Private Investment

The point of a private investment group is plain and simple: MONEY. They buy something that they think is worth more than the asking price, and they then prep it in order to sell at a higher price.

Clear Channel is now owned by a private investment firm. The company will eventually be
broken up and sold off in chunks. Before that happens, its bottom line will be cut to the point where it costs next to nothing to run, thus giving perceived value to whoever buys whichever parts.

I used the term "perceived value" because I highly doubt there will be any real value in buying into the industry at that point. Today's private investors aren't buying into the industry though. They're just buying. And selling. For them, it's the selling that is the important part.

When I was in high school, my mother owned a local restaurant. It was more or less a neighborhood place for breakfast, but she also made dinners and her claim to fame (such as it were) was pies. She was a talkative woman, always chumming it with the people who dropped by. One day, one of her regulars figured out that he could make money by buying her restaurant, renting out the space to someone else and then selling her equipment. At the time, I thought "he wants the place for the ovens you make pies and doughnuts in?" I didn't get it.

Years later, I realized that what the buyer did made perfect sense from a monetary view. I thought it was a failure because the restaurant closed shortly after the sale, but I later learned than the buyer tore the place apart. He sold the huge ovens, sold the shake machines, sold half of her over-sized parking lot to a neighboring salon and he then he sold the restaurant and remaining parking space to someone else.

It took him a few months, but he walked away with twenty thousand dollars for his efforts, and my mother got to pay off her bills (management was never her thing... so for her to get out from under debt seemed like a great deal at the time... and, in truth, it was).

Fast forward............. A dear friend of mine designs children's clothes. She works for a company that has a thriving catalog business, plus maybe 25 stores nationwide. In early 2008, the company was sold to a private investment firm. The private investment firm is in the process of doing the exact same thing. They're buying apparel companies they can either sell at a premium or break up and sell in pieces for a premium.

Clear Channel is no different.

They're now owned by number crunchers who intend to pick the company apart for profit under the assumption that the parts are worth more than their sum.

My mother's restaurant was worth more for the value of its building, its ovens and parking than it was as a business. I was sad to see the place close, but everyone involved walked away with money.

...everyone except for her employees, that is.

My friend at the children's apparel company is watching her friends lose their jobs as the bottom line gets slashed. Her hope is that she can hang on until after the company is sold. Assuming they can maintain the quality of clothes they produce as well as the customer base they've built... they'll be sold in one chunk and survive this private investment group phase.

Who knows.

What's next for Clear Channel is anyone's guess. Surely the company will be ripped apart and sold off in pieces to maximize investor profit. The only relevant questions are:

...Which pieces.
...Sold to whom.
...and most importantly... What will the transition be?

Again, using my friend at the children's apparel company as an example... her company is pretty high end and they have a really healthy profit margin, even through the recession. Sure, there have been cutbacks, but overall, they've been kept together because they're highly profiltable.

On the other hand, another company bought by the same private investment firm has already been shredded and sold off for parts. Out of maybe 150 employees at that compnay, ten survived - if you can call it surviving. They still have jobs, but there is nothing left of the company they once worked for, and their resumes are shot since anyone in the business knows the brand they work for is now meaningless.

Am I saying the name Clear Channel is meaningless?

Not yet - but soon, it could be. Some of their properties have value beyond that of the group as a whole whereas some do not. Ah, but once cutbacks sink in, the bottom line will drop. In theory, they'll be more profitable as a whole... but will the individual stations retain any sense of individual value?

Will it even matter?

Will there be buyers waiting to get into radio as a business, or will the entire industry have been sucked dry to the point where the signals have more value as repeaters for internet providers, or maybe cell providers?

Terrestrial radio is only special so long as the content on terrestrial radio is special. Once it isn't... it isn't. And that's it.

Internet radio will never beat terrestrial radio. Period. But once the owners of terrestrial radio allow their properties to become losers, it's game over.

Will Clear Channel be sold off in bits and pieces? Absolutely. Anyone who suggests otherwise is a fool. The question is: will the pieces be worth a damn?

Anybody want to buy a newspaper? How about you Mr. Zell?

Keep your eye on the rate card. When that goes, so goes radio.

...forever.

Most of us came into radio during the days when we fought for the top. We all waned to be #1.

What's coming next for radio will be a battle for the bottom. Who can push their rates the lowest while still being able to afford to keep stations on the air.

None of this has anything to do with the current recession. It's all corporate greed eating itself alive.

Deregulation will always lead to uncontrolled capitalism that leads to a monopoly that collapses unto itself.