the phone, in social networks) and become experts at showing, well – solutions.

Too many radio sales groups are beating the phones to sell spots and not solutions and believing the economy will return and so will radio budgets. That may be partially true, but when those budgets increase the new media components will increase with them.

One last thing.

He loves Steve Jobs – that flawed, quirky icon who runs Apple like a personal fiefdom. Respect for the company – for the management and its policies – that’s what he and others at the Apple Store have.

They don’t begrudge Jobs for being worth billions – and growing – every day but in radio we get sick to our stomachs when radio CEO's make huge paychecks.

Perhaps its an issue of competence or lack of it.

Or maybe that Steve Jobs has inculcated in Apple the belief that he cares to take a lead in designing new products, having them well represented to customers and institutionalizes the value of respect and appreciation to those employees who do not earn billions.

Could radio learn from this?

Visit the Apple Store and you’ll lament the missing element in today’s consolidated radio – that is exactly how great radio companies operated before the “enlightened” era of consolidation.

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6 New Mobile and Digital Trends

Have you heard about what Sears is doing?

Sears Auto Center is conducting a marketing campaign online for drivers all across the nation this summer.

Their mission: Take $1,500 for gas, food and lodging and make a video introduction of yourself with those going along with you then Tweet, blog, report to Facebook and video your adventure.

Some think Sears has pulled off a TV reality series without TV for the new age for pennies on the dollar.

Sears Auto signs have to adorn participating cars and they will use social media as content along with pre-recorded video introductions.

“Exploring My America” consists of 21 teams on week long trips to places like the Appalachian Trail, the Dixie Overland Highway and Route 66 from Chicago to LA. Each car (sorry, winners have to use their own) gets a $500 tune-up at Sears Auto Center and gets equipped with a video camera and WiFi card to help the images keep flowing at exporingmyamerica.com.

Sears reportedly received 100 video auditions by the beginning of July. Online viewers do the voting. Each week from July 11 through August 28, viewers are voting for their favorite team after watching online photos, videos and reading blog entries created on the road. The winning team gets $500.

Earlier in the year Pepsi bailed on the Super Bowl and did a community activism promotion where local do-good groups could receive some of the millions they were offering. Again, online voters determine who gets the money for their community campaigns.

Increasingly, advertisers are going on their own to use the Internet as an alternative to traditional media.

Radio could be and should be doing these promotions which sound very much like radio promotions from another day. Radio got lost in its own robo world when it relied on ticket giveaways and texting contests. It may be time for a rebirth of local radio promotions that may (or may not) reside on the station’s airwaves.

There is an audience out there that is worth harnessing and radio people have the talent to find it. Note the sports teams that are starting to treat their venues as social networking opportunities by tying them together during the game.

Broadcasters feel comfortable broadcasting 24 hours a day, seven days a week and letting the audience catch them.

It’s obvious that content providers are going to now have to catch consumers where they live and work in other ways.

Five other interesting trends to keep an eye on:

1. Now people over 65 are adopting Facebook at a faster pace than any other age group – 6.5 million in May alone and more than three times from a year earlier according to comScore. Young demographics were indeed the earlier adopters.

2. Americans have increased their time on social networking sites by 43 percent, while their use of email has declined by 28 percent according to Nielsen. Some 40 percent of American’s on-line time is spent on social networks (22.7%), online games (10.2%), and e-mail (8.3%). These categories increased from 37% a year earlier.

3. An analyst for Simba Information says Americans use e-books at a rate much slower than it thinks. But there will be an estimated ten million e-readers out there by the end of the year up from only four million a year ago. Reading books electronically could be ready to take off but don’t count the Kindle out. Apple’s iPad has eye fatigue issues (not good for serious readers). There is also distraction from mail, the Internet, video and other things with the iPad that further complicate the segment. Color Kindles are on the horizon.

4. Streaming music subscription services continue to be rolled out even though no one service has caught fire. The latest is Rdio, a social music service that offers an unlimited streaming of seven million songs to computers and smart phones for $9.99 per month. Consumers can purchase tracks for 99 cents. This product and others such as Rhapsody seem built more for the record labels than a consumer. The labels insist on doing subscriptions their way which is why it will take Apple to stream your iTunes library from the cloud to make subscriptions work.

5. Android has become the number two smart phone behind iPhone (now 34% of the market). Blackberry slipped to third place within the past few weeks and RIM’s new iPhone-acting Blackberry isn’t selling all that well. It looks like a race between Apple and Google on this category. Global shipments of mobile phones running Google’s Android system grew 886% in the second quarter from a year ago (source: Canalys) and Apple is continuing to sell iPhones as fast as they can make them. Canalys analyst Pete Cunningham says, "By 2013, smartphones will grow to represent over 27 percent of shipments worldwide, with the proportion in some developed markets in Western Europe surpassing 60 percent and 48 percent in North America."

The first ten years of this new century were devoted to the Internet.

The next ten will be about the mobile Internet.

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Digital Overload

A recent article in The New York Times was a fascinating study of what happened when a group of scientists took off for the Grand Canyon without their mobile devices for an analog vacation.

Cell phones did not work. There was no Internet access. This trip was an unscientific beginning to what I believe is going to be required research in the future on how heavy use of digital devices and other technology affects our brains.

There were five scientists in the group – some believers and some skeptics, as the article pointed out.

What they were searching for is the answer to the question, does heavy technology use inhibit deep thought and cause anxiety? Can getting away from being connected – such as camping out in the Grand Canyon – help?

There is no doubt in my mind observing young students at USC that depriving them of mobile connectivity causes extreme anxiety. Young people often sleep with their phones, waking up to respond to text messages at times and then returning to sleep even if that sleep is of poor quality.

Students are smart. At the peak of their learning ability. Yet many are tired and as students in bygone eras did, turn to caffeine to stay awake.

Study of the impact of heavy digital use on the brain is the focus of the National Institutes of Health which now has a division to support studies of the parts of the brain involved with focus.

Broadcasters, mobile streamers, content producers and musicians will surely have an interest in their findings.

All of us from the content providers to the end users are experiencing increasing anxiety from digital overload. How simple and perhaps therapeutic it was to only have a radio to listen to on the way to school or work. Now, we text while driving, get the traffic and weather from our phones, check email and other things while making the same commute.

In the 60’s, a listener might curl up with a radio and listen to Jean Shepherd on WOR from 11:15 p.m. until midnight with no other distractions. Now, 45-minutes is a long time to commit to any kind of content.

We cannot begin to understand the most important thing of all unless we study the consumer - how is the end user able to receive that which we create?

Back to the Grand Canyon.

These five scientists experienced a form of withdrawal that ended on the third day. They called it "Third Day Syndrome". I recently experienced some of this myself on vacation at the beach. Those first few days were brutal. I sat there looking at the ocean doing everything I usually do at a desk with digital devices nearby. What a waste of a view.

Here are some observations from the Grand Canyon digital experiment:

1. At least one scientist arrived at the conclusion that he may be turning to his cell phone in moments of boredom. You and I may experience the same thing. I am wearing out my pockets pulling my iPhone out and pushing it back in. Am I bored? Students told me they liked to hold their cell phones in their hands. Made them feel better – more connected as they could glance down for messages and respond in kind.

2. Sometimes the cell phone was used so the user could be anti-social. That’s interesting as mobile devices allow us to be connected by Facebook and Twitter to other "friends" who are not in our company. Could we be shortchanging those around us?

