The fall of Citadel


Citadel Broadcasting is now facing delisting by the New York Stock Exchange because its stock has been trading below a buck a share – quite a fall from the IPO at $19.00 in 2003. CEO Farid Suleman had staked the company’s future on acquiring ABC Radio from Disney, but rather than reversing the company’s Wall Street decline, it has accelerated it, with both the original Citadel and the ABC stations underperforming.

RBR recently received this scathing review from a former ABC Radio employee, who is still working in the industry and must remain anonymous. You will no doubt find it an interesting read.

Long-time Cap Cities / ABC fans and employees were  disgusted when they read about the rape and pillaging of a once-great company by Citadel broadcasting six months ago.

Wielding a scimitar over hundreds of the employees is not only inexcusable but the most egregious case of ass-covering and finger-pointing perhaps ever in Radio. And, as Radio Business Report pointed out Monday morning, it has made things worse, not better.

Let’s look back at some of the points in RBR beginning back in March.

When it comes to talking about losing your job for underperformance, we have to wonder how secure Suleman is in his own job.
While it may be convenient for the Citadel boss to run for cover behind the performance of the former ABC Major Market stations, Citadel’s own stock history tells a very different story.


If you did not know the date of the ABC-Citadel merger, could you pinpoint it on this 5-year Citadel stock history? I didn’t think so.

The first question is – with or without ABC – is Citadel always going to be a small-market, small-minded Also-Ran, pure and simple? You have to wonder. During one of the greatest sustained stock run-up’s in our lifetime, Citadel has collapsed perilously close to Penny Stock territory and a likely farewell to the big board if things don’t get better and fast.


And, the second point – where was Citadel Management when they could have ordered the crew to "pull up" countless times in the 5-year flop of the company, years before the ABC acquisition?

In response to an analyst’s question, Suleman said overall he feels "really good" about the team of managers in Citadel’s markets, although there will be some changes made.

He noted that every major market was down in Q4 for Citadel and that national advertising was "a complete disaster." However, he praised his national rep, Katz, for its efforts underway to bring new national advertisers to radio.

Which is it – really good managers doing a bang-up job or a doofus gang that can’t shoot straight? Olympic-caliber national sales reps or a major reason for the steep and continued national revenue declines?

Here’s a hint: it can’t be both.

Now, can we once and for all put to rest the much-repeated and frankly absurd idea that having an office down the hall from Mel Karmazin once-upon-a-time makes someone a Radio or Financial genius? (pssst. Your office was close to Mel’s so he could drag you into his on short notice!).  And, one more thing: You are never going to get anything close to Howard Stern results putting Don Imus on your stations. It is not as easy as Mel makes it look sometimes.

"What you want to do is give everybody an opportunity to perform," (Suleman) said following the merger that brought ABC Radio into Citadel. "The environment is such that you don’t have the luxury of too much time,"

True enough — Before Citadel came along ABC Radio was not known for its urgency. They didn’t come to the Consolidation Party; had only a handful of stations you’d consider prime real estate; left outsiders scratching their heads as some of the major ABC Radio stations fell out of the top-10 and stayed there; and, the company often seemed satisfied with a 2-share, hoping swelling market revenues would raise the fleet. A few years ago one of the top Radio execs at ABC told us, "…I don’t worry too much about a station until it’s had three down books…"  Enough said.

So, we have to wonder, how long is a "fair opportunity to perform?" Put another way – should we have expected the ABC Managers to produce major cultural, ratings, and financial turnarounds in less than nine months when Mr. Suleman has had a six year "opportunity to perform" since taking over the company? And in that time Citadel shareholders have lost 95% of their "investment." (Citadel took over ABC on June 11, 2007)

Was there dead wood at ABC Radio? Probably. Are there managers at every level who have been sub-par performers? No doubt. What company can’t say the same. But, Citadel’s ruthless and hysterical overreactions are gutting the former ABC group. This is not a carefully-considered set of surgical steps. We’re talking butchering here, pure and simple. Not a merger … a hostile takeover.

One by one, former ABC radio clusters will be commandeered by Citadel champions. It happened in Atlanta.

And, by the way – Don’t be surprised if color-coding the deck chairs and throwing some of the kitchen staff overboard doesn’t help. Things may get a lot worse before they are better.

The story in Radio Business Report this week was Moody’s review of the company in light of "…on-going weakness in the company’s operating performance…" 

In English: Citadel stock was selling at about $10.00 as the ABC deal was being finalized. As this review is being written the price is
88-cents a share; a gut-wrenching 92% down a black hole.