Clear Channel’s John Hogan: On The Hot Seat (09/29/03)
By Reed Bunzel
In the 7 1/2 years since passage of the Telecom Act kicked deregulation into high gear, Clear Channel Communications has served as the poster child of consolidation. At times both lauded and vilified for leading the consolidation charge, the San Antonio-based Radio giant has come to exemplify everything that’s wrong — and, in fairness, some of what’s right — with the deregulatory process.
Flash back for a moment to the late 1990s: Radio groups were trading stations much like school kids sitting around the playground and trading Pokemon cards, and Clear Channel was one of a half-dozen companies clearly at the forefront of this frenzied activity. During this process, thousands of people lost their jobs to the market-clustering process, and suddenly, the industry that had been an exciting place to earn a living no longer was fun. People doubled and tripled their workloads, budgets became tight, stations were criticized for sounding the same; and Clear Channel — with more than 1,200 stations in its portfolio — was chastised for draining the life from Radio.
In a world where perception often fronts for reality, Clear Channel — rightly or wrongly — has found itself stuck in a quagmire of rumor, myth and innuendo. Because Clear Channel was the big, new kid on the block, everything that was uncomfortable about the “new world order” of the Radio industry was laid at the company’s San Antonio doorstep. In many circles, the Clear Channel name has become synonymous with arrogance, corporate greed and frugality, a stark contrast to the bellwether image that had made the company a Wall Street favorite for years.
“Over the past few years, it became very fashionable to take a shot at Clear Channel,” concedes John Hogan, who last year was tapped to replace Randy Michaels as CEO of Clear Channel Radio. “We became a target for a lot of people who think that big is bad. We became the target of a number of special-interest groups who were opposed to deregulation, not just of Radio but of media in general, and we were painted with a very broad brush by some of those groups. The momentum of the negative spin surprised us, and we have worked very hard to get caught up and replace inaccurate gossip with real information.”
One of Hogan’s responsibilities over the past year has been to help Clear Channel re-shape its negative image, or at least draw attention to the fissure between rumor and reality. Part of this strategy is to accentuate the positive aspects of the company’s “decentralized” operating structure. He points to Clear Channel’s active push to identify and train new salespeople, promote managers to new levels of responsibility within the company, develop new sources of nontraditional revenue, promote new business development at the national level, and give the company’s managers — up and down the line — the latitude to be both responsible and accountable for their stations.
“We have to continue to innovate, to challenge ourselves, to be different, to think differently, to act differently,” Hogan says. “We also have to encourage our managers to do that in every one of their markets and, where it works, to shamelessly appropriate it for wherever it makes sense — and where it doesn’t work, to learn from it and move on to the next great idea.”
Ten years ago, Hogan was GM of WGST and WPCH in Atlanta, and says he was “looking forward to my golf handicap heading down. Back then when you got to be general manager, a big part of your job was shaking hands with the mayor, playing golf with clients, and generally trying to keep your one or two stations between the lines.” It’s a far cry from overseeing Clear Channel’s 1,200+ Radio stations, dealing with the challenges and headaches — and a few of the pleasures — that go with it.
Radio Ink recently sat down with Hogan for a candid conversation about some of the misperceptions that still cloud Clear Channel’s corporate image, and to discuss some of the steps he and other top execs are taking to transform the company into what he calls “the best-run company in Radio.”
INK: Last year at the NAB Radio Show, a joke was going around: “What’s the difference between Enron and Clear Channel? About six months.” Can you find humor in that, or do things like that irritate you?
HOGAN: I had not heard that, and actually I think it’s funny. Of course, it’s probably a lot funnier today than it was 12 months ago. I hope I never lose the ability to laugh at myself or at ourselves as a company. It’s certainly no secret to anyone that Clear Channel has been through a very trying period over the last 15-18 months. It’s important to be able to maintain some objectivity, and to see how some people from outside the company might see us. That joke also is funny because — however things have appeared on the outside — internally, we have always felt pretty good about the company. We feel a lot better today than just about any time in recent memory. While some of our public relations, government and press issues remain to be solved, we have always known we were solid, even if other folks didn’t.
Many people believe Clear Channel exemplifies just about everything that’s wrong with Radio. Why do you think this is?
Because we are the largest owner of Radio stations in the country, we draw an awful lot of attention. Also, we have initiated an enormous amount of change over the years. If you go back to 1996, look at the industry then, and you look at what it is like today and look at what our company is like, the number of things that are different is striking. Clearly, many of the changes we made were difficult for a lot of people. That’s the nature of change: It’s hard. We took everything that was familiar and comfortable, things about which many people had developed a large skill set, and asked them to rethink everything they knew. An unfortunate side effect of consolidation — for Clear Channel and everyone else who has consolidated — is a lot fewer jobs. When we put eight Radio stations into a single location, there were seven receptionists unhappy with the new structure. People used to work under certain conditions. Under consolidation, those conditions have changed, many people were let go, and they’re not happy about it.