3. It was observed that clear thoughts were the benefit of getting away to enjoy nature without the use of digital devices.

4. One scientist said he could now understand why teenagers decided to text while driving even putting themselves and others in danger.

5. Maybe digital stimulation leads to poor-decision making. Ever since I have owned my iPad and used it to read books at night, I have been getting lousy sleep. I Googled the phenomenon to find that others are having the same problem. Turns out the light emitted from the brilliant iPad screen even at the lowest settings disrupts sleep patterns. I went cold turkey for two weeks with better results. Now I ordered a Kindle for late night reading as much as I like the iPad better. Kindle digital “paper” does not produce the overstimulation of the iPad.

6. Most wanted to eliminate the digital overload to the point of seeing an improvement but not necessarily beyond. This may be the most interesting side effect of all. I, too, want as much digital stimulation in my life without getting brain weary, sleep deprived, rude to others or distracted.

In the end, consumers will have to learn to manage their digital lives better than they do now.

This adds an extra dilemma for content providers who are still new to the game.

But it also presents great opportunities.

The next Jean Shepherd could tuck you in with a 20-minute monologue developed for nighttime digital use whenever your "nighttime" is.

Radio will be used the way toothpaste is now used.

Squeeze your favorite morning personality out of your mobile device and use it on-demand in your “own” morning drive. Hopefully, you won't also spit it out like toothpaste.

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The FM Chip Is On the NAB’s Shoulder

Emmis CEO Jeff Smulyan is a great guy. Good to his people and very smart. And a USC Trojan – what more can you say?

But he is dead wrong on the issue of mandatory FM chips in mobile devices.

The NAB is pandering to Smulyan to win his support for their imminent sellout to the music industry which I call the NAB Radio Tax.

Smuylan believes FM belongs on billions of mobile phones. It wouldn’t cost phone manufacturers much to include an FM chip on cell phones but they are not rushing to do so.

They know better.

Consumers don’t want their phone to be an FM receiver. Radio does.

Just look around. There are cell phones with FM chips out there already in lesser numbers and they are not being used as radios. Consumers – if we would only observe them – use their cell phones for other things.

Cell phones are not a modern day Walkman in spite of what Jeff Smulyan thinks.

That’s the problem with radio CEOs today. I am sorry they paid all that money for those towers and transmitters but the world has changed since.

Richard Harker, one of the best radio researchers for years, wrote a blog recently warning the radio industry to be careful what it wished for.

Harker citing Nielsen research, tells us that good old fashioned email still takes up almost a half hour of every consumer’s mobile hour. Compare listening to music at less than two minutes an hour and you can see where Richard is headed here. He calls for an end to robo programming, voice-tracked nonsense and unremarkable content.

I believe that the radio industry will have some big decisions to make in the next few years.

Radio executives will have to decide whether to get into the mobile content business in a meaningful way or hang on to a technology that is rapidly falling out of favor. The radio industry hastened its own demise by cutting personalities, moving away from live and local programming and serving their communities. An entire generation (Gen Y) grew up without radio as a key element in their lives.

This brings me back to the FM chip.

What do AM broadcasters think about this FM chip? Are they not broadcasters, too? And HD proponents who missed the boat a long time ago argue why not HD?

Smulyan and the NAB are making a mess out of what really is going on which is the sellout of radio to music industry interests in return for $100 million more in royalties. The NAB spin machine is cranking out talking points in consumer as well as trade publications. And CEO Gordon Smith, the ex-senator, has taken to lecturing you on how much more money do you want to spend on fighting with the music industry. The fix is on.

The NAB includes empty promises like FM chips to sweeten the deal which they intend to make with the RIAA. They will do this without widespread support as most radio station executives are against the NAB’s aggressive position to cut a deal even before the upcoming election that will likely change Congress to be more in favor of preserving radio’s immunity from such a tax burden.

The NAB uses scare tactics like – how would you like to have to negotiate a deal with the evil CRB like streamers had to do. The CRB is a bad idea, no doubt about it, but no radio tax is likely and what’s the rush?

Radio’s FM chip problem is that it is all a fantasy.

Sounds great to think of billions of cell phones as radios, but it will never happen. The major consumer products and mobile industry is against it and they have real lobby groups not what the NAB has turned into -- impotent.

$100 million in annual increased taxes for stations sounds like nothing the way the NAB is throwing your money around.

Except for one thing.

Consumers have and will continue to reject a mobile phone as a radio and $100 million a year is just the starting point. It, like other taxes, will go up and never down.

In other words, you are about to be had once again by your National Association of Broadcasters, the people who were instrumental in tacking on radio deregulation to the Telecommunications Act of 1996 with little warning to most radio operators.

Maybe it’s time to put a person who has actually worked in a radio station as head of the NAB. The last guy was from the beer industry and Gordon Smith is a former senator. Both pretty unimpressive at exactly the wrong time.

Tying FM chips and other perceived “benefits” to an onerous tax of $100 million more radio dollars (for starters) is misguided.

I’ve got an idea for you straight from one of my readers.

He said, if the NAB turns Benedict Arnold on its own constituents one more time and signs off on a music royalty tax of any kind, the NAB members (about 50% of all radio stations) should take 100% of their annual NAB dues and apply it to paying the NAB Tax and pull out.

Then stay home and take a pass on the NAB events and conventions, and put the travel savings, hotel and food costs that they were going to spend with the NAB toward the NAB Tax.

I'll bet the NAB would think twice if their Radio Tax effectively put them out of business instead of you!

I’ll make it one better.

Start doing it now and send a message to the NAB – no added music royalty tax now or ever! If you live up to the boasts you made for the past few years that Congress was on radio's side then maybe consider rejoining them as a member later.

After all, that’s why you have a trade association – to lobby on your behalf.

If the NAB were half as competent as other lobbies, say the NRA, they would be working night and day to scare the living hell out of local politicians who dare not vote against a local broadcaster if they want to be reelected.

The FM chip is on the NAB’s shoulder.

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Lessons From My Digital Vacation

Every year I return to the New Jersey beaches where I vacationed since childhood to contemplate the year ahead, set priorities and observe how consumers use media in a changing world.

After my years of being a professor at the University of Southern California I have changed a lot of my views and beliefs about the music and media business. As you know I write about it in this space, but thought that you might like to see my thoughts on challenges and opportunities ahead.

Here are a few observations:

1. Only ten years ago you couldn’t go to a beach without hearing boom boxes everywhere with the local radio station blaring. These local stations had a stronger signal than many of the more distant larger stations and they made their money (especially in New Jersey) in a three-month period of time. Thus, lots of commercials – stops and starts – and local content. For the fourth year in a row I did not spot one boom box on the busy beaches I attended. Instead, lots of iPods and almost everyone (no matter what age) had a cell phone that was in clear view.

2. The debate on the FM chip for mobile devices is troubling because as I have been saying, young consumers do not use their mobile devices as radios. This could be a chicken and egg thing. What comes first – the listeners if radio gets live and local or do listeners have to have FM capable mobile devices to bring radio to their cell phones?

3. Kindles and iPads populated the beach. My wife brought her iPad but I did not. The iPad is fantastic in normal light and not so easy to see in bright sunlight. Kindles are easier to read in the sun. Older people seem to have Kindles. Younger folks iPads. Kids will use anything to play games. But I saw one family playing Scrabble on a beach blanket the old fashioned way and they seemed to be enjoying each other.

