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Cumulus Media: Suicide of a Company?

Limbaugh dispute surfaces Dickey brothers as issue in conduct of company.

By 5.14.13

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Let’s talk.

Let’s talk talk radio.

Specifically, let’s talk Cumulus Media and all those stories like this one about Cumulus being unhappy with Rush Limbaugh.

You know what the Big Story is here?

For once, this is a Big Story in talk radio that really isn’t about Rush Limbaugh at all. And the same Big Story isn’t about Sean Hannity either, although Hannity’s name has been thrown into the mix.

The Big Story here is this:

What in the world is going on at Cumulus Media?

What’s with this very, very discernible pattern that should be obvious as the sun -- to Cumulus investors. Which is to say Cumulus shareholders. Not to mention all those journalists and dopey liberal Rush Limbaugh haters like the Daily Beast or Media Matters. The latter two whose willful ignorance of the facts makes them look -- well, to be gentle -- laughable.

Let’s refresh and detail, shall we?

The Dickey Brothers, that would be Lew and John by name, run Cumulus Media. Cumulus Media. Which less than 24 months ago bought Citadel Broadcasting and several large AM talk stations (like the flagship WABC in New York) that run conservative talk programs, in particular those of Rush Limbaugh and Sean Hannity, both huge money-makers.

It now seems clear that the Dickeys, who up until then were small and mid-market radio station managers, bit off much more than they can chew. Among other things, the Dickeys may have overpaid for the stations Cumulus purchased. A decent profit is a problem when, as the Atlanta-Journal Constitution noted, the $2.4 billion Cumulus deal to buy Citadel and its formerly ABC properties meant that “Cumulus is swallowing an elephant.” Cumulus repeatedly draws starkly negative reviews for its treatment of employees, such as this one, which has a mere 28% of Cumulus employees saying they would recommend the company to a friend.

In fact, even before Cumulus purchased Citadel, as far back as 2009 the issue of drastic cost cutting combined with the Dickeys’ own compensation at Cumulus was at issue, as reported here in the Toledo Blade. Said investment research analyst Tom Corbett of Morningstar Inc.:

"I would argue that that compensation package is not very reflective of the return that Cumulus shareholders have enjoyed. There's definitely a disconnect there."

While Rush’s political enemies snipe with wildly misleading stories about his “bleeding” Cumulus and Lew Dickey is out there ringing the Sandra Fluke bell, in fact now that Cumulus has swallowed the elephant it is Lew Dickey’s own compensation that has drawn attention. Like this story in the Atlanta Business Journal in which his compensation is described with words like “soars” and “skyrockets.”

The stations Cumulus acquired include much more than talk stations. The idea that the Dickeys are depending for their next serving of meat loaf based on whatever word is breathed by Rush or Sean is, um, shall we say -- a tad inflated. The Dickeys -- Cumulus Media -- own country, urban, sports, and other stations with different formats.

But here’s the loose end of the thread that leads to the unraveling of the Big Story. 

Somehow, mysteriously, it seems that when financial quarters end Lew Dickey, the man whose compensation “soars” and “skyrockets,” is forced to report the company's poor financial situation. And always seems to do so in the finest Pavlovian style of bell ringing. Dickey but murmurs or hints at the words “Sandra Fluke” (ring ring!) -- and the anti-Rush media starts salivating at the idea that Sandra Fluke is still, dammit, going to end Rush Limbaugh’s career. Because, as every liberal has deluded himself, it’s really all Rush’s fault that the Dickeys are not meeting investor expectations. Thus thinking they are about to be thrown the Sandra Fluke steak, mainstream media and liberal bloggers love it. Like Pavlov’s dogs, every Rush hater in liberal land comes running. Positively slobbering not only that they are about to be in on The Kill of Rush’s Career, but maybe, just maybe with any luck….pant pant!...Sean Hannity’s career as well!!!!!

If it weren’t for the fact that the Dickeys appear to be so utterly dependent on these liberal Pavlovian “conditioned reflexes” -- to use Ivan Pavlov’s original term -- to account for their problems, all of this would be some sort of bizarre Wall Street joke worthy of an Oliver Stone movie. Instead of whispering the Stone movie mantra of “Greed is Good,” the Dickeys have only to whisper “Sandra Fluke” -- and the pack comes running, salivating.

Let me try to unravel. Buckle in, we’re headed for details.

FIRST, PUSH ASIDE the star names that are Rush Limbaugh and Sean Hannity. Forget them.