The company also has earned the nickname “Cheap Channel.” Is there some truth in this term, or is it just another cheap shot?
I’m not sure where the term comes from. I used it myself before I was a part of the company, and one of the things I can attest to is that they are anything but cheap. It is one of those myth-realities. There is no question that Clear Channel is willing to step up and invest any amount of money we believe will deliver a good return for us. Now, coincidental with that, there is a very, very high expectation that our people will have found the most efficient way to operate their Radio stations. Clear Channel really is an incredible American success story, and much of that success comes from the way that the company is very careful with money. But there is no doubt in my mind that the “Cheap Channel” label is misapplied.
Why is there such fervent criticism of dereg, and why does Clear Channel draw most of the heat in the Radio industry?
I don’t know that I can give you a great answer. We own only 9 percent of the Radio stations in the country. The Radio industry is very unconsolidated, relative to other industries, so the constant criticism doesn’t make sense to me. It’s human nature to resist change, avoid the unfamiliar and to be wary of the unknown. And I have to tell you, we are in an area that is uncharted — nobody has ever done this before. Now, I do think that there is a strong current in the country today, where big is bad. What’s really unfortunate is that it’s being applied to Clear Channel when, in fact, we have a fundamental belief that we are really a collection of small companies. We have 275 local businesses run by local managers making local decisions, and they happen to have the resources of a big company at their disposal. We can share best practices, we can share different systems and structures, but it’s a strongly decentralized business model.
How do you respond when critics of Radio claim that consolidation has narrowed the choices of formats available to listeners?
It’s a funny dynamic. There is a reason there aren’t any Zydeco formats outside the state of Louisiana — not enough people want to listen to them. The fact is, the number of formats available today is significantly larger than it was pre-Telecom. There were something like 35 formats in 1996. Today, there are more than 80. There are more distinct artists and songs on the Radio today than there were four or five years ago. Think about it: It’s in Clear Channel’s best interest to give the listeners what they want to hear. If we do that, they’ll keep coming back.
One of the first things you did as CEO was to stop collecting payments from independent record promoters. What was your reasoning?
The primary catalyst was that we had very poor relationships with the labels. It was very apparent from day one that it was a dysfunctional relationship that was not working for us and not working for them. One of my goals initially was to understand that situation better, talk with labels, talk with artists, talk with our product team, and figure out how we could have a better relationship. One of the things we did was to discontinue the practice of independent promoters paying us for information.
Essentially, we needed to provide a different kind of leadership for the company, both internally and externally. I firmly believe that we have a better relationship today with every single label out there than we did 12 months ago, in part because we’ve discontinued the practice of independent promotion payment. More important, we’ve begun to talk with the labels directly. We’ve acknowledged that we each have challenges and, while we’re not in the same businesses, our businesses intersect. We’re much better off being candid about our challenges and what we might do together to solve those.
Clear Channel has been accused of stifling innovation and creativity by not exposing new artists on the Radio. Is this a bum rap?
It’s not our job, our responsibility or our goal to break new music just for the sake of breaking new music. An entire other industry does that. Now, about 250 of our Radio stations are formatically aligned with breaking new music. In those instances, we’re very focused on making sure that we stay ahead of the curve, that we’re looking for the next Big Thing, whether it’s in Country, Rap or Rock. That leaves 800 stations where we’re playing what hundreds of thousands — if not millions — of people have told us through phone calls and research they want to hear.
Could Clear Channel have worked harder from the beginning to deflect some of the criticism?
In hindsight, Clear Channel probably underestimated the amount of attention and focus that would be placed on our company. The momentum of the negative spin surprised us, and we have worked very hard to get caught up and replace inaccurate gossip with real information. The more we do that, the more we’re starting to see change in the level of intensity and the tenor of the criticisms of Clear Channel.
While we’re attentive to and responsive to the criticisms, it’s my belief that we’ve begun to turn the tide. People are seeing the decentralized nature of our company, and they’re seeing the impact we have on market after market. We’re a long way from being accurately portrayed, but we are much further along than we were six or nine months ago.
Is it more important today for a station to sound local or to be profitable?