4. I had to mail a postcard and asked a young store clerk where the nearest mailbox was. He looked at me as if I had two heads. Now I understand why. It took me another day to find a mailbox on the 18-mile Long Beach Island. Okay, it was the first postcard I have sent in probably three or four years, but still, if you can’t readily find a mailbox in a resort, snail mail is over for the next generation.

5. Just a few years ago you had to get to the local WaWa (our convenience stores) early to get a printed New York Times. No more. They’ve got plenty of newspapers no one is buying including the Sunday Times. I love newspapers. Took journalism as part of my communications school education. But they are dead on arrival. KYW Newsradio's website (CBS) or Philly.com (Philadelphia Inquirer) kept me up on local news.

One day I tried to go cold turkey and not bring my iPhone to the beach. I hovered around it and plugged and unplugged it trying to make the final decision. Then I detached and left it in the charger. I was miserable. I understand fully why we are addicted to mobile devices for better or worse and I will share some thoughts with you on digital overload shortly.

My students and young people in general cannot be without their phones but I submit that older people are getting to be the same way.

Texting while driving?

Absolutely. Everyone does it. This is not a young person’s guilty pleasure anymore although I observed many shore vacationers on bikes texting while peddling. The government says texting while driving is more dangerous – more dangerous – than drinking and driving yet more people text than drive drunk (I think. I hope).

So, the world continues to evolve and observing consumers as they embrace new media can be fruitful.

Let’s be specific.

1. If I am a radio station, I’ve got to do better. Must be live and local. Do not need to stream my station but do need to be in the mobile content business. I expect to have to say this until I have no voice left because broadcasters are sitting right there looking at these assets they bought that provide what consumers are using less and less – 24/7 programming.

2. If I am a news organization, I’m going to invest heavily in mobile news content. This is the successor to newspapers. You might argue that there will always be newspapers. I have come to accept that newspapers – even online – are not a growth business. News content presented to groups of like-minded people (say local) will eclipse general delivery. That is the perfect marriage of social networking and mobile content.

3. If I am a new recording artist, I am watching consumers wander onto planes, into restaurants, down the street with their ear buds implanted in their ears. I want to be on their mobile devices. It is no longer a requirement to hammer a radio station until I get airplay. It is more important to find your fans in the mobile space. Record labels have let you down. Time to take control of your music and deliver it yourself to consumers.

Steve Jobs is the ultimate observer of media use by consumers. He leads them by following their sociology. The content creators need to do a better job studying how drastically their listeners and users have changed.

This leads me to conclude that there are no vacations from mobile media.

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Fa-GREED!

Late last week my old buddy Jim Carnegie broke the story that Citadel CEO For Life Farid “Fagreed” Suleman accepted with humility a $43.5 million stock grant from the puppets he calls directors.

It’s all right out there with nary a blush for all to see in the Citadel 2010 Equity Incentive Plan which rewards company managers.

Suleman gets 1,901,042 restricted shares, half of which vest on June 3, 2011 and the other half on June 3, 2012. If you’ve got your calculator out – and he does – multiply $22.875 per share which was the price of Citadel stock when the grant plan was filed recently.

Suleman’s radio “wife” Judy Ellis gets $2.288 million on the same two-year vesting plan and CFO Randy Taylor and VP/General Counsel Jacquelyn Orr (both get 80,000 shares) and Sr. Finance VP Patricia Stratford gets 56,250 shares.

Fagreed also saw to it that his new board was well taken care of with Jonathan Mandel, Paul Saleh, Gregory Mrva and Doreen Wright receiving about $1 million each on the same basis.

One thing is true about Farid Suleman.

He takes care of his own self.

Maybe two things.

He is shameless.

Citadel has been laying people off for years along with other consolidators. They have all been crying about the economy. Then, this pretender to the throne gets the people who put him into his job basically kicked out (Teddy Forstmann). And he files for bankruptcy in a pre-arranged filing that was rubber stamped by a court.

That wipes out the debt from a company he clearly could not run and puts it in the hands of the creditors who apparently don't care – and get this – are so happy to have him running their company they give him a sweet deal to continue with great salary, benefits and complete with golden parachutes at the ready.

A few years ago I nicknamed Suleman "Fagreed" because he has proven again and again that he is taking care of good old number one first. This one-time second banana to Mel Karmazin may not be able to run a radio group, but he sure can earn a salary for doing it.

Over the years I’ve criticized the likes of Suleman, Lew Dickey (Cumulus), Clear Channel (Mays, Hogan et al.) and the other fat cats for not really caring about radio.

There is an underlying group of pretenders such as Radio One And Done who can’t run a company either but these folks aren’t as shrewd as the big dogs apparently. Radio One is frantically looking to refinance the debt it couldn’t afford and other consolidators who have not already gone bankrupt have no choice but to throw themselves on the mercy of, well -- the bankers without whose permission this could not have happened.

This is not going down well with the rank and file.

One said, “the inmates are running the asylum”.

I’m hearing Suleman is moving the company headquarters to Miami to save taxes. Never underestimate the power of a bean counter.

In today’s radio, these stories never seem to stop.

Dickey has more schemes than Carter has liver pills to turn his media empire into a personal monopoly game. His mean spirited management does not sit well with many of his own employees. Cumulus has a class action lawsuit against it and requires questionable non-competes from employees who have no choice but to sign in a bad economy not to mention a few personnel issues.

What is odious is what happened to a great business that was fortunate to have fine people working in it.

The mentality that thinks of only the guy at the top and not the employees who make the company work is sheer greed – like in Fagreed (but not limited to him).

In today’s radio industry, repeater radio, voice tracking and demoralized sales staffs are top priorities.

The radio industry as run by investment banks has less to do with how profitable they are than the value of their real estate. It’s like a Monopoly game where Park Place might allow you to build five radio stations on it because one day some sucker is going to come along and land on it with money to make the owner yet another profit.

But there is a big difference between the board game and today’s “game” of radio.

In radio, the assets have to be worth something – presumably more than the buyers paid. When they let key people get away and pawn off unremarkable national programming instead of live and local radio, their franchise value goes down (or as we say in Monopoly, the price you pay for their hotels and houses are worth less like, say, Baltic).

No mobile or Internet strategy.

Isn’t that amazing?

It’s as if this investment bank game of radio operates in a void skipping the Internet, social networking and generational media.

Some Citadel managers have been forced to fire others, cut their salaries, take away health benefits, uproot families, heap stress on marriages in an impossible attempt to help their bosses avoid bankruptcy.

You see, we had it all wrong in the first place.

Citadel was not bankrupt.

Its leader was morally bankrupt.

The handful of greedies that have hijacked the radio industry should be viewed with shame, not as conquering heroes.

Thank goodness there are small and medium market radio owners who still care about the industry and their people. But when major owners act out of greed in a time of economic uncertainty, it’s a long road back thanks to the black eye they have heaped on terrestrial radio.

In the meantime, we'll have to wait another month for Michael Douglas to reprise his role as Gordon Gekko in Wall Street 2 to help us understand the close relationship between fantasy and reality.

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Bankrupt Newspapers Leave Employee Unions and Government Corporation Holding the Pension Bills

It has not been a good month for newspaper unions at bankrupt newspaper companies or the government corporation that insures pension funds. As part of their reorganizations, a number of bankrupt newspaper firms are not paying money owed union pensions or are quietly letting the guaranty pick up the tab for retiree costs.

