Economics threatens to silence radio

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By Jennifer Harper

When big media companies lose big money, the public gets unnerved.

Some people wondered, for example, whether the New York Times would fold after it racked up $400 million in debt and was forced to borrow against its own office building to stay solvent a few months ago.

The paper is still publishing.

Now it is the moment of truth for CC Media Holdings - parent company to Clear Channel Communications, the nation's largest radio conglomerate. The company announced that it lost $5 billion in revenue in the fourth quarter, following a layoff of 1,800 employees in January.

Among its many properties, the Texas-based company counts Premiere Radio Networks - home to Rush Limbaugh and Michael Savage, among many other broadcasters - as a subsidiary with 190 million listeners. Clear Channel's programming is heard on AM, FM, online, HDTV, via iPods, cell phones, and even navigation systems on BMWs and Volvos.

The company on Tuesday appointed a "revenue manager" to maximize any moneymaking capabilities - with 40 monetizing experts to be hired in the near future.

"Clear Channel is showing us that there are no quick fixes to big corporate financial problems. They're going to have to operate with fewer resources - and I just hope it doesn't hurt the end product," said Michael Harrison, founder of Talkers Magazine, which tracks talk radio.

There are interesting dynamics at work, he said.

"Rush Limbaugh is now being hailed as the leader of the Republican Party. So maybe it's talk radio, which is the hope of the medium," Mr. Harrison said.

"Clear Channel hasn't failed yet. It has traditionally been the pattern that where Clear Channel goes, the industry followed. That was more true when the company was publicly traded, but that's no loner the case since it went private in 2006," said Eric Rhoads, publisher of Radio Ink, an industry magazine and blog.

The company is facing a "perfect storm," he said, paying for past spending sprees and unreasonable hopes of big profits.

"Some of this debt is very old. But there's now no capital to tap, no new money coming in, and an advertising depression under way. Still, there's light at the end of this tunnel," Mr. Rhoads said.

"Advertisers who previously cut their budgets will find that business is getting worse. So they typically seek something less expensive than TV - like radio, which is more cost-efficient," he added.

Brian Maloney, a Massachusetts political and media analyst who writes "the Radio Equalizer" blog, agrees that Clear Channel - along with Citadel Broadcasting and other radio companies - are in trying circumstances.

"Boatloads of debt, no assets, drifting audiences - it's a recipe for disaster," Mr. Maloney said. "And what's the impact on programming and listeners? That always gets left out of the conversation."

With their iPods and MP3s, younger listeners are turning away from traditional music formats, he said.

"Talk radio is where there is some real true potential, particularly in the current political climate. But there's a clear strategy, too. Talk radio needs to divorce itself from this whole mess," Mr. Maloney added.