Radio Giant Faces Crisis in Cash Flow

[ThomCat]

Clear Channel might become the largest media company to go bankrupt is this current recession/depression

http://www.nytimes.com/2009/04/30/business/media/30clear.html?_r=1&src=linkedin

It is too soon to say who will be the biggest loser among media companies in this recession. But Clear Channel Communications is vying for the title.

Clear Channel, the nation’s largest radio station operator and an outdoor billboard company, last year became the biggest leveraged buyout ever in the media business, after it was taken private by Thomas H. Lee Partners and Bain Capital.

Now its revenues are plunging and so is its cash flow, making it harder to meet the payments on the billions in debt accumulated in the process of buying out its public investors. If it violates some of its loan agreements, those interest payments rise sharply.

As advertiser spending plunges week by week, the likelihood grows that Clear Channel will fall out of compliance with one of its loan covenants by year’s end and be in technical default, several analysts said. The covenant requires that debt not exceed 9.5 times its cash flow. Lately, Clear Channel has been adding to its debt even as its cash flow is shrinking.

[KharmaTrain]

1. It's Real Ugly Out There...What This Article Doesn't Say...

The other day Cheap Channel fired 600 MORE employees...add that to the 1,200 that were given their notice the day President Obama was inaugurated (nice move, John Hogan) and this company has cut nearly 25% of an already bare bones operation. All of these cuts have come at the local level where Cheap Channel is now turning once proud and profitable local stations into repeaters of national shows. Not only are jobs gone, but so are local news departments, weather and important emergency information...there's no one left...just satellite dishes and hard drives. And hints are there are more cuts coming.

For those not familiar with Bain Capital...that was the investment firm founded by Mittens and is now a subsidiary of the Carlyle Group. Bain tried to bail out Cheap Channel prinicpals who were all boooooosh backers (Pioneers to be exact). Cheap Channel's empire was built similar to the real estate bubble...inflated prices on their stations that didn't reflect what kind of revenues the operations were bringing in. Thanks to Telcom '96, they were able to buy out competitors right and left...building up bigger debts, but also manipulating their stock price. So while operations began to decline, the principals were taking their dividends and huge bonuses (sound familiar?). Now the bill collector has come knocking, advertising revenues (what are left) have vanished and the next move the company has is to shut down statiosn (which it already did a week ago in Scranton, PA).

Others are following Cheap Channel's lead...CBS fired several dozen people yesterday and rumors are rife of cut backs ahead at the near bankrupt Citadel and Cumulus. "Deregulation" has turned our public airwaves into a trash heap.

[ThomCat]

2. I hope that after all the corporations fail with all these stations

perhaps small local stations will begin to crop up again that are less concerned with big profits and more concerned about making enough to just stay on the air and support the local community. We would all gain from a re-emergence of small local stations.

I'm really hoping that there will be a phoenix rising from these ashes.

Though, that could all be wishful thinking because I know there are a hell of a lot of nearly insurmountable obstacles to handle first.

[KharmaTrain]

4. That's What Some Of Us Are Working Toward

And it isn't easy...there's little financing out there and local retail markets that were dismal before the economic hit the skids. Many local operations have suffered thanks to the "mallification" of the country...the loss of the "mom & pop" retail operations. The Wallmarts prefer to advertise nationally, not on a small station. The big corporates promised that they could "fix" this problem...as they had the "national pull" but that pull never left the corporate board rooms as no sooner did they buy out many of these local stations, they first "consolidated" and then "down scaled"...now they're into full scale outsourcing.

There are a lot of quality radio people out there...many are working on Internet and other media. In many areas, it's the non-profit and college stations that are the last bastion for creative and local programming.

The burn still isn't complete. I predict we'll see a lot of radio stations go silent over the next couple months and with credit tight as a drum, it's impossible for local groups to get the financing to buy. And then, the market is so screwed up no one really knows what the value of a radio station is these days.

There is a phoenix already out there...and you are just a mouse click away from being one of the millions that have gone from conventional to internet radio. It's empowered many small operators and with the new generation of wireless toys, the days of the old AM/FM are numbered. Best the corporates end up with that mess...keeps them out of the way from those of us who are building toward the future.

Cheers...

[ThomCat]

5. I'm already a fan of internet radio.

:)

Hopefully many more people will discover it and it will take off.