• Unions of Philadelphia Newspapers LLC (The Inquirer and The Philadelphia Daily News) were forced to accept 12 cents on the dollar for the $12 million the bankrupt company owned to employee pension plans as part the reorganization plan.
• The Chicago Sun-Times off-loaded $49.1 million of its underfunded pension obligations for 2300 retirees and employees to the Pension Benefit Guaranty Corp. The paper and it suburban subsidiaries were purchased out of bankruptcy without the new owners assuming the pension obligations.
• The Dayton News Journal dumped $15.4 million in underfunded pensions payments on the Pension Benefit Guaranty Corp. , which will ensure 1,100 current and former employees receive benefits owed to them. The newspaper and its assets were purchased out of bankruptcy by Halifax Media, but it did not take on the pension liability.

The Pension Benefit Guaranty Corp. is a federal corporation designed to protect pensions when company-run pension funds collapse or cannot pay agree benefits.

These types of problems occur when money due for benefits is not paid into pension funds or money is removed from company-run funds by the company. When this occurs companies use the money for other purposes: increasing liquidity, paying bills, giving executive bonuses, etc. However, this creates problems if the company ceases operating or if liabilities of underfunded pension obligations weigh too heavily on the balance sheet.

Existing laws allows employers to take money from company-run funds if they are overfunded, but do not require them to immediately fully fund them when they are underfunded. Overfunding and underfunding, however, are normal conditions caused by fluctuations in stock and bond markets in which pension funds are invested. Because overfunding and underfunding tend to even out over time, companies using the funds like a bank can create problems. Even when pension funds are not run by companies, delays in paying obligations create problems if the company closes or goes into receivership.

Newspapers across the U.S. have carried large stories about pension payment problems at other bankrupt companies, but coverage of the problems at their newspaper colleagues have drawn scant attention.

The Cumulus Path to Peak Strategy

It’s hard to figure Lew Dickey out.

He’s a very bright guy who, in my opinion, over the years has gotten hard headed when it comes to adapting to new ideas and trusting radio professionals who are qualified, working and on the ground.

Take Lew’s Path to Peak strategy (as he calls it).

Employees will tell you that this is the thing he and his minions are trying to beat into the heads of his managers. It’s Lew's brainchild but Gary Lewis and Gary Pizzati, his loyal partners, are on board.

You create a path back to a station’s peak years looking to return to the revenue that existed previously.

That’s a good thought except that we have had a recession, hundreds of managers and sales execs have been fired and new media has taken off not just with youth (who companies like Cumulus have by and large ignored) but with older demographics as well.

Here’s how a person familiar with Path to Peak describes the game plan:

“Send out to all the markets the amount of 'capture and hold' new revenue they must acquire every month to get them back to peak billing within 24 months. That's on top of your current budget. It's really quite marvelous math work, that makes it look so easy. If you would just capture and hold (the hold being the most important) an extra $5,000 a month, you would be back to your peak in 24 months”.

Simple enough except there is no new investment in on-air product or for that matter retention of personalities popular with local advertisers.

Nor is revenue from new digital media a potential contributor because Cumulus, like other major radio groups, does not budget even 3% of its total operating budget to new media.

Path to Peak appears to be built on the simplicity of getting salespeople on the streets and talking to their advertisers. As incredible as this may seem to other groups that would never talk to advertisers in such a demeaning way, Cumulus allegedly wants a face-to-face conversation to take place where the salesperson explains to the struggling local business that Cumulus has been carrying THEM for the last two years.

Here's how an insider explains the directive:

“We've made price concessions and lowered our rates to be accommodating to their needs in the tough economy, so they should appreciate that fact and gladly pay more going forward. But John (Dickey), my ratings are down less than half of what they were back then. Doesn't matter, it's about rates and more "coverage" (people) in the market”.

So you can’t argue with the sentiment, let’s get back to our peak earning years before the recession, but what is apparently not going down well with some Cumulus people is that the company has created the very impediments to increasing the billing over the new few years.

I am told:

“All Cumulus employees are required to sign an "exclusive employer" agreement. Meaning while you're working for the Cumulus empire you will not work for anyone else”.

Asking employees who feel they are working for a mean-spirited company to sign a non-compete is a tough task even when these very employees presumably need a job. Even that is changing. Saga is hiring excellent Cumulus people away as Cox has done. Many disgruntled Cumulus employees tell me that getting out is on their “A” list this year.

Bonneville, the antithesis of Cumulus in employee relations wins enthusiastic cooperation on all corporate edicts. Plainly put, Bonneville employees trust their employers.

In addition to the human relations tough stuff at Cumulus, the seemingly unfair compensation standards that the Dickeys apply to themselves that their employees do not enjoy sticks in their craws.

For example, on the top of page 16 of the Cumulus 10-Q this little -- discussed gem:

" In March 2010, the Compensation Committee of the Board of Directors reviewed the three-year performance criteria established in March 2007 for the 160,000 performance-based shares of restricted stock awarded to Mr. L. Dickey on March 1, 2007. The vesting conditions for those restricted shares required that the Company achieve specified financial performance targets for the three-year period ending December 31, 2009.

"The specified threshold was not achieved, however, the Compensation Committee determined that in light of the unprecedented adverse developments in the economy in general, and the radio industry in particular, it would be appropriate to modify the performance requirements and extend the vesting period so that Mr. L. Dickey would retain the ability to achieve vesting on those shares of restricted stock if the revised performance criteria is achieved.

"Effective as of March 1, 2010, the terms of Mr. L. Dickey’s 2007 performance-based restricted stock award of 160,000 shares were amended to provide that those shares would vest in full on March 31, 2013 if the Company achieves specified financial performance targets for the three year period ending December 31, 2012”.

It goes on and on but you get the idea.

Some Cumulus employees feel that “Market Mangers, sales managers, and local staff's are terminated for not hitting their numbers. But when Lew misses his goal, the compensation committee determines that in light of the unprecedented adverse developments in the economy, it wasn't Lew's fault and he should be given the bonus anyway.”

Family fiefdoms are not new to radio, but when a few relatives get investment bank financing anything is possible.

Except winning the cooperation of your management and sales staff when you so badly need it.

The lesson:

No matter how smart you are or think you are, without the enthusiastic support of your people you eventually will be at their mercy.

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Music Second, Pay First

Sooner rather than later, terrestrial radio stations will be paying what I call the NAB Tax – that special new fee for being allowed to help record labels expose their music for free while they make all the money.

We can cry about it if we want, but a royalty tax is coming to a radio station near you thanks to NAB.

Big consolidators can absorb the cost and write it off as debt, but mid-to-smaller operators are going to feel it on their bottom lines – certainly 5-10% erosion of profits in some cases.

As irked as radio people get when the labels come after them for fees, they also roll over and play dead when it comes to getting tough on airplay.

I can’t imagine that radio stations will want to sit still for this botched initiative by the NAB and then go passively into the night exposing the record labels’ best product while being charged an additional tax for it.

Auto dealers make a profit when they sell cars. Retail clothing outlets earn a profit for that which they showcase, sell and in some cases even advertise.

Only in radio, will this raw deal exist. You help the labels make money and get to pay for it.

Well, I’m about to be sick (again). In the past I have hammered away at giving the labels a taste of their own medicine. Perhaps now, we’ll be committed to fighting fire with fire.

The Del Colliano Plan should be inspired by the name MusicFirst which is the group leading the very successful negotiating fight for the record labels.

So let’s call our radio plan, “Music Second, Pay First” – kind of catchy, don’t you think? Maybe we can make it hit home to our friends in the music business. Now that we have a name, let’s see if we can come up with a basis for our strategy. Feel free to add to this on our Facebook discussion today.

