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Big Changes Ahead For Citadel
LAS VEGAS -- February 29, 2008: "This has obviously been a difficult and a disappointing year," began Citadel Broadcasting Chairman/CEO Farid Suleman at Friday morning's Q4 and full-year earnings conference call -- and he said there will be "management changes, format changes, programming changes, and sales management changes" coming soon.
Declines, Suleman said, were "across the board, with every major market declining." He continued, "National was a complete disaster. The markets were down, but we underperformed the markets by a factor of almost two to one. To put all the declines in perspective, in the fourth quarter alone, [Hot AC] WPLJ in New York's cash flow was down over 50 percent. This was on a 70 percent decline in revenues."
Chicago, San Francisco, and Atlanta were also down significantly, he said, while in midsized markets, the situation was "not as bad, but also a disappointment," with the biggest declines in Birmingham, Providence, Tucson, New Orleans, and Allentown.
Asked later for more detail on major markets, Suleman noted that in Atlanta, Citadel was down about 23 percent compared to a market dip of 12 percent and said, "It's a ratings problem, in part because we had a format attack where a big company came and changed a format to Country, and we had a Country position there."
In New York, he said, "We were totally repositioned because there was a void in our music programming, and Fresh [CBS Radio AC WWFS] came in and provided a real good format alternative for people to go, all day. CBS was able to do that, and we allowed that to happen. We're not going to do that, going forward."
On the positive side, Suleman said Wilkes Barre, Harrisburg, and Little Rock had "phenomenal years," while the ABC Radio Networks was "essentially flat, which is great in this marketplace, and for the first quarter the network is pacing well ahead."
Suleman said Citadel will soon see a "major restructuring in our major markets." He continued, "The purpose of this is to have very significant savings in costs, but not only will this save costs, I think this is going to position the stations for major growth, even in a zero-based-growth environment." The changes will become public, he said, over next several weeks.
While he said Citadel isn't giving guidance due to uncertainty in revenues, the target for now, said Suleman, is to "stabilize to the 2007 levels the operating cash flow at the major-market stations and put all the changes, including management changes, format changes, programming changes, sales management changes so that we can recoup in a zero-revenue-growth environment the underperformance that exists."
Suleman said, "So, roughly, we're about two years behind where we said we were going to be, but we expect to put everything in place to get there in this zero-revenue-growth environment."
Asked how Citadel will cut expenses while making format and other changes, Suleman said one thing the company will be doing is to "streamline the sales structure so that you have people taking more ownership and possession of sales, rather than having a lot of management structures in place."
He also said Citadel is "trying to redeploy some programming expenses to ratings that, perhaps, are more revenue-related than truly ratings-related, so we're going to be more focused on ratings that bring revenue rather than ratings that bring ratings for the sake of ratings."
He continued, "Performance and rewards at the company, going forward, are going to change from what it has historically been in the past. People will only make bonuses and incentives if you make budget, and so there is an incentive to do that. And if you don't make it, then you don't get a bonus, and if you underperform the market, perhaps you won't be with the company anymore."
Asked about what radio will need to to stabilize ad pricing, Suleman said two or three big new national advertisers would make a huge difference, letting radio feel more comfortable about maintaining rate integrity. But until that happens, he said, "You're still in the same position, where if one national advertiser holds back, people start dropping rates and pricing for share."
But he added that he believes the industry is more focused on growth now, "rather than pricing for share of a declining pie," than it has been in the past two or three years.
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