Our hard look at what is causing the bankruptcy of IHeartMedia Inc. and Cumulus got us on this edition of the Economic Warrior. It was an economic card-trick that caused this whole mess in the first place.
The titans in corporate radio are finally going bankrupt (like we predicted). Here’s why.
- They failed to bring new relevant content. They pushed listeners to the internet in search of the new music that radio abandoned. If radio does play new music now, it’s from corporate playlists.
- They failed to feature their local communities. Corporate radio can’t promote a local community when nobody is live in the studio to interact with the locals. Furthermore, DJs are restricted to endorsing the corporate script, which leaves little time for local music, local charities or local businesses.
- They succeeded in fooling the financial press. Consolidators bought healthy stations at such high prices that firing the staff was the only way to pay off the inflated debt. When is the press going to ask questions about corporate debt and how it relates to Private Equity and mass firings?
- Private Equity (PE). When a holding company (PE) can put debt on an industry but not be responsible for that financial burden, bad management can be expected. To be fair, PE does not own all of radio, but they own enough of it to have artificially inflated the prices of radio stations across the market. As long as Private Equity remains part-owner of radio, station prices will continue to be artificially high in their market value and unaffordable to those who want to revive local radio.
- They increased commercials. This doesn’t mean radio increased revenues because they also made those commercials cheaper. More repeat commercials per hour now grate on our nerves. Thanks.
- They fired all the DJs. Ok, there are still some DJs but they’re overworked and they can’t curate music. And when night shifts were eliminated, there was no longer a place for new DJs to hone their skills. The skill of interacting with a live audience is not something you can develop in a podcast. Live DJ’s were the heart and soul of local radio.
- They elected to buyout the competition rather than be better than it. This is actually a paraphrase of something that DJ/host Mancow told me. “When you buyout the competition there is no incentive to be the best”.
- They divided listeners instead of uniting them. They stopped broadcasting and started narrowcasting. The corporate owners divided us into narrow demographics to advertise to. Most people are more complex and nuanced than this. Dividing us up has also had a damaging effect on our nation’s politics.
- They gutted news departments. Imagine a time when rock stations had their own reporters and you will get a picture of a much more informed society. Even those who did not seek out news were exposed to some amount of information to stay involved in voting, local charities and emerging local businesses. Cutting the news department also made it harder for the station sales staffs to sell station ad time because they couldn’t pull the heart-strings of advertisers with stories of what good the station was doing in the community. It made it harder to mobilize their audiences.
- The telecom act of 1996. What? Yeah something that congress did in 1996 ultimately is behind all of these reasons. This is what changed radio from a locally owned business into a high finance trading chip. Thanks Bill Clinton / Newt Gingrich Congress of 1996.
Cumulus/Clear Channel/“I Heart” want their killing of radio to be swept under the rug. We can’t let that happen, or they will repeat the cycle. This is why we put Corporate FM on Amazon Prime.
As of last week broadcasters no longer have to maintain local studios thanks to a new ruling by the FCC. Chairman Ajit Pai, himself a former Verizon counsel, pushed to abolish the “Main Studio Rule” that was meant to maintain the local presence of radio. He countered that it would benefit minority broadcasters because they would not have to pay for an expensive studio or staff. You see in Mr. Pai’s world of conglomerate media, a studio is a piece of corporate real estate. But minority broadcasters and small town broadcasters gladly maintain humble studios in some of the most impoverished (and low rent) parts of our country. These studios serve as a gathering place for programming in communities that corporate radio has abandoned. Locally owned radio will continue to have studios long after this rule, but the consolidators who wish to buy them out, now have added cash with which to make their acquisitions.
This gift will also allow Cumulus to cost cut and may help keep the bankrupt giant from having to sell off stations. It also allows the private equity firms that own Clear-Channel or “I Heart” to fire more staff and tighten their status quo of remote control radio.
The corporate giants want to blame the downfall of radio on anything but themselves. We just can’t stand by and let that happen or they will keep ownership after bankruptcy. This is why we’re sending them (and you) a little gift. Corporate FM is now on Amazon and Amazon Prime.
