Clear Channel Radio CEO John Hogan sent out an email Friday ordering all VPs, GMs and Business Managers to make immediate cost cuts to curtail Q1 expenses. This follows RBR’s recent report on how soft national sales pacings were early in the quarter (1/23/08 RBR #15). Apparently the shortfall is deep and wide for Clear Channel as management struggles to keep profits up in preparation for the going private buyout by Thomas H. Lee Partners and Bain Capital, which is expected to close by the end of the quarter.
"No one anticipated how challenging Q1 would be for us and while the plans we put in place last Fall made sense then, clearly we are operating in a different environment and thus need an adjustment to our plan," Hogan told the troops. He has ordered a cut off of all spending for audience research as of February 1st, along with an end to all spending on advertising and promotion as of the same date. All new hires of sales people have been banned, effective immediately. Hogan also told the managers not to make any other new hires, even if they are already budgeted. If any employee leaves, they are not to be replaced unless specifically approved by the Exec. VP of Operations overseeing the market. Managers were also told to cut out any and all discretionary spending, such as travel, meals and entertainment. "If you can save it, do so," Hogan said.
Read the entire email below.
RBR/TVBR observation: For a company that had already long ago cut expenses to the bone, further cuts could very likely create opportunities for competitors to increase audience and/or revenue share. But with the economy sliding into recession, it’s not clear that very many will have the resources to grow as the radio industry giant shrinks. It will be hard to ramp up promotions and hire more sales people at a time when, in many cases, flat revenues will be seen as good news. For Hogan and his bosses, Mark and Randall Mays, the top priority right now is getting the Clear Channel buyout across the finish line. The stars appear to be in alignment, but anything that knocks the Q1 financial numbers severely off-course could be disastrous.
John Hogan’s email:
From: Hogan, John
Sent: Friday, January 25, 2008 09:31
To: Radio General Managers – All; Radio Business Managers
Cc: Radio EVP’s; Radio SVP’s ; Radio SVPP; Radio RVP
Subject: First Quarter Contingency Plan
As you are undoubtedly aware, we are generating less revenue for Q1 than we budgeted and less than what actually ran last year. At the same time, our budgeted expenses for Q1 are up 4%. While there are a number of factors contributing to our revenue shortfall the fact is we are behind on our revenue plan, up over last year on expenses, and as a result we will be well below our budgeted Q1 bcf. As responsible managers, we need to address the shortfall not only by continuing to find ways to increase our revenue but also by implementing cuts on the expense side until revenue production improves.
No one anticipated how challenging Q1 would be for us and while the plans we put in place last Fall made sense then, clearly we are operating in a different environment and thus need an adjustment to our plan. The following Q1 expense reductions are to be implemented immediately in your market and correctly reflected to San Antonio by having your Market Controller access the Flash website under Reporting Events and complete the form titled "Q1 Contingency Plan". You will need to provide the expenses reduction amounts on the required form at the market level for the items identified below. This needs to be completed by no later than 7 pm ct today. If you should have questions regarding the logistics, please contact Jeff Rice or Katie Gingrich and they will help guide you thru the process. The Q1 expense reductions are as follows:
Q1 Expense Reductions
-all Research monies after 2/1
-all Advertising and Promotion monies after 2/1
-all New Sales Hire guarantees not already implemented effective immediately (do NOT hire any additional sales people effective immediately)
-any New Hires budgeted but not hired effective immediately (do not hire any additional new employees)
-any/all discretionary monies (i.e. travel, meals and entertainment, etc) for your market. If you can save it, do so
Additionally, you are not to replace any departing personnel without specific approval from your EVPO
I completely understand the challenges associated with implementing the above cuts. It will make your job more difficult and have some long term affect on your overall performance. It goes without saying that leading through these reductions will be challenging. If there were another better alternative, we would not be requiring these reductions be implemented. Unfortunately, there is not another alternative.
Please contact your EVPO for any questions you have on implementing the reductions. Please recognize that your team will need strong leadership and support while implementing and operating under these expense reductions. Please help them understand the necessity of implementing these cuts and the importance of figuring out how they can operate as effectively as possible in the reduced Q1 expense scenario.
Again, I realize this is a challenging task but I am asking for your help, leadership, and support to implement and then work with the resulting expense plan to the best of your ability. It should go without saying that at the earliest opportunity, that is when revenues begin to stabilize and increase we can reverse the expense reductions.
Thank you in advance for communicating the above to your teams and for your Market Controllers completing the information requests on the accompanying website. Please let me know how I can help.
Pres. & CEO