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 comments… add one }
  • 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.

  • Eric

    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.

    • Kevin McKinney

      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.