I am a passionate believer that all good Radio is local Radio. It’s the nature of the medium to be personal, intimate, almost on a one-to-one relationship with a listener. Clear Channel and the Radio industry as a whole have remained pretty true to that belief. What has changed is the definition of what’s local. If you look at the technological advances today — if you look at the speed of information, if you look at the exposure to the incredible amounts of information that the average consumer has — the local community has changed dramatically. Ten-year-old kids have access via the Internet to literally the entire world, so the whole notion of community and localism is fundamentally changing. Radio today reflects that, and it is in our best interest to be a resource for and a reflection of the communities that we serve.
How does the practice of voice-tracking play in this definition of localism?
Voice-tracking is one of those things that has been misunderstood. Simply put, voice-tracking allows us to import a voice, not the content. Most of our voice-tracking is done in-market. In other words, a person from one station will voice-track a shift on another station, or voice-track a shift on the same station but in a different daypart. So the vast majority of voice-tracking — probably 85+ percent — is local in nature. In those instances where we employ someone from outside a market to provide a shift in a different market, they actually may work harder at being connected and resonant for the community in which they’re going to be heard, because they’re not there. They work much more closely with the program director, and they’re more focused on getting it right, because they know they’re not in that market.
How would you compare your management style with that of your predecessor, Randy Michaels?
First, I would say that Randy is one of the most unforgettable, character-type of people I know. He is a brilliant engineer, programmer and businessman; and his contributions were absolutely invaluable to us as we grew the company.
In the acquisition phase, Randy was great, but we have clearly shifted to a different phase in the company. Now it’s all about how we make what we own work.
My style is very different from Randy’s and well suited to what the company needs today. I have a lot of respect for Randy and what he has done, but I’ve never felt that I needed to be Randy. First and foremost, I’ve been an operator for the last 24 years, and my style and experience is to be in and around Radio stations. I know how they work, I know the people that make them work, and I know the energy and vibe that goes with a great Radio station.
With your 1,200+ Radio stations, how much operational control comes from San Antonio, and how much latitude do your local and regional managers have in running their stations?
Clear Channel has always been operated on a decentralized model. We place incredible importance on our local managers’ running their business in an entrepreneurial, autonomous way. As we aggregated the Radio stations and brought in a lot of disparate cultures, experiences and histories, that line might have blurred. Some people may have been more comfortable or familiar with a centralized system, while others liked the decentralized structure. One of the very first things I did was to make it as clear as I possibly could to all senior managers — our general managers, product managers, sales managers — that the responsibility for running these Radio stations and running these markets resided in the market. Ultimately, the general manager is responsible for everything that happens at his or her stations, and that is a really good thing. Now, along with that responsibility comes accountability, and we made that very clear, as well.
Because of this, we’re able to maintain an incredibly small corporate staff. Here in San Antonio, there are 14 people, including assistants. We really do push the responsibility out to the field, and ask our managers to take advantage of the resources there so they can make the best decisions for their local markets. We help them, we offer whatever resources they need; but at the end of the day, they have to decide what is right, not us. And that’s the way it should be.
How important are the people within the Clear Channel management structure?
In the last year we’ve created opportunities for senior management positions for about 80 people at the regional VP level. These are folks on the general-management side and the product-management side with responsibilities past their home markets. It’s an incredible training ground, it provides invaluable experience, and it is a terrific resource for the markets in which they serve. The good news is that probably 98 percent of those have come from inside the company. It is a very diverse group of people, which has been important to us. We’ve bumped up people to the senior vice president level. Out of the 10 SVPs, six of them were RVPs this time a year ago. Our goal is to do everything we can to be the very best broadcasting company out there — to be the very best Radio group, not just the biggest. Being the biggest was relatively easy to do; that just took money and speed. What we want to be is the very best, and if we can do that, we won’t have to talk people into it.
What steps are you taking to bring new blood into the Clear Channel system?
We’re trying to be very pro-active in recruiting new talent and making sure we continue to feed the pipeline. We’ve charged all of our managers with making sure they are constantly current with their communities, knowing what’s going on, and looking for really talented people to bring in. For example, we recently hired 100 sellers from around the country and completed our inaugural training class. It was an incredibly diverse crowd with lots of different backgrounds. The one common characteristic is that these 100 people had been qualified and then selected in certain markets. We took those 100 people to a six-week intensive training program in New York. That was really illustrative of how we’re trying to do things differently. We’re trying to go past just talking about it, to actually getting it into action.
At the end of the first quarter this year, CBS President/COO Mel Karmazin criticized the practice of cluster selling. Was that a jab at Clear Channel?
Mel completely misunderstands how Clear Channel Radio sells. We have dedicated sales staffs for about 95 percent of the Radio stations we own. We are strong believers in the importance and value of having a team of sellers that is focused on an individual station. Every single day, we have people out there pitching their individual stations. Where and when it makes sense for our Radio stations to work together cooperatively or collaboratively, we will do it. But the notion that we are sending out a seller with four, five, six Radio stations and telling them to bundle it up and get it sold is just not accurate.
