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.

art by paulorocker

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.

3 thoughts on “<span class="caps">WILL</span> <span class="caps">CLEARCHANNEL</span> <span class="caps">BANKRUPTCY</span> <span class="caps">SAVE</span> <span class="caps">RADIO</span>?”

  1. 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.

  2. 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.

    1. 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.

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