I corrected yesterday's post, where I had KTLK's generic conservative talker Chris Baker physically returning to Houston. In classic mega-media fashion, Baker will instead be providing, uh, content, such as his stunningly credulous interview with Michele Bachmann, to both the Twin Cities and Houston markets (with a combined reachable audience of, um, nine million or so).

My gaffe provides a nice segue into a post from a University of Southern California professor and world-class Clear Channel nemesis named Jerry del Colliano.

Colliano founded the trade publication Inside Media and has written literally hundreds of blogs excoriating the pagan tastelessness and the shortsighted greed of big-time radio consolidators, such as Clear Channel, which, like CitiGroup, Bank of America, and just about every other "aggressive player" in the early '00's financial world, is collapsing under its thirty-to-one debt margins. Colliano and Clear Channel have been at war for more than a decade and currently have dueling lawsuits accusing each other of damaging their business.

Here's Clear Channel executive Randy Michaels ranting about Colliano last November:

    "It’s become obvious to me that Jerry Del Colliano has no regard for the truth. He has printed stories about Clear Channel cutting sales commissions, planning layoffs, replacing commissioned sales people with salaried sales reps and limiting bonuses.
    "I believe he has been using the pages of his newsletter to disrupt our business and cause our employees to question the integrity of their company. Competitors can use the stories as fodder to attract our people and challenge our business. It is time to put an end to this harassment.":

Clear Channel "cutting sales commissions," "planning layoffs," . . . why that Colliano is clearly recklessly unhinged and lacking any kind of journalistic integrity! Who would ever take him seriously? (Clear Channel has been cutting and laying off and replacing almost nonstop ever since.)

Here is Colliano yesterday predicting yet another round of blood-letting at Clear Channel.

A couple choice quotes and my comments:

(Colliano): So, here's what I'm projecting next:

Some big groups will file for Chapter 11 bankruptcy [he mentions Clear Channel Citadel and Cumulus ] to avoid paying the bills they cannot afford. There is no other way. The recession will get deeper and local radio revenues are flirting with 35-40% off in some markets. You can't run a debt-ridden radio group with no cash flow.

(Me): No duh. Colliano notes that virtually every large radio consolidator has slumped to "penny stock" status--including the KQRS parent company, Citadel, with almost no market at all for radio stations. These are formerly ultra-valuable properties, which sold for twelve and fifteen times the earnings three years ago, are now maybe getting five . . . if anybody had cash or credit. Bottom line, principal owners of these companies are going to have to accept bankruptcy to get . . . the big investment banks . . . off their backs, and, as Colliano notes grimly, it will also allow them to fire their few remaining employees--a Clear Channel station in Los Angeles has dropped talk for automated top 40--without having to honor severance agreements.

Now that radio shares have become "penny stocks", it's time to realize that the only reason to gut your own business without the prospect of selling it for a profit is if you don't have future plans to operate it.

If this sounds too much like Avista Capital Partners and the Star Tribune, just move on to the next item.

The other day I wrote that consolidators [i.e. huge radio acquistors like Clear Channel which topped out close to 1300 stations when debt was cool] didn't have a Plan B in case buying stations and building them up for eventual sale didn't work out.

As it turned out, they didn't even have a Plan A -- they just bought properties, added their free cash flow to the mounting debt and assumed radio would always be a hot market segment.

Clearly, radio -- as well as many of today's troubled U.S. industries -- was only viable before ownership changed hands from seller to buyer.

Without skills to operate you get incessant format changes, no innovation, mass execution of radio's extensive talent pool, hogtying capable managers, top down corporation management and arbitrary budgeting based on what the company needs to service their huge debt.

None of this can or will change.

Again, the Avista-Strib situation is obvious. But the larger point is how much of the economy in general was structured where "Plan A" was a leveraged buy for the sake of acquisition, not improved product or service, and how there is a no "Plan B" (since the over-leveraged owners have no great emotional interest in the businesses they're stuck with) other than to reduce everything to the level of a cinder pile the next owners don't have to deal with.

Through the magic of bankruptcy, this time radio consolidators have in essence fired themselves.

That's why they are looting the treasury while their stations rot away.

Consolidation is a game of greed and the greedy are now on their way out. It wasn't about diversity or building a stronger radio industry. That's just the bull the NAB, Congress, the FCC and the Department of Justice fed everybody in an age of deregulation.

The "diversity" building virtue of consolidation, which Bill Clinton loosed on the land with the TeleCommunications Act of 1996 (now he says he never anticipated how it would be exploited), was always a joke. The few minority owners who were able to put together the twelve to fifteen times earnings dough to buy a station were invariably out of the deal with a nice enough profit after a year or two.

The upside here--and maybe in a lot of industries that followed the Clear Channel model, tanking up on debt and ratcheting down the creativity in their goods and services—is that the cost of acquiring what's left (in radio terms the finite number of licenses) is back to a "price point" that would allow actual diversity . . . assuming someone has cash or credit.