The Radio Bailout: Devil vs. Angel

I remember a cartoon from my childhood, when Goofy was deciding whether to do something, and there was a little devil whispering in one ear and a little angel whispering in the other. Of course, as a child I didn't realize how real that is -- to continually battle, right against wrong, good against evil.

Is it possible that those little devils are whispering to the consciences of some radio people about taking government bailout money?

Here is what that conversation looks like:

Devil: Go ahead, take bailout money from the government. It would make things easier, take the pressure off, and we could probably make a lot of money on it.

Angel: But if you take it, there will be strings. There are always strings.

Devil: We'll just do it for a little while. Just long enough to get the business solid again. Then we'll pay it back.

Angel: You know you'll never pay it back. What if business doesn't get better for a long time? Will you go back for more money? What about all that taxpayer money going into radio?

Devil: It won't matter. They're going to spend it anyway. Everyone else is taking government money. It might as well go to radio too.

Angel: But what if it harms the radio industry? What if it limits our business practices and the government starts telling us what we can play, what we can say, how we must do business?

Devil: Hey, I'll be long gone. I'll get my money out. It will be someone else's problem.

Recently a group of minority-owned broadcasters met with Treasury Secretary Timothy Geithner to discuss a bailout to keep minority radio on the air. I don't want to give the impression that I think bailout money for minority radio is a bad idea. I think bailout money for any part of radio is a bad idea. It just so happens that the minority broadcasters were first in line. I think there is a strong possibility that many other radio companies could soon be looking for government bailouts.

Wall Street didn't pan out, stock values have fallen, advertisers are disappearing, and the economy isn't improving, so a bailout seems pretty attractive. Plus, a radio bailout would solve all our problems, make the business whole again, allow us to bring back some of the things we've been doing without, and let us preserve jobs. It all sounds great. But we need to carefully listen to the voices in our heads. Because you and I both know what could happen....

A few individuals will get the money and line their pockets with big bonuses, and radio will continue to operate exactly the same way. Balance sheets may end up healthier, but I doubt that will trickle down to more local service, more jobs, or better practices for radio. At best, it may save some jobs.

Radio Government-Style
Has it crossed your mind that if radio became nationalized, like the car companies and banks, our businesses could be more beholden to the direction of the government? Somehow the ideas of "freedom of speech" and "government ownership of news media" don't make good bedfellows. Car companies were told to take certain actions, shed a certain percentage of dealers, and maintain certain previously unheard-of practices. Do you want a new "Radio Czar" in Washington pulling strings and saying, "Let's pull that story or we pull our money," or, "That talk host is a little too negative. We need to keep things positive. I think you should pull that program." One senator recently stated that he would like to see more government control over radio formats because he cannot find a jazz station in his small town. Can you say "BBC"?

A Radio Lightning Rod
Even it were a no-strings-attached financial arrangement, a bailout for radio would have a big difference: Chrysler and GM were not already using the people's airwaves. This issue could create a whole new dialogue and impact us in ways unimagined. I'm not sure we want radio to become a lightning rod for deeper attention by the administration, who may look at our problems and decide to re-regulate radio in new ways.

 

We've recently heard talk in the halls of Congress and at the FCC about reducing licensing renewal terms, creating community boards to determine the direction of local radio, and creating more "balance" among formats. Do we really want to open a new can of worms and risk deeper controls and limitations? Do we want to risk the return of pre-consolidation limits on station ownership, or return to the FCC of the 1970s, when the commission required hourly news, stronger localism, public ascertainment, and government approval of format changes?

Listen to the Little Voices Carefully
Could a radio bailout happen? Count on it. The bankers and note holders of radio's biggest companies are most concerned about their balance sheets, and they seem barely aware of the issues broadcasters could face from government intervention. Most won't think twice about allowing government strings to control radio companies. Once they get their money, these investors will be long gone -- as will many CEOs. After all, radio isn't completely free in other countries. How much could it hurt if the FCC dictates formats, chooses a balance of programming, decides what content is and isn't acceptable, and enforces sharing of the American airwaves?

To those asking for bailout money now, or those considering it in the near future, I suggest you listen carefully to the little voices in your head. I implore you to consider the ramifications of the strings that could come with a bailout, and encourage you to walk away if those strings stand to threaten the only free broadcast system in the world -- even if it solves your personal business problems, and even if it makes you rich. If more people had considered the little voices in their heads and the impact their decisions would have on the industry as a whole, we might not be facing many of the problems we're living with today.