Help set the record straight on how radio was killed from the inside. Please share the film and add it to your watchlist.
These excuses are important because owners have used them before to retain possession after bankruptcy like they did with Citadel Broadcasting. The excuses are also used by any owner who wants to avoid scrutiny for skimping on the staff.
- The internet made me do it. The notion that a service that people pay for (the internet) could threaten a service that is free (radio) shows us just how bad radio has become. The last time I checked, new cars still have radios in them, and it is easier to access than the internet. They will try to blame services like Spotify while ignoring the fact that radio only plays predictable corporate playlists. Radio motivated us to search the internet when they started ignoring us. They could have integrated the internet into their local stations to strengthen the bond with us, but instead they just spent money on acquiring more stations.
- It’s the millennial’s fault. Blaming the audience is the same as blaming the victim. Radio continues to lose every new generation because the content is no longer curated by the new generation. Radio dictates content to us instead of playing our requests. Today “requests” have to fall within the pre-established corporate playlist. It’s an illusion of choice.
- The great recession of 2008. The recession only hurt radio because they had been firing the staff in order to pay their debts. In 2008, even the bankers wised up that radio couldn’t cut any more costs without cutting too deep into bone.
- The iPhone did it. Since the dawn of television, every new technology has been heralded as the death of radio. On a surface level it seems logical that you’d rather watch TV than listen to the radio because TV is like radio with pictures. But the real question is: what can you use radio for? Radio is supposed to be a passive medium of local expression. In other words, you can do an engaging activity (like driving) with radio. Cable TV, and Facebook do not change that. What does change that is when corporate radio owners fire all the DJs who made the station worth listening to.
- It’s the Debt (That they agreed to pay). This excuse it legit. What is not OK, is pretending like this is something that they did not already know. The numbers were there in black and white in the mortgage papers. They chose to buy-out the maximum number of stations rather than to responsibly own fewer stations. They also used something called private equity to foist debt on an industry while shielding themselves from the risk. Private Equity makes the stations responsible for debt while the owners collect fees. I find this outrageous. This is revealed further in the film on Amazon.
ClearChannel/“I Heart” banned this song when it first came out because they said it was “anti-radio”.
You can’t turn him into a whore
And the boys upstairs just don’t understand a
Well the top brass don’t like him talking so much,
And he won’t play what they say to play
And he don’t want to change what don’t need to change
Who plays what he wants to play
And says what he wants to say, hey hey hey
Cumulus stock has been sooooo low that they are being threatened with delisting from the exchange. Enter the “reverse stock split” (10/12/16). Here Cumulus takes all their shares and converts each 8 shares into one.
So lets say shares are worth 32¢ a share. ? Multiply that times 8 and they should get $2.56 per share which doesn’t sound as meager. The problem is that traders know that this is a desperate move. Today Cumulus traded at $1.05 which means that had they not split, they would be under 14¢ per share. Will they have to do this maneuver twice…three times? How low can they go?
“Reverse splits usually signal trouble and do nothing to correct what’s ailing the company,” says Frank Fernandez, the manager of equity trading at J.P. Turner & Company in Atlanta. “It’s a maneuver used to get the stock price over a dollar so the stock doesn’t get delisted, though statistics show that probably three quarters of recently reversed-split stocks trade lower following the split.”
So how did we get here?
Greedy consolidation produces monstrous debt which causes the firing of talented DJs and staff. It was the local staff that made radio worth more than $1.05 per share.
Steve Bell passed away this week in the news room at KCUR, the very same place where we interviewed him for this clip from the film. He was known for his resonant voice, but he brought a far-reaching wisdom with his years. There were things that young reporters missed that he would bring to a story just because he lived through the history of many stories.
He lamented that as only one man, he could only work on a limited number of stories. He said corporate radio stations that have 2 or fewer reporters are confined to reporting on only crime and traffic. They skip government. This bothered Steve because he felt that listeners needed more information in order to vote intelligently.
