AM “Revitalization” Destroying AM Radio

%22We have a company that's doing progressive stuff, and yet we're named after AM radio stations.%22

Bob Pittman, the head of iHeart Media, said this when announcing the company’s name change from Clear Channel Media + Entertainment.

I can’t imagine former Clear Channel CEO Randy Michaels ever saying something like this.

Ouch.

It’s going on three years since the Federal Communication Commission (F.C.C.) announced plans for “AM Revitalization.”  Then, late last year, the long-awaited AM Radio Revitalization Report and Order was finally issued by the F.C.C.  Included are numerous items, most of which will create additional interference on the AM broadcast band.  One item allows AM stations to operate with higher power at night.  The idea is to help lower power local stations provide a better signal so it can better serve its local market with meaningful local programming (more on this later).

This, however, would be at the expense of other stations, including those big signaled 50,000 watt “clear channel” stations.

But, first a history and science lesson.

Decades ago, to insure radio coverage was available in rural and farm areas of the country, the U.S. government assigned “clear channel” status to stations on certain frequencies across the country.  These are stations like WSM in Nashville, WLW in Cincinnati and WLS in Chicago.  With 50,000 watts, an assigned frequency on the left or lower end of the AM band and most importantly no other station operating on those frequencies at night when the AM signal travels farther, these stations were heard in upwards of 35 or 40 states.  Having a Class I station, as it was then called or a Class A today, was unique, valuable and gave station owners a competitive advantage over their lower powered competition.

Here’s the science part.  If you have one transmitter operating on a certain frequency and you have another transmitter operating on the same frequency at a tower site next door, the radio waves from each transmitter will cancel each other out and you won’t hear anything, even though both stations are transmitting and operating normally.

 

Simply put, two transmitters operating on the same frequency simultaneously cancel each other out.

 

In the mid 1980’s, the F.C.C. allowed what were then called Class IV local AM stations to increase power at night.  These stations were on frequencies like 1400khz with an assigned daytime power of 1000 watts and 250 watts at night.  Remember, AM radio signals travel farther at night.

While this may be counterintuitive, unless you understand the science behind radio, these stations had bigger coverage areas with 250 watts at night.  Why?  By increasing the power to 1000 watts at night, increased interference on these frequencies resulted in smaller coverage areas for stations once the sun went down.  The signals cancel each other out at distances away from their transmitters.

Science.

A few years ago, I wrote a blog about the F.C.C.’s initial plan to help AM radio.  My then employer and many radio industry trade publications didn’t appreciate my candor.

Guess who was right?  People are just now getting outraged?  Almost three years after “AM Revitalization” was announced and I spoke up?  Now?

I’m guessing someone at iHeart Media Googled “clear channel” and found they own a bunch of these stations.

“Well, hot dang,” as they say in Mississippi!

It appears an order was sent from the offices high above Midtown Manhattan for iHeart Media owned “clear channel” stations to instruct listeners to sign a meaningless “online petition.”  The petition calls on the F.C.C. to drop their proposal allowing increased power for some AM stations at night, especially on “clear channel” frequencies.  Correctly, the company concludes, this would cause interference and cut down the nighttime coverage areas of the “50 clears” they own.

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For example, there’s iHeart Media’s WGY in Schenectady/Albany, New York, a legendary station (if there ever was one) originally put on the air by General Electric.

I’ll let them make their case.

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Interesting, because their programming isn’t anything unique.  If WGY disappeared, listeners in their region could easily find the same programming elsewhere.

  • WGY does have a three and a half hour morning show broadcast from their studios in suburban Albany. It starts at 5:30am and runs until 9am.

But, let’s see how unique the rest of WGY’s weekday programming is and where it comes from.

  • At 9am, there’s Glenn Beck and his daily weeping session.  He’s followed by Rush Limbaugh.  Plenty of stations carry these shows.
  • Evening drive time, when the WGY signal starts to boom as the sun goes down, they broadcast the syndicated Sean Hannity show, heard on hundreds of radio stations.
  • In evenings, it’s Michael Berry.  His show is syndicated and broadcast from Houston, Texas.  Similar to Ted Cruz, I’m guessing he doesn’t understand “New York values.”
  • Mark Levin follows.  His show comes from WABC in New York City.  It’s not hard finding his show on numerous radio stations at night.  But, at least he knows how to find a good slice of pie in the Empire State.
  • Then it’s Clyde Lewis’ and his conspiracy show.  But, “Ground Zero” doesn’t come from gritty lower Manhattan.  It comes from quaint Portland, Oregon.
  • Finally, it’s Coast to Coast AM with George Noory.  His studio is right off the 405 in Sherman Oaks, California.  Traffic sucks.  But, who cares?  It’s L.A., right?

WGY has a grand total of three and a half hours of local programming each weekday – hardly the meaningful local programming I spoke of earlier.

To be fair, this isn’t the fault of the local program director or market manager.  This is what they’ve been required to broadcast from iHeart Media and its syndication arm Premiere Networks.

Does syndicated programming have a place on a station like WGY?  Of course it does.  Just not 85% of its programming.

And that’s why WGY’s meaningless online petition is…well…meaningless.

If iHeart Media, or any consolidator company for that matter, actually thought they had something special with their “clear channel” stations, they would have been fighting to insure a strong AM band years ago. They would be defending their investments from the bad ideas coming from the F.C.C.  They would have spoken up almost three years ago, as I did.  But, they didn’t.

iHeart Media also owns 700WLW in Cincinnati, a station that is locally programmed.  But, this station is the rare exception when compared to many of the other “clear channel” stations it owns.

I’m not being nostalgic here.  A “clear channel” AM is a very special type of radio station.  It has unique strength, power and influence even in times of quickly advancing technology.

A “clear channel” station deserves ownership that passionately understand its value.

Radio’s Big 20th Anniversary (of Being Sold Out!)

February 2016 marks the 20th anniversary of the Telecommunications Act of 1996.