Best,
Eric Rhoads, Chairman/Publisher
Radio Ink

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[Larry Jennings]

For the record, I'm opposed to any type of government bailout for radio. Period. But I notice that the discourse on minority owned radio seems focused on race or color. Actually, minority-owned encompasses women, African-American and Latino. I'm not sure, but I belive there are some other classes included in that definition.

[Alex. M. G. Burton]

What is so bad about some radio ststions failing in these tough economic times? If they don't know how to attract listeners and serve their community then of what good are they? Let them fail, minority or other wise. Those left can take up the slack and perhaps offer some listeners choises.
That's whey tough timer come along. To weed out the incompent and those who have not paid attention to business.

[Tom Darrah (aka Daren)]

The only words scarier than "corporate radio" would be "government radio."

[JD Stearns]

Eric makes some very good points and they could be related to what is happening in the small business contracting arena with respect to Department of Defense Contracts. If federal money is used to bail out radio stations, it shouldn't matter the race of the owners. The determination for bailout should be objective, if bailout money is offered at all.

Bottom line, the federal government is SUPPOSED to be color blind.

A summary of the case is below:

FedCir: Disadvantaged minority set-asides for DOD contracts unconstitutional

(Rothe Dev Corp v Dep't of Defense, November 4, 2008). A federal law that sets a goal of awarding five percent per fiscal year of defense contracting dollars to companies owned by "socially and economically disadvantaged individuals" has been found unconstitutional by the Federal Circuit Court of Appeals. The law incorporates the Small Business Act's rebuttal presumption that African-Americans, Asians, Hispanics and Native-Americans are socially disadvantaged individuals, but implementing regulations require all owners to demonstrate the economic disadvantage element. The plaintiff corporation, owned by a Caucasian woman, claimed the law was unconstitutional on its face and as applied by the Department of Defense (DoD) when it awarded a contract to an Asian-American-owned business despite the fact that the plaintiff was the lowest bidder. In 1995, the US Supreme Court held in Adarand Constructors Inc v Pena that all race-conscious government programs must be evaluated pursuant to strict scrutiny standards to determine whether they violate the Constitution's equal protection guarantees. Under strict scrutiny analysis, such programs must be narrowly tailored to further a compelling government interest. In the present case, the Federal Circuit found that Congress did not have "a strong basis in evidence" upon which to conclude that the DoD was a passive participant in racial discrimination in relevant markets nationwide. Thus, Congress did not have a compelling state interest to justify the race-conscious remedial measures contained in the law when it was reenacted in 2006.

This is from the blog of Mitchell H. Rubinstein, Adjunct Professor, St. John's

[Bob Fox]

Maybe every failed business should get a bail out - restaurants, dry cleaners, you name it. This ia all nonsense. If one doesn't know how to run a business, then the business will fail. Unfortunately, with consolidation it seems those in charge of companies owning radio stations took on tremendous debt that is impossible to pay down. Further, it seems some of those CEO's had never operated a radio station. The results are well known. Very, very sad. By rhe way HD is not going to save the industry. I believe it is the "Edsel" of the radio industry.

[Dick Baggs]

What's that old saying - "What goes around, comes around?" Radio is getting exactly what it deserves at this point in time. And it will be a relief to finally witness the end of the Great Corporate Experiment and the return of individual ownership. This is what happens when you turn an entire industry over to a bunch of idiot bean counters and slimy corporate terrorists. Enjoy sleeping in the bed you've made for yourselves, douche bags.

[Eric Rhoads]

Sean Kelly's point is spot on. Imagine a world of restrictions, which make us less marketable while streamers rejoice and take even more audience.

In the AM days the FM guys took advantage of the the standards the AM people could not overcome. This could drive more online success.

Of course those of us in radio must not assume we will need those towers in the future. We certainly do now and for a few years (while having companion online offerings). But in the future those towers make be like the printing presses the papers no longer need.

