Don’t blame Cumulus, iHeart, and Audacy for the financial challenges in our industry. There is a common theme among radio veterans — blame the big company of your choice for seemingly bad decisions. Cumulus has filed a pre-packaged bankruptcy, and they are not the guilty ones.
Let us take the stigma out of bankruptcy. Whether personal or business, bankruptcy is legal protection from creditors. It is a lawful instrument to reset a financial situation. I have not personally filed for bankruptcy as Cumulus did for a second time, but I certainly know people who have had to file for various reasons.
Our industry’s woes with innovation can certainly be pinned on the financial burdens that many companies took on some 30 years ago. When the feeding frenzy of Wall Street’s influence on our industry’s consolidation came to an end, very capable radio executives asked, “What now?” Publicly traded companies are expected to grow each year. There used to be a rule of annual growth of 10%.
Well, if that revenue growth is tied to acquisitions and nothing else can be purchased or created, this is a problem. Unlike a Trader Joe’s, radio stations cannot build new locations. We are a government-regulated industry and are now seeing contractions, with radio stations shutting down in some places.
As social media became a thing, radio gave up the mantle of connecting with our communities. I guess it is easy to look back and think that radio should have seen this coming. But we didn’t. Part of it was arrogance and a corporate focus on making sales goals and watching expenses. Radio also worked as free promotion for our competitors in the social media landscape.
Content creation was once exclusive to movies, books, radio, TV, theater, and music. It was a controlled environment determining who could create and distribute that product. Now, anyone can create content — anyone. That ability has provided so many more choices. The other issue is that radio and television have not adjusted to the on-demand world. Radio largely just repurposes what it does on the air and calls it a day. Joe Rogan would not work on radio, and your radio show as a podcast rehash doesn’t work either.
So, the masters of the universe at the Wall Street hedge funds are realizing that they have this huge debt and very little chance of seeing that money back. The hedge fund people who made these decisions 30 years ago are likely retired or dead. Wall Street is cleaning it up.
Alpha’s debt was sold to another hedge fund, and the radio stations are being operated by Connoisseur Media. Jeff Warshaw and his team will hopefully be very successful. My observation is that if the hedge funds could make a similar deal to sell off the debt to another Wall Street interest, they would do so immediately.
With all the challenges our industry faces, the good news is that over 80% of people listen to the radio each week. If you look at the Nielsen data, those people are most likely in the car or at work. Home listening is not what it used to be. Businesses are still being built by advertising on radio stations, and you are likely familiar with the successes experienced by your cluster’s clients.
Radio’s self-inflicted damage was not a failure of the medium, but of overwhelming debt.
I once thought it would be better for the industry if the number of owners multiplied from just the likes of Audacy, Cumulus, and iHeartMedia. I am convinced that radio closer to its communities — in ownership, management, and personalities — is much more effective.
Look at WABC. John Catsimatidis purchased WABC and made it a personal passion project. That station went from irrelevance to ninth place in Nielsen’s most recent monthly ratings. Catsimatidis made that station New York again. It’s a great model. Investment, patience, and innovation have led to this great radio story.
There is no entity on Earth that can operate under smothering debt. One of our other challenges is getting teenagers and Gen Z focused on radio again. How many music stations are nostalgia-focused? Nostalgia formats have built-in advantages, but the local businesspeople buying advertising are generally a little older, and they may not be interested in advertising on a format they personally don’t listen to or much less understand.
Cumulus eliminated $600 million in debt. Does this make them profitable? Will it help revitalize the industry with energy and innovation? Or is this just a band-aid? The future of radio is in our hands. We didn’t create this predicament, but we do have the opportunity to build that future.
Just because something failed in Bangor, Maine in 1980 doesn’t mean it was necessarily a bad idea. The experiment may have been executed by a less-than-motivated staff. The program director may have felt a format thrust upon them, much like the world was mandated to watch Bad Bunny at the Super Bowl.
Think of Netflix. People would have DVDs delivered to their homes, then return them after viewing. Netflix transitioned to the streaming model and has become a dominating force. What is next for radio? It is really up to the imagination, tenacity, and patience of our executives. It is tough to be innovative when short-term ROI is handcuffing us.
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