Steve was formerly a program director on the music side. Program directors have to endure complaints (and occasional praise) from the community. This is why they are so cool. The experience opens them up to the true diversity of the radio audience. Steve understood his audience in a way that few in radio do today. Love for that audience is what motivated him. It is also what I will remember about him.
When Corporate FM won the AMC Documentary feature award, I was very proud and shocked at the same time. I didn’t feel like the film was completely done. One of the judges (Rudd Simmons, The Life Aquatic, High Fidelity) gave me this advice: “Tour with this film for a year,” he said, “and sit with every audience who sees your film. Then you can edit it.” I did that and it ended up being a very gratifying experience. After the tour, I took a year off. Then I rented an edit suite and took the entire film apart, rebuilding it from the beginning. I added some characters and subtracted some. Entire scenes fell to the cutting room floor (you can see them in the DVD extras) and even a song by the Capsules made it in. During this time I fell in love all over again with film-making. If I felt like I needed film footage of a radio tower above a sleeping city from a high-up perspective, I’d go to the mountains and shoot it.
With my 2 cork boards of note cards showing plot points (Walter Munch style), I cut the film we have today.
A nice thing about feeling “done” is that I can now pursue things like TV and VOD (Video on Demand). It’s been a long road to get here, but I find that the film and I are better for it. -KM
From: Justin Wittmayer
Sent: Thursday, March 31, 2016 10:40 AM
Subject: A new direction for KGO and KFOG “new direction” = loss of jobs
Today, we have set in motion new programming strategies for both KGO and KFOG that will help us better meet the needs and demands of our listeners, advertisers and community. Step 1: Blame the listener. By blaming them, the advertiser and community it shifts the discussion away from the rapacious greed of the Cumulus consolidators that caused this mess. Our goal is to reposition these two stations for future growth and strength through new and enhanced programming, and new additions to the KGO and KFOG teams, including programming veteran Bryan Schock, whom we announced this morning as the new OM/PD of KFOG and KSAN. Step 2: Shift the focus onto a well liked staff member. It’s no longer Atlanta dictating programming, It’s our pal Bryan Shock trying not to lose his job as he does everything Atlanta tells him to. Oh, and by the way, he’ll have plenty of time to do a good job since we fired all his helpers. We believe the new programming direction will put KGO and KFOG on the best paths to growth and success. Step 3: Make a belief statement. These are excellent because nobody can persecute you later for saying that you believe something.
Unfortunately, to achieve that goal, we had the difficult but necessary task today of restructuring our KGO and KFOG station staffs to allow us to meet the new needs of these two stations as we invest in new programming that is redefined, refocused and of the highest quality. Step 4: Acknowledge the difficulty of the firings and blame it on the bogus reasons you opened the letter with. Use the word “invest”. That’s so rare nowadays. Today, we informed the affected employees about these changes, which included the elimination of a number of full-time and part-time positions across these two stations, primarily in the news department at KGO and in key dayparts at KFOG. I want to thank those professionals who are leaving us for their contributions and service to KGO and KFOG, and wish them only the best as they continue on in their careers. Step 5: Thank star talent in hopes that they will not drag you into negative press about the station.
I want to thank the remainder of our team for working with us through this transition and in the coming weeks and months, as the new KGO and KFOG take shape. Together, we will build these newly imagined stations into strong and vibrant brands that our listeners and advertisers will love.
I will be sharing with you more specific details on these programming shifts and additions in the next few days and weeks. In the meantime, please reach out to me directly with any questions. Step 6: Make sure complaints come directly to you so you can squelch them.
Vice President – Market Manager (Guy who gets fired after he fires everyone else)
Cumulus Media Email Policy
PLEASE NOTE: This message contains confidential information and is intended only for the individual(s) named. Employees of Cumulus Media Inc. and its subsidiaries are prohibited from forwarding this email or otherwise disclosing the contents of this email, or any portion thereof, to any third party, including any non-employee of the respective companies. Failure of an employee to comply with this policy will result in disciplinary action up to and including immediate termination of employment. Step 7. Post threatening message at end to keep email from getting in the hands of some smart-ass blogger.