[Eric Rhoads]

Larry....
For the purpose of clarification:
1) Localism, Local News, etc. are great elements of great radio. But when the gov't legislates this it changes the free market and the ability to innovate.
2) Ascertainment was a good idea in theory...listen to the local community. BUT, it was all a ruse. Stations would ascertain, show how they were addressing it, then throw a show on Sunday morning when no one listened. Primarily because IF they did what they learned it usually meant no audience.
3) Limbaughesque? Come on! I don't think you have to be or think like a right wing conservative to understand that the less government intervention in content, the more freedom we maintain. Even places like the UK do not have complete free speech and the people never can get the full picture... no matter which party or idealism they support. It cuts both ways in to Liberal and Conservative. We need to protect this at all cost therefore we must avoid strings. This isn't a car company who was out of touch with its customers. Though the loss of GM would have a big economic impact it won't kill free speech.

[Larry Jennings]

I agree with Eric on the bail-out issue. It's a crazy idea and one that ultimately makes a few people rich while the industry remains the same. Radio and GM have much in common. Neither was willing to make the changes necessary to evolve until market conditions (and the government) forced a change. Eric is driving on the bridge to nowhere with all that Limbaughesque talk about government take-overs of radio. By the way, what's wrong with localism, hourly news and ascertainment? I thought these were public airwaves. What was I thinking?

[Sean Kelly]

Eric left out a sentence:

Do we want to risk the return of pre-consolidation limits on station ownership, or return to the FCC of the 1970s, when the commission required hourly news, stronger localism, public ascertainment, and government approval of format changes?

ESPECIALLY WHEN YOUR NEW COMPETITORS ON THE INTERNET DON'T NEED A LICENSE AND HAVE TO UNDERGO SUCH SCRUTINY?

Lets face it. The realities of this business have changed forever. There isn't enough government bailout money to get the genie back in the bottle.

We can either adjust and adapt or go the way of newspapers.

[Valerie Langford]

Thanks Eric - we all know that old saying that "You never get something for nothing" and that is the status quo for any bailout monies. Beware!

[Charlie Ferguson]

Radio stations taking bailout money virtually assures programming in the government's interest - not the public's. You'll see me in the unemployment line long before you'll see me standing with my hand out in the government bailout line. "Abandon Hope All Ye Who Enter Here" - Dante

[Bob Bellin]

The senior lenders (Goldman, et. all) who are lining up to take over their radio assets probably won't assume the programming reigns. In fact, most will likely leave the management in place. They will just control the asset and little will change, as there isn't much of a market for radio stations right now.

A bailout - even for minorities, seems far fetched. True, it would probably come with strings attached, but I don't see much public appetite for further bailouts...and the 2010 election is just around the corner.

[Eric Rhoads]

Skip brings up some very important points, of which I was not aware. There is no doubt better hands to operate are those of broadcasters.

Thanks for the vote of confidence Skip. Absolutely this is NOT an issue about Minority stations.

My ONLY, repeat ONLY concern is that the strings for receiving money do NOT control our industry or what we can put on the air.

[Skip Finley]

Or, another way of looking at it; suppose Goldman, GE, Bank of America, Wells Fargo(et al)and/or groups of anonymous hedge funds were the licensees of the public interest, need and convenience? How's that feel to you? Goldman, for example, controls so many stations in the Cape Cod market that it must find a way to divest several Nassau Broadcasting stations that it took 85% control of due to the attribution rules. Do you believe Goldman will do a better job programming in the public interest than Riviera Broadcasting--where Goldman took 100% control? Or Border Media? Or that Lazard will better operate the highly respected and localized Mapleton stations? Oh, did I mention that none of these were minority owned? I can vouch for Eric Rhoads sensitivities on the issue--but absolutely no one elses. So I don't abide by negative comments at any time after minorities have developed a very sophisticated legislative solution to an evident problem that the rest of the industry seems to have overlooked, for whatever reasons.

[Steve Gaines]

I can't think of anything worse for this industry than to think that a bailout is a good idea. The biggest issue of them all is, as you point out, that it would change NOTHING about the way the business is being run. (And run quite poorly for the most part, I might add.) It would be nothing but "bottom line" money for the top shelf.

When will the industry start to think about the importance of reinventing the way radio is done? When will the industry wake up to using Social Media to truly build REAL one-to-one connections and community portals?

Nah, let's just do the same ole same ole and whine. And maybe hold out a hand for some government cheese.

Glad you posted this Eric. I know you carry weight in the industry. I dearly hope some are listening.