There are no planned celebrations.  No parades.  No planned parties.  You’d think someone, somewhere would have popped open a bottle of Dom Perignon by now.  But, nothing.  Not even from those who lined their pockets and are clearly to blame for tearing the fiscal heart out of the radio industry.

“Two thousand zero, zero party over oops, out of time.

This month we’re gonna party like it’s 1996.”

I guess the silence makes sense, because that’s how “radio’s” deregulation came about in the first place, buried in a bill that many in Congress were all too happy to approve.

On a typical, winter February day in 1996, then President Bill Clinton picked up the actual pen President Eisenhower used to create the interstate highway system in 1957 and signed away the futures of the thousands who made their living in radio.  This was to the cheers of the National Association of Broadcasters (N.A.B), the Washington lobby that regularly cuddles up to Congressional members for, how shall I say,  favors. Clinton then, symbolically used a “digital pen” to sign another “electronic” copy of the bill that was to be posted on the Internet.

This was in 1996.  A “digital” what?  “Inter-who?” Can you explain this “digital” you speak of?

Ironically, the Telecommunication Act of 1996 really had little to do with radio broadcasting.  Its purpose was to get rid of regulations in the telephone and cable industries.  One idea was to allow local telephone companies to offer long distance and cable TV services and allow cable companies to do the same thing.

You know, more competition means lower prices.  How much is your monthly cable bill again?

The bill addressed important “1996” issues like V-chips for parents who didn’t want the responsibilities of parenting and Internet porn.  It also addressed something very few were talking about, at least publicly.  There in small print, somewhere in the bill’s dozens of pages, were a few words about lifting ownership limits for radio station owners.  Section 202 to be exact.  Companies would now be able to own up to eight radio stations in a market, instead of just two.

Clinton, a Democrat, said the bill, “fulfills my administration’s promise to reform telecommunication laws in a manner that leads to competition and private investment.”  In his remarks that day, he never brought up the lifting of radio’s ownership limits.

Let’s jump back a few more years to November 1994.

The Republicans had just taken control of the House of Representatives in the midterm elections.That’s when House Speaker Newt Gingrich became nationally known.  Gingrich, through the think tank the Progress and Freedom Foundation, was already working on deregulation for telecommunications. That organization authored a piece called the “Magna Carta for the Knowledge Age.”  No where in it was radio mentioned.

Then, in early 1995, the newly sworn in Congress began reaching out to communication industry executives to, as a New York Times article says, implore “companies to offer suggestions about the ways that Congress could help them.”

Now they were speaking the N.A.B.’s language!  Green backs.  Benjamins.  Dead Presidents.  Scratch.

Here’s something you didn’t know.  The version of the proposed telecom act that was originally drafted would have allowed one company to own a market’s cable television system, its newspaper, a TV station and EVERY local radio station.  Yes, you read that correctly.  EVERY as in all of them.

Greed was on display in all its glory.

The N.A.B. was quietly being the BFF of Congress.  Reports from back then suggest there were many late evenings meetings, plenty of steak dinners and gallons of top shelf liquor consumed.

But, then common sense took hold of Congress and they started to question the logic of putting that much media influence in the hands of a only a few people.  Sure, it was a great idea if these few powerful people liked them.  But, what if they didn’t?  Congress figured this can’t be good.

Their debate soon focused on radio as they tried to determine if it was really a serious news and information source for the public.  Remember, this is 1995!  Congress determined radio wasn’t.  They knew, of course, this wasn’t true because conservative talk radio was just starting to approach the heights of its popularity.  The GOP controlled Congress loved talk hosts like Rush Limbaugh and others carrying their water and using their talking points as show prep.  What wasn’t to like?  These hosts would parrot anything the Republicans told them say.

Eventually, ownership provisions for television, cable and newspapers were removed from the bill, but radio was ignored.

Congress, serving its N.A.B. lobbyist masters, kept quiet.  The N.A.B., serving its Congressional masters, kept quiet.  It was the ultimate quid pro quo.  No one called attention to what was left behind in the final draft of the bill, the lifting of radio station ownership limits.

The N.A.B.and Congress adopted the Mafia principle of “omertà” and ultimately sold out the radio industry.

And what about the Federal Communications Commission (F.C.C.)?  Where were they when it came to protecting the “public interest, convenience and necessity?”  With a bill as important as this, the first major rewrite of communication law since the 1930’s, could we have expected a public meeting or two?  They did nothing.

TELECOMMUNICATIONS ACT OF 1996 TIMELINE

  • On June 15, 1995, voting 81% to 18%, the U.S. Senate approves the bill (1% didn’t vote).

  • On October 12, 1995, the House of Representatives approves the bill.  Since there were no objections, there is NO record of individual votes.  

  • Finally, there were what’s called conference committee reports, meant to workout any differences in the House and Senate bills.  On February 1, 1996, each chamber voted on these compromises.  The House approved by 95% to 4% (1% didn’t vote).  The Senate approved by 92% to 5% (3% didn’t vote)

  • President Clinton signed the bill into law.  That was on February 8, 1996.

Some now say if Congress knew what was in the bill, it would never have passed.  I don’t believe that for a minute.  The fix was in.  The lobbying group charged to protect broadcasting, the federal agency charged to protect the public’s interests, Congress, both Republicans and Democrats, and the President were all in on it.

The result, 20 years later, two greedy “consolidator” companies are on the verge of bankruptcy. There’s less diversity in radio programming and we have an industry resistant to the changing needs of the consumer.

Happy 20th Anniversary!

iHeart Media – “Hiding the Pickle?”

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Who’s yer buddy?

“Hiding the Pickle” is a little game I was accused of playing when doing budgets back in the old Clear Channel/Jacor days.  When putting together the annual programming, promotional, news and sports budgets, I’d hide a few dollars in various lines to “pad” things (so to speak).  I had little tricks like putting the cost of billboards in as “gross” instead of “net.”  That provided a few more dollars to spend for staff t-shirts and stuff like that.  Of course, that was back in the days when radio stations actually bought billboards because they believed in what they were selling – advertising.  But, I digress.

