Category Archives: Radio

How To Ruin Radio, Bank $25 Billion, and Still Say “I Heart Radio” With a Straight Face

 

L: Lowry Mays, Chief Bad Guy.  R: Billy Joe “Red” McCombs, Edsel Salesman

You could have easily missed this bit of business news earlier in the week.  iHeartRadio, a group of corporate bankers/investors and owner of around 825 commercial radio stations across the US of A, filed for bankruptcy, siting mountains of debt and growing competition from the Spotify/Pandora streaming services of the world. However, lost in many of the stories written about the failure, is the iHeartBreaking story of the unnecessary destruction of one of the most revolutionary and romantic (for many of us anyway) inventions/industries in the history of the 20th century.

Note:  What follows is a rough, layman’s description of the debacle.  I am not a corporate finance expert, and I don’t write about this issue as a business journalists.  What I did do was live and work in the radio industry during the entire length of this tale, and listen and learn about it from some of the brightest minds in the business. I also worked for a couple of those brightest minds, who remained family owned, operated profitable and stayed community connected. The closest I came to working for the “bad people” was the 8+ years spent undercover in public broadcasting  fighting the Empire known as the South Dakota State Government from the inside out..  In short, if not factually perfect, this is how I saw it go down.

It’s 1996.  The national economy is pretty good.  In local media, Radio is humming along as a nicely profitable industry, and serving loyally in their communities.  At that time the law of the land limited the number of radio stations one company could own in a community, and across the country.  Then the Telecommunications Bill of 1996 was passed, largely sponsored in the U.S. Senate by South Dakota  Senator Larry Pressler (thanks Larry).  The news coverage of the bill focused chiefly on its groundbreaking  rules for the telephone (internet?)/ and cable industries.  However, buried in there were game-changing rule for ownership limits.  There were some rules somewhere, but basically the law said if you have the money, honey, you can buy all the radio stations you want.

Back then, the company we know as iHeartMedia was being put together by a TV/Radio company called Clear Channel Communications.  CC was largely owned by the Lowry Mays family, and a rootin’ tootin’ Texas mogul names Red McCombs, know in these northern parts as the one-time owner of the Minnesota Vikings.  With the new (no?) rules in place, CC went on a ginormous buying spree, eventually owning some 1200+ radio stations.  Other companies tried to keep pace by doing the same thing, which made it a seller’s market.  CC bought the stations they wanted, price be damned, and ended up over paying again and again. Their first years were spent slashing out “expenses” (also know as people) and automating, voicetracking, networking and “blanding”  as much radio content as they could.  Content quality, organic, market-specific programming and community service were, shall we say, a ways down on the ol’ priority list.  To compete, the CC wannabe groups did much the same, making the only competitive race the one to the bottom.

By 2008 much of the damage was done. The “zanies”, (the non-conformist, risk-taking and at times marginally dangerous goofballs (the kind which for generations had made radio content interesting; also known as My People) were off horsin’ around these new-fangled things called Internets. Clear Channel had ironically renamed itself iHeartRadio because the Clear Channel name had become a dirty word, the name and face for ALL the robber barons who instead of “IHearting” Radio had left it out in the rain to rust.  Having largely run out of expenses to cut, and with listening and revenue down as the result of tapioca content,  IHeartRadio did what many nameless, faceless publicly-traded companies had always done:  cash out by finding a sucker with more money than brains.  They didn’t have to look far and hornswaggled a bunch of bankers, who knew nothing about the radio business or how it had been gutted, to overpay THEM to the tune of $26.5 Billion dollars, with the new guys also taking on all the debt. And oh, yeah, this savvy bit of overpaying occured about 20 minutes before the economy followed the bankers into abyss known as the Great Recession.   In 10 years since, things didn’t get any better for the investment bankers, who ran out of things to cut, borrowed more money and tried to keep things going by ripping out and selling the copper plumbing and setting insurance fires.  And, oh yeah, the entire environment of content and methods of distribution experienced a Big Bang, flattening most of what previously existed and reshaped the planet in ways not unlike the Genesis Device in Star Trek II and III. Debt was the onl thing that thrived. Things finally hit bedrock this week when bankruptcy was filed.