Let’s look further down the food chain of the Cumulus empire -- to the land of local radio. When what do we see but a very, very interesting pattern with Cumulus Media and the Dickeys. A Cumulus pattern that extends from one end of the country to the other with local radio personalities -- and executives -- who have nowhere near the national name ID of Rush or Sean or for that matter of hosts like Glenn Beck, Mark Levin, Michael Savage, Mike Huckabee, or (before he stopped doing his radio show) Bill O’Reilly.

Let’s look at some of the various news stories of Cumulus Media at work with local personalities and/or stations in:

Birmingham: Here’s a story from the Birmingham Business Journal reporting on Alabama’s premiere radio sports broadcasters, Paul Finebaum, that 

Court records show Finebaum is suing Citadel -- his employer since 2007 -- alleging the company coerced him into signing an unfavorable amendment to his employment contract by threatening to pull his popular radio show from the air if he refused.

The suit also alleges breach of contract against Citadel over a recent bankruptcy and claims that company executives worked intentionally to suppress Finebaum’s pay. 

Citadel, of course, as the Journal notes, “now operates under the name of parent company Cumulus Media Inc. -- following a buyout last year” and “is countersuing the radio host.”

Finebaum’s suit against Cumulus isn’t the only one in the world of Birmingham radio, either. Here’s this story in Radio Online about former Cumulus market manager Bill Thomas:

….who is suing Cumulus over his termination which happened shortly after the company purchased Citadel. 

Thomas claims Cumulus violated the Americans with Disabilities Act when they fired him just six days after he disclosed having congestive heart failure. He also claims he had never once been criticized or counseled regarding the quality of his work. He’s looking for back pay and other damages. (05-02-13)”

Chicago: Here’s a story about the firing of the popular Chicago DJ Fred Winston of Cumulus-owned station WLS-FM. Take note of this reporting on the firing by the trade journal Chicagoland Radio and Media:

Fred Winston, afternoon DJ on WLS-FM and one of the most famous radio personalities in Chicago history, was released by Cumulus Media late yesterday. Station staffers confirmed the shocking news early this morning.

In August of last year, Fred Winston returned to WLS-FM as a weekend and fill-in jock. By the end of September, he had been promoted up to full-time, taking over the afternoon shift of 2:30pm-6:00pm, beginning on October 1st. Just over seven months after coming back to WLS-FM, he is out -- for no obvious reason.

At the same time Fred Winston was promoted to full-time afternoon DJ, the station changed it musical direction somewhat. It abandoned its slogan of "The Greatest Hits -- 94.7 WLS" and began branding itself as "Chicago's Classic Hits." Gone were most songs from the 1960s, many songs from the 1970s, most songs sung by female artists, most songs sung by artists of color (including Motown acts, former a staple of WLS-FM), and any song considered to be an "Oldie." Instead, the music took a decidedly Classic Rock shift and shrunk its playlist down to only a handful of artists, playing only their most recognizable songs -- and doing so repeatedly. One of the biggest changes was filling the station's roster with some of well-known names from WLS-AM's Musicradio heyday, including Fred Winston, but then not allowing them to talk for more than a few seconds at a time, and only a few times per hour. Cumulus Media had hired some of the most talented DJs in America, and then would not let them use their incredible talents.

These decisions were made by Jan Jeffries, Cumulus Senior Vice President of Programming and WLS-FM Program Director. This was done, in theory, to raise ratings, and thus raise revenue.

As expected by most everybody outside of WLS-FM and Cumulus Media, the station's ratings suffered due to these managerial decisions.

Dallas: Here’s this story in the Dallas News about Dallas radio star Mark Davis, who in fact is known to Rush Limbaugh’s audience as an occasional substitute host: 

Conservative radio talk show host Mark Davis confirmed Thursday that his contract had expired and, for the moment, he is no longer on the air at WBAP-AM (820).

He declined to discuss the specifics of what amounts to a salary dispute with the station, pointing to his words online.

“My contract with WBAP’s new owners, Cumulus, ended last week, and we have been unable to reach an agreement on a renewal,” Davis wrote on his personal blog. He also commented Thursday on Twitter, saying, “The story for today is not departure, but impasse.”

Davis, the leading political talk host in the Dallas area and perhaps the state, has been with the station for 18 years.

In fact, Davis never returned, and is now a star on another station.

San Francisco: Here’s this story:

Longtime sports radio talk-show host Ralph Barbieri sued his former employer Monday, saying he had been wrongfully fired from KNBR (680 AM) in April after 28 years at the station.

In a lawsuit filed in San Francisco Superior Court, Barbieri accused the radio station and its owner, Cumulus Media Inc., of age and disability discrimination, breach of contract and wrongful termination.

