Inside Music Media

Jeff Smulyan is the first and only radio executive to go public with what many privately think of the iHeart CEO even though they dare not say it.

Smulyan is CEO of Emmis which has had its ups and downs in the radio industry – Emmis means “truth” in Hebrew” and Smulyan launched into Pittman as a selfish person who can’t be believed and who has harmed the radio industry (often with its permission).

NextRadio fiasco

Via Smulyan’s book Never Ride a Rollercoaster Upside Down: “It was only after we started to raise the funds for the Sprint (NextRadio) deal that I began to understand the nature of another very significant problem: Bob Pittman”.
“Bob was a known commodity when he took the job, and one friend said, “If he sells the industry, he’ll help all of you. If he imposes his strategic thinking on your industry, he’ll kill all of you”.
Smulyan calls him “Bob Pitchman” – “I marvel at his ability to tell a story convincingly, even when I know it is a lot closer to fiction then fact”.
Smulyan had a good relationship with Clear Channel’s Mark Mays before Pittman took over but he had a funny feeling about Pittman even before the Sprint deal closed.
NextRadio was a broadcaster app that works with smartphones containing FM chips allowing users to listen to local radio stations using less data and battery power than connecting to radio apps but Pittman wanted to become the “gatekeeper between broadcasters and their listeners”.
Smulyan: “I felt like the rest of the industry is stuck in the back seat of the car and Pittman and (John Hogan) are Thelma and Louise and they’re about to drive the rest of us over the cliff with them”.

But there’s more

The NAB was an enthusiastic financial backer of NextRadio but with giant iHeart wavering publicly on support saw them slowly drifting away from their partnership.

Entercom (now Audacy) CEO David Field comes off as a Pittman suck up – “Bob Pittman is furious that you want to put NextRadio in cars and he wants it stopped immediately”.

The most bizarre meeting

Pittman: “Look, I know automobiles better than anyone in this room and I can state definitively that there is absolutely no interest or need for interactivity in cars”.
“They want the standard radio tuner, and that’s all they want and we will not support putting anything else into cars”.
Smulyan: “Bob, you realize that the tuner you are talking about was invented for the 1946 Studebaker. Don’t you think we’ve come a bit further than that now?” and Pittman didn’t appreciate the put down.
Pittman continued his argument until Smulyan rubbed the 1946 Studebaker’s old technology into his face again to which he replied “Goddammit Jeff, stop mentioning the ’46 Studebaker!” Then he brought up the 1973 Dodge Dart and “By this time, there was more smoke rising from his head than from the Vatican when a new pope is selected”.
Pittman got revenge six months later stealing the Emmis Power 106 Los Angeles morning personality Big Boy paying millions to exact his revenge.

The end of the world as we know it

It’s out there – putting his own needs ahead of the industry and misleading the public on the way – Bob may not stop, but a radio exec known for his ethics has poked the bear in public.

Jerry Del Colliano is a professor at NYU Steinhardt Department of Music and Performing Arts Professions Music Business Program. His background includes Clinical Professor of Music Industry at the University of Southern California, TV, radio, program management, publishing and digital media.

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Led by the tech sector, radio consolidators backed by hedge funds, banks and lenders who hold their debt are moving toward deeper layoffs sooner rather than spreading them out over a specific period of time.

The straight scoop: It’s like the Fed, doubling down on raising interest rates to bring inflation down except it’s stepping up the reduction of workforce with less consideration for its impact on surviving personnel.

NYU professor and entrepreneur Scott Galloway on the podcast Pivot called for the tech sector to be more like Elon Musk and fire more tech workers sooner apparently to realize the immediate savings and assuage lenders arguing that tech workers are among the most qualified and they will be alright.
Galloway’s pod-partner Kara Swisher also aggressively called for the need to reign in tech’s workforce and we’re beginning to see firings across all businesses.
Radio has been a leader in workforce reductions led by Clear Channel (iHeart) which has eliminated an estimated 10,000 plus positions since it went public – other debt-ridden radio groups (and that represents many) followed suit.