I’m sure glad that tradition continues today.

We recently learned through Bloomberg Business News of a company called, Broader Media LLC, which is a subsidiary of iHeart Media.  It appears to have been created to raise and funnel investment dollars back to the parent company so the parent can avoid being called a “deadbeat” because of their inability to payback the money it borrowed.

$20.6 billion is the reported debt iHeart Media owes.  That’s a 20 and a 6 and a whole bunch of zeros. That’s more than the entire radio industry makes in a year – combined.  Put another way, a billion is a thousand million, so figure it out.

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I called upon my go to economic insider, Dr. Siegfried Pepper, to shine a light on if a pickle is being hidden and if he could sniff out where that tasty kosher dill is.

“Dr. Pepper,” I asked, “is iHeart Media creating another company and moving so called ‘good’ assets into its ownership to raise money by offering stocks, bonds or various other securities using the subsidiary company’s new assets as collateral?”

Dr. Pepper’s answer?

There’s not much in terms of actual details here (referring to the Bloomberg articles), but to me it seems like a good ole fashioned kick the can.  They can’t pay back this debt and make money.  Refinancing debt is common, which is what they’re doing.  The difference is they are moving it from a parent to a subsidiary.  It’s impossible to say how this will work out without details.  The article also mentioned equity to buy back debt.  This make sense since the debt is trading at 39 cents on the dollar.  The question is whether someone would do that.  When you get equity and the company goes under (which IHM could), you get wiped out.  With debt, these investors will at least get some money back in bankruptcy court.  How much depends on the collateral and where the debt ranks on the liquidation totem pole.  It sounds like the new debt may actually have stronger claims (i.e. better collateral in the event of liquidation).  And moving these assets to the subsidiary makes this possible.  As they say in the long run, we’re all dead.  Well, in the long run, IHM is bankrupt.

According to Dr. Pepper, it just depends when the white flags go up and someone yells, “No Mas.”

So here’s the plan.

  • Plan A – Offer a bond (debt) or stock (equity) deal to raise some cash to pay off the debt it owes now.  Yes this will be new debt, but it will be due years from now.  This is the “kicking the can” the esteemed Dr. Pepper referenced.
  • Plan B – Sell securities, meaning stocks, bonds or various other types of investments, in Broader Media LLC and use that money to buy back bonds (debt) on the open market from the greedy S.O.B.’s that shouldn’t have loaned the money in the first place.  In recent days these bonds were trading at about 39 cents on the dollar.  It’s basically, “Hey.  You’re screwed.  But, we have a ‘deal-deal’ for you.  We pay you 39 cents on the dollar for that bond you have and at least you get some of your money back.”

Those were sure fun days before the Great Recession hit in 2008, huh?  What could possibly go wrong?

pickle1 372x488

Twerkin’ like a gherkin!

It appears they’re munching on some tasty pickles at HQ in Midtown Manhattan. You’ve got to love it when a new plan comes together.

I thought it would be fun to see how social media was reacting to the latest Wall Street “Hide The Pickle” game to get the attention of the business media.

 

At this point, it’s a debt Ponzi. Nothing more. There are a lot of “dumb” institutional retirement fund managers chasing yield … but not as many as there once was. Sadly, the employees will be the only ones to lose, the geniuses who couldn’t get out of the deal they signed in 08 before the crash have used junk bonds secured by the company to cash themselves out.

 

Bain’s exposure has largely been shifted to the people who’ve bought the more recent junk bond issues – and what’s left of the company. They’ve sold alot of assets to pay down their original exposure, too. Bain didn’t want to close but really, due to ZIRP, they won’t really lose much, if anything – the Fed’s pumped the junk bond market while keeping even trash debt yield low – whereas they couldn’t have cashed out the penalty owed the mays boys if they’d walked away.

 

Reading that article sounds like some type of shell game. Transfer and hide the debt for another day to make your bottom line look good to potential investors.

 

I will take an AM/FM in a resort area off their hands to help pay down the debt.

 

Get ready to buy a gutted shell of a radio station. Get the mop out. You’ll be cleaning up one grand mess.

 

We talked about this day when that would happen 20 years ago already…to us it was self evident. I hope they choke on it.

 

I consider myself to be a compassionate human being. But, conjuring up any sympathy for a company that almost single-handedly ruined radio – a medium I have loved deeply and passionately for most of my life – is impossible. My heart bleeds for i-Heart about as much as it did for Enron. F*ck ’em!

 

Ever wonder how you screw up “free,” as in something with an infrastructure in place, that’s everywhere and magically comes through the air for “free?”  Somehow they, and if you work or worked in the radio industry over the past few decades, we managed.  But, that’s for another day.

Black Radio Stations Matter

The immutable “Rule #1 – It’s about ratings and revenue.”  If you don’t accept this, you’re doomed.

Each fall, the big media companies go through budgeting for the new year.  The companies look to see who they can fire even at their successful stations.  A standard exercise is being asked to “rank” employees.  Thinking managers at the station level know if you’re told to go through this twisted process and report back, chances are numbers 8, 9 and 10 on your list of 10 are being sent home.  It’s also a time for companies to look at the failing stations in their portfolios.  Some get another chance, while other laggards and their staffs get a December date with human resources.

Toward the end of 2015, WDBZ-AM, “The Buzz,” owned by Radio One, was not spared because it wasn’t living up to “Rule #1.”  Fair enough.  It was a black talk station aimed at the inner city community in Cincinnati.  It had a bad signal and equally bad ratings.  Rarely did one hear a commercial, outside of political season spots, a funeral home endorsement or a weekend car dealer remote.  Funny thing, that dealership is way out in the red-neck suburbs, across the street from a Tractor Supply Company store (if that gives you any clue) where they sell Wrangler jeans and cowboy boots.  Let’s just say that dealership was way out of the station’s coverage area in more ways than one.