Barbieri said the station fired him after he had disclosed last year that he suffered from diabetes and Parkinson’s disease. The station claimed, Barbieri said, that he was being terminated for being late to work.

Also in San Francisco was this story:

If you've enjoyed listening to my Chronicle colleague C.W. Nevius on KGO Radio for the past 15 months, be sure to tune in Friday. It's his last day after more than a year of "Open Mic With C.W. Nevius" on 810 AM.

No reflection on Chuck, nor on other contributors being let go with little warning. They simply got caught up in the latest changes at what was once the Bay Area's top radio station.

However, with ratings continuing to decline, there's considerable anxiety in the newsroom about the future, I'm told by insiders.

… Citadel was acquired by Cumulus Media, the nation's second-biggest radio station operator, in 2011. Headquartered in Atlanta, Cumulus oversaw the shift to an "all-news" format, resulting in the departure of a number of popular Bay Area radio personalities.

Listener displeasure, which was loud at the time, washed over into the ratings. The No. 1 station in the Bay Area for 27 years, KGO was overtaken by all-news KCBS-AM in 2010, a slide that has gathered momentum since.

KGO slumped to 16th in the Bay Area with a 2.6 audience share, according to an Arbitron survey of listeners 12 years and older published in January. It now rates a decidedly negative 1.5 stars on Yelp.

Syracuse: Here’s this story of Cumulus battling two ex-hosts who simply picked up and left for a competitor after contract talks collapsed.

Washington, D.C.: Here’s this story about popular Washington host Jack Diamond getting the axe, in spite of good ratings.

And don’t miss the saga of one Michael Baisden, a successfully syndicated African American with a popular show inherited by Cumulus, who was recently let go and locked out of his studio.

But well besides these stories of Cumulus running around the country upending local favorites and changing formats, only to lose local audience -- yet somehow providing that “skyrocketing” compensation for the man at the top, there’s more.

Let’s run through a list.

1. The Dickeys JC Penney Problem: Contempt for their customer base. Stunningly, the Dickeys have attacked the talk radio audience as too old. (The average age of Cumulus new hires Geraldo, Huckabee, and Savage is around 70. Hello?) Have you ever heard of a company attacking its own customers? Would McDonald’s attack its customers as too fat? Would Budweiser attack its customers as a bunch of beer-swilling drunks? Is this how you keep and build a customer base -- in the case of talk radio, an audience?

Obviously, the answer is no. Why would any serious business executive believe having contempt for his customers could possibly lead anywhere but to a bad place? Just ask JC Penney. As has been in the news, the venerable JC Penney department store chain has

recently ousted the supposedly-smart-guy Ron Johnson, whom they hired from Apple. Johnson and COO Michael Kramer -- also brought in from Apple -- have been repeatedly panned for their view of the company they were chosen to run. Here is the version of the tale that appeared in Time: Among other things, it notes the two exhibited a “disdain” for the customer base, saying this: 

In late February, the Wall Street Journal quoted JC Penney COO Michael Kramer voicing his distaste for the company as it was before Johnson took over. “I hated the J.C. Penney culture. It was pathetic,” Kramer said. 

The same mentality -- contempt for the customers -- appears to be at work with the Dickeys and the primary audience of conservative talk radio: conservatives.

The Dickeys acquired large AM stations. It is a known, empirical fact that 85 percent of the younger audience demographic listens to FM radio, or doesn't listen to radio at all -- preferring smart-phone apps, online listening, satellite, etc. So, why buy AM stations in major markets if you are going to trash the audience you rely on for ratings and profits? This seems, to say the least, a curious thing to do. Make no mistake, when any company is actively communicating that message of contempt for its customers -- in the case of Cumulus that means a conservative audience -- those customers will respond. And not well.

2. The “More Conversation and Less Confrontation” Ploy: Having made much of Rush Limbaugh’s controversial Sandra Fluke episode, why hire the distinctly controversial Michael Savage, who was out of radio when they brought him back? If “more conversation and less confrontation” was really the Dickey goal, they wouldn’t have signed up Michael Savage in a million years. Yet sign Savage they did, calling the signing a “milestone.” Thus hiring the man who is so controversial the British government (infamously, wrongly, and laughably) banned Savage from entering their country.

