Moody's Investors Service issued a report on Monday indicating that Clear Channel Communications — parent of Rush Limbaugh's syndicator, Premiere Networks — will need to become profitable very soon if it is to survive the year 2016 intact. Moody's noted that "by 2016 [Clear Channel] will have debt levels that are greater than its expected asset value", and "the possibility of a restructuring or a distressed exchange remains high."

Clear Channel's debt obligation from 2013 to 2015 is nearly 1.9 billion dollars, which Moody's anticipates the company to meet. But in 2016, Clear Channel will need to come up with 10.1 billion dollars to meet its financial obligations. Moody's reports that "Clear Channel may struggle" to meet that requirement.

Del Colliano, who notes that both Clear Channel and Cumulus (the largest and second largest radio industry networks) are facing bankruptcy — Clear Channel by 2016, and Cumulus at any time — believes that both companies are likewise ripe for mergers. And both need partners with healthy balance sheets to dilute their own deepening debt. Cumulus wants to buy; Clear Channel may be positioning itself to be bought. But Del Colliano observes that radio listening is in decline, and digital is putting pressure on local ad budgets. The idea that Clear Channel will soon become profitable enough to eventually pay off — or even be healthy enough to reschedule — its 2016 debt seems almost laughable.

The industry is so jumpy that RadioInfo today published,



Layoffs Coming to Clear Channel San Diego? RadioInfo hears that some staffers at Clear Channel Media and Entertainment’s San Diego cluster are being summoned to a meeting this morning. Though the reason for the meeting is not clear, sources say the staffers believe they are to be laid off at today’s meeting. Stay tuned for more on this possible breaking story. --Clear Channel Debt Issue Sparks Speculation of Sell-Offs, Mergers and More

Clear Channel Columbus firings coming by Friday (considered a major mkt).#undertheradar #radio — Jerry Del Colliano (@jdelcolliano) December 5, 2012

Clear Channel appears to be continuing their relentless layoffs elsewhere as well, perhaps now not quite so stealthily

Then there is Dial Global — a radio network that has been fortunate to mostly stay out of the news the past week. Dial Global delisted from NASDAQ when it dramatically fell to $0.47 a share on November 16. In the ten business days since, Dial Global has continued to drop steadily to an intra-day low of $0.22 a share. There aren't too many pennies left to fall.





Dial Global's one month stock chart

Dial Global has blamed Rush Limbaugh for their woes. Cumulus has made similar assertions about Limbaugh. Clear Channel — which syndicates Limbaugh through its Premiere Networks subsidiary — will never make such assertions, as that would be tantamount to blaming themselves.

RadioInfo published an article today with a blaring headline entitled Clear Channel Debt Issue Sparks Industry Wide Speculation (of Sell-Offs, Mergers and More). The industry publication editorialized:



TALKERS/RadioInfo publisher Michael Harrison states, “While it certainly is too early to lose faith that things in the business will drastically improve by 2016, which would mark a continuation of the present corporate status quo, or that Clear Channel will pull another refinancing magic rabbit out of its hat, the doomsday scenario for today’s mega-consolidators could actually spark new life into the radio industry. There is an awful lot of unemployed, ultra-seasoned management talent out there who would make extremely capable owner/operators of small- and medium-market stations and realistically designed groups if only given the chance. That opportunity would come if the biggies were forced to sell off hundreds, if not thousands, of properties at prices that could be serviced by reasonable earnings. It would require these individuals to find financing from new sources – local banks and businesses with roots in their communities. More importantly, it would require them to blow off any notion of living the soft corporate, cover-your-ass, way of thinking... --Clear Channel Debt Issue Sparks Speculation of Sell-Offs, Mergers and More

That's certainly looking on the bright side, while acknowledging recent mega-corporate trends.

Speaking of looking on the bright side (while totally ignoring reality), Clear Channel's CEO Bob Pittman claims that radio's $16 billion business should really be a $35 billion business, if radio could just "tell a better story". According to RadioInk, Pittman asserts that "radio is getting such a small piece of the advertising pie because, as an industry, we're not making enough sales calls."