The rest of the story

Audacy faces bankruptcy this year, the recession expected to take a bite out of their already underperforming revenue and leaving them no other option but to cut staff to placate restless lenders in fear of a bankruptcy that would force them to become owners instead of lenders.
iHeart had one excellent quarter last year but the 3^rd quarter showed weakness – iHeart has had at least one significant RIF for the past few years – two, the year of the pandemic one of which was ahead of the pandemic.
Cumulus is in a state of continuous cutbacks as they sell assets to pay down debt, but the debt is around $1 billion counting their failed tower sale so they are a candidate for more aggressive cutbacks.

Street talk

Audacy and iHeart unleash major cutbacks within the next 45-60 days and perhaps again after the first quarter.
These cutbacks could be deeper and more painful due to the urgency of the economics’ negative impact on radio revenue.

Equal time

Audacy is selling Cadence13 and perhaps Pineapple Street Studios now that the podcasting pivot seems to be changing and they need money to pay down approximately $1.8 billion in debt.
iHeart is seeking new investors but not for more than 15% ownership so that current owners maintain control – fewer assets to sell without disrupting their platform and their debt remains near $6 billion even after one bankruptcy so it is estimated that it takes nearly a billion to service their debt each year.

My deadly honest POV

This time they are not hiding, the debt-laden consolidators will make more significant firings because they don’t have the time to keep reducing staff under the radar.
No doubt the national trend led by the tech sector is to make deep, quick and repeated firings a la Elon Musk at Twitter.
The only way out for the three major consolidators and others who have spent more than they can afford to borrow is bankruptcy where lenders get burned, become the new owners and any talk about reengaging the audience takes a back seat once more.

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Audacy is preparing for bankruptcy in the year ahead by cutting costs, reducing workforce and selling assets and now even auctioning the unused and out-of-favor web domain Radio.com.

The straight scoop: They want a minimum of $2.5 million for a name that they rejected as useless and replaced it with Audacy.com.

This feels like selling the deck chairs on the Titanic to some – even Cumulus the leader in selling assets has not resorted to anything that indicts their reason for existing – radio.
Bidders have until March 28^th to meet or exceed the asking price in an auction being conducted by GoDaddy.
It’s not clear whether the proceeds will go to paying down debt which at an estimated $1.8 billion would be a drop in the bucket or go towards operating expenses where Audacy is reportedly burning through capital.

But wait, there’s more

What’s important is that Audacy is setting the table for an expected bankruptcy that is apparently baked in to its current 25-cent stock price.
The New York Stock Exchange is expected to delist Audacy from their exchange within the next months because the stock has failed to return to the minimum NYSE price within the generous grace period they were granted.

What to watch

Audacy will likely initiate a reverse split similar to the 10-to-1 Cumulus stock split to artificially boost their stock price above a dollar.
Audacy will retain its listing on the NYSE but will be dinged in the financial community.
Remember Cumulus – their stock rocketed back up after its 10-to-1 split and then eroded just before bankruptcy as financial people often see a reverse stock split as a last-ditch effort to remain viable before submitting to bankruptcy.

Street talk

There is only one way Audacy can avoid bankruptcy – to reduce debt by significantly paying it down from operating profits but Audacy does not generate that kind of money so they service debt not substantially reduce it.
Even selling assets usually does not work because by the time they are forced into that move, the debt far exceeds their ability to substantively reduce debt and revenue is usually used to service the debt.
Once things get tight (can’t service debt from asset sales or revenue generation) bankruptcy follows.

On the record

It’s a matter of time and with a recession bearing down the time is this year.
David Field hangs on because there is a real scenario in which he could lose the company if debtors become the new owners – why would they keep the CEO who presided over a stock explosion from $16 a share before the CBS merger was announced to a quarter today?