1. Radio will gladly play the necessary big hits for record labels at no cost to them. We choose which songs these will be and we’ll dump them after they hit peak popularity.

2. Young people are not as nostalgic for “recurrents”or “oldies” so once a hit is done, it will be as if it never existed (for the purpose of selling the labels’ catalog, that is). May I show you a rate card for additional airplay?

3. Radio stations will play no licensed new music the day that a terrestrial radio tax is actually imposed without receiving payment for the plays. Let’s see now. In streaming, the labels charge per listener per performance. I like that. Let’s do that. And let’s charge an extra fee for mentioning the name of the artist. Okay. Okay. I’m starting to sound like a greedy music industry executive.

4. Radio stations will begin to integrate music using their best instincts from artists who are not licensed and who expressly give them permission to play their music for free. As long as they do, the stations can feel free to continue to air the music.

5. Start a Sunday night radio show devoted to all new music in your format’s genre. That is, with a real music authority and with interviews. No record label artists allowed even if they pay.

I’m just getting warmed up.

I started out writing this piece as a joke – you know to let off a little steam as I do from time to time when I feel outrage, but you know, it has kind of empowered me.

See, to their credit, radio people never thought like record execs – even when they were down and out (which many are). Radio could never have been serious about charging for airplay. Hell, we hardly got much legal paid advertising when the labels owed us more of that out of sheer gratitude.

And now that I have brought up the topic of gratitude – let’s put it out there. The labels have turned on radio to save their bacon. But ironically enough, whatever they extort from the radio industry in new fees will be offset by the many, many other poor decisions record industry execs have made over the past ten years.

They couldn’t see the importance of Napster.

Still don’t believe bullying consumers with lawsuits isn’t a deterrent to theft.

Wrong about paid monthly music services.

Ditto on getting ISPs to charge consumers for all the music they can eat.

And wrong about taxing radio to help them help themselves to profit.

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Gaming the People Meter

It strikes me as somewhat ironic that the radio industry fought Arbitron’s portable People Meter unmercifully for many years dragging out its implementation.

After all, PPM delivers more radio listeners even if they really aren't listening.

That is, PPM delivers more radio listeners to some formats which is why many radio groups are racing to dump what's left of format variety for same-old-same-old formats that could play well with an increasingly defective ratings methodology.

And now, guess what -- radio groups really like PPM.

Imagine – close your eyes for a second – I walk into your office and pitch you a ratings service that doesn’t reside on an existing mobile phone or device, but on a bulky add-on that must be schlepped wherever you go. Then, I tell you it is so inaccurate (I’m crossing my fingers at this point – maybe even toes) that it picks up encoded signals even if the person carrying the meter device isn’t listening to the radio stations they like.

Would you pay money for that in this day and age?

Well, broadcasters are and they are being taken hostage by aliens who are gaining power over their radio stations.

Here's a real life example of a PPM carrier who was wooed with lots of money to wear a bulky People Meter while she admits that the only time it recorded her real listening was when she was in her car -- read it and weep here.

CBS was first to figure out it needed to do mass-appeal hit formats with just music and no real talk. A commercial-free day each week and no personalities at first. Later, a more music morning show.

Then others followed. Even Lew Dickey eventually figured it out and started blowing up Cumulus formats (as opposed to shutting them down like he did in Louisville recently). And I am sure you have noticed that hardly a day goes by that another station is dumping an established format for "PPM Hits".

Now we have the new term “going PPM”.

You have crazy PPM thinking like jamming commercials at the end of each quarter hour or stuffing them at the end of the :15 and :45 quarter hours. That strategy never worked during the diary days when spots were saved for the middle of the quarter hour and it’s insane to believe this kind of radio reflects something audiences want to listen to.

There are Arbitron consultants now as back then who make a living coming up with such wisdom.

It's time to ask the spiritual question, what would Steve Jobs do?

Maybe study the audience rather than the technology. Oh, what am I saying?

The geniuses that bring us PPM and the cult that is growing around it actually believe listeners listen to radio stations in a more equal fashion. I’ll tell you, if you can find any young people listening to a radio, they listen on-demand. If they want to hear a song, they listen. If not, they leave. What’s new about that?

Are we now saying dumping commercials at the end of one or two quarter hours will no longer work because listeners don’t like it (they don’t) or because programmers are trying to game their ratings technology?

Look, all this gaming is fine. There is nothing wrong with getting an edge on a competitor. But what is dangerous here is believing that it really works.

You’ll see less variety and we’re seeing it now as some formats become extinct – I’m thinking Smooth Jazz here, but there are many others.

The very oldies formats everyone was dumping in the diary days of not long ago are being embraced now that Dan Mason proved WCBS-FM in New York didn’t know Jack but it knew oldies (excuse me, classic hits).

Of course, in the PPM frenzy lots of folks fail to understand that WCBS-FM is an actual great radio station. It uses some of the tricks of PPM but the station has personalities who listeners like. Plays good music. Greatest hits.

Can we argue that WCBS-FM would never have been number one in the market as it was once (briefly) and always near the top – without PPM? I can. See, the old WCBS-FM, the oldies version programmed by Joe McCoy, was also a great radio station. When CBS management decided to drop it for Jack ("We play what we want" -- how un-Gen Y is that?) it made the decision based on the flawed diary ratings system. Did oldies/classic hits suddenly start working when PPM replace the diary or were we all wet to believe WCBS-FM was slipping?

We’re doing radio ass-backwards if you don’t mind me using a little Italian.

PPM shouldn’t drive radio formats.

Listeners should drive radio formats.

Period.

So,

1. Short-attention spans require stimulation so play music, a spot, music, a spot, etc.

2. Never do a long music sweep if you’re taking into account attention spans. I know it's heresy to some but it is true. Interruptions work today. The more the better. Please, please -- I beg you -- re-read #2.

3. Personalities riding the music like jockeys—hey let’s call them disc jockeys – are the best way to bring the many format elements together.

4. Want ratings – add variety. Audiences are different today. When radio lived and died by short playlists it was because the radio was the only place audiences could hear free music and we got to control the number of things they heard. Now, listeners steal music, preview it, look to peers, iTunes, YouTube and find more variety than radio can offer. Radio needs to address this issue.

So, enjoy the short-term perceived benefits of gaming radio to the already outdated technology of the People Meter.

The station that listens to their listeners gets the listeners.

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Attention all Women Born with a Transsexual and/or Intersex Birth Challenge: You Have The Right to Vote Too! Happy Women's Equality Day!

Next week, August 26, is National Women's Equality Day! August 26th is the anniversary that women won the right to vote. Also, late transitioning transgender males and white heterosexual cross dressing males are not the only ones who have the right to vote on issues pertaining to transsexual, transgender and intersex (TTI) equality, however, they have colonized the transsexual community. The results of this colonization has been devastating to the progress of transsexual (TS) and intersex (IS) Americans. Look at the history, and the law books- it's all there. Ever since cross dressing men and transvestites co-opted the transsexual movement, TS folks have actually LOST already pre-existing rights. And ever since Gay Inc co-signed the transgender fascista's co-opting of the transsexual birth challenge, many in society have been miseducated about the transsexual birth challenge, and it has been gay appropriated in a very oppressive way.

