clear channel on jenny craig

Clear Channel on Jenny Craig

Tom Taylor broke the news of John Hogan's "draconian" first quarter

contingency plan in his Taylor on Radio-Info publication Monday.

It's bad -- all bad.

Hundreds of additional jobs are in jeopardy -- this from the industry

leader that has been cutting jobs at a record pace in preparation for

what they hope will be the completed sale of Clear Channel to Bain

Capital and Thomas Lee Partners within a few months.

Clear Channel has a problem. It isn't making budget for the first

quarter and revenues are down.

In the movie Airplane, Lloyd Bridges who played the character Steve

McCroskey said "Looks like I picked a bad day to give up sniffing

glue". In this uncertain economy, it looks like Clear Channel picked a

bad quarter to give up making a profit -- or at least breaking even.

Why?

Because Lee and Bain are overpaying for Clear Channel stock -- $39.20

a share to be precise and yesterday CCU closed at $31.42 -- off some

7% in one trading day. The arbitragers are going to make money on the

spread -- that is, if the deal ever closes.

I have said all along that if this deal closes it will either be

because the $39.20 price will be renegotiated downward or Lee and Bain

have a new buyer (can you say Sam Zell) to which they can sell all or

some of the Clear Channel properties. That theoretical sale would also

be subject to a lower, more reasonable sale price.

Let's just say at $39.20 Clear Channel is overweight and needs a diet.

The cutbacks are symbolic of calling 1-800-597-Jenny because to do

this deal either to Lee and Bain or to Zell, Clear Channel needs to

lose weight.

Hell, even Larry Craig could help because Clear Channel needs a wider

stance if it is to unload its public company, allow the Mays' to

escape in exile with millions more and for the poor folks running

these properties to eventually return to a position where they can

actually do their jobs.

Right now their most important job is to cut back expenses. That says

a lot.

Here is what Tom Taylor is reporting from the Clear Channel website as

the expected reductions to be implemented immediately:

"Expense reductions: All research monies after 2/1. All Advertising

and Promotion monies after 2/1. All new sales hires not already

implemented, effective immediately. Any new hires budgeted but not

hired, effective immediately (do not hire any additional new

employees). Any/all discretionary monies (i.e., travel, meals and

entertainment, etc.) for your market. If you can save it, do so.

Additionally, you are not to replace any departing personnel without

specific approval from your EVPO."

Jenny Craig says "Join Jenny and lose 2o pounds for $20 plus the cost

of food". To continue the analogy Clear Channel seems to be saying

"Join Bill Hogan and lose at least 4% (the budget overage) plus the

cost of losing more of your audience".

I assume the Mays' private jets are included in this draconian

cutback. Southwest has some great fares these days out of San Antonio.

What?

Isn't losing private jet service the definition of draconian?

No, of course not. Cutting your content, marketing and sales is the

ticket, right?

Here's Hogan's thinking as Tom Taylor reported. Read it and then I

will give a quiz:

"It will make your job more difficult and have some long-term affect

[sic] on your overall performance. It goes without saying that leading

through these reductions will be challenging. If there were another,

better alternative, we would not be requiring these reductions be

implemented. Unfortunately, there is not another alternative. It

should go without saying that at the earliest opportunity, that is

when revenues begin to stabilize and increase, we can reverse the

expense reductions."

Question: does anyone believe these expense reductions will be

reversed in their lifetime?

The radio industry wanted to be a Wall Street player.

It got what it wished for.

So the public companies that have done their part to help with the

demise of terrestrial radio must continue to play by the rules of the

Street.

To get this deal done at an inflated stock price negotiated more than

a year and a half ago, Clear Channel dare not show losses. The sellers

are in it to get out. They must make nice.

If the Clear Channel sale does not go through, the entire industry

could be toast. The worst punishment would be for Clear Channel to

have to keep operating the stations they have gutted and pillaged in

their attempts at one more big pay day.

For the good people who try to do great radio without adequate money,

support or strategic planning, it's time to get on your knees and pray

for Lee and Bain and Lowry, Mark and Randall. Turn the other cheek.

If this deal blows, Sam Zell who only buys undervalued properties can

ride in on his Harley.

That would be an improvement over this desperate group.

But if somehow even that fails Clear Channel in the hands of

principals who don't want to own it -- in a bad economy -- is a

disturbing thought for everyone.

Hogan's severe cutbacks at this late date are like putting Twiggy or

Nicole Richie on a diet.

There's no dead weight left to lose -- only muscle -- and the

patient's life would be in peril.

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