[BC] The costs of going digital

[Davis, Steve - SVP]

 > ------------------------------
 >
 > Message: 21
 > Date: Tue, 17 Jan 2006 00:00:25 -0500
 > From: Rich Wood <richwood at pobox.com>
 > Subject: Re: [BC] Interest in/Availibility of HD gear
 > To: "Broadcasters' Mailing List" <broadcast at radiolists.net>
 > Message-ID: <7.0.0.16.2.20060116231256.08e82c28 at yahoo.com>
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 >
 > ------ At 06:20 PM 1/16/2006, Davis, Steve - SVP wrote: -------
 >
 >>I've seen the invoices),
 >
 > Do those invoices include the cost of real radio? Or are they simply
 > for mechanized noisemakers.

I have seen invoices for both.  Last year Clear Channel set up a
"Content R&D" team and have hired (and continue to hire) programmers and
have commissioned research to determine what content/programming people
want that they aren't now getting.

 > You can't talk about radio content while
 > firing the people who create it.

We certainly don't intentionally fire people who create great content!
We try and keep, nurture and grow those.  Great content is the most
valuable offering we have.  And we still have a lot of it in my opinion.
Clear Channel is seeking great talent all the time.   Don't apply to me
or the Corporate office (or the HD Alliance) though.  Local program
directors and managers make the decisions as to what talent will be
embraced by their markets and audiences and make all their own hiring
and firing decisions.  We don't hire talent at the corporate level.
Because as you've pointed out, we really aren't the best judge of that.

 > Let's say you're an Oldies fan.
 > After years and years of WCBS-FM with legendary talent will you run
 > out and buy an very expensive radio to be disappointed by what's left
 > on WCBS-HD2.

My company isn't the one that changed format on WCBS-FM, nor did this
have anything to do with the HD Alliance so I can't speak to CBS's
reason for doing this.  I'm not sure what format WCBS-FM HD2 will
actually go with after launch, but I fervently hope it isn't something
that will disappoint it's intended audience.  Imagine that: me, a Clear
Channel employee, hoping that a CBS staion doesn't disappoint!  That to
me is really what the alliance is all about: the feeling/spirit that
we're all in this together, we need to make this work.

 >
 > My bet is that most of those tens of millions are being spent on
 > hardware, not new people with new programming ideas.

Money is being spent on both hardware and programmers plus programming
research, focus groups, etc.  It is a great time to work in free,
terrestrial radio.

 > Wall Street
 > loves hardware. They hate people. People can't be depreciated.
You show a lack of financial acumen but that's ok, I lack programming
expertise.  Actually people or any expense items are generally
preferable because they are expensed in the same year, thus reducing our
income tax liability (and increasing our real net after taxes).  A $10
million salary paid in 2005 gets charged all in 2005, but a $10 million
hardware investment could be depreciated over 15 years (if it's
HD/transmitting equipment) which means while we're still out the same
$10MM we only get the tax benefit on our 2005 return of a $667K expense.


 > > Even if today we decided to throw up
 > >"My favorite HD channel is.." in front of Olympic competitors as
Sirius
 > >is doing, what channel would we promote?  There might be a channel in
 > >Chicago but not one in Des Moines.
 >
 > Wow! I've won you over. I've objected to premature promotion from the
 > beginning.

You and I agree on this issue.  So shouldn't we have an alliance, get
the infrastructure and programming up first, and THEN promote the heck
out of it?
 >
 >
 > I'm afraid the HD Dominion personified by Jabba the HD and backed by
 > mythical dollars (still no answer if there''s actually a bank account
 > with $200 million in it) is bad news for radio.

There is no bank account with $200 million in it.  A portion of the $200
million is in a commitment to provide non-preemptable inventory, and a
portion of it is cash.  I'm not privy to the amounts of each.  For those
who say advertising on the radio is preaching to the choir, please
remember that radio has successfully promoted our stations and formats
in the past and our medium today reaches 97% of all Americans (according
to Arbitron not Clear Channel or the Alliance).  Which includes
satellite, iPod and other users.  But even so the advertising won't be
limited to just radio.  We do want to reach that 3%.  Also the Alliance
isn't going to create the advertisements.  Like Sirius and XM did, the
Alliance will use an ad agency to do that.

 >If I owned a golf
 > course, I'd be thrilled. Maybe Jabba the HD and his snacks will ooze
 > creativity on my golf course. The same people who sterilized radio
 > are now charged with birthing babies.

I hate to repeat myself but I'll make this point one last time.  Nobody
expects the HD Alliance to be creative.  They are like the United
Nations of radio: trying to find common ground so we can compete as a
unit the way Sirius and XM can.  Nobody employed by the alliance will be
coming up with programming ideas or concepts.  They are merely there to
keep this from being the "wild west" or a "goat rodeo", and provide a
forum within which station programmers can agree on which station will
program which format in each market.