Our hope is that the business type cross dressing males, TG Inc & Gay Inc will STOP censoring and bullying the realities, hopes, dreams and special needs of transsexual and intersex Americans. TS & IS women are NOT drag queens, fetishists, transvestites, gender dismantlists and gender queer activists. These are people who were born with a medical condition, and it's high time the sexist and transsexual-phobic practice of misrepresntation stops. So many politicians and trans advocates know this to be true, and tell me so, but they get scared of not being politically correct (because they are paid money to brush with general strokes). Its unfair that men get to use women's birth challenges as a political game chip. Their condition is not meant to usurped by dishonest people who feel threatened with transsexual and intersex people articulating their truth. Stop sexualizing, misrepresenting and stealing the realities of transsexual and intersex people! Its wrong, and many women are sick of it! And though TG Inc, CD Inc and Gay Inc are doing everything in their power to prohibit transsexual and intersex Americans the right to vote, there is a large mobilization happening internationally, and pretty soon the transsexual and intersex advocates will take their right to vote without permission. Just because TS and IS people dont have the money or populace that the white cross-dressing male communities or Gay Inc has, does not mean that they dont deserve a seat at the table.

When you know the REAL history of this issue, its really upsetting. It was actually transsexual women who gained all the initial rights for the TTI communities in the early 1900's. Then after Stonewall, some quack cross dressing heterosexual male named Virginia Prince (who was an open misogynist,voiced public disdain for the transsexual communities, and was homophobic against gay and lesbian people) decided to rally the other white heterosexual cross dressing males to usurp the transsexual community against their will. And since the patriarchy supported the sexualizing and silencing of TS women, it was easy for CD males to hijack the TS movement. Everything started to go downhill after that for women and men born with transsexualism.

So in this month, where we celebrate women's right to vote, let's also celebrate all that transsexual women did in the early 1900's to secure rights for the TTI communities. And let us not silence the transsexual women's community any longer.

Let the women speak. And when they speak out against the bulldozer who broke into their safe home and tainted thier sanctuary, and planted weeds in their garden----- listen, and try to understand.

Just because Dennis Rodman is a cross dresser and wears wigs, does not mean he is the sister of the transsexual women's community! Even Ru Paul says he is NOT trans gender, he says he is a gay male and entertainer. And just because cross dressers who have been diagnosed with autogynaphilia have the resources to buy a seat at the table, it does not mean they speak for actual women who are do not subscribe to "clothes equating womanhood".

Just as the suffragettes endured a lot of attacks to pursue the right to vote, so have transsexual and intersex women. The last few months many transsexual women have been campaigning heavily for the right to represent themselves. And they all have been brutally attacked by the gay media, mainstream media and some transgender activists. This year The Advocate published an article calling me "Tran Coulture" (as in Ann Coulture), and even refered to us transsexual advocates as women with "do it your self changes". I was shocked that the Advocate, who I had always thought to be classy, could be so publicly transsexual-phobic. The Advocate also misrepresented our plight many other times. "Queerty" called me the anti-transsexual slur "tra**y". Planet Out paid gender queer rebel Kate Bornstein to write an article where Bornstein dismissed the transsexual community entirely, and misquoted me intentionally to drown out our voice. Former draq queen Alexandra Billings refered to transsexual women as "not real". A late transitioning transgender blogger (who has some issues) named Autumn Sandeen joined Gay Inc and called me "divisive", when in reality, all I was doing was calling out the oppression of TS and IS people at the hands of Gay Inc and TG Inc. But we are making progress, and we have doctors, scientists, politicians, actvists, feminists and flower power heroines backing up the plight of all transsexual, transgender and intersex people.

Attention all transsexual and intersex women: Get out and vote! I know it seems that your vote may not count because the establishment has a fetish of editing out your Truth, but take a stand and vote anyways. And vote loudly!

Also, here's a poem I wrote years on August 26, 2007 for Women's Equality Day:

Radical Women have inspired me to act!
I was blind till they spoke to me, this is a fact.
The Freedom Socialist Party's morals are truthful and pure.
I'm taking a stand with them; no longer demure.
Patriarchy is like an army of reptiled lost souls,
The Radical Women are angels, with humanity saving goals.
Let's unite all our causes, to defeat the big beast,
Which is only so big when we're divided, to say the least.
Today we celebrate the giver of life's right to vote.
Some were intimidated, and that was murder she wrote.
We all have a life in us, that could never be bought!
Unlike some of these elitists- such a sold out sad lot.
Now we are fighting to gain good national health care.
Left out are minorities and poor - this is not fair!
This injustice is why we have gathered here today,
Together we'll find solutions, we will make the way!

Hold Out for This Radio Royalty Plan

The recent dust up over the NAB’s negotiation with the RIAA over more music fees for terrestrial radio stations has caused a lot of concern in the industry.

The NAB argues that the radio industry is under Congressional mandate to come up with a settlement for radio stations with MusicFirst which represents the record labels.

You can understand the angst on the part of radio broadcasters who have driven the sales of music through free radio airplay for many decades. And it is not as if you can expect owners to go down easily because whatever fees they agree to are likely to go up. This can be done by future legislation.

What’s really eating a lot of broadcasters is that they have been assuaged into believing that the NAB had taken care of the forces in Congress pushing for a radio tax. I am told by a source close to the NAB that radio never had a royalty tax exemption. I was surprised to hear that. Perhaps you are, too.

As I have written recently, the NAB got a little ahead of itself, in my opinion, trying to float a trial balloon to the industry and press when they hastily called a board meeting to report on the negotiations that I am told took place some six months prior with the RIAA.

While the NAB points out that there is nothing inevitable about the proposed settlement, I firmly believe that a tax on terrestrial radio is now inevitable and the NAB did not do its job in protecting broadcasters. On the other hand, the music lobby earned its dues by more effectively winning the very Congressional support that is now forcing the radio industry to its knees.

What’s more, it appears radio broadcasters are going to be made to feel – by its own NAB – that the deal it is currently negotiating is the best solution totally ignoring the fact that they are actually negotiating a costly surrender.

Lew Dickey doesn’t care. He and Farid Suleman, John Hogan and the other greedy consolidators can simply leverage the extra expense into their next inevitable loan at whatever high interest rate they settle on.

No, the burden of the NAB’s failure to defend its industry against this outrageous tax is going to fall squarely on the shoulders of radio operators – the mid-sized, small and local types who are the only backbone radio has left.

When it became apparent the NAB was losing the fight, I suggested in this space that they might want to explore ways to negotiate a deal that would give radio very favorable digital fees going forward. But the deal the NAB recently floated is about getting out from under Congress in one piece.

No fight left.

Keep in mind the new NAB CEO Gordon Smith is a former US Senator.

In a 1998 issue of CounterPunch, a political website, this is how they implicated our new NAB CEO with Enron:

"In Oregon, Enron lavished contributions on the state's congressional delegation, supporting both Gordon Smith and Ron Wyden. Neither senator uttered a critical peep about the Texas takeover of Portland's electric utility".

In all fairness, Smith later attacked Enron when it became apparent that Enron was going down, but never returned the money.

I'm not saying Smith is sympathetic to the RIAA, but the reverse -- that he is insensitive to the needs of radio operators other than the handful of fat cats who have backed his royalty capitulation. Peter Smyth stuck his head out of his corner office to back the big guy -- see it here.

In the meantime, Smith and his small negotiating board have won you a radio chip if you really care (or at least help in getting one from manufacturers) to appease Emmis CEO Jeff Smulyan. It’s an awful idea on its face if you look at how consumers use mobile devices in this country. Nonetheless, politics are politics and the NAB is in Washington.

