November 24

Airwaves: November 24, 2006

Private Channel

The ink had barely dried on last week's column when the news item mentioned became reality: Clear Channel Communications -- owner of eight radio stations in Los Angeles: KLAC, KFI, KYSR, KIIS-FM, KTLK, KOST, KBIG and KHHT -- was going private.

The company's board of directors accepted a deal arranged by current management from private equity investors that will pay $37.60 per share for all outstanding shares of Clear Channel stock, a premium of about 25 percent over the average price of the last month.

The deal must still be approved by shareholders and various government agencies, and the company will also entertain competing bids through December 7th.

Quite a turn of events for the company that was once high-flying, or at least thought they were. Clear Channel grew through mergers and purchases to become by far the largest radio company in the world, with 1,150 radio stations in the United States and ownership or operating agreements on more than 240 radio stations in Australia, Mexico and New Zealand. Additionally, it owns 42 television stations.

It controlled costs by consolidating numerous stations into one building and using computer technology to beam personalities in one city to multiple stations, thus cutting costs further. It even cut the cost of contests by running the same contest on multiple stations in different cities.

The drive to make radio broadcasting a common commodity was met with protests from industry observers and radio fans -- including myself -- who noted the lack of creativity on Clear Channel stations, as well as on stations from competitors who followed the same operating plan.

Those protests, as well as laments that many radio stations no longer broadcast in the public interest nor provide real local programming, were met with cries of foul from the industry. Radio listening is stable, they said. There is more variety on the air now than ever, they yelled. People don't want news or public affairs, they cry. Radio is better than ever, they say with a straight face.

Turns out we were right after all. Clear Channel was an excellent cost-cutter, arguably the best. But in cutting costs so well, they cut out the soul of radio. And since the soul was gone, listeners started leaving for other entertainment sources. To quote industry newspaper Radio and Records, "in the last two years, growth (at Clear Channel) ground to a screeching halt."

Ironically, had the company -- the industry -- invested in the future by developing talent, programmers and managers as was done in the past by such companies as RKO and Metromedia, they wouldn't be in the mess that is taking Clear Channel private. An industry never cuts its way to success. As in every industry, you have to invest in the future; Clear Channel did none of that. A one-trick company, it found itself stuck when it could no longer cut costs dramatically as it lost listeners to iPods.

Not that it isn't still trying. As I write this, bulletins continue to arrive mentioning layoffs at Clear Channel stations throughout the country, mostly in programming.

By going private, and selling off 448 radio stations and all 42 television stations, Clear Channel takes the pressure to grow and perform off of itself, albeit temporarily. For while shareholders will no longer be demanding growth, the private buyers certainly aren't doing it for the music.

Hello Country

Country music will expand to KKGO (1260 AM) when it starts simulcasting KSUR (540 AM) beginning December 1st. That unfortunately leaves standards fans without a station to call their own once again. Too bad, really. Owner Saul Levine should consider putting the standards back on 540 so that both San Diego and Los Angeles can hear standards; XSUR broadcasts from a transmitter in Northern Mexico.

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