My deadly honest POV

He’s tried everything – a merger, blowing up the merger through firings, consolidation, substantial staff reductions, name changes and now embracing a industry that Audacy is not really in – audio.
I have never heard a listener call radio audio – have you? And if ad agencies and advertisers do because radio tucks into podcasting and other “audio” for buying purposes, they just dumbed down radio again.
And listeners hear “Audacy” as “Odyssey” – they even have to spell the name to listeners on-air to avoid confusion.
The only reason this will end ugly for the Fields is because their number one option is off the table for the next few years when they need it most – low interest refinancing that would allow them to kick the can down the road in the future as they have done in the past.

Send me your responses to Audacy’s latest asset sale -- I’d like to hear your POV (click below).

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The radio industry will begin the tough love it needs to reinvent itself and the music industry will see what user-generated content will do to it.

The straight scoop: The recession expected in full force this year will unravel the last of the consolidated radio companies – a good thing that will be painful along the way.

Radio predictions

Audacy files for bankruptcy – David Field may survive but he could get kicked aside by lenders who will be forced to take equity in bankruptcy and become his boss.
iHeart closes the vice on competitors using desperate tactics to undercut rates in seeking bulk ad packages that in essence reduce radio rates substantially – this tactic makes Cumulus, Audacy and smaller groups that compete with them in various markets vulnerable to shrinking their ad revenue.
Keep an eye on Urban One – bankruptcy looms if they cannot get considerable debt under control. A diversion to casinos is more of a wish than a solution to the age-old radio problem of borrowing at rates they can’t afford.
Put Beasley in the bankruptcy column – Like other radio companies, Beasley does not generate enough revenue to both pay down debt and be a growth company (which explains their stock priced under $1) – the only way out is reducing debt and that is most likely through bankruptcy.
This could be the year Cumulus jettisons Westwood One, now a meaningless asset that is not essential to the sell-off that board members (former lenders, now owners) want to pursue.
Cumulus settles the lawsuit with Local Radio Networks – LRN cleaned them out of accretive local radio 24/7 clients, Cumulus dangles a settlement – this never goes to trial and both sides never speak about it in public.
Townsquare revenue soars – they did a side bet on digital which is now the main lifeline for the small market radio company. BUT digital is about to be disrupted, a risk but not a death sentence.

Podcasting

As predicted here for years, podcasting has finally peaked – not able to sustain the interest of audiences enough to be a major draw and not potent enough for advertisers to pay higher rates. When Edison reports podcast listening down as it just did, pay attention.
Young listeners choose music over podcasting – yes, they have a favorite podcast (everyone does), no they don’t have retro-attention spans that allow them to consume even short podcasts. Podcasting game over without youth.

Music

Nothing in sight will disrupt the 85% revenue benefit to labels from streaming music services – this juggernaut continues throughout the expected recession.
One area of concern: user-generated content. Short form music is licensed different than Spotify or Apple Music and there could be repercussions.
TikTok is bigger than the feds and competitors – Banning it is like banning booze, young people still rely on TikTok for music discovery and perhaps soon as a streaming alternative to Spotify and Apple Music -- competition for streaming music services that will really upend the ecosystem.
Ticketmaster meet Swifties – the long-hated ticket service for live events is about to be roughed up by Taylor Swift’s fans who among others are tired of being jerked around when asked to pony up for high ticket prices – Elizabeth Warren is listening.

Cable News

CNN’s pivot to the middle will lay an egg – Expect continued audience losses as cable news is an older viewers preference and they pick sides before spending their time watching – Twitter is the new cable news along with other apps.
No future for cable news without young people who do not watch cable leaving MSNBC and CNN in a tough position and Fox with a lot of out of demo viewers.