Another NAB sales point for this awful deal: The AFTRA issue goes away allowing local radio stations to play AFTRA commercials on its local streams.

Another questionable victory.

Radio should be creating separate commercials for online advertisers not crying over AFTRA rates. Make money not excuses.

The big talking point you’ll hear in the NAB spin is that jurisdiction would move away from the CRB which has made a mess of streaming royalty rates in a draconian and unfair fashion.

And, of course, the rate is at 1% -- to start – which is the lowest they could go to trigger reciprocity in Europe.

If you like that deal, go for it because 35 NAB board members are likely to decide the fate of the terrestrial radio industry – at least when it comes to another $100 million in expenses from radio's profits. One CEO told me the NAB is polling its regional members on the plan. That's how out of touch the NAB is. Inside Radio did a poll that showed 85% of radio people do not support it.

I rest my case.

But I think there is a better way and I have communicated it to the NAB negotiating board. If you like it, you may want to give them their instructions instead of the other way around.

I get that the NAB lost the battle and a new tax on radio in inevitable. Don't rush to do a deal. When the new Congress is seated, there should be more support for radio.

But if radio people want to pay royalties then at least get something meaningful in return for it.

My major points are:

1. Terrestrial rate of 1% guaranteed for ten years and then changeable only with Congressional action. However, this is not the year to punish radio with the NAB’s failure to protect their back. The 1% rate would have to start one year from the agreement date. Medium and small market stations are dealing with a recession.

2. A much better rate than the 10% reduction in the current streaming rate which was all the NAB could get which amounts to .0017% per listener per performance rising to .0025% at the end of five years. Not good enough. You want an agreement with terrestrial radio, then you’ll have to do better.

3. No agreement will be finalized unless or until all radio station owners get to vote by proxy through a third party accounting firm on whether they agree with it. This is too important an issue for 35 people and an ex-senator to decide.

The NAB pushed for radio consolidation by tacking on language in the 1996 Telecommunications Act, a bill not intended for the radio business. It was done with the NAB’s help in the dark of the night as this performance measure is being commandeered.

Fool me once, shame on you.

Fool me twice, shame on me.

RIAA wants a deal. Needs a deal -- now.

NAB's version of the radio industry is rolling over and playing dead.

Oh, and by the way, I favor a little Jersey negotiating which would come in handy here.

While MusicFirst plays strategic games, how about the NAB getting together a group of the best and brightest communications lawyers to come up with a legal plan to charge record labels for airplay on their new artists.

Give them a taste of how hardball is played before the game is over.

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Gerrymandering Local Radio Sales

By now you’ve heard that national billing has been carrying radio stations of late and the recession has so hurt Main Street businesses that local radio sales as a category is now uncharacteristically down.

That, too.

Turns out we’re forgetting one big thing.

Your friendly local radio consolidator has not only been busying firing (or “laying off” as they prefer to call it) local account execs, they are also gerrymandering local sales to become national.

Listen to this from a longtime sales person in one of the top 50 markets:

“I sell for one of the big 3 Cs … and our commission was cut in March."

Here are a couple of other reasons local radio is down:

“MANY MANY local accounts are now national.

“The NSM often sells lower rates than us so naturally larger regional/local advertisers benefit from the savings. Personal relationships can’t trump the bottom-line in a recession.

“Remember NSMs are salary with only tiny commissions so no argument from the home office. BUT there is no local sales “personality” to become attached to. Kind of like repeater radio for sales”.

In other words, local advertisers don’t get the qualified sales professionals they used to get and whether the home office wants to believe it or not, the message that radio will work for them is not being reinforced where it needs to be -- on the street.

Cumulus, for example, created the position of Key Account Manager (or KAM) that the Dickey brothers used to funnel commissionable accounts from the sales people that earned them to KAMs who are paid a lot less just to manage them.

Manage them doesn’t mean hang out with them, or get to know their businesses or help them to use radio to solve problems. It’s a simple financial workaround that cuts costs at the expense of local sales relationships.

Also at Cumulus (and I am sure at other consolidators), local accounts are being taken back by headquarters so as to avoid paying the local salesperson’s higher commission rate. That is, national does it for less from out of town. Even if you don’t have a problem with Repeater Radio from elsewhere, apparently local businesses do.

So, local accounts going national by assigning them to someone who works at a cheaper rate is one way.

The other is, take back the local business and report it as regional or national.

This could be one of the reasons why local sales is hurting. Of course if you’re satisfied with using the recession as an excuse, go right ahead, but Apple didn’t. They grew their business during every month of the recession.

There is another reason why local sales are down.

Lack of experienced local salespeople.

Cumulus and others are happy to fire professionals for inexperienced sellers who never saw the inside of a radio station because they will work on the cheap. That apparently hasn’t worked well, either, if you’re looking at actual sales results.

One radio seller reminds us:

“It’s tough to recruit new people to a 100% commission gig when there is no gas allowance, no car allowance, no entertainment reimbursement, reduced commissions, long hours and weekend work for no additional compensation, “non-competes” and the same 2 wk vacation standard as the rest of the company”.

I guess what I am saying is that I’m not buying that local radio sales (reported as an industry) is down. There are too many ways consolidators have bent local into regional or national for their own purposes that it makes local look anemic.

How do I know?

Take a look at the mid to smaller radio groups. Their local sales are gangbusters. Some small stations must think they are Apple because they haven’t really had a recession. It’s hard to lose sales when local advertisers feel like part of your station. When they sponsor their favorite personalities year after year – at least in markets where there are still local and live personalities.

At first I bought the local downturn theory, but my readers have suggested this other nuance.

What is local today?

Who gets to define it?

How do we know when it is up or down? The rules are being changed in local sales as well.

So when consolidators predict a little rough spot ahead, they may be correct but when they say the rough spot is soft local sales maybe they should look at soft local sales strategies – theirs.

You can call it national, regional or local but local sales will be just fine as long as you give advertisers something live and local to sponsor and brought to them by people who live where they live.

Outsourcing local sales is and will continue to be a failure. It will leave lots of money on the table for new media local initiatives from non-radio companies.

That is the real problem – not just the recession.

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A Record Label Against Performance Royalties

One of my former USC music industry students, Meredith Jung, sent me a quick note the other night to tell me that a Nashville start-up music label has come out squarely on the side of the radio industry in its fight against paying a music tax.

I thought you would appreciate the logic and clear thinking of this entrepreneur and hope that it will get everyone including the over anxious NAB to stand back and take a much needed time out.

The NAB for years has been selling soft soap about how the radio industry has nothing to worry about in the music industry's attempt to tax the very radio stations that give them free airplay and exposure for their new acts.

Then, all of a sudden with the hiring of a former United States senator (Gordon Smith) as NAB head and pressure from a handful of lawmakers on radio (not the labels), the NAB appears to be turning tail and running from this fight.

The NAB now says, in my view, never mind what we’ve been feeding you, we had better make a deal with the evil record labels before they send us to the big bad wolf (the CRB) and we lose control of what we’ll actually be paying.

While imposed rates are a possibility, I must tell you that I cannot find one person close to this situation who thinks radio needs to settle right now this minute. The NAB says all it is doing is floating a trial balloon, but even The New York Daily News a few days ago was making it sound like a deal is near.

This is curious because what gives the NAB the power to negotiate for an entire industry and then impose the new tax? It represents only 50% of all radio stations.

Second, the 1% additional that stations are supposed to be giving up to the greedy labels can easily be 5 or 10% of profits (that’s profits not revenue) at a time when profit is hard to come by.

