INK TANK

Bankruptcy: Music To My Ears

A message from Radio Ink Publisher Eric Rhoads

It's not in my nature to rejoice in the misfortune of others. The bankruptcy at Citadel Broadcasting is unfortunate for all the good people who've lost their investment and for all the good people who've lost their jobs over the past couple of years, and for those who perhaps still will. Sadly, the bankruptcy court may have been sold a bill of goods when the judge was told Citadel will be through its bankruptcy within 300 days.

I doubt Citadel's lawyers mentioned that the company was on a path to self-destruction long before the economy got bad, or that its management has been considered by some in the industry to have made nothing but boneheaded decisions. But, of course, the company's attorneys would never say that, and how is the judge to know any differently?
 
The Domino Effect
Though we've all known the Citadel bankruptcy was just a matter of time, waiting only until a prepackaged deal could be reached with lenders, the actual event is music to my ears and one of the best things that could happen for the good of the radio industry. In recent editorials I've predicted that once one falls, we'll see the start of a domino effect. And, of course, NextMedia fell after Citadel, filing for Chapter 11 the following day. Will more follow? I think you can count on it.
 
A Failed Experiment
I can't fault anyone for being seduced by the high multiples and the easy money to build radio groups at the dawn of consolidation. Almost everyone was doing it. But the experiment failed. Though radio was and always will be a high-margin business, the mistake was thinking it could be a 50- or 60-plus percent margin business and support all that debt. 

Another mistake is thinking that our problems are rooted in the economy. We must not forget that we had eight years of negative growth prior to this economy. That was just the final coffin nail.
 
The Radio Reset Button
Bankruptcy could be pushing the great reset button for radio, which can again thrive with reasonable levels of debt. Of course, that is entirely dependent on how we operate these properties going forward and on whether the boards and investors of these companies don't allow the same mistakes to be repeated -- and if, in some cases, leadership is changed. Then, and only then, will we see a changed and thriving industry.

Money Waiting In The Wings
Behind the scenes at our Forecast event in New York in early December, I learned of four companies that have been formed and have raised hundreds of millions with the intent of buying up distressed spinoffs out of radio bankruptcies.

While a couple of these companies are investment groups with no broadcast experience or leadership, the others were formed by broadcasters who have track records of success and who intend to operate with the critical core values that made radio successful. There is a strong possibility that this industry will look very different in just a couple of years.
 
The Past Won't Repeat
For those of you who are wishing for the past to return: It won't. The radio industry we are about to see won't resemble the radio industry of pre-consolidation days. But if mistakes aren't repeated, this industry will again flourish. After all, unlike television and newspapers, which are suffering great losses, we've never actually lost our audiences, just our revenues. Imagine what we can do if we actually start promoting again and start serving our audiences with deep conviction and localism.
 
Music to My Ears
Bankruptcy is music to my ears. Not for the pain and loss it's causing many, but for the hope that radio will again return to the core values that make it strongest once the debt pressure is removed.
 

Best,
Eric Rhoads
Radio Ink

Please don't reply to this e-mail. To comment, click here. 

TWITTER
FACEBOOK
LINKEDIN

---

A Message from Deborah Parenti, VP/General Manager of Radio Ink:
Eric and I want to thank everyone who attended our Forecast conference earlier this month. We had a standing room only crowd and the best agenda yet. I'd like to thank Bill Stakelin of Regent Communications and Lee Westerfield of BMO Capital Markets, who were our co-chairs this year, and thanks to our sponsors as well. Our next conference will be Convergence 2010, to be held in the spring.

Bound By The Chains Of History

Most of my friends live in the past. Perhaps it’s their age, perhaps they are romanticizing a bygone era — or perhaps they’re right. We must not discount the value of experience. Yet, while experience can anchor us, it can also capsize the ship during a storm of change.

In Glimmer, Warren Berger’s new book about design, collaborator Bruce Mau discusses the reinvention of entire industries and businesses through experience design. Mau believes that true innovation is rarely accomplished from the inside out. For example, MP3 players had been around for several years when Apple made the iPod a phenomenon by bringing in outsiders to reinvent the consumer experience.

Mau says people on the inside, no matter how innovative or proactive we think we are, tend to worship elements of the past, bowing to them like golden calves. We may have breakthrough moments, but we talk ourselves out of changing because of an idea’s historical importance.

