[BC] The costs of going digital

[Rich Wood]

------ At 10:57 AM 1/17/2006, Davis, Steve - SVP wrote: -------

> > 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.

For someone with a "lack of financial acumen" the networks I created 
or ran seemed to do pretty well. I checked with my financial acumen 
guy this morning and he's of the opinion employees aren't capital 
expenditures. They're recurring expenses that can't be written off 
over 3 or 5 years.

I'm not sure your $10 million dollar man works that way. Next year 
he's going to cost you another $10 million. If he's an engineer, he's 
a cost center. If he's a salesman, he's a profit center (hopefully). 
You don't hire a $10 million dollar man just to have a tax writeoff.

I sent him the text of your explanation and his eyes crossed. I told 
him to delete it so they don't stay that way.

>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 don't agree with restraint of trade.

>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.

Thank you. Finally an answer. As expected, it's funny money.

>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

Please us another analogy. I fully expect the HD Dominion to be as 
effective as the United Nations.

>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 don't see where I threw Randy in your face. I used him as a 
positive example. Randy is the seat of your underwear (literally) 
radio person who stirs things up and inspires creativity. I think 
most of us have great respect for him and the Clear Channel he 
created. That's most likely why he's no longer there.

>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.

Absolutely. I miss the point of it because I see no point to it. 
That'll do it every time.

>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?

Formats I love to malign? Which ones are those?

It's funny. Every monopolist I've ever read about touted the 
efficiency of monopolies and how terribly inefficient competition is. 
If the Carterphone decision hadn't been rendered that allowed devices 
to be connected to the phone network and Ma Bell hadn't been broken 
up before it combined again, we'd still be sticking our fingers in 
holes to make a call and there'd be a damaged public telephone on every corner.

>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.

None of the above. I don't dislike large owners. I dislike large 
owners ganging up. Buckley is a group owner. Kaiser was a group 
owner. GE is a group owner. ABC is a group owner. Starr was a group 
owner. Tribune is a group owner. Most of my employers are or were 
large corporations. I've been fired once in 45 years in radio. It was 
a blessing. A couple of times, when I made too much money, my job was 
eliminated. No one replaced me. I've never been replaced by a younger 
person. I'm still welcomed as a friend when I visit those companies 
that still exist.

I actually don't fit the mold of the nomadic broadcaster. I spent 
about 10 years with WJIB (Kaiser, GE). 8 years with Noble at XTRA. 10 
years with Buckley at WOR. 3-5 years at a few places and some side 
roads like working in Alaska with Tom Bodett while living in New 
York. The commute was a killer but the job was a blast.

I've had a very long run with some great people and done some 
tremendously exciting things. Clearly I've been valued by those 
companies. Mel Karmazin once complimented Rick Buckley on the success 
of the WOR Radio Network. Rick looked at me and responded "It's not 
my network. It's Rich's." I believe he meant it. He gave me virtually 
everything I asked for to make it work. That's not the kind of 
experience that makes one bitter. It makes you respect your boss 
because he respects you. I still consider the people at WOR great friends.

Rich

Rich Wood
Rich Wood Multimedia
Phone: 413-303-9084
FAX: 413-480-0010