 > If Randy Michaels struck fear
 > in the hearts of the triple starched, I can only imagine what the new
 > generation of pierced, inked, ambisexual and not so reverent
 > programmers will do to those who ring the bell in New York at 4pm.
 >
Please don't throw Randy Michaels in my face.  Randy and I are GREAT
friends, I just spoke with him a couple of days ago and we enjoy a
fairly frequent dialog.  I have nothing but the utmost respect for
Randy's programming and engineering prowess.  I have Randy to thank for
the position I hold today.

One thing you and I appear to have in common: I don't "get" a lot of the
20 something lifestyle, with the piercings, tattoos, baggy pants, etc.
But that's why I, and people in my generation, aren't programming
stations targeted at teens and 20-somethings.  We let the 20 somethings
who live and understand that lifestyle, control content that is relevant
to that demographic.  And we have people with other
interests/knowledge/talent programming stations that are differently
targeted.  Just look at who is programming our legendary talk stations
like WOAI, WHAS, etc.  It's not 20-somethings.
 >
 > Organizations like the HD Dominion aren't creative. Individuals
 > competing with each other are. Jabba the HD doesn't move easily or
 > fast. He's one, big fat mother. 18-24 months of huge egos trying to
 > turn the ship of radio on a dime is an awesomely optimistic
 > prediction. The composite Jabba the HD comes from sales, not creative.

Again, you miss the point of the HD Alliance.  Yes they come from sales,
so they will do what they do best: SELL HD to the public, distributors,
and manufacturers.  Something I'm clearly failing to do, but then again
I don't come from sales.

The alliance is NOT DICTATING or CREATING content.  And I truly believe
(and here we'll probably simply have to agree to disagree) that having
an alliance WILL enable us as an industry to move more quickly than the
3000+ individual broadcast owners would otherwise be able to move.
Simply because of the coordination the alliance will provide.  Here's
the irony:  free unbridled competition has resulted in the formats and
programming you love to malign.  Why would continuing to follow the same
business model with HD2 somehow create a different result?  We want that
different result so we're trying something different.  Yes there's a
risk that it won't work.  I will then be applying for a job at the local
Radio Shack -- I don't believe the satellite operators need as many
broadcast engineers as free terrestrial radio does.  I don't think they
need or employ as many programmers either for that matter: yes they have
100+ channels each, but that's NATIONWIDE.  Even with some dayparts
voicetracked, there are thousands (well, actually over 13,000) of
stations that have programmers on the payroll.  Even if each of those
stations only has ONE live shift, that's 13,000 programming jobs!  I
have been involved in the construction of studio facilities for my
company for the past 10 years.  I have never built a radio facility that
didn't have at least one fully equipped live air studio for each call
sign, even in markets as small as Bangor Maine and Minot ND.  Yes my
company engages in some voice tracking (less than 10% of our programming
is voice-tracked from out of market though) but the vast majority of our
stations have at least four live shifts and quite a few are live around
the clock.  The most frequently automated daypart is overnights.  How
many of us really enjoyed working those hours anyway?  I personally
worked as a midnight to six jock when I first started in this business,
at KIXZ-AM 940 in Amarillo TX as a top-40 jock.  And let me tell you I
did NOT think the facility, job, pay, equipment, promotional support,
benefits or management were better when I worked for that small outfit
(or any of the other small outfits I worked for) than when I eventually
came to work for Clear Channel.  I have never worked for a company that
paid better, supported our employees more with equipment, resources and
training, or provided a better working environment, than Clear Channel,
in my 30 years in this business (both Radio and TV).  So shoot me.

 >
 > Darth Vader had little more
 > than a great voice. In today's radio he'd probably be fired rather
 > than paid what he's worth.

You seem to be bitter or have a dislike for radio group owners.  I don't
know your history, whether you ever worked in radio, were unjustly
fired, replaced by someone younger, etc.  And I acknowledge it's none of
my business (though it would help me to understand your position on
this).  Where are the large radio companies firing good talent rather
than paying them what they're worth as you allege above?  Just take a
look at the salaries and perks of our top talent, even in medium markets
(50 - 100).  Many are well into the six figures.  Some are seven
figures.  Are Dr. Laura, Rush Limbaugh, Art Bell, Sean Hannity, Kidd
Kraddick, etc. etc. untalented or underpaid (whether or not you agree
with their positions or politics or enjoy their particular programs?)
It could be argued that Howard Stern left terrestrial radio because he
wasn't paid well enough.  Clearly Sirius is offering him more.  But was
he really underpaid?  And is that why he left?  I think he left because
of onerous FCC regulation and indecency rules that impact free
terrestrial but not Satellite.  But that's a different debate.  And one
on which you and I may just be in agreement.

--Steve Davis


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