One more quick point before I tell you about the record label that is on the side of radio broadcasters in this fight.

The record industry should pay radio – and I’m going to offer my plan for your inspection next week.

The Savannah Music Group is against its own trade association, the RIAA, the way radio should be against its own trade association on this matter, the NAB, arguing the proposed additional royalty tax that would force radio stations to pay performers and record labels would have unintended consequences for struggling artists – namely less chance of getting radio airplay.

Now, that record label is talking the way radio stations should be talking.

That’s what the NAB should be selling the RIAA in negotiations instead of treating the royalty tax like a health care compromise.

Independent and new artists could suffer from this tax thus making the benefits of a quick radio tax outweigh the risk of making it harder to break new acts.

Radio hasn’t been an easy place to get airplay over the past decades. The labels and program directors have kept the playlists tight. However, some stations may wind up augmenting their lists with non-licensed music and other measures that would make the labels rue the day they hit their brethren with this levy.

RIAA is anxious to get a deal done. Its constituents are in short pants. RIAA is leaning on Congress where it is fair to say it has done a better job than radio’s NAB rallying support. If I am wrong, then why is this sellout even being considered?

Especially now as fall elections will likely change the mix of lawmakers to perhaps a more favorable radio core of supporters.

Look at this quote in The Nashville Business Journal:

“It’s tough enough now to get songs on the radio as it is,” Savannah President Dave Gibson said. “We’re trying to get this company off the ground, and the smaller the playlists and the more stations that switch formats, makes it harder.”

Gibson wants an “opt-out” provision.

For record labels!

“Should a performance royalty be mandated by Congress, artists and labels must have the opportunity to opt out. If not, the major record labels win, and the songwriters and artists lose."

How about Dave Gibson for CEO of the NAB!

This guy makes sense and if this label exec can so effectively articulate yet another reason to give radio a break on royalties, why isn’t the NAB embracing him? March him up to testify before Congress. Think he may open a few eyes?

Instead, the fix is on to do a deal that radio will never live down.

The Internet didn’t kill radio.

Neither did Steve Jobs.

The NAB has done more to cause the mess that radio is in today than anyone else.

Consolidation – it helped tack it on the Telecommunications Act of 1996. Most radio executives never saw it coming.

And now, the gift that keeps on giving radio’s profits to greedy labels.

Lew Dickey can write this tax off as something else to finance and so can the other selfish radio groups among us.

But if the radio industry is smart – better rise up against your own trade association like Gibson is doing – the one selling you out while smart people everywhere from music industry students to independent label execs know that the music royalty tax for radio doesn’t just hurt radio but hurts everyone who isn’t a big four label.

If you want more of what consolidation brings you, sit and wait for a deal to be made.

If you want to take the decision away from Farid, Hogan, Dickey and the NAB, it’s time to not just sit there -- do something!

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Lessons from the JetBlue Media Meltdown

So I was on a plane the day after JetBlue flight attendant Steve Slater pulled his Howard Beale (Network) imitation – "I'm as mad as Hell, and I'm not going to take this anymore!" and freaked out over a rude passenger.

Before the dust settled, I can tell you the flight attendants I chatted with were not too thrilled to get that kind of attention. Frankly, if you travel a lot, you see almost as many rude flight attendants as cranky, rude fliers.

By the time I landed, Slater had become a folk hero of sorts and a very good airline (unlike the one I was flying on) got its nose bloodied for no fault of its own.

It’s too early to tell what kind of image damage JetBlue will suffer but what is remarkable is the traditional and new media response to Slater's antics.

I’ve had time to mull some fears and concerns I see ahead for the media business because for a moment there I was reacting like a traditional media guy but today I’m thinking – okay, Slater is being hailed as a hero but JetBlue could also come out ahead as well.

And, the concern that all of us in a world of social networking – artists, radio stations, streamers -- are just this far away from having to deal with a nutcase that can gather social media support by just – well, creating a Facebook page for starters.

In the case of the “Freakin’ Flier” as The New York Post called Slater, instantaneously a Facebook page went up that quickly got over 50,000 fans to support him. There was a “Free Steven Slater” page, PayPal fundraising and sites that compared Slater to pop music stars seeking to make him more popular.

Traditional media including television hardly knew which way to go – you could sense they went with it for ratings but part of them knew they were cheating on the facts. What Slater did was dangerous (could have killed a worker on the tarmac) and socially beyond inconsiderate to his passengers, his co-workers and an excellent employer. Yet there was more to this story than the incident. What about the nerve it hit?

I even felt sorry for the crummy airline I was flying and their employees. To butcher the song “If Loving You Is Wrong I Don’t Want to be Right” -- if extolling Slaters virtues is wrong, how do I turn out being right?

In the radio business what happens when a singer is trashed or embarrassed beyond criticism of his or her work? Or when a local radio station has to face an “KXXX Sucks” social network page that can be easily accessed by media buyers on a Google search?

If it hasn’t already happened, it will.

My experience with the next generation is that they are not a mean generation. They spy – alright. But they are never going to go for attack politics. It doesn’t work for them. In fact, I believe their response to the freakin’ flight attendant is more youthful curiosity and angst than glorification of a bad dude.

It's a social networking expression of outrage.

And consistent with their generation, Gen Y will forget this guy faster than they are forgetting MySpace. This is important to keep in mind when responding to unjustified attacks in an age of instant social revolution.

JetBlue has kept its corporate mouth shut about this issue – probably on the advice of legal but maybe even because they are just smart enough to understand some of the things we’ve discussed here.

Nothing on their Facebook page and only three meaningless comments on Twitter.

And all this from a corporation that is very skilled in using both.

If your station is attacked or if a new age Randy Michaels sets up shop in your face on the most meaningful social networks, do you attack back?

In the pre-social network case of Michaels vs. yours truly, I did fight back and publicized everything he said and did as unfavorable as I felt it was. After all, he was the biggest, most powerful CEO in radio at the time. In the end he lost his job and his company bought my company as part of a settlement to drop my counter suit.

But, not responding can also be effective – don’t give the enemy any more publicity than they deserve. It’s risky – lots of radio station formats used to get attacked head on in past decades and they almost always lost their frontrunner's status. It’s hard ground to protect.

What to do?

The most important thing is what the JetBlue case teaches us and it is right before our eyes – yet it has not been fully noted.

JetBlue is considered to be a great operator. Consumer friendly. Communicates with its customers. Does right by them (each passenger on Slater’s flight will get a $100 coupon on JetBlue for having to put up with his mouth and actions).

That’s it.

Build a fine reputation because social media cannot make you that which you are not and cannot break you when renegades decide to put up a page.

Putting up a page is just a thing – something we do in our world of social networking.

But doing right by customers and audiences using social networking as a tool buys you valuable capital.

Ad Age quoted Steve Rubel, Senior VP-Director of Insights at Edelman Digital, as saying:

"JetBlue has done a good job of building a tremendous amount of relationship capital with the online community by embracing new digital platforms and communicating with people through them so they might not have to answer as many questions about the details of this incident. When a company puts itself out there as a company adept and active in social media, it gains social capital that it can cash in later on in a crisis or legal situation."

In the end, it's not so much about JetBlue.

It's about an angry public that now has a new "going postal" phrase ("sliding the chute") to let off steam about shabby treatment of employees! And, now they have ways -- fast and far reaching ways -- of taking their response public without the impediments and filters of traditional media.

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