Right before the holidays, Radio One gunned most of “The Buzz” staff and started playing gospel music.  As we all know, a sterile “computer” is cheaper than an engaging live “personality.”

But here’s what I found Interesting.  There weren’t many mentions of the station’s format change in radio industry press and few mentions of those let go.  In fact most of the press covering radio these days seem to downplay the constant layoffs and disrupted lives of the people affected by a RIF (reduction in force).  And if a person’s name is mentioned, rarely is there a follow up as to how they’re doing.  I thought I would start.

But, first I’d like to call it as it is.

FIRE

Unfortunately, one of Cincinnati’s best talk show hosts was on “The Buzz.”  Nathan Ivey is his name.  I think he worked seven days a week, except when he would be bounced from his show for that car dealer remote one Saturday each month.

Nathan Ivey

Curious.  Connected.  Comical.  Culturally astute.  A communicator with great instincts in getting the most out of topics and callers, callers which he really didn’t need.  Never belittling.  Always respectful. Playfully sarcastic.  And with silence or a single word said with a tiny twinkle in his voice, made you laugh out loud at the lunacy that will pass for topics, controversy and some callers on talk radio today. He spoke often about is life and his family and his struggles as a husband and father to his kids.  He humanized himself and was genuine and real.

On “The Buzz” many of his callers had nicknames, like “Lady C.”  “Lady C” was “Miss C” on my old show. Her real name is Yvonne.  A lovely African American woman who had strong opinions and knew how to really get under the skin of the testosterone driven white male audience on “The Big One.”  Many male callers on “The Buzz” had self given stage names like “Black Lion.”

His show was appointment listening.  Part pop entertainment, culture, hip hop, sports and politics from a black perspective all held together by his strong advocacy for the community he served. Nathan embodies everything that will make the successful radio talk host of the future – if this format is to survive.

He’d play off genders, respecting women and dragging out the misogynist views of male callers.

One of the funniest and most memorable things I had ever heard on the radio came on Nathan Ivey’s show.  Trust me on this one.  It doesn’t translate well to a written blog.

For some reason a male caller needed to explain to Nathan why a woman would never be poor in this country.  I’m guessing this rant had been building up in this caller’s warped brain for years and it was obvious he had given hours, if not months or years of thought to form his opinion.  In his mind there was no chance of a poor woman living in America, not with its core capitalistic beliefs and economy and this caller knew the very simple reason this was the case!

“Do you know why Nathan?  Do you know why a woman ain’t never gonna be poor? Do you?”

“Why?”

“You don’t know?  You really don’t know?  No woman will ever be poor in this country!”

“No woman will ever be poor.  Really?”

“Because she’s got a diamond.  You understand what I’m sayin’.  A diamond.  All women have a diamond.

“A diamond?  All women have a diamond?”

“Yes.  A diamond.  She’s got a diamond.”  A diamond between her legs.”

“A diamond between her legs?”

“A diamond.  A woman ain’t never gonna be poor.  She’s got that diamond, that diamond between her legs.”

As I was laughing out loud, I thought, “I did not know this.”  I was very enlightened that afternoon.  The caller stopped short of advocating all women should take up a career in prostitution because of the gem they all carry.

I follow Nathan on Facebook and while he hasn’t totally revealed his future plans, he continues to use the social media followers he gathered while on the radio as an audience.  He says “the best talk show in Cincinnati returns on Monday at 7am.”  He’s a former talk host with a plan and a talent who will not be silenced – regardless of the medium.

May be it’s time for the radio industry press to start taking more interest in the talented people that have left radio on their own or because of the massive downsizing happening in our industry and focus on the human side of what’s gone on since consolidation began 20 years ago.  I believe a focus on those that have made new lives and those that have struggled and may need help from an industry that at one point was the proudest of families would be appropriate.

After all, radio is at its best when it emotionally touches a person.  The human side of people like Nathan Ivey makes a bright future story for a format (talk) and industry (radio) struggling to survive.

Bengals’ Fans Can’t Hold Their Liquor

You either watched it live on CBS, were there or you saw and read about the rowdy Steelers-Bengals NFL Wildcard Playoff game later.  The sad thing is Cincinnati, the well-mannered “northern most southern city” in America, showed its seamy underbelly to the nation this past weekend.

Yes, we can debate the two thug dumbasses who cost the Bengals the game (yes they are and should be cut).  How head coach Marvin Lewis is a playoff loser and needs to go (he is and should).  Or how the Pittsburgh Steelers’ players and coaches are scumbags (arguably true too).  But, none of that excuses the behavior of many Bengals’ fans in attendance at Paul Brown Stadium, many of whom went looking for a fight.

I was at a sports bar 15 miles from the stadium that night and people there were emotionally jacked. At the half I heard the first, “Fuck you Marvin.  You piece of shit.”  I can’t imagine what it was like in the stadium.

Well, actually I can.  I’ve seen what happens on Sunday afternoons at 1:30, let alone after a full day of heavy drinking on a warm, rainy Saturday in January.

You say the Bengals as a team aren’t ready for primetime?  Neither are its fans who go as a drunken mob to Paul Brown Stadium not being able to hold their liquor.  It’s sad really, for a city that prides itself in its brewing heritage.  Back in the day, I’m guessing Pawpaw was able to hold his cold Hudy Delight much better at old Crosley Field than his grandkids of today.

Inappropriate behavior at NFL games is not unique to Cincinnati.  Far from it.  Other cities have reputations of rough, fight filled and drunken stadiums, where the visiting team’s fans are dared to wear their favorite team’s colors.  Cleveland, Philadelphia, Oakland and Buffalo come to mind.  But, Cincinnati?  Decent and nice Cincinnati?  A place where people not understanding you will respond with a polite, “Please?”

Prior to the game I asked a few people, “Hey.  You going to the game?”  To a person they said, “No way. I’m done going to night games. I’m not gonna get hurt.”