In radio, for instance, we cling to the standard 30- or 60-second ad format. Why? Because we run our stopsets at the same times. Why? The stopset clock used by most radio stations today was based on an Arbitron TV ratings clock from the 1950s. That became the quarter-hour measurement, and we stopped in those traditional places because running ads within five minutes on either side of the quarter-hours would penalize our quarter-hour shares. We can throw all that out the window in a PPM world. How many stations in PPM markets are stopping at the same times they used to? All of them.
This week I hold my Forecast conference, an annual gathering of radio executives. Some will talk of change, as they have for the last few years, but few will report that they have actually made any significant changes. Some will say what we are doing is working well while reporting another down quarter. Perhaps they are right — but how will we know unless we experiment?

What if a radio company, or the industry as a whole, brought in an outsider to reinvent the radio experience from the outside in? What would happen? How would radio change? Chances are it wouldn’t; we would ignore the outsider’s recommendations because they "don’t understand radio."

But those wacky ideas might work. We pooh-poohed streaming, but Pandora, a webcaster that some say doesn’t understand how radio programming should be done, has amassed an audience of millions. Radio continues to discount it, which probably makes Pandora CEO Joe Kennedy very happy as he flies under the radar to steal our audiences. Although he has yet to effectively monetize the service, eventually something will work.
We all live in the past to some degree, because the past has proven successes. For example, I’m a big believer in the basics of community and local personality to facilitate an unfair share of the market. It’s proven itself time and again. But how realistic is it that debt-burdened companies will reinvest when survival is on their minds every moment of every day? How likely is it that one company will hire an outsider to reinvent and experiment with even a single station?

Perhaps it’s time. You cannot create change when bound by the chains of history.

The Fat Lady Is Singing

A message from Publisher Eric Rhoads

According to Wikipedia, the expression "It ain't over till the fat lady sings" originated with comments about Richard Wagner's Der Ring Des Nibelungen and especially its last part, Gotterdammerung. The fat lady is the Valkyrie Brunhilde, often portrayed as a very buxom lady with a horned helmet, a spear, and a shield. Her final aria lasts almost 10 minutes and marks the end of the cycle of operas.

It's over. The fat lady is singing. Today is the last chance.

When I told the story about why I created the Mighty Red HD Radio, I never anticipated we would sell so many so fast.

We sold out our entire shipment in the first four hours after my e-mail one week ago today. We never anticipated that some people would buy 15 or 20 radios and that the average order would be 2.8 radios.

Because of the demand, we scrambled to get another shipment created. We doubled the size of the shipment this time, and now it's almost sold out. Only 350 radios remain from that shipment, which will be the very last.

No more. The fat lady has sung.

A Crapshoot
When you create something like this, you never know if the market will like it or accept it, especially after I've told you about the big booming HD sound from this little tiny radio you can strap on your arm for $35. But comments are starting to come in from people who received their orders from our first shipment.

---

Eric,

As promised, my Mighty Red by Eric Rhoads arrived today and within minutes I was hooked into Supertramp on The Gator. I haven't tried the earbuds yet, I wanted the full experience and have no problem pushing my big ol' broadcast cans through a mini adapter. "Goodbye Stranger" never sounded so good on a device smaller than a pack o' smokes -- especially since I have trouble getting good reception on standard FM this far north.

Thanks, Eric, Merry Christmas!

Dick Downes, CRMC
President/CEO
Custom Publishing & Marketing Group Inc.
Jupiter, FL

---

Eric,

I just received my Mighty Red, and it is mighty great!! Easy to use and, as you said, good quality audio.

I salute you for your getting this accomplished. The industry needs to promote this because it is a great advantage to radio listening. I also got one for my son who lives out in Palo Alto, and when I told him about it he had never understood what HD Radio really was, and he is a radio listener. He's coming here next week and I am excited to give him his and show what it can do here in NYC/Long Island.

Eric, thanks for covering radio's back. You are a great asset!!

Happy Holidays,

Jim Champlin

---

I got my Mighty Red yesterday, charged it and am using it now. You have hit a HOME RUN with this little radio. Way to go, Eric!

Webster James
Raleigh, NC

---

Mighty Red. The Little Radio With Booming HD Radio Sound by Eric Rhoads.

Special $35 price.

Once these last 350 are sold, Mighty Red becomes a collector's item.

My goal is for every person working in radio to own and experience HD Radio.

 

---

• A great gift for family and friends.
• A great employee gift.
• A great client gift.

The last day we are offering these is at our Forecast Conference in New York on Tuesday. Unless, of course, the remaining 350 sell out today, which is likely.

To place your order, visit

www.mightyredhd.com

Eric Rhoads
Radio Ink

TWITTER
FACEBOOK
LINKEDIN

 

Liberating This Chained Industry The Good and Bad News About Radio and the Coming Renaissance

A message from Radio Ink Publisher Eric Rhoads

First, the bad news.