3. The Huckabee Business: Who can forget, since the Dickeys love to repeatedly cite Rush Limbaugh’s Sandra Fluke episode as some sort of trauma for Cumulus, that they hired former Arkansas Governor, GOP presidential candidate and Fox host Mike Huckabee to be the literal symbol of the new Cumulus motto of “more conversation and less confrontation.” Now? Even Mike Huckabee has waffled with his Cumulus bosses, as seen here and here and here. Although the Dickeys peddled the former RINO governor as an alternative to Rush Limbaugh (how out of touch with the conservative market can you possibly be?), Huck is now suggesting he may -- or may not -- leave his three-hour show behind, citing too much work for not enough pay. The Dickeys repeatedly cast the ex-Governor as the Alternative to Rush -- yet now we not only hear nothing about Huckabee outstripping Rush in ratings, we hear not a peep about the cascade of cash a Huckabee show was supposed to bring in to Cumulus -- and Huckabee himself is talking aloud of abandoning the Cumulus ship.

4. Show Me the Money: The magic words Tom Cruise’s Jerry Maguire had to shout to win the confidence of his suddenly only client must surely be on the lips of Cumulus investors. But here's the big question: as mentioned above, what kind of revenue is the much ballyhooed Mike Huckabee Show bringing into Cumulus? Let me be even more precise: Cumulus is a publicly traded company. In my Google search, I can find nowhere any mention by Lew Dickey, in any of his quarterly presentations, of the revenue Mike Huckabee -- or for that matter Geraldo Rivera, another much talked about Dickey hire -- is generating for investors. You have to assume that if Huckabee and the other shows were drop-dead financial blockbusters, Lew Dickey would have told the world. For all of the compensation Dickey himself is reportedly receiving, one would think the pots of gold coming from all these Dickey decisions would be shouted from the media rooftops. Instead: Silence.

5. The Money Tree: So the question, since the Dickeys are out there pounding on Rush and Sean, would obviously be: what revenue do Rush Limbaugh and Sean Hannity bring to Cumulus? Is it not equally interesting that with all the hype about Rush losing revenue, and the Dickeys citing Rush as a reason for their revenue losses (remember, this is an over $2 billion company and Rush is a single host within this massive conglomerate, making the Dickey claim preposterous on its face), the Dickeys never actually state publicly what one can only surmise to be the case -- that Rush and Sean actually bring millions of dollars in revenue into Cumulus; which, note well, is why, in part, Lew Dickey is able to pocket that “skyrocketing” compensation package for almost two years of what some would certainly call management failures. Management failures that get discussed on radio chatter boards like this one where the subject is the dismissal of still more Cumulus employees, this time in Savannah.

6. Ad Men: Cumulus put out information the other day that Rush and Sean are on 48 of 50 no-buy lists. Now, folks, what does that mean? Whose lists? Those of us who listen to talk radio throughout the day already know that advertisers on these shows are generally not the big, blue chip corporations, such as GE, Berkshire Hathaway, or Progressive Insurance. In fact, most advertisers on talk radio appear to be of the direct-sale kind involving such products and services as flowers, chocolates, stamps as well as various conservative groups (The Heritage Foundation, FreedomWorks, etc.) looking to expand their membership lists. For as long as I can remember, that has been the nature of talk radio advertising. So to say Rush and Sean are on certain no-buy lists is yet another misleading claim intended to create the impression that these shows are not commercially successful. (By the way, how many no-buy lists is Michael Savage on?) Which takes me back to point 4 -- show us the money. Show us the revenue dollars, both for the hosts the Dickeys have brought into radio and those they inherited from Citadel Broadcasting. The radio audience they trash -- that would be millions of conservatives like me -- and their investors who pay the “soaring” and “skyrocketing” Dickey compensation packages would surely be curious.

7. Rush, Sean, and the Lesson of KGO: Recall the story of the Cumulus take-over of San Francisco’s KGO, above? It is a radio version of the JC Penney story. What happened when Cumulus took over a Number One rated station which was never a conservative talk station but rather a news/talk station with moderate to liberal local hosts? It was a great station, which regularly rated as the top station in the San Francisco market. The Dickeys did their thing -- and the audience fled, sending KGO plummeting from first to sixteenth place.

A version of this same story played out in Chicago.

In these cases, the damage to Cumulus was limited to San Francisco and Chicago. Can you imagine the uproar that will engulf a good-bye to Rush Limbaugh or Sean Hannity on Cumulus stations around the country? Plainly put -- and this isn’t (or shouldn’t be) rocket science: if Rush goes, or Sean goes -- their audience will go with them. Period.

The first time conservatives in the New York area turn on WABC on a weekday noon hour -- only to realize that familiar voice is gone? Dials will turn in a nano-second -- until they find that voice. (Which, according to news reports, may be Clear Channel’s WOR.) And pretty soon, the New York station that was once one of the leaders in the nation will, just like their Cumulus brethren in San Francisco, find an entire audience gone.

