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November 22, 2014

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First Mediaworks


07/03/06 What Have You Done For Me Lately?

The seduction of taking a company public has driven many a CEO to pursue an IPO. With the allure of wild financial success and the financial power to dream big and accomplish great things, the public market has made many CEOs into billionaires. Yet it has turned others into unhappy indentured servants.

After the honeymoon, many a CEO finds being public a detriment to doing business. Every decision made by the CEO of a public company is examined under a microscope, often by people who don't understand the business. Great leaders often achieve success by forging ahead with obtuse ideas, dreams, vision, and gut instinct in the face of doubting employees and investors. Not all obtuse ideas work, of course, but a leader must continue to innovate and take risks.

CEOs who previously built significant success on risk-taking often find that running a public company requires them to play it safe. In a public company, risks and innovations are applauded until they fail. Then, the CEO is considered a failure, the company is downgraded by Wall Street, and further risk is discouraged. On the public market, you're a hero in an up cycle and a loser in a down cycle. There is no room for failure, which is actually an important element of success.

The public market seduced radio. Now, Wall Street is saying, “What have you done for me lately?” The dreams of many radio company CEOs have been stolen by going public. Though most put on a happy face and say, “Things are great and getting better,” many are seeking an exit strategy. Some feel they have been forced to cut too deeply, and know they have not invested enough in building advertising and listenership.

Once the darling of Wall Street, it seems radio can do nothing right today. Some analysts think radio is trending down because radio is 100-year-old technology, unlike like iPods, satellites, and cell phones. But remember, 30 years ago, every analyst on earth said solar energy would replace all of the electric companies in 10 years. Today, they are saying radio will be replaced by new technologies. Yet radio is as entrenched in society as electricity. How can Wall Street miss this?

Since we're no longer the darlings of Wall Street, perhaps it's time we go home from the dance and leave our date behind. I respect Jeff Smulyan at Emmis Communications because he has a history of leading the industry on future trends. Smulyan has extended an offer to take Emmis private. He faces tremendous criticism and challenge, but he stands a strong chance of success.

Though some others won't be able to escape, I believe many in our industry will follow his lead. Radio had its time to be public, but the industry's future success may be dependent on industry privatization.

Wall Street taught us many tremendous operational disciplines, and we're better for having learned those important lessons. When this discipline is applied to newly privatized radio companies that reinvest in areas that have previously been ravaged just to make the bottom line look stronger, radio will see a new golden age of unparalleled financial success.


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