Comparing ABC Radio and CompuServe

Back in the days before the Internet was entrusted to the Public, there were several national dialup computer services that bleeding edge type people were using (Rush Limbaugh was one).

CompuServe (also known as Compu$pend) was THE place to be if you were wanting a public presence nationally.     It was very expensive to use and that kept people from just loitering around to cause trouble.   Every major tech firm had their customer support operation there (to distribute updated drivers, etc…)   If you were someone important, you had a Compuserve email address

ABC Radio was the nationwide radio brand in the 1960s for the young people.  It was the network with the rock and roll stations that were changing the minds of young America.   They owned AM radio in many major cities (WABC in New York, WLS in Chicago, KQV in Pittsburgh, KABC in Los Angeles).   CBS Radio was and still is a major player in AM radio, but they were the stodgy Edward Murrow “Greatest Generation” news/talk stations.   Satellites didn’t exist yet for communications.   Syndication had to be done over leased phone lines, which meant it was very expensive.  AT&T had made a deal in the 1930s to sell that service to radio networks in exchange for the promise that AT&T would stay out of the radio business.

Then FM radio came along.  The stereo and better sound made it inevitable that music was moving to FM.     AM radio morphed into News/Talk radio with the early attempts at syndication.   Long John Neville, then Larry King on Mutual Broadcasting, Sally Jesse Raphael and Bruce Williams on NBC’s TalkNet.  The radio world was still constrained because a radio owner could own no more than 20 stations in the entire country and no more than one AM and one FM in a single market.   Most AM stations still had to turn off the transmitter when the sun went down.

Then Ronald Reagan arrived with his ideas about deregulating radio.  Certain ownership rules were relaxed and the monopoly that had been in effect for 50 years that allowed a handful of companies to monopolize major market AM radio were weakened by requiring all new AM stations to be 24 hour stations and cutting back the “Clear Channel” (not the company, the 50 kW non-directional signals that used to dominate AM radio at night),  The national ownership limits would move slowly up to 20 AM and 20 FM.

Without music and without a syndicated talk lineup, ABC radio was not prospering.  Its biggest programming asset was a guy named Paul Harvey.

Then the leveraged buyout people showed up in 1986.  ABC Radio and TV was swallowed up by the much smaller Capitol Cities Broadcasting of Chicago.   Then this guy named Rush Limbaugh showed up and proved that you could build a national audience on AM radio – he was working for a company called Premiere Radio and most of his big market affiliates were ABC radio stations.  Another guy named Art Bell did the same thing in the middle of the night.  Life was good.   ABC became the Brand for Radio.  NBC disintegrated, CBS just kept doing what it had always done.

Then Cable TV exploded.   ABC TV launched a number of cable TV channels to market as a package with their local TV stations.   In 1995, Walt Disney lusted after ABC TV’s assets, and took over the company.

Then Deregulation happened.   The Telecommunications Reform Act of 1996, passed by the Republican Congress in cooperation with President Clinton changed all the rules overnight.   Telephone companies would be free to compete, ownership limits on radio stations would mostly go away – the Internet had arrived, and the Old Order no longer needed government protection.

Disney never wanted to be in the Radio Business.    With the purchase of ABC, they acquired ESPN and several other cable TV channels, and had their own Disney Channel to market.   The Talk Radio business made lots of money, but was a pain – too many boycott threats and advertisers shying away.   Radio hosts would come on the air and complain about things like “Gay Pride Day” at Disneyland and give them heartburn.  To the extent Disney was in radio, it was only to promote its own brand and its own musical artists.

So in 2005, Disney put the word out it wanted to unload its ABC Radio assets (it would keep ESPN Radio and its own Disney Radio stations).  Two main bidders emerged – a company called Citadel that used borrowed money and the 1996 Act to buy up a large number of small town radio stations.   The other was a company called Cumulus that was also buying up hundreds of small town stations from owners glad to cash out and flee from the radio business.

Citadel “Won” the bidding war for ABC Radio.   They borrowed a large chunk of money (about $2.4 billion), and turned most of it over to Disney, although Disney retained an interest in the ABC radio stations.   It was quickly apparent that Citadel was in way over their head, and there was no chance they could ever make the payments on their loan.  They quickly were teetering on the edge of default and by 2009 were in bankruptcy.

At CompuServe, they also completely missed the coming deregulation.   AOL stunned the world by offering unlimited online time, while CompuServe still charged by the hour.  AOL had figured out that with the new 1996 rules, they could actually force the local phone company to pay them for every hour you stayed online  (See:  Reciprocal compensation if you want to know the details).   CompuServe was owned by H&R Block, the income tax people.  They neither had the interest or the skills to compete with AOL.

By 1997, CompuServe was a ghost town.   It was bought up by rival AOL for next to nothing.   In the final indignity, AOL rebranded Compuserve as the simple service if AOL was too complicated for you to understand or $20 a month was too expensive.

Friday, Citadel’s employees will be forced to start using an @cumulus.com email address, ignoring the disruption this will have on sales people.   This is very deliberate.   It is the Dickey family in Atlanta making it clear that you are now owned by Cumulus Radio and you better get your mind right about that.  The cuts will be brutal and impersonal. Lew Dickey says he can save at least $50 million a year from the combining of operations.

AOL essentially no longer exists.  After taking over Time Warner based on stock values that had no basis in real accounting, Time Warner eventually spit out its management and divested it.  AOL is now just an adjunct to the Huffington Post.  (Robert Pittman, the leader of AOL during much of that time now works for Clear Channel Radio)

I don’t expect the acquisition of Citadel/ABC Radio by Cumulus to have any positive benefits for anyone in radio.   I’m very pessimistic.    The persons most at risk are Don Imus and Mark Levin who are still syndicated by Citadel Media.    Sean Hannity used to owned by ABC, but opted out after the sale to Citadel and moved to Premiere (now owned by Clear Channel)

ABC Radio, rest in peace.   You will be missed, by at least a few.