But media economist Jack Meyers projects that radio is headed in the opposite direction, and by the year 2020 will be only a $13.4 billion industry. Radio Ink concludes that radio's revenues are "stuck-in-the-mud", and that "in 2012, despite high expecations for political advertising dollars, radio revenue, as reported by the [Radio Advertising Bureau], was flat to up a trickle."

Note that there will be no political advertising dollars to rescue the industry in 2013.

Cumulus — Clear Channel's nearest competition — has meanwhile been attempting to boost sales by intimidating its sales force. According to Del Colliano, meetings with sales staff in large markets (San Francisco) and small markets (Knoxville, Tennessee) are conducted in much the same manner: the meetings promote the company's new computerized selling system. But the system isn't working; "short term payroll savings seems to be creating long term revenue drops."

Cumulus has a CEO without a lot of sales experience in radio. He makes up for it with vehemence, and no hesitation in laying blame on more experienced radio pros. His San Francisco meeting with sales staff was described as a "55 minute ass kicking." No friendly vibes, no hand-shakes. No questions allowed, no polite clapping at conclusion. Just stunned silence on the part of the sales staff, and shock at the tone. One person who heard a tape of the Cumulus CEO addressing sales staff commented that it is "chilling to hear an adult talk to professionals as if they are morons." Meanwhile, Cumulus is introducing spy software to track sales personnel, and spy cameras to monitor all employees.

Radio ad sales operate on deadline. When a deadline approaches, sales personnel may be tempted to offer advertisers a lower rate to close the deal. Cumulus corporate has been cracking down on these lower rates, and has been kicking advertisers off the air even when the revenues are desperately needed. While Cumulus is cutting sales commissions to its local sales force, it is paying premium rates — well above the industry standard — to national ad agencies, presumably to curry favor in hope of obtaining lucrative national contracts. This is Cumulus, dumping the big bucks on influential national agencies in the hopes that they will somehow rescue Cumulus from its own incompetence and bad business practices.

How is all of that working? Cumulus hasn't posted a profit since 2009, and (according to Del Colliano) local billing is tanking nationwide.

In San Francisco, Cumulus has even laid off the plant waterer:

Desperate housecleaning:Cumulus fires 2 promo coordinators & the plant waterer at San Fran cluster.Bankruptcy anyone? — Jerry Del Colliano (@jdelcolliano) December 1, 2012

But Cumulus (like Clear Channel) has a plan. Replacing expensive, more experienced staff with newbies. (Or with no one.) Automated sales (to lower sales commissions). Stations with zero staff, remotely operated. Other than the FCC mandated station ID, there will be only one voice heard on the air. In the case of a Cumulus prototype station, that one person is a website gossip columnist by the name of Perez Hilton, who happens to be syndicated by Cumulus. Here is the full list of the prototype station's on air staff:

http://995thevibe.com/...

Phone calls to the station reportedly go to voice mail. For at least nine months, email to the local sales manager went to a dead address; the sales manager had been laid off nine months earlier. (Does Cumulus seem to have its act together?)

But Clear Channel also has the "robo station" concept down pat: syndication replaces local programming. Cheap promotions (based upon the iHeartRadio app). No local studios. One remote program director per cluster of stations. And the same thirty music hits, played over and over. (And over again.)

But that's just the future for many stations. In the present, it seems, all the technology is just falling into place. So there is a significant need for immediate cost savings.

Cumulus and Clear Channel are both reportedly engaging in "brass knuckle contract negotiations". When an employee's contract is about to expire, the companies offer a renewal at a severe pay cut, and if the employees don't immediately swallow the new terms they are shown the door. Pay cuts amount to fifty, even sixty percent.

Against this surreal background, Cumulus recently sought to impose its brass knuckle contractual straitjacket on talk show host Don Imus. According to Del Colliano, Cumulus was offering Imus a million dollars a year to continue his morning show. (In 2008, Clear Channel paid Limbaugh the equivalent of $50 million a year for eight years.) One million a year is down from the current Imus salary of $4 million, which was down from $7 million before that. Cumulus meanwhile trashed Imus in order to drive down his bargaining power, declaring that he was "old and not worth the money". Clear Channel stepped in, offering Imus the equivalent of his current salary. Cumulus had no choice but to match. Apparently brass knuckles work with some employees, but not with others. Cumulus can't afford Imus. But even less can they afford to compete with Imus at another network.





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