Streaming Video

Netflix has peaked – You know Netflix is in trouble when they are doing a series on exercise – they’ve maxed out, too many competitors, consolidation coming, resistance grows for streaming subscription prices.
Subscription price is increasingly an issue – Disney+ raised theirs (a mistake), Netflix is considering raising theirs and clamping down on multiple users, too many choices – consumers moving to one or two streaming video sources, no more.
Too many video streaming apps, not enough aggregators -- There is too much streaming video and no real good system for aggregating what to watch and there is no all-encompassing, reliable, new age digital TV Guide – it’s a big problem that will get worse.

My deadly honest POV

David Field really doesn’t like the word radio (a dirty word to them) – the name, the original and best local version of it and is likely to go down with his radical pivot to audio (whatever that is at the moment).

I think iHeart gets sold within three years, Cumulus hangs on as a cash register for the c-suite execs and board members, Audacy refusing to acknowledge that they can’t put Humpty Dumpty (the CBS merger) back together again.

The end of the hostile takeover of radio by Wall Street is closer but it means more pain, lost jobs, ruined careers and lost listeners and in five or more years, a new group of moms and pops will salvage the wreckage and start to put this medium back together again – radio is not going away, its consolidators are.

Happy to be back, hope your holiday was happy and restful. I’m getting ready to launch an additional course at NYU called “Stress-free Living and Working in the Music Industry” so I may not write on some class days but will be full force otherwise. Sorry, David.

Send me your responses to my predictions today and I’d like to hear your own (click below).

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Late Friday caller ID flashed my longtime friend Todd Wallace was on the phone.

I answered with “hey, how ya doin’” in my best Phillyese.

The voice on the other end was Todd’s son-in-law who said “I don’t think this call is going to go the way you thought it would” and informed me of Todd’s passing.

His credentials were rich: Big 8 Drake jock, program director, consultant here and in Australia and New Zealand, the “father of call out passive music research” and on and on.

I know him from our long relationship and mutual love of radio. When I founded Inside Radio, Todd supplied his audience ratings even before the publication made it big.

When I moved to Phoenix, Todd along with fellow buddy Bill Gardner founded the “Scottsdale Study Group” to study the lunch menu at local restaurants and pursue non-stop two-way conversation about all things radio.

Bill and I once stayed on after one of our lunches to talk right up until dinner – non-stop talk with no commercials in a way.

We had regulars like Bruce St. James and John Sebastian and a host of friends like Gary Edens, the late Jim Taszarek and many others.

We’d have guests passing through join us like Scotty Brink – sometimes in ways a bunch of program directors could appreciate like the time I invited a radio acquaintance who said he was on his way to check into hospice where he expected to die.

Lowry Mays picked up the tab because every time I got my Amex out I told them that the hardnosed founder of Clear Channel who tried to sue me for $100 million wound up settling for millions to get me to drop my countersuit so before wallets came out, the question would be posed, is Lowry paying?

Back to the programmer on his way to hospice -- he died and I covered it in Inside Music Media but a few years later he returned from the dead – that’s right, he never died – to stage a bank holdup. You can’t make this stuff up.

Bank bandit or not, how could we know – he was a programmer who loved radio, that was the ticket to admission.

Todd often encouraged me to give voice to the radio industry and its people we love who know how to do the best local radio and expose the evil ways of hedge funds and their CEO puppets – like I needed encouragement. Still, I appreciated that my friend appreciated what I was doing.

I don’t have to tell you that every loss is a tough one and particularly so when it is a radio friend.

Radio is like ice hockey – we compete ferociously but always shake hands in the end to show respect.

I’m glad I never had to go up against “One-book Wallace” as he was called for his ability to fix stations quickly and make them bulletproof.

And now that I’ve had a few days to let it sink in Todd’s passing reminds me of how fortunate we are to be in an industry where we care about the audience, probably make less money than we could doing something else and forge wonderful lasting relationships with everyone -- even competitors.

Todd was an outstanding radio guy and devoted friend, I celebrate his life today by reminding myself and all who will listen that like radio, even friendship is local.

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FREE SAMPLESJerry Del Colliano

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Remembering Todd Wallace

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