But you do operate your stations in a cluster mode.
Sure. There are enormous advantages to operating multiple Radio stations from a single location with single management. We think it’s extremely important to have clear, consistent vision, direction and management in a market. I’d love to talk with Mel or anyone else about the benefits of operating as a cluster as well as our continued focus on selling our stations individually. If you look at the nature of many of our clusters, we have Radio stations that are formatically and demographically aligned. Look at Los Angeles: We have CHR, a Hot AC, an AC, and a nostalgia station. Demographically, those fit together pretty well. Now, the individual staffs of those stations are out there every day, competing for their share of the dollars. But when an advertiser wants to reach females from 18-54 and wants us to work together, we’ll do that. And that’s smart. By having consistent promotions and coordinated efforts, by having a cooperative and collaborative effort, we’ll deliver better results for an advertiser. I’ll stand behind that all day and every day.
Most group operators claim they don’t sell against other Radio groups, just other media. Are they blowing smoke?
In most markets, some dollars are specifically directed toward Radio, and Clear Channel — and every other company out there — will be competing against other Radio stations. Anybody who is not competing against other stations is not in the game. That said, the future for Radio — our long-term growth — depends to some extent on our ability to grow the overall share of the Radio pie. Some of that will come from industry efforts and increased awareness of and continued effectiveness of Clear Channel and other broadcasters. Consolidation to some degree has helped with that. We can talk very confidently about our ability to deliver numbers that are as big, if not bigger than, television stations — certainly bigger than newspaper. We can do things we’ve never been able to do before.
Is Radio in danger of not being a primary medium to younger people, who are growing up with an abundance of entertainment and information sources?
The first thing we’re doing is to make sure that we don’t think of ourselves as being in the Radio business. We’re in the business of delivering information and entertainment. With the proliferation of news, information and entertainment outlets today, it would be crazy to think of ourselves as just Radio operators. Having said that, we’re always looking for new talent, new music — in fact, the New Music Network that we started about 10 months ago has some 6,000 bands on it. We have a team of people who evaluate technological advances and opportunities so we can stay at the forefront. This is a very different time from what it was when we grew up, but the time when we grew up was very different from when our parents grew up. What we need to do is take a quick look back, see how much can change how quickly, and make sure that we remain flexible and — most important — be willing to change along with it.
Since Clear Channel has moved from a model of growth by acquisition to growth by operation, can you continue the revenue gains that Wall Street has come to expect?
Clear Channel has high expectations of growth, and it’s part of the job of every one of our managers to find and develop business that will allow us to increase our revenues. NTR remains an integral part of how we grow our revenues; it allows us to extend our brand to increase the value of the Radio stations without having to add inventory. We continue to invest in salespeople; a critical part of our formula for success is that we have more and better people on the street. We’re continually challenging our folks to look at the brands and the opportunities they have in-market, and come up with new and different ways of generating revenues. The advantage we have with 1,200-plus Radio stations is that we have a much bigger laboratory to harvest the intellectual capital of our people, exporting great ideas from one market to another. Maybe the most important thing we’re doing is providing great returns for advertisers. There’s nothing that succeeds like success, and if we focus on doing the right things for advertisers — working with them to have effective campaigns — they’ll come back. The really good news is that it’s such a responsive, such an immediate, such a powerful medium, we can deliver incredible results — and that’s what we’re trying to do in market after market, day after day.
After reading this interview, many people will turn the page and say, “Well, John Hogan seems like a nice guy, but Clear Channel still sucks.” What would you like to say to them?
Unfortunately, I think you’re right. Fortunately, I’m more of a believer in action than I am in words. So I would say, “Look at what we have done, not necessarily what is being said about us or what we’ve said about ourselves.” A year ago, I had several goals. One was to improve the relationships with the labels and the artists. Another was to improve our participation in the industry. A third was to make sure we continued to provide opportunities and challenges inside our company. I have said it’s incumbent upon Clear Channel to provide leadership in the industry for things like accountability and innovation.
Over the last year through our actions, we’ve definitely improved our relationship with independent promoters, and we’re much better citizens of the Radio industry. One hundred percent of our Radio stations are members of the RAB, we are the largest contributors to the Radio Audio Effectiveness Lab, we are members of the NAB, and I’m on the board of AWRT and the Emma Bowen Foundation. We encourage all our managers to participate in their local organizations.
That said, I don’t think we’ll ever talk our way into making people believers of Clear Channel; we’re going to be judged by our actions. My goal is to make sure that we really walk the talk and that we demonstrate by our actions the commitment we have to our listeners and our advertisers and to our people.
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