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December 14, 2012

Lew Dickey, Chairman, President & CEO, Cumulus Media
By
Fred Deane


Lew Dickey


As radio industry leaders look ahead to next year there is obviously much to contemplate these days regarding the future of the medium and the myriad of directions it needs to go…seemingly all at once. Many radio groups have taken leaps over the past few years in areas of individual company growth with an acute awareness of digital delivery systems and social networking platforms as instrumental areas of exploitation and implementation. Cumulus has also taken a special interest in the critical mass issue of aggregating cume power in its efforts to deliver total marketing solutions to its advertisers and enhanced content to its consumers. Lew Dickey has been integral in many of these vital decision making initiatives, including the ambitious acquisition of Citadel, the introduction of the company’s e-commerce play Sweetjack, and the firm belief that the collective power of the radio industry, via strategic partnerships with competitors, will ultimately allow the industry to compete with the big digital players on a more even playing field.
         Dickey’s perspectives and insights have always been thought provoking and stimulating, and given the ultra-busy past two years, he and his company have been working in non-stop overdrive assimilating new properties, new initiatives and new ways of conducting business into its overall arsenal of strategic assets.


 

It’s been a full transition year for the “new look” Cumulus. How did the integration process of Citadel go this year relative to day to day business?
It was a large and complex integration and it surprisingly went very well, but it has been a lot of work. Our company doubled in size on the broadcast side alone, and we also have the network which is an entirely separate business that we haven’t had any experience running before. We had to learn that business, improve its prospects and make it a strategic asset of the company. The team has put forth a lot of effort to bring these businesses together. The integration was largely complete by early fall and I’m very pleased with the outcome and the resulting cost structure. I believe the platform is more valuable now than I anticipated when we were chasing the deal.

Has the management structure changed much regarding the main players given the massive undertaking explicit with a deal of this magnitude?
There was a lot of change. