WILL CLEARCHANNEL BANKRUPTCY SAVE RADIO?
No. This is why it is important not to just hate commercial radio and hope for the best. I got an email from a listener who was happy that Corporate radio was dying. He thought that we should “starve the beast”, implying that if it went bankrupt, the rats would jump off a sinking ship and someone who cared about their community would buy the station back. I wish that were the case. The way high finance manages radio stations, allows them to keep them in a zombie state rather than killing them. Even if the station does go bankrupt, the same firm that sucked all the life out of the company can manage to keep the company after bankruptcy. This is called a “pre-packaged bankruptcy”. In such an arrangement, they convince a judge that they are the best ones to manage it, because they obviously know whats wrong now and they promise to pay a percentage back to debtors. The creditors may get 90% of the new company. Who’s complaining? The listener would if they knew about it.
Imagine you were a DJ at Citadel (a radio consolidator) where you watched all your friends get fired and the quality of the programming drop thus driving listeners away. The company is huge, thanks to debt financing and mergers spurred by a private equity firm (Forstman Little and Company). In 2009 when the company is heading for chapter 11 you may think, at long last the CEO Farid Suleman is going to get his comeuppance. It never happens. He keeps the company. He keeps it, till he sells to another radio consolidator (Cumulus) who with the help of another private equity firm (Crestview Partners) lobs even more debt onto the stations and fires even more people. This is a pattern.
If you want to “starve the beast” then we have to stop feeding the beast with tax breaks every time it uses excessive debt (leveraged buyouts) to consolidate. By ending Interest Tax Deductibility solely on corporate takeovers, you would end the financial incentive that these companies use to prey on vibrant industries (paying little to nothing in taxes). Interest Tax Deductibility is what private equity firms use to convince the companies that they lob debt onto to accept that debt. The debt is the reason good employees are fired and ultimately the reason why commercial radio sucks.
The root problem with leveraged buyouts is that they often doom the company the moment they happen because the level of debt is so high that it is unrealistic to pay it off. The banks and the private equity firms don’t care about this because they make money off this debt though fees that they charge. To starve this beast, we have to follow the money to the firms that make money off of this destruction and cut them off. These small buyout groups should not be making huge sums of money if the companies they own do not pay taxes, and they should not make any money at all if they cannot afford to keep employees who were a part of the companies long before they took over. Capitalism has taken an extremely dysfunctional turn since Private Equity firms started abusing this tax loop-hole.
This movie needs to be made, and is right on target. I’ve been in the business – mostly as an engineering consultant – for nearly 40 years. What’s happened to commercial radio is CRIME. It began under Reagan, and was sealed under Clinton in the worst legislation of that decade – The Telecom act of 1996.
Throughout my entire 22-year career as an announcer and studio engineer, I have never worked for a corporate owner; only for smaller owners, not-for-profit entities and non-commercial outlets. Corporate broadcasters raised too many barriers to entry for me…I worked most of my career in my home market of St. Louis, MO. I lost my last commercial job 15 years ago, when the station I worked for was sold to Radio One. I was recommended by the boss I worked for under local ownership to be an engineer’s apprentice; Radio One wanted its own people, so they never contacted me. After that station was sold, I applied at every non-union shop I could…Emmis, Sinclair, even Clear Channel…no one would talk to me about job opportunities. I was looking to move up, and didn’t want to do it outside my home market. I tried to get into commercial radio in northwest Georgia in the early ’90s…there were too many barriers to entry there, too. Radio needs to abandon the policy of “it’s not WHAT you know, it’s WHO you know”…otherwise known as PATRONAGE and CRONYISM. This policy is the biggest barrier to employment in the radio industry. The industry also doesn’t believe in hard work; I worked so hard for 22 years to earn a spot in commercial broadcasting in my home market…and all I got were jobs that didn’t pay more than $9.00 per hour (even with an Associate’s degree).
I strongly believe the Telecom Act should be completely repealed, and replaced with strict regulations on ownership, programming and even hiring. Most corporate broadcasters don’t know how to hire qualified personnel.
I think you add an important nuance to the problem of cronyism in consolidation. I saw cronyism while making this film in the “good-ole-boy” network of mostly elderly white men that seemed to rather run radio by their club rules rather than by what would serve the community the best. This was the biggest barrier to diversity in programming and new music discovery. I can only imagine the frustration felt by employees who are struggling to create great radio for bosses who simply do not care.