Game day I got up early and went online looking for tickets.  Plenty of aftermarket seats were available, some close to face value.  I considered going, then thought it’s going to rain and better to watch it on TV.  In a sick sort of way I really wanted to be there because I knew what was going to take place, more so in the seats, concourses and restrooms than on the field.

As first reported by wcpo.com, I’d like you to meet Ethan Hager.  He’s 11 and was at his first life threatening Bengals’ game.

Ethan Hager

Ethan and his Dad decided to cheer on their favorite team in person Saturday night dressed in Bengals’ orange and black.  At one point, as the crowd around them devolved into a drunken brawl, someone motioned to his Dad to help his son.  Ethan was down for the count after being hit by an unopened beer bottle.  He was hurt.

Here’s Ethan being wheel chaired out of Paul Brown Stadium on his way to Cincinnati Children’s Hospital.  “Who Dey, Ethan.  Who Dey!”

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There’s the story of a woman being hit in the face by a man.  He told the cop who arrested him, “I was just waving my terrible towel.  I hit her with the towel.  Her face got in the way.”  The Hamilton County Sheriff Deputy responded, “Tell it to the judge on Monday,” as he was taken to a jail about seven blocks north of the stadium.

Drunken teens.  Fights in the restrooms.  And speaking of restrooms why needlessly waste time going to one when a guy can just whip it out and drain that $9 Budweiser on a fan in the row in front of him.

Meet Martin Cooke of Kentucky.  It’s an apropos (although untrue) stereotype, being from the Blue Grass State, that he’d pee in public…not necessarily on someone.

martin cooke

It’s possible Martin is just a good ol’ boy from the hills of Kentucky with a prostate problem. That $9 Bud can come out as fast as it went in.  Police reports also say Martin punched the victim.  No one is sure at this point if the punch or pee came first.  I think the punch.  Ultimately, there must be rules that maintain decorum during combat.  I believe this may be written somewhere in the Geneva Conventions.  Punch first, then pee on your enemy.

Here’s my point, years ago the WWE figured out rowdy brawls in the stands and blood in the ring would ultimately destroy the professional wrestling business.  They stopped the brawls, stopped the bleeding and became more family friendly.  The UFC made the same decision.  You see, blood is bad for ticket sales and for TV ratings.

Truth be known, I had a few beers in me Saturday night, but certainly not the 15 plus beers some people had in them at the game.  The Bengals, the other 31 franchises and the NFL itself needs to carefully examine what happened in Cincinnati Saturday night and take additional steps to discourage and stop this type of behavior from happening in buildings that are mostly subsidized by the generous taxpayers in team cities.  The NFL is allowed the use of these stadiums.  In most cities they are the guests, not the hosts.  Ignoring inappropriate fan behavior and risking the safety of those who are simply looking to enjoy a football game is unacceptable.

If for no other reason, the NFL needs to keep 11-year old boys attending their first game with their dad safe. They, ultimately, are the future fans.

iHeart Media’s “Momma Ain’t Happy”

You know what they say, “If Momma ain’t happy, ain’t nobody happy.”  Generally speaking this phrase, from America’s south, means a “family” looks to Momma to keep it organized and functioning. If someone gets out of line, Momma will not be pleased.

For iHeart Media, two of their “Momma’s” are investment bank Goldman Sachs and a hedge fund called Canyon Capital Advisors.  Etiquette demands Southerners politely say, “Momma ain’t happy.”  Those of us from the Northeast just toss in a few douche bags and crudely say, “Momma’s f***ing pissed.”

The New York Post reports Goldman Sachs and Canyon Capital want some of their money back or else.  That “or else” is a possible court date and a forced corporate restructuring.

A few weeks ago you may have read about problems in so-called “high yield” bond funds.  “High yield” is Wall Street’s 2015 politically correct way of saying garbage.  Twenty years ago or more similar bonds were called “junk bonds.”  Today, they’re called “high yield bonds.”  “Junk” verses “high yield.”  Which would you like to invest in?

It appears problems in the “high yield” bond market may have made Momma a little queasy.

With bonds higher interest rates or yield means higher risk to your money.

With bonds, you’re a lien holder and loan a company money for a specific length of time or term. You’re kind of like a bank holding a mortgage.  The company pays you interest each year and at the end of the term, if the company hasn’t gone broke, you get your original investment back.  For example, you loan a company $10,000 at 2% interest over 10 years.  Each year, the company pays you $200 in interest and at the end of 10 years you get your $10,000 back. Over that time you made $2000 on that $10,000.

“High yield” bond funds invest in clusters of these loans or bonds made to high risk companies.  These companies pay a higher interest rate to borrow money because they are a higher risk, meaning there’s a better chance they could “default.”

“Default” is finance industry happy speak for “Too bad and too sad.  They’re broke. They can’t pay you back.  You’re screwed and your money is probably gone.”

Conversely, having equity or stock means you own a piece of a company and as owner you can share in its success.  Let’s say you own a few shares of Procter and Gamble stock.  As an owner, P&G tosses a little taste of its revenues your way each quarter.  This is called a dividend.

It appears Momma (in this case Goldman Sachs and Canyon Capital) has found iHeart Media owns 90% of Clear Channel Outdoor and is getting a $196 million dividend payment from that company on January 4, 2016.

Reports say iHeart Media is scheduled to pay back $193 million in bonds in 2016 and that’s what they planned to do with the dividend money.  Here’s where Goldman Sachs and Canyon Capital come in. They, being senior bond holders, want that money.  The bond holders that are scheduled to receive payments in 2016 appear to be  junior bond holders.  As with any high school hierarchy, in business seniors come before juniors when paying off debts.  And that’s why Momma wants her money.  She’s a senior and wants her money before any juniors get theirs.  She wants it now, not later, as reportedly planned.  Momma probably feels there’s a chance no money will be left in the checking account at some point and rules in life and in bankruptcy court dictate seniors get theirs first.  Juniors get what’s left.

