There is nothing new about this story to long time readers here.
Lew Dickey was hired by the lenders to Citadel/ABC to cut costs. Rush and Hannity are the single biggest line items on Dickey’s spreadsheet. It doesn’t matter how much revenue they bring in – we must cut costs!
Both are syndicated by Clear Channel, now headed by Bob Pittman, a lifelong major donor to the Democratic Party. While he has some obligations to the Clear Channel lenders, Bob Pittman is not going to lose sleep if Rush leaves the air. His contract runs until 2016.
The story states as a fact from an unnamed source that Cumukus has decided to pull the plug on their ABC Radio talk syndication deal with Premiere when it runs out at the end of the year. Clear Channel has known that for months – they saw how Dickey dumped all his own hosts and syndication with Talk Radio Network because he’s unable to see that in major markets you have to spend serious money to make serious profits. Clear Channel bought up WOR-AM in New York months ago just for this reason.
Rush’s deal with Premiere is based on part with a revenue sharing on the national ads. In March 2012, Premiere at one point unilaterally stopped selling ads. There is no doubt in my mind that was a breach of their contract. Rush has the best lawyers in the business, but even so he probably can’t force Premiere to work hard to get advertisers.
A lot of the money to Rush was front loaded so if Premiere pulled the plug, Rush has the cash. He has an iron clad contract that he can’t be fired for anything he says on the air.
Mel Karmazin is gone from Sirius/XM. Rush’s golfing buddy John Malone now controls the company. They have 25 million subscribers and it is hard to buy a car today that isn’t Sirius/XM capable right from the factory. The economics are all on the side of this happening when their contracts are up. If 100,000 new subscribers joined, that’s 100k x 12 x $20 a year = $22.4 million in gross revenue.
While Rush’s current contract is $400 million over 8 years, a lot of that was up front and inflated numbers for the industry based on optimistic revenue projections. You can see those lines cross at very low subscriber levels. The 24 minutes an hour advertiser supported business model is what has died.
Sean has a different arrangement because he was syndicated originally by ABC – when Citadel took over ABC, he had a contract provision to let him leave ABC to go to Premiere, yet let Citadel (now Cumulus) continue to have a different arrangement in how ad revenue is split. That’s probably what is ending.