RBR/TVBR Publisher Blogs on – All of us in the media are in for one hell of a ride for the rest of this year until a number of issues are resolved. Now these issues were not created by any of us normal broadcasters, but by a few of the greedy.
RBR/TVBR Blog Log review:
04/03/08 RBR #66 Clear Channel keeping the closing table ready, get this done or go home.
Follow the money – well RBR/TVBR posted the money stats, check it out, Clear Channel buyout funding. There are more zeros on this chart than in any of our checkbooks, which is the key. I do not feel one bit of pain for any player in the San Antonio tower or the deal players and makers. The guys at Clear Channel are smarter than anyone gives them credit for, as they most likely planned this exit strategy a few years back.
I have no inside information, but I believe the exit strategy started with the Clear Channel stations company-wide promotion called, Less is More (LIM). Next to the 1972 legendary station promotion by Jack McCoy, The Last Contest (TLC), LIM is the greatest Smoke Screen the radio business has ever seen in 30+ years. And it probably will succeed, but not by any normal means. But I’m getting ahead of myself.
For those who have never heard of The Last Contest, I pulled this explanation from Reel Radio, Uncle Ricky Collection:
"The Last Contest was the creation of KCBQ’s Jack McCoy, who also credited a ‘Milwaukee newscaster named Doug Harmon’ with helping him develop this biggest of all big radio contests. Listeners were presented with a mind-boggling number of ‘prize packages’ from which to choose — and all they had to do was call the ‘secret phone number’ to win. When the ‘secret phone number’ was finally announced, a third of the San Diego telephone system was out of order for a half-hour. Parts of San Diego County along the coast were without phone service for 90 minutes.
McCoy revealed later that only one prize was awarded, and there was very little cash investment by the radio station. The ‘prize packages’ were all contracted as ‘trade’ (merchandise for advertising). The practical realities of ‘The Last Contest’ didn’t tarnish the magic…"
Now do you see the similarity of The Last Content to Less Is More? My gut has told me for years LIM was invented to divert Wall Street’s attention while the blue prints were being developed for this exit. Why? Because a deal of this size takes about 12 to 18 months of planning and negotiations behind closed doors. The only real surprise was that after working for months with KKR, the Mays boys found themselves outbid by Thomas H. Lee and Bain Capital. No problem, they switched teams.
The problem IMHO is that in the year and a half that the deal was being discussed under the radar, and the other year and a half since it’s been out on the table, the radio business has not righted itself – indeed, it has gone in the wrong direction. Radio’s ivory tower CEO’s have been vocal for the past four (4) years that "Radio Has a Perception Problem." Wrong, "Radio has a Reality Problem." And this Radio problem is just one reason why CC is having trouble keeping its stock price within periscope range of the buyout price. Add in completely unrelated problems in the credit world and the bankers are simply scared shitless.
I have consistently reviewed this going private buyout process and wonder who or what tossed the plumbers wrench that stopped up the toilet? I can only point to one factor, the RBR-TVBR 01/28/08 report on Clear Channel ordering deep cuts as recession looms, where Clear Channel Radio CEO John Hogan sent out an email ordering all VPs, GMs and business managers to make immediate cost cuts to curtail Q1 expenses. That was the end of January and Lee/Bain have said in court filings that it was in February that the banks came "hat in hand" wanting to redo their financing deal.
Hogan’s email pointed to these key areas of DO NOT DO:
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
The cost cuts remain in place and employees remain in limbo, waiting to see who they’re working for and whether their 401(k) accounts get an infusion of long-awaited buyout cash. Clear Channel is suing the banks in Texas. Lee/Bain are suing the banks in New York. The banks are countersuing. And, as of today, no one knows how this is going to end. There is pressure on the banks to settle by today, since they face a court hearing that they don’t want tomorrow (04/08/08) before a judge in San Antonio, TX.
Of the multitude of parties involved in the legal battling, how many of them are headquartered in San Antonio? Just one – and it ain’t one of the banks. But maybe the banks will decide to take their chances and ignore the explicit infamous warning "Don’t Mess with Texas or it is Yippie-Ki-Yay xox!! "
It will be a pleasure not to see the Clear Channel stock symbol on our RBR/TVBR stock charts and, more, not having to listen to another Smoke Screen quarterly conference call. Well, actually, CC Media will have stock trading in the over-the-counter market. Let the 800-pound radio gorilla go lick its wounds and try to figure out how to build back up its decimated operations while other companies become the face of radio on Wall Street. Like the new Tribune headed up by former Clear Channel architect Randy Michaels who is now cherry picking key people or the best of the best that is left at Clear Channel to build the new Tribune. With this in focus, perhaps the sector will eventually regain some respect.
Getting this deal closed is important. To be sure I feel no pain for the folks in their ivory towers at Clear Channel, the private equity firms or the banks.
But I do feel for the rank and file people at Clear Channel: The ones who took a piece of their paychecks to invest and buy stock in the company they worked for. For many of them this was their jump start for personal retirement or for their kids’ education. They are the ones taking it in the shorts and checkbook, but they are still on the frontline fighting daily to make a buck for the deal makers and big money players. It there was ever a lesson to learn, never invest too much of your paycheck in the public company you work for.
Carnegie note: Have a comment or observation? For liner comments post below. I encourage longer observations at least 300 words with your photo for publication send to me [email protected] Share in the Voice.