A lot press has been devoted to the possible bankruptcy or restructuring  of companies like iHeart and Cumulus Media. iHeart Media, with a debt of $20.5 billion dollars, owes more to lien holders than the radio industry’s total annual revenues combined.  Yes.  You read that correctly.

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As a second or junior lender recently opined, “In our view, it’s clearly not a sustainable capital structure.”  

Thank you Captain Obvious!

There is a difference in restructuring and bankruptcy.  In fact, if you’re an employee restructuring may actually be a good thing.

Bankruptcy is expensive and for a company with $20.5 billion in debts, lawyers will be like pack of famished wolves feasting on a fresh buffalo kill; savages feeding until the bones are pick clean and dry of every billable legal fee dollar.

Wolves

In bankruptcy, there are numerous other legal issues to deal with too, the least of which for lawyers may end up being the most important for you – employment contracts.  Will it be honored in bankruptcy? How will severance be handled?  How will non-competes be enforced or not enforced? Bankruptcy lawyers will gorge and purge themselves many times before worrying about your rent and car payment.

Debt restructuring, on the other hand, allows a company facing cash flow problems to reduce and renegotiate its debts so they could keep more money in the checking account and continue operating. Granted, it takes all lien holders to agree on something like this, which in itself is quite the feat. It results in lower interest being paid out to lien holders and extending bond terms farther out into the future.  It’s said iHeart Media pays well into the nine figures annually in interest on just a portion of the total debt it owes.  This so-called unsecured debt, money loaned with no collateral just the promise to pay it back, comes with very high interest.

Early in December it was reported iHeart Media was already trying to get people they owed money to, to swap debt for equity.  This means give stock or ownership in the company in exchange for the bonds owed.  The benefit is annual interest payments are lowered, freeing up needed cash to operate. The bad news if you own stock in a company that does this, that stock becomes diluted and may be worth less in the future.

As 2015 comes to an end, 2016 will be another pivotal year for everyone in the radio industry. You may not work for iHeart or Cumulus Media, but a date with a bankruptcy judge or a corporate restructuring for either of these companies in 2016 will affect the entire radio industry for many years to come.  And that may not be a bad thing.  It could be exactly what this industry needs – a clean balance sheet and a fresh start.

It’s The Most Wonderful Time Of The Year

The wife and I just subscribed to Netflix.  We’re a little late to the party on this one.  We just finished watching the third season of House of Cards.  My wife is sort of Claire to my Francis without the bisexual threesome with the Secret Service Agent (a MMF for those familiar in those sorts of things, not that I have any experience with stuff like that).  Rarely, have I ever jumped up off the couch and said, “Really?  They did NOT just do that. They did NOT just do that.”

everything-you-need-to-know-before-watching-house-of-cards-season-2

Anyway, the wife told me to get back to being satirical in these musings. “Yes Claire.”

Last Saturday, which is traditionally the busiest shopping day of the year (the Saturday before Christmas), I over heard two women in a Kroger parking lot.  At first, I thought they were just speaking loudly over the rumble of car engines, the winter’s wind gently blowing through trees now devoid of leaves and hearing Andy Williams singing “It’s the Most Wonderful Time of the Year” for the 6000th time. What a horrible song.

It was then I heard one of them exclaim in a shrill voice to the other.

“You’re a loser!”

Oh yes.  It is the most wonderful time of the year.

For example, we tell ourselves Jesus is the “reason for the season.”  But, in many areas there’s the time honored “tradition” of wrapping a church’s outdoor manger scene in chicken wire. Why?  That’s to stop people from stealing the Baby Jesus.  It seems people enjoy traveling around town with the Son of God figurine and taking pictures with him…like in bars!  Granted, if you’re going to list the famous people you’d like to drink the Blood of Christ with, Jesus would be close to the top.  A nice cabernet sauvignon should work.

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We’re told over and over again in each newscast, on websites and with every TV and radio commercial we need to be in the “Christmas spirit.” And the only possible way to achieve this psychotic mental state is by participating in an orgy of buying anything and everything that’s not bolted to a store floor. Max out those credit cards.  Take out an eight year car loan.  It’s good for the economy, you’ll experience a euphoric acid flashback type of high and most importantly it will prevent retailers from having a “Blue Christmas.”  We can’t have Macy’s be sad now, can we?

Christmas Dogs

The “Christmas Tree,” some say Pagan in origin, has been replaced by something even more Pagan as our new holiday symbol.  The “Christmas Flat Screen.”  In past years one yearned for the biggest tree in the neighborhood and little would prevent one from attaining this prize of superiority.  If the Bumpuses had a 6-foot tree, you got a 7-footer.  Today?  Screw the tree.  You want a bigger flat screen than the Bumpuses.  In 2015, an 80-inch “Christmas Flat Screen” should do it.

I buy a TV once every 10 or 12 years.  Why do so many people need a new one each December?  It’s like buying a new snow shovel each winter.  What happened to last year’s shovel?  Put the shovel in the basement in the spring, not at the curb.

Black Friday TVWhy do Christians rarely mention Jesus was Jewish at this time of the year?  And before you say anything.  He was born of a Jewish mother, in Galilee, a Jewish part of the world. All of his friends and disciples, all of them were Jews. He regularly worshipped in Jewish communal worship, what we now call synagogues. Sounds pretty Jewish to me.

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Remember the good old days when businesses closed early on Christmas Eve only to reopen on December 26th?  If you can’t find Memaw and Pawpaw on Christmas Eve or Christmas Day and you’re wondering where they are, don’t waste your time going to their church.  They won’t be at mass.  Truth is your kid’s grandparents will be at the casino gambling away your inheritance, because casinos will be open for business.

Come on. Is there anything more Catholic than a little Black Jack and Texas Hold ‘Em to celebrate the birth of our savior Jesus Christ?

old lady gambling

 Have a very Merry Christmas, a belated Happy Hanukkah and all the best for a wonderful 2016!

Wanna Buy a Radio Station Really Cheap?

