November 30, 2015

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07/18/05 Should Radio Walk Away From Wall Street?

Radio needed Wall Street to consolidate. We became the belle of the ball because of our growth from acquisitions. Now that the acquisitions have stopped and cuts have gone to the bone, our stock performance makes us the ugly stepchild. Wall Street has abandoned us.

Wall Street's mantra is “What have you done for me lately?” - not “What are you doing to grow my investment wisely?” All businesses cycle through times when short-term thinking is detrimental to long-term success. A recent Harvard Business Review study revealed that the majority of companies who reacted to Wall Street's short-term quarterly pressures were out of business within 20 years.

Consolidation has been good for radio, but the quarterly earnings report has not. Most of radio's problems are rooted in trying to make quarterly earnings look good at the expense of good business practices.

Since the high-return dot-com days, Wall Street has become unforgiving and unwilling to allow companies the necessary time needed for growth, reinvention, and cyclical adjustments. Meanwhile, regulations such as Sarbanes-Oxley create a wall of paperwork that turns aggressive entrepreneurial businesses into restricted paperwork bureaucracies. General managers, sales managers, salespeople, even program directors in publicly owned radio companies say that a significant portion of their time is consumed by meaningless paperwork. What have we become?

Has radio outlived its need for Wall Street? Is it time to orchestrate stock buy-backs and go private? Will companies sell off stations to enable unlocking their Wall Street handcuffs? Boardrooms are buzzing with these discussions.

There is a season to be public, but I have a hard time finding any value in being a public company in this season of radio. Perhaps it's naive to think that we don't need Wall Street anymore, or that the debt can be paid without public money, but radio would change for the better if we could shed the Street and its need for quarterly performance. That freedom would let us focus on doing what's right for the long-term growth of our business, rather than only what looks good this quarter.

Fortunes can be made in radio by paying attention to the important growth strategies of our industry and leaving the business of theatrics, acting out foolish scenes to make Wall Street gush. It's not working, and some scenes are embarrassing and humiliating. Radio needs to get back to the business of radio. Wall Street is a fair-weather friend whose value to us as an industry may have passed.

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