Consolidation within the consolidator:
CCU merging Premiere and CC Advantage operations into Katz

As first reported in our RBR/TVBR Bulletin yesterday, Premiere Radio Networks is being combined into Katz Radio Group and Clear Channel Advantage is merging into Katz Dimensions, with Katz Media Group CEO Stu Olds running the whole show. Clear Channel revealed the shakeup to staffers at the affected units last Friday (9/10/04), but didn't go public with the news until RBR/TVBR started asking questions yesterday.

Here's how it's going down: Premiere Radio Networks is not going away, but will have more interaction and direction from Katz Radio Group. It's not an official merger. CC Advantage is merging into Katz Dimensions and the new company name will be "Clear Channel Katz Advantage." They're disbanding CC Advantage, the cross-platform selling arm encompassing CCU's Radio, Outdoor, Entertainment and Interactive media properties. The new operation is going to be run by Bonnie Press, President/Katz Dimensions. She'll continue to report to Stu Olds. Reporting to Olds for the first time is Premiere President/COO Kraig Kitchin. He keeps his job and titles, but Olds will now have more say into the network operations. Olds will be overseeing the sales side of the two entities - - overseeing sales and the budget process.

Confirming the new arrangement, Katz gave RBR/TVBR this statement: "Premiere Radio Networks and the Katz Media Group will be working in closer collaboration as a way to better service our client and customer base. Premiere Radio Networks will continue to operate independent of any other unit within Katz Media. Premiere's existing staffing structure remains intact and the #1 Radio Network will still be managed by the highly regarded leadership of Kraig Kitchin, reporting to Stu Olds, CEO Katz Media Group. According to Stu Olds, 'Our goal with this new collaborative structure is to take advantage of existing synergies and explore new partnership and revenue stream possibilities. We are pleased that this more formalized relationship will allow us to do what we discussed informally over the past year for example, the creation of the Premiere Radio One Network which took advantage of the Clear Channel urban lineup of radio stations along with the Katz represented stations of Radio One. Together, Alfred Liggins of Radio One, John Hogan and Kraig Kitchin made that a reality.'"

So, what's the motivation? What does Clear channel gain by combining the operations of Premiere and Katz?

One industry source explained it this way: "I think Katz was off about 15% in July and off dramatically in August. Those businesses are off, the networks are off, everybody is off. They're looking for ways to cut costs. Another issue is these big buying agencies just can't comprehend this dinosaur-like way that radio is purchased. And agencies don't like to staff up for that heavy stuff. When you buy network TV, you get one bill and you pay one check. With radio, you have to cut like 200 checks and have a whole floor of people just doing paperwork. Clear Channel is the biggest operation in our business and they may be looking at some way to combine network and spot. I'm also hearing that Clear Channel may be coming up with some sort of Hispanic network. CC is the biggest player in the business and they may be saying, 'We need to have some coordination between our network, our spot, we've got to have this all together.' They can't have that competition between network and spot. I know network has been big with :30s and :10s and now spot wants to go that way now too. They've got all these stations together and they're now just going to put them all together in networks - - whatever it takes to get the business. Tying promotions together, etc...Networks can't do promotions well, but now a marketing plan can be done in conjunction. They're taking all the Premiere stuff and putting it as part of Katz and it's going to be a competitive thing that Interep right now doesn't have. Radio needs to create some excitement. They've got to make radio relevant and this is one big attempt. They're thinking if they combine Premiere and Katz together, Premiere will have some new synergies."

Another source: "Right concept, terrible execution. What they should have done is moved Advantage under Premiere. They should hire a TV exec who can sell the Irwin Gottliebs of this world. Now you're going to have spot reps selling network radio. There's never been competition between network radio and spot for dollars. It's a completely different universe."

RBR Observation:
Katz has no history in programming. The original TranStar Radio Network (now part of Westwood One) was lost on Stu Olds' watch. CCU has still never successfully consolidated all the pieces of their empire - - Outdoor, Internet, network radio, concerts and spot. Perhaps this is another attempt at it. CCU is the only company that has the potential to compete on a national level with the Yahoos, the MTVs, etc, in order to put demand-side pressure on the inventory. Until they can do this, this industry is going to founder. The question: are Stu Olds and Bonnie Press the people who can do this?

We know the industry is consolidating, but this is an odd example. In an advertising-based business, the content and sales departments are natural enemies, in a good way. There should be a tension between the two departments that ideally results in as perfect a balance between ratings and revenue as possible - - neither can exist without the other. Administration, over and above these two departments, must be the arbitrator when the two inevitably come into conflict. This move telegraphs which of the two departments Clear Channel thinks is more important. Time will tell if giving sales the upper hand over programming is a smart decision.

RBR bonus: Kraig Kitchin's memo to staff.

Today our company announced a new reporting structure in which Premiere Radio Networks will align with Katz Media Group, the division of Clear Channel Radio that sells advertising time for thousands of Radio and TV stations. Katz Media Group is a 100-year-old-plus entity with a great tradition of serving radio and television properties, as well as the needs of advertisers.

Premiere Radio Networks will continue to operate as a stand alone entity, and I will continue to be its President and Chief Operating Officer. We will not merge our operations or change our management structure, nor will we change our mission to provide the most compelling programs and services to radio stations worldwide while also serving the needs of advertisers.

Both Premiere and Katz Media work with thousands of the same radio stations and advertisers each year, making our alignment a natural one. We both serve the business needs of Clear Channel and non-Clear Channel media entities, as well as the needs of hundreds, if not thousands, of the same advertisers each year.

Our efforts of collaboration since becoming a part of Clear Channel in 2000 are numerous. A good example of this approach was our creation of Premiere Urban One, a RADAR measured radio network with specialized media reach to African American audiences.

Stu Olds, the chairman of Katz Media Group, is an industry leader and I look forward to collaborating with him further in 2005 and beyond.