It’s been almost 20 years ago since the Federal Communications Commission (F.C.C.), the National Association of Broadcasters (N.A.B.), Congress and then President Bill Clinton all teamed up to reinvent broadcasting with the historic Telecommunications Act of 1996, the first major rewrite of regulations since the 1930’s.

With this combined brain power and political and business clout, what could possibly go wrong? Many assumed the President along with these groups would have the public’s “interest, convenience and necessity” in mind when crafting these new rules.  And you know what happens when you assume.

Struggling broadcasters could now survive because of clustered ownership, allowing multiple stations in each market, and benefiting from economies of scale.  We were told broadcasters granted the privilege and given licenses, along with the public’s trust, would create new and diverse programming options for listeners.  A fragmented radio industry, mostly made up of mom-and-pop stations back then, would consolidate and once the big money of Wall Street discovered this high cash flow business, there would be incredible innovation.  Best of all, radio because of its newly aggregated audiences, would be able to leverage and grow its share of the total advertising pie.  Industry professionals, from CEO’s down to the overnight weekend DJ’s in Kokomo, Indiana, could now dream and it would be reality.

Really, what could go wrong?

Back in the 90’s, I commented, “I never thought radio would come down to 6 or 8 big radio companies.”  The person I said this to responded, “Darryl, do the math.  It will be 2 or 3 companies. Companies have just been trading stock.  Wait until the real money comes in.”  He meant Wall Street’s real money.

iStock_000013186053_MediumThat real money did come in and now the two biggest radio companies, Cumulus and iHeart Media, are in big time trouble.  And if they’re in trouble, so is the entire radio industry.

I’m going to make this overly simplistic.  Remember financial data doesn’t exist in a vacuum.  There are many variables.

I brought data to an economist/professor I know and his first reaction when checking it out on his Bloomberg terminal was a surprised, “Oh.  They’re bankrupt.”

On November 10, 2015 Cumulus Media’s stock price was valued in pennies, as in “27 pennies” per share.  iHeart Media’s stock was $1.50 a share that same day.

In financial circles, a company’s worth may be judged by its “market capitalization” and/or its “enterprise value.”

Enterprise Value

Let’s look at the “market cap” first.

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Of course, each company has other businesses and divisions, but their core business remains radio.

Market Cap

Too simplistic for you?  The other way to look at a company’s worth is by its “enterprise value.”

On November 10, 2015, Cumulus Media had an “enterprise value” of $2.468 billion, while iHeart Media had an “enterprise value” of $20.54 billion.

I know.  You’re saying, “Well there’s the worth of these companies.”  Kind of, since the buyer of a company would normally assume its debt, but if you take debt out of this equation, in both cases, these companies have negative equity.  iHeart Media lists it debt at $20.588 billion and Cumulus Media has outstanding debt around $2.5 billion.

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In 2014, the radio industry’s total spot revenues declined to under $14 billion, with total revenues just over $17 billion.  iHeart Media alone is in hock by almost $20.6 billion.  But, here’s the killer, each year the money companies pay to service debt is increasing at the same time radio’s advertising revenues shrink and that’s not sustainable.

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Think about the interest you’re getting from a CD at a bank.  It’s probably less than 1%.  Interest rates are at historic lows, yet iHeart Media is paying, in one case, as much as 14% on its notes.  When borrowing money, high risk equals high cost.

Both iHeart Media and Cumulus have also been selling tower sites (or land) to create cash.  Land was the only equity some radio stations had, especially many AM stations.  Call it what you want, but when a radio company starts selling its real estate, it’s nothing but a good old fashioned fire sale.

Back to that fellow I discussed radio consolidation with in the 90’s.  I recently asked him why these companies haven’t been selling stations.  His response, “They can’t.  To make it work financially they’ll need to get at least 14 times cash flow, may be 16 times, depending on taxes and the cost of sale. They’re backed into a corner.”

Wanna buy a radio station really cheap in the future?

To paraphrase that old New York City TV pitchman Crazy Eddie, “The prices are INSANE!”

Please like and share this blog.  

Get more insight and thoughts in 140 characters on Twitter by following me @darryl_parks

F.C.C. Acts To “Save” AM Radio (and does something else too)

Baby-shocked-face

No way!

You can imagine my surprise last Friday night when the Federal Communications Commission (F.C.C.) announced it was moving forward with its plan to help AM radio survive.  “Ratchet Rule?”  Marconi must have come up with that.  Change it. Transmitters that decrease carrier levels when low or no audio is present to save electricity?  Sign us up. And FM translators for AM stations! That’s sure to work because a low power FM signal will cause lots of people to switch over to the AM band and ensure its survival.

AM Revitalization?  It’s more like “AM Migration.”

Most of these planned fixes are going to cost lots of money.  Will struggling AM station owners actually invest in their facilities having the knowledge their chances of getting a return on their investment is low? We’ll see.  Rule changes are one thing, opening a check book is another.  If it doesn’t make sense financially, these rule changes may simply be words on a document.

Look, I think most of the F.C.C.’s plan is a bandaid being placed on the arm of a leprosy victim. But, to their credit the F.C.C. did something to earn their taxpayer supported pay.  Headquartered in Washington, D.C., a city that gets nothing done, they at least wrote a press release.

But, there was something else the F.C.C. did in the last week that should have everyone take notice.

Howard Beale

“Get up. Go to your windows, open them and yell, ‘They’re now selling our radio stations to foreigners.’ Good God man. This was only a movie in 1976!”

Remember that old movie Network and Howard Beale, the prophetic, delusional news anchor character?

This tube can make or break presidents, popes, prime ministers… This tube is the most awesome God-damned force in the whole godless world, and woe is us if it ever falls in to the hands of the wrong people.  And when the twelfth largest company in the world controls the most awesome God-damned propoganda force in the whole godless world, who knows what shit will be peddled for truth on this network? 

The F.C.C., after being successfully lobbied by the National Association of Broadcasters (N.A.B.) representing its largest, “in-debt” consolidator company members, decided it was a good idea to not only grant U.S. citizens the right to be 100% owners of American broadcast stations, but felt it was time to give that right to…well…anyone on planet Earth, as long as they get the government’s wink and nod and have the cash. Cash being the most important part.

