http://spectator.org/archives/2013/05/14/cumulus-media-suicide-of-a-com
HPaws passed along this link – the author is trying to figure out Lew Dickey’s motives in sparring with Rush Limbaugh in public. Borrowing from a quote attributed to Napoleon Boneparte “Never ascribe to malice that which is more adequately explained by incompetence”
Cumulus Radio is the worst of both worlds – it combined Citadel, a company owned by a private equity firm consisting of a large number of small and unrated market stations being run by a man who wanted to run high profile major market stations – combined with Cumulus that contained a number of mid and small market stations run by the Dickey Brothers from Atalanta who have never run a major market station.
Added on the side was the Susquehanna Radio company which was founded by a family that makes high quality china and just sort of accidentally got in the radio business. The “third generation” had no interest in Grandpa’s radio business and sold it to PE firms that had a vision of Cumulus they could “take public”, but it went nowhere. The deal was while they were packaging the deal, Lew Dickey would throw in a couple of his and run Susquehanna for a management fee and part ownership.
Very quickly, Cumulus Media Partners became insolvent, the lenders took over the company and Dickey’s Cumulus wrote off its entire investment in CMP.
So when Citadel went through bankruptcy after acquiring ABC Radio, the post bankruptcy creditors were upset the Citadel CEO not only didn’t leave, but gave himself a big bonus for using bankruptcy to stick it to the lenders
Cumulus and Citadel had almost no overlap in their small markets – cities tended to be one or the other – this made merging fairly easy. So the money lenders (who know nothing about radio) encourage Cumulus to take over Citadel. The deal was justified on Lew Dickey’s promise he could cut costs – a lot.
What this misses is you can’t cut costs and not lose audience – which you’ll never get back once they take you off their car radio presets.
If it wasn’t for the debt, radio is a cash cow. With a high net margin product with a finite number of ads to sell, the last thing you should do is cut costs that cost you revenue.
Blaming Rush is a convenient excuse, but not the reason Cumulus is seeing shrinking profits, despite spending almost nothing on maintaining and improving the radio stations they control
Looks like Bain Capital, smells like Bain Capital… so glad we didn’t step into it. 😉
http://network-management.tmcnet.com/news/2011/08/02/5677947.htm
Yep, that was the precursor – once CMP was cleaned up and merged into the parent company, then the parent’s balance sheet was able to be leveraged to borrow the money to take over citadel – Disney still has a stake in Cumulus, but the terms were never very clear. My guess is Disney has senior debt and an agreement that if Cumulus goes under, Disney gets the ABC radio stations back. Disney still owns ESPN, ABC TV, and their own Disney radio network.
My guesstimate is that the ABC radio stations have probably lost 80% of their value since Citadel took them over.
Outstanding article, HPaws it sure gives one a sense pause.
The analysis is consistent with Art’s analysis that he posted a month or two back of WWIQ ratings compared to WPHT when Rush/Sean switched stations.
I liken Dickey to the owner of the Cubbies… no need to invest in a winning team when you think you are making money cutting costs…. problem is, Dickey is more like the owner of the Montreal Expos. 😉
LOL I guess , if I ever go back to school and want to do a case study on how ‘NOT’ to run a business, this is the most excellent example. I guess the cumulus management team thinks they are legends in their own minds ?
Lets run Dave Ramsey for 12 hours(none of it live), and then Mike Huckabee live for three hours and wonder, where are all of the listeners & advertisers? Queuing ‘Farnsworth Bently’ PSA rapping(or trying to) on staying in school and getting a school loan. LOL That helps.
Stupid should hurt. (or at least cost)
Bain redux , good one CC !
Parrott
Oak Tree Capital has there hooks in Cumulus as well I think, or used to. Radio (and most other business) is now “owned” by debt controlled by global banks and sovereign funds – the “owners” are just along for the ride until the banks pull the companies into receivership and steal the equity from the original owners