But that will depend on Net Neutrality. It won't happen if the corporate ISPs are able implement tiered pricing to force people to visit only corporate sites.

[donco]

16. Could there be auctions

in the future for the frequencies and transmitters/parts?

[KharmaTrain]

35. "Fire Sales"

Right now with the credit situation being so tight, and radio having such a poor record, getting financing to buy is nearly impossible. There may be a time in the near future that some of those licenses will be turned into the FCC...the station goes silent and it'll be up to the government if those frequencies will be activated again (no sure bets). Or if the companies go into bankruptcy, they will be forced to sell their profitable stations at auction...or a "fire sale". One would hope that when that occurs, there will be preference given to local ownership...but that's just conjecture.

The FCC needs to repeal much of Telcom '96 that allowed these companies to get "too big to fail"...make those licenses available to local ownership and revise the rules that would prohibit these companies from owning so many station in a market.

[populistdriven]

28. you took over the market, now enjoy your pyrrhic victory assholes

[Overseas]

37. Thank you for the background info, depressing as it is.

Some of our progressive radio shows were carried on Clear Channel stations, although the majority of their stations seemed to cater to the old-fashioned hard right hate talkers.

[Egnever]

3. Good!

I guess right wing radio isnt the cash cow they have been pretending it was after all.

Couldnt happen to soon for me. Maybe just mayne we will see some local stations poping up again.

[AllentownJake]

6. The media is taking a huge hit right now

One of my good friends was a camera man/associate producer for a local news station. They laid off a lot of staff. The biggest advertiser to the local news are car dealerships.

[Liberal In Texas]

7. Another leveraged buyout and now the company is in trouble. Surprise surprise.

Thom Hartman has been talking about this. Somebody buys a company by borrowing 90% of the purchase price and the company now has that debt, not the guy buying it. To pay the debt the company usually has to lay off workers or sell assets. Plus, the guy buying it may have no interest in or knowledge about the type of business he's running; he's only interested on squeezing dollars out of it. Now with a weak economy, it's no wonder these companies are in trouble.

Leveraged buyouts need to be made illegal, like they once were.

[KharmaTrain]

9. It Was A Bigger Ponzi Scheme Than That...

Once the company aborbed a competitior (usually at a premium price) they'd issue a big press release and schmooze their Wall Street lackeys and the stock price would jump up. It wasn't based on any increase in revenues...just on the acquisition. Rarely was it mentioned how much more debt was being added and for many years, the banks were more than happy to reschedule debts as they, too were making money...through the stocks and the growing interest on the debt.

The problem is Cheap Channel valued their stations at 10 to 12 times cash flow...and that was based on good times. They poured in millions in new digital toys that haven't paid off (anyone have an HD radio??) and they let radio fall behind cable tv and the internet as a major local advertising medium.

There are no dollars left to squeeze...just bankruptcy.

[Liberal In Texas]

32. It's unbelievable that these kind of crazy business deals are legal.

But I guess we know who's been deregulating for the last decade or so.

Clear Channel should never have been allowed to buy as many stations as they did either. Having any one company with more than 2 radio licenses in any market is not in the best interest of of the public, but the best interest of Clear Channel.

It's time to get back to where government serves the people, not a few rich bastards.

[zbdent]

8. HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA!!!

I would love it!

[Subdivisions]

10. I hate to say this considering the jobs involved, but...

DIE! CLEAR CHANNEL, DIE!!!

[WeDidIt]

11. Maybe if they let market demand choose programming rather than ideological purity

they'd make a profit.

Ya think?

It's not surprise Clear Channel would go bankrupt. They support the GOP with their programming choices and the GOP is going bankrupt, too.

[mod mom]

12. DON'T BAIL OUT THE BASTARDS! May they fall flat on their faces!

[stlsaxman]

13. WOOOO HOOOOOOOO! Hip-Hip-Hooraaaaayyyyy!

Fuck Clear Channel!

...i'll repeat that-

Fuck Clear Channel!

...i'll repeat that-

Fuck Clear Channel!

...i'll repeat that-

Fuck Clear Channel!

...i'll repeat....

(with a tip of the hat to Bonzo Dog Band and King Crimson)

[Phoebe Loosinhouse]

14. I read about the impact of Clear Channel in the Midwest where farmers used to rely

on local radio for market and weather reports. Also, that a big part of the dangerous weather system monitoring/warning got lost. People were surprised when they called what they thought was a local station to just get voice messages that basically went nowhere.