Some of this is a result of an earlier decision dealing with Pandora wanting to buy an FM station.

The F.C.C. and its former cable and wireless industry lobbyist, Chairman Thomas Wheeler, already changed those annoying foreign ownership rules for common carriers, industry speak for telephone and wireless companies, so it was time to extend those honors to broadcasters.

I’m not going to go all Howard Beale on you here.  Lord knows most of us have had our fill of the shit being peddled on many radio stations.  Can’t get a stiffy or pee old man?  We’ve got a “natural enhancement” pill for you. Did you know Obama is a Kenyan and it’s time to take our country back? Check.  And if that’s not enough to freak you out, the economy sucks too and you need to buy gold and hoard food.

To paraphrase, “Who knows what shit will be peddled on our radio stations?”  And I’m not even bringing up the shit that passes for country music today, because “Bro Country” is real shit.

Let’s get right down to it.  The business of money is money.  It stays in motion and flows like water.  And the American broadcast industry, with the huge debt it’s rolled up after the Telecommunications Act of 1996, needs new money or said another way needs foreign money to keep refinancing its debt at higher and higher interest rates.  The consolidators have basically talked all the money they are going to get out of American banks and private equity companies.  It’s time to talk foreign banks and PE companies out of their pesos, liras, rubles and rupees and keep that money facet flowing.

The private equity companies invested in American radio like Bain Capital, Thomas H. Lee Partners and the poor bastards that financed Cumulus Media want out.  If they’re down to selling tower sites and land, the little equity remaining for some stations (especially AM stations), what’s left?

I’m not Bernie Sanders and against capitalism.  I’m all for it.

But, you can still thank the F.C.C. and the N.A.B. for selling out radio, this time to foreign interests.

To paraphrase another old movie, “Thank you sir.  May I have another?”
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Why Your Favorite FM Station Doesn’t Come In As Good Anymore

A lot can be learned from data and tracking it.

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For example, in radio and television, there are Nielsen ratings. You analyze ratings by the week, month or over a year to develop and see a trend. Is the station or program going up or down? Trending up is good. Trending down is bad.

One of my recent blogs focused on AM radio no longer having the time to correct problems with its technical limitations and the increasing interference from consumer devices and other AM stations. The Federal Communication Commission (F.C.C.) has said they have a plan to help! But, their two-year old plan has never been implemented. But, lucky for those of us in radio and our listeners, at least they do have a plan, agree or disagree with it.

FM Translator

One of the genius ideas to help struggling AM stations and to safeguard the survival of the AM band is to put the programming of these stations on very low powered signals or translators on the FM band.

Saving the AM band and ensuring its viability by putting an AM station’s programming on weak signaled FM’s!  As the British would say, “Brilliant!”

A number of years ago, Clear Channel Media + Entertainment iHeart Media decided to add a weak FM translator to the massive AM signal of 700WLW in Cincinnati. The idea was to help “in office” listening in the downtown area. One afternoon I decided to drive this tiny signal. After hearing the scratchy and thin signal, my wife who was along for the ride and who’s deaf in one ear, said (and I quote), “So let me see if I have this right. WLW is 50,000 watts and can be heard in numerous states. When you speak on it, the processing makes you sound like God. It markets itself as ‘The Big One.’ And they put it on this small FM signal that’s hard to pick up and sounds like it’s coming over a telephone line. OK.”

Yep. OK.

It’s just another weak signaled FM translator, among thousands of others, causing interference to other high power stations on the FM dial. I call it the “AM-ization” of the FM band, because one of the interference issues on AM is there are too many stations interfering with each other, especially at night when an AM signal travels farther.

There are plenty in the radio industry ignoring this “AM-ization.” But, you can’t ignore basic psychics.

FM Stereo

Back in the day when Radio Shack actually sold radios!

In fact, numerous state broadcasters associations have now begun to speak out about the interference from LPFM or low power FM stations to existing stations.

Have you ever asked why your favorite FM station doesn’t come in as good as it used to or why you can’t pick it up on the fringes of your city like you used to?

Non-believers of “Am-ization,” look at the data. Decades ago the F.C.C. shoe-horned directional and daytime AM stations anywhere one could fit on the band.  Now, the F.C.C. has allowed massive increases in licensed FM signals over the past 10 years. Remember, there are just 101 assignable FM channels available in the U.S.

2015

2014 2005

% Inc/(Dec)

AM Stations

4692

4715 4758

(1%)

FM Commercial

6688

6633 6215

8%

FM Educational

4090

4085 2626

56%

FM Translators

6422

6186 3920

64%

FM Low Power (LPFM)

1364

873 598

128%

TOTAL FM

18,564

17,777 13,359

39%

Two years ago, the F.C.C.’s acting Chairwoman Mignon Clyburn revealed the plan to help AM radio stations at the National Association of Broadcasters (N.A.B.) Fall Radio Show in Orlando. Part of the plan was her support to allow AM operators a one-time, exclusive window to apply for these low power FM translator licenses.  But, here’s a shocker.  Two years later, her opinion has changed!

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May be she considered basic physics or realized you can’t help the AM band by giving its station owners FM signals or as she now says favors allowing current translators to be moved up to 250 miles.  This, supposedly, is to speed the F.C.C.’s help to struggling AM operators.

Then again, the inaction by the F.C.C. to help the AM band by its former cable and wireless industry head lobbyist and current Chairman Thomas Wheeler is either about freeing up that spectrum space for his buddies at AT&T and Verizon or just kicking the can down the road.  After all, the November 2016 elections are coming up and there will be a new person occupying the chairman’s seat at the F.C.C., causing regulatory help for the AM band to be put off for many more years.

With the 1% decrease in the number of AM stations over the past 10 years, the marketplace, sadly, is determining the future of AM broadcasting.  Remember, trending down is bad.