Clear Channel’s recipe for disaster
Every now and then something comes up that’s so, well, apt that we have to include it in full, with kudos to the author and publishers.
The Cleveland Frees Times’ John Gorman usually hits the nail right on the head, and he thinks Clear Channel ’s Mission Statement had gone awry.
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>Clear Channel’s disdain for ratings is a prescription for disaster
By John Gorman
Tom Owens smells the odor of an unclean rodent. He’s the supercilious senior VP of programming for Clear Channel’s beleaguered 1,200-plus radio stations. When there’s success, he takes credit. When there’s failure, heads roll. While surrounding himself with a hackorama of talentless buddies, he goes through programmers and air personalities like we change underwear. Now, he’s getting a whiff of cruel reality.
Owens’ claim to fame is programming WEBN in Cincinnati, which is best described as a rock station for bottom feeders. Under Owens, Clear Channel’s radio programming division has become the media symbol of ratings failure and a place where connections trump aptitude. Like fast food at interstate stops, you’re assured to get the same bland product anywhere Clear Channel has a radio station.
A few weeks back, Owens heard the future of Clear Channel’s radio division and it wasn’t pretty. Ratings aren’t important. The ghost of the ’70s Detroit automotive industry has returned in a corporate radio disguise.
John Hogan is the CEO of Clear Channel radio and Owens’ capo. His job is to reverse the division’s revenue performance while eliminating internal corporate featherbedding. He’s spent the past year trying to unravel the mess left by his predecessor, Randy Michaels. Hogan is replacing Randy’s "good ol’ boys" with those he believes are more competent managers. Owens is one of the few "boys" still on the dole from Randy’s rule. Clear Channel’s revenue losses occurred even after the company lightened their load by a few thousand employees to lower operating costs, or as Hogan puts it, "efficiencies."
Michaels was relieved of duty by Clear Channel’s corporate office when it was learned that, among other things, he charged $447,100 to the company for "consulting and transportation." Michaels didn’t expect the bean counters to scrutinize, but they did and discovered that money was spent on a private plane, leased from a company Michaels owns. From one pocket to another.
Michaels is still with Clear Channel in a powerless administrative role with its Internet division. By his own job description, he surfs the ‘net while being paid close to a half-million dollars a year until his contract ends. Michaels has Owens protected, too. Neither can be fired. They share an expensive golden parachute covenant, which was set up by corporate titan Sam Zell, who owned the radio division the duo worked for prior to its acquisition by Clear Channel. Still, Owens’ Kentucky-sized ego has been brutally bruised. It also elucidates Clear Channel’s bipolar showing on Wall Street and sets the bar on how all other dysfunctional companies will be measured.
What does Clear Channel radio have to do with the Detroit automobile manufacturers in the ’70s? More than you could imagine.
Since the beginning of the radio industry, success was measured by ratings. Survey results determine what a station charged for advertising by its audience share, listening patterns and demographics. A ratings drop translates to a management overhaul, a format change or both.
Hogan now claims that ratings have nothing to do with a station’s revenue and that market share does not automatically equal more profits. "One of the things long important to and characteristic about radio has been market share," said Hogan in a recent statement. "But while we want to be focused on competing against other radio stations, we want to be even more focused on profitability than market share now."
The obvious comparison is the automotive industry in the ’70s, best chronicled by author David Halberstam’s The Reckoning. In it, he says, "The public was not the people who bought the car, the public was the people who bought the stock." Substitute the word car for radio. Detroit automakers were convinced that no one would ever buy a car that was labeled Made In Japan.
Clear Channel corporate CEO Lowry Mays probably didn’t read Halberstam’s book. Earlier this year, he told Fortune Magazine, "We’re not in the business of providing news and information. We’re not in the business of providing well-researched music. We’re simply in the business of selling our customers’ products."
Detroit automakers assumed that its customers were trapped. They could use cheaper materials and cut corners to produce inferior products without affecting sales. The automakers also shortened their products’ planned obsolescence. Build a car that will fall apart in two years so it could be traded in for a new one.
Clear Channel views radio listeners as a captive audience. In their world, since the majority of radio listening is done while commuting, people have no choice but to listen to their product – good or bad. Their hubris blinds them to the fact many vehicles are equipped with CD players and cell phones and satellite radio and Internet radio via Wi-Fi, all offering significant alternatives to their insipid fare.
Author Max Frankel said, "What look like efforts to achieve monopoly power are actually concessions to weakness." That sounds like Clear Channel’s mission statement gone awry. Hogan’s right to reign in Owens but wrong to assume that the poison will be out of the radio division’s bloodstream by ignoring ratings.
Besides witnessing Tom Owens’ final slurp at the Clear Channel trough, we’ll get the added attraction of hearing radio making itself obsolete. Stay tuned.