• Radio will be down 18-20 percent in 2009 and is expected to finish the year at $15.5 billion, down from $21.5 billion in 2006.
• Radio has lost over 10,000 jobs, and that number could increase.
• Several radio companies are facing bankruptcy.
• High fixed costs (much of which is debt), perishable inventory, and overcapacity are creating a deflationary spiral in rates, which continue to fall.
• We have commoditized the radio business because it's easier to stimulate demand through price than to train people and hold them accountable for selling value.
• Much of our industry has been forced to eliminate valuable localism, strong sales organizations with accountability, and much-needed promotion.
• We face low-cost competition from online media, which is seducing advertisers with brilliant technology that makes offerings highly targetable and attractive.
• The likelihood of increased federal regulation appears to be looming, with deeper controls on content and potentially increased costs through performance royalties.
• None of us is immune. Every station owner, operator, employee, vendor, and supplier is impacted.

Now, the good news.

• Unlike print, newspapers, and television, radio listening is alive and well, and radio continues to have a strong hold on audiences. Our audiences are not eroding.
• New data suggests that radio has not lost its grip on the youth market and remains relevant with 18-34-year-olds.
• Independent broadcasters and many small-market operators have been able to prevent severe declines in business with strong localism strategies.
• Some radio companies are starting to wake up to the fact that digital media plays a significant role in our future and are integrating it deeply into their organizations.
• Desperate times spawn great innovations. New plans seem to be emerging that will change the very nature of how we operate our business.
• Bankruptcies and further consolidation will weed out many of those who have had a negative impact on radio.
• There is money to be made even in a declining industry, and most industries cycle back eventually.
• Breakups of some larger groups will spawn more independent, true-to-the core broadcasters.

The Best and Worst of Times
Historically, the worst of times bring the best of times. When things appear their darkest and coming storms create further disruption, we must stay focused on the idea that with storms comes a cleansing and dramatic change.

The Radio Reset Button
It won't be long till we see a massive reset in this industry. Though flushing out equity and handing companies over to lenders won't solve our problems, it might, at the very least, open eyes to the need to focus on sound business principles that have been ignored, and to simultaneously focus on true innovation. This innovation will be disruptive, will create further job losses, and will bring a true reinvention of how every radio station is operated.

One thing is for sure: Returning to the past won't work. Though elements of the past that have been ignored will become critical to continued survival and success.

Liberating This Chained Industry
We, the people of radio, are living in an important time. Those of us who remain committed to the radio industry will see days ahead in which we thrive. Those who understand that we must reinvent the way we create programming, the way we offer it to the marketplace, and the way we sell it, and those who are willing to challenge every assumption will thrive. Those who possess the important heritage skills, many of which have been ignored, will again have the opportunity to prove how radio can thrive with the right tools.

But this won't be your father's radio industry, or even the industry we knew pre-consolidation. The past won't return, no matter how much you pine for it, and you'll need to remain flexible and open-minded. Actions that may at first seem like bad ideas may in fact liberate this chained industry. It will be a different industry than we know today, but those willing to adapt their skills will see very bright days ahead.

Refusing to Repeat Our Foolish Mistakes
For decades I've watched this industry from the perspective of an industry publisher. My gut tells me that radio is about to experience a renaissance. No one can predict what it will look like, what the outcome will be, and who will emerge to lead it. I can almost guarantee it will be different from anything most of us can anticipate. With it will come great hardship, great change, and, sadly, many more of our industry brothers and sisters will be sacrificed. Yet this industry will emerge stronger than ever.

But only if we refuse to repeat the foolish mistakes of our recent past. Radio's future lies with debt holders, equity investors, and board members, whom we can only hope will demand higher levels of accountability from their CEOs and be willing to invest back into this industry, which has been stripped of its natural resources. We must have strong, accountable boards and stronger CEOs, who are willing to battle the whims of investors who not broadcasters and who will not be puppets or yes men.

We need experienced operators who can not only implement the core basics that have been removed from our industry, but are open to dramatic change in the way everything is done. Unless these debt holders start to understand that, in some cases, they've bought into the tricks of fools, and unless they begin to surround themselves with experienced people who have earned their stripes on the streets of radio rather than pretenders, we'll simply enter into phase two of a radio experiment gone bad. Yet somehow, I sense the bad eggs will be thrown on the grill, and the domino effect will be like bringing down the Berlin Wall, with the hope of returning this industry to great days ahead.

Are you ready to commit to the coming renaissance? It will be a wild ride, but well worth the effort.

Best,
Eric Rhoads
Radio Ink

Please don't reply to this e-mail. To comment, click here. 

TWITTER
FACEBOOK
LINKEDIN