Radio Waves Podcast #101

The current ownership model for radio stations in which a few corporations own a huge number of stations in each market has been documented here and elsewhere to be a dismal failure.

The promised cost savings from efficient operations of “clusters” of stations never materialized, leading owners to cut other costs ... such as the money spent on personalities and staff ...  the very people that made stations sound great.

Programming quality decreased because stations that once competed for listeners were now under the same ownership, and care was taken not to attract listeners to a station at the expense of a co-owned sister station. The net result: listeners tuned out and the industry changed radically to the point where many stations have become background entertainment, leading advertising revenue to tank.

Few areas experienced this decline as much as Los Angeles, in which two companies, IHeart Media and CBS, control a huge percentage of the listening pie -- 47.4 percent in the most recent Nielsen ratings -- and even one of the better group owners, Entercom, is running a national contest on its Los Angeles station, The Sound (100.3 FM).

To put the last statement into perspective (though I am not meaning to pick on the company), Entercom is giving away $1000 four times ($4000 total) in a contest available to listeners of Entercom stations nationwide. In the pre-consolidation days, RKO’s KHJ gave away $1000 a day, and that was in 1975 and but one example. Even in 1984, KHJ gave away a car a day for a month. For many stations, such contests -- all local since companies were limited to owning a total of 14 stations nationwide, seven AM and seven FM -- this was typical.

No wonder radio listening, especially among young people, is at an all-time low. Radio is forcing listeners to discover alternative means of entertainment since radio itself is in such decline, disarray ... and denial.

While all of the major group owners can be considered guilty to some extent, the absolute worst offender by far has been Cumulus Media. Founded by Lew Dickey in 1997 when he purchased and combined Citadel Broadcasting -- itself a poorly-run conglomerate -- and Dial Global, the company soon became a radio giant, with 460 stations in 90 radio markets along with programming providers such as Westwood and ABC Radio. It is the second-largest radio group owner in the country, second only to IHeart Media.

Too bad the giant has no clue how radio works. Lew Dickey and his brother John had no business ever running anything related to radio, and the proof is seen locally on KABC (790 AM) and KLOS (95.5 FM), two once-great stations that -- especially in the case of KABC -- were allowed to wither and die. 

And it wasn’t just in Los Angeles; it was seemingly everywhere. In San Francisco, the Dickey’s meddling caused the destruction of KGO. In New York, their “expertise” killed WABC. The story is repeated over and over in almost every one of their 90 markets, and the situation got so bad that Wall Street even noticed: the company stock dropped more than 80 percent over the past year, closing at a mere 73 cents October 2, leaving it with a market cap of just under $171 million.

Compare that to its debt load of $2.5 billion and net operating income of just $11.8 million, and you can see there is a problem. The market cap itself -- about the equivalent of a mere ten major market FMs -- has the company worth far more broken up than together. The question is: why isn’t the Cumulus Board of Directors taking notice? 

Well they finally did. Announced last week and effective October 13, Lew Dickey will step down from his position of President and CEO of Cumulus, while brother John -- an executive VP in charge of content and programming has already left the company. Lew will unfortunately stay on as Vice Chairman.

John’s replacement was not announced at press time, but my dog Shadow could put together a better programming team. Lew is being replaced by Mary G. Berner who came to the company from the magazine side of the media industry and has no radio experience herself. She has her work cut out for her, and her lack of radio experience is not helpful: Cumulus stations have for so long been so badly programmed and/or promoted that most -- dare I say all -- would be better off in the hands of other, hopefully small or independent owners.

What should be done? Cumulus should divest itself of all stations. Staggering debt, a total company valuation that is worth far less than the station portfolio and a dearth of programming expertise at the top make my point. That won’t happen, yet at least. But if real radio programmers are not brought in soon, there’s a good chance it will have to happen. Just turn off the lights if you are the last one to leave the building. Or buildings ...