One can only imagine the value lost when radio assets are simply tossed overboard. Indeed, Talker magazine’s founder Michael Harrison says the real effect of Cumulus dealing with Rush as they deal with others is a question of scale, that “the people really being hurt are the small and medium players in the business who rely on Rush and Cumulus as resources, or simply role models by which others judge the industry.”

Here's what we conservative fans know. If Rush and Sean leave Station X -- we leave with them. And when we leave -- you know, we older listeners in our 40s and 50s, among others, who still like radio and buy advertised products and services -- then competing stations that air them will benefit from our loyalty

8. The Dickeys’ Problem With Conservatives: A central part of any media enterprise is understanding -- and valuing -- the targeted audience. Listeners of rock and roll are not tuning in to hear Beethoven. Listeners of Country and Western are not tuning in to hear Justin Bieber. If you want to follow stocks you don’t tune to a sports channel. It is a serious mistake for the Dickeys to assume that a conservative talk radio audience will tune in to hear just any conservative, not to mention any one who is not a conservative. Conservative talk radio came to life in the first place precisely because it was the one area of the media that was not under the iron-fisted control of liberals. Rush Limbaugh was -- and remains -- the Original Conservative Voice on radio. The man who reinvented AM radio and radio period. To misread that Conservative Audience, not to mention show such visceral contempt for it, is to lose that audience. Again, the JC Penney problem. Cumulus CEO Lew Dickey willfully energizes every Rush Limbaugh enemy -- and therefore the enemies of millions of rank-and-file conservatives -- by insistently claiming that his company lost a couple of million dollars in each of the first two quarters of 2012 because of the lame advertiser boycott launched against Rush by the professional left-wing haters of Media Matters and the rest who sought to chase him from the air because of the Sandra Fluke incident.

By his own admission, Dickey says the losses amounted to about one percent of total revenue, a sliver of money that might have been lost due to a number of things. It is impossible to assign the loss of a few million out of $245 million to a single cause, especially when the economy is still sputtering and your company is withstanding the fits and starts of gobbling up all of the formerly ABC-owned radio giants.

In an August 2012 earnings call, Dickey said Cumulus's top three stations had lost $5.5 million, in part because of an advertising boycott against Rush. In a March 2013 earnings call, Dickey said the company's talk radio side had "been challenged... due to some of the issues that happened a year ago."

For the Dickeys to not understand the politics involved in being seen by conservatives as repeatedly playing games with Rush or Sean Hannity is to willfully create problems between Cumulus and the presumed audience it seeks to reach.

Not to put too fine a point on this, but Carbonite learned this the hard way. When CEO David Friend took the occasion of the Sandra Fluke incident to release a statement pompously withdrawing Carbonite’s ads from Rush, grassroots conservatives immediately stopped doing business with Carbonite.

By August, this was the news from Carbonite as reported over at Legal Insurrection:

On August 1 Carbonite released its 2d Quarter 2012 results, the first full quarter after dropping Limbaugh in March. The results shocked Wall Street, as Carbonite did not meet its growth targets, causing multiple analysts to drop the target price. The stock dropped 15% in a day. (h/t reader W)

Most important, in a conference call held on August 1, the CEO David Friend admitted that dropping Limbaugh damaged Carbonite’s growth, and is likely to do so for at least one or two more quarters.

So the question?

Is this incompetence?

Or is it suicide? A deliberate attempt to do in talk radio for reasons known only to the Dickeys -- (money? other?) -- a suicide involving the deliberate alienation of its two biggest moneymaking stars for purposes unshared with shareholders?

Given what might be called the Dickey Pattern, how long will shareholders hang in with Cumulus Media?

The Dickey Brothers come across in all these stories as a nothing more than a couple of corporate raiders who don't give a damn about the audience, employees, advertisers, or investors -- as opposed to free market capitalists trying to build and nurture a business. They have pocketed millions while cannibalizing what were wonderful radio stations built over decades by the hard work of others, and wiping out staff, while blaming others for the company's poor performance.

Rush Limbaugh and Sean Hannity and conservative talk radio are not the problem here. They are merely in the way of the Dickeys, as were all those others in one radio station after another across the country. They are just the latest, albeit the biggest, targets.

Give the Dickeys this much: they know how to ring that Pavlovian bell and stoke liberal bloggers. But the day will come when propaganda -- such as repeatedly ringing the Sandra Fluke bell for gullible journalists or left-wing activists responding like so many of Pavlov’s dogs -- won't fly.

When that moment arrives, will Cumulus investors begin demanding answers? Or will it be too late? For Cumulus?

Stay tuned.

Photo: UPI

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About the Author
Jeffrey Lord is a former Reagan White House political director and author. He writes from Pennsylvania at jlpa1@aol.com.