The sorriest irony of all is that should the value of the station carcasses go low enough in the bankruptcy liquidation, the Mays/McCombs cabal would consider…get ready…buying them back for a pittance. I predicted this very thing would happen in 15 years after the Telecom Act (2011),  while it actually took 22.

On the bright side, there are those on the station level in communities across the land who have continued to fight the good fight and are still serving their communities DESPITE their absentee landlords’ efforts to burn it all down.  I also don’t at all blame the local owners who got out and sold. Most loved the business as much or more than anyone, and couldn’t bear to see it all laid to waste.  Let’s see how any of us would have reacted had someone put that big cabbage in front of us.    And, as they corporate owners go down, the good operators are also buying back stations and returning to the business of being live and local.  I say more power to them, and good luck.  But for many talented people who were sacrificed by bankers, venture capitalists and stockholders who never set foot in the market, never listening to what they owned and couldn’t identify the career people they disposed of out of a lineup, many lifetimes of dedicated service and incredible creativity just disappeared.  Or ended up on a wildly profitable webcast available world-wide.

 

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Strange What You Remember

Memories are fickle. Sometimes they take you back gently, clouding over the bad spots and putting halos around the good. Other times the past returns and smacks you in the face. A couple of days ago Memories flashed me back to October 22, 1989 and punched me in the gut. Like countless others I stopped in my tracks upon learning that the Jacob Wetterling abduction case had been solved, the body found, and the abductor/killer in custody. After all the years of dead-end tips and broken hopes the case had the feel of a mystery which would never be solved. But there it was, in gruesome detail, all the answers to all the questions of what happened to an innocent 11 year old snatched off his bicycle at gunpoint near his home in tiny, safe St. Joseph, MN. The killer, Danny Heinrich, a serial child sexual predator currently charged with child pornography, confirmed every one of our darkest, worst-case nightmarish horrors: Sexual abuse, two bullets, two burials, other victims.

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Danny Heinrich

It’s strange what you remember. It was late in the evening of the Tuesday following the abduction. I was in Rochester, MN and the 28-year-old Program Director at KROC-AM. We were the only local station with a link to the state’s only satellite network.  A man named Douglas Wood, a neighbor of the Wetterlings, had written and recorded a song called “Jacob’s Hope” , which radio stations all over MN were asked to play at the same time the following morning, with the hope that Jacob would somehow hear the song wherever he was and somehow know people were looking for him.

Remember, this is 1989. no one was walking around with cell phones, email was extremely limited and nowhere near able to send audio files, no websites, no universally accessible satellite downlinks. There was no Amber Alert and no apps. The newsroom was just transitioning from electric typewriters to word processing. Not only was it impossible for stations to download the song, it was impossible to let them all know they were supposed to play it the next day. Impossible, except for the old-school ways. I remember getting one shot at capturing the satellite feed (got it), then made copies on reel to reel tapes. I then got in the car late at night and delivered those tapes one at a time to every radio station in town,

The sun was coming up by the time I finished my deliveries. Everyone got the song and played it the next morning at 10am. I knew in my heart the chances of that young man hearing that song were zero. It was an exercise which made no difference, other than give a state full of people a way to show they cared, wanted to help, but had no idea how.

I can’t imagine what the Wetterlings and those close to the case have gone through the past 27 years, and in the last few days. I hope I never have to know. The case was instrumental in making states create the first sex offender databases. It marked the end of small-town innocence in this part of the country. No more kids riding bikes and running unsupervised around small towns in the summer. Afterwards kid’s activities were supervised and scheduled. No more unlocked doors at night. The loss of trust.

Strange what you remember.