(Original Cumulus letter posted by Matthew Keys of The Desk.)
When I heard about the latest Cumulus bloodbath in San Francisco, I had to make this logo. About 20 staff were fired at KFOG and KGO. The financial press often ignores the real reason for these mass firings. The layoffs are part of the plan and not a freak result of a competitive market. Quite the contrary, consolidation occurs because competition is gone. It won’t matter to Cumulus if they fire their star talent because they also own the competition (who might have otherwise beaten them). Consolidators fire staff so that they may run a skeleton business and claim an increased profit through fewer expenses. It’s that simple.
Competition is actually what we need to end this radio nightmare. Businesses operate at the speed of competition, not at the speed of the consumer. When stations have to compete for the consumer, that’s when great programming occurs. However, corporate radio has pushed the government to create this alternate reality where competition is not allowed. Competition is bought out and consolidated. Rival consolidators now divide entire cities for monopoly control. In the past, many smaller broadcasters acted as disrupters and sent our culture into new, exciting places. Breaking up the consolidators would act as a stimulant to the economy through more local jobs and would also jump start the culture through more local programming. Music movements begin with faith and that is something that consolidators see as a negative on a balance sheet. It takes a human being who feels the music and knows one’s audience to make radio work. That is something that consolidation, by its very nature, destroys for quick gain.
Jim Ladd’s book Radio Waves, is part memoir, part historical narrative about the rise and fall of freeform FM radio. If you don’t know what freeform radio is, you will certainly recognize it in this book, as the very soul of radio. It’s the ability of a local DJ to pick music that they love, play it and speak as they like on the air for their entire show. Such freedom is now gone with tightly restricted corporate playlists and curtailed speaking times. Ladd shows with delicious detail how FM once garnered huge audiences through the simple force of sincerity and localism. The book may be a requiem for FM commercial radio, but is is also an unsettling reminder that good radio is just one decision away. But as long as corporate bosses and finance tycoons run radio, the “safe” choice of pushed programming will always win.
The final chapters of Ladd’s book read like a greek tragedy about the impending murder of the living LA rock station Radio KAOS. Out-of-town owners, motivated by ever-increasing appetites for cash, turn solely to accountants and research to determine programming. The result is a mishmash of mediocrity that tanks the station. The only person who learns a lesson from this is the reader, as the same catastrophe is played out over and over again as management moves up and DJs and listeners are moved out.
Radio Waves is an engaging read that is sprinkled with the author’s personable encounters with rock’s greatest legends. In the end, I was left wondering if all of us know that good radio requires localism and a talented staff; how long will it be till we reimpose the localism rules that were ditched by the government? The move is certainly ripe.
306 pages, St. Martin’s Press
High finance is secretly getting rich off of Radio while ordinary investors (and the tax payers) are stuck with the bill. Private-equity firms load tons of debt onto radio while hand-picking the management and skating with fees. It is no wonder that commercial radio is dying. Those in charge are not radio people. The film CORPORATE FM shows a way out of this.
Radio, the experts say “call it media”. Those experts are wrong and this is why it matters.
Many well-meaning radio consultants are afraid that emerging technology will destroy radio. These consultants even swayed the former head of NPR “National Public Media?”. Ask anyone on the street what it is; they call it Radio. Even at pledge-time the multitude of volunteers call it radio. These consultants believe that to save radio, it must become more like the internet. We already have an internet. If it were the 1950’s would we be telling radio to call itself TV? Radio survives because it is…radio first.
Changing from “Radio” to “Media” is wrong for 4 reasons.
1. It turns it’s back on 40 years of branding (for NPR). Who would tell Coke change its name from Coke? There are plenty of new popular energy drinks and esoteric teas are gaining market-share. It could make sense if you went only by the numbers. And that is exactly why the consultants get it wrong about radio repeatedly. Coke is Coke and Radio is Radio. Continue reading…