[lib2DaBone]

15. I hope Clear Channel chokes on their own vomit...

The Federal Communications Act of 1934- License Radio Stations to serve the United States in public interest, convenience and necessity

Give us back our radio stations you fat ugly bastards. I want to hear my local weather, farm reports and swap shops on the radio.

I want to hear what my local mayor has to say, my local alderman, and I want to hear what's on the school lunch menu for the day.

I DO NOT want to hear pigboy Rush Limbaugh, Sean Hannity, Laura Ingram or any part of your right-wing torture propaganda.

[ProudToBeBlueInRhody]

17. Go fuck yourself, Clear Channel

You've poisoned the airwaves, and now I hope you get all that is coming to you in spades.

[FarCenter]

18. The outdoor billboard ad business must really be bad

I see lots of "white" billboards, as well as lots of billboards carrying public service ads.

[yowzayowzayowza]

19. Fail, baby!! Fail!!! n/t

[Soylent Brice]

20. good. clear channel is fucking evil.

worked for them for a couple of years.

EVIL FUCKING EMPIRE.

[lpbk2713]

21. So they wrote Limbaugh a $400 Million contract and now they're going broke?

Link: http://www.nytimes.com/2008/07/03/business/media/03radio.html


Holy shit, I'm laughing my ass off here!! I love it.

Shrewd businessmen these Clear Channel people. :rofl:

[City Lights]

22. Ha! Couldn't have happened to a more deserving assholic corporation!

:rofl:

[hvn_nbr_2]

26. Well, maybe. It could have been Sinclair.

But I basically agree with you. I'm just being logically precise.

[bullwinkle428]

23. Does Mitt Romney still have a financial interest in Bain Capital?

I know he was one of the founding partners, and led it from 1984 to 1999, but not sure what his involvement is (if any) these days. It's a delicious thought to think he might be taking a huge bath on this one...

[sinkingfeeling]

24. I've got my fingers crossed that Clear Channel goes belly up.

[Are_grits_groceries]

25. The Dixie Chicks revenge!

I hope they go so far under that they get the bends if they ever try to come back up.

[hvn_nbr_2]

27. May their executives drown themselves in a bathtub full of their own effluent. nt

[YOY]

29. Who the fuck knows...we might actually see a return back to real radio before it goes extinct.

This is one company I cannot feel sorry for.

[L0oniX]

30. WOOT ...I hope they die.

[fascisthunter]

31. That's What Happens when you aren't it for the Money

as much as you are in it to push political propaganda for a certain segment of your population. Bad business practice.... they deserve this.

[Kablooie]

33. When will Fox News follow? (I hope)

[ThomCat]

42. Unfortunately, Fox seems to have no shortage of stupid people

addicted to viewing their shows. :(

They're still making lots of money.

[dethl]

34. Keep paying Ru$h the big bucks and any major company will fall

Greedy ass bastards push their political ideologies for as much money as they're able to get their hands on.

Ru$h gets $400 million over 8 years from Clear Channel - http://www.nypost.com/seven/07032008/business/400_million_mouth_118341.htm

So why isn't he helping out those less fortunate and losing their jobs? Oh wait, he can't...Oxycontin is pretty damn expensive on the black market these days I've heard.

[proud2BlibKansan]

36. Karma's a bitch

[KharmaTrain]

38. No I'm Not...

I'm very much male...and only bite those that deserve it. :rofl:

[proud2BlibKansan]

45. LOL

[Touchdown]

39. Cancel Limpball's $124m per year contract and they should be solvent.

Getting him off the air would do them some good too.

[musette_sf]

40. ah, quelle dommage!

:nopity:

[Raster]

41. Die! Die! Die!

[anonymous171]

43. NO PITY FOR THOSE FUCKERS!

[Mike 03]

44. They DESTROYED local A.M. radio and they get what they deserve.

I can't even list the number of talk-radio stations that used to employ local talent that have become 'bots' for want of a better expression, running the same old abominable shit, day after day, sometimes two or three talk radio stations in the SAME MARKET.

No wonder AM is terrified of SIRIUS/XM.

[jgraz]

46. I guess that's what happens when you have a product that nobody wants

When can we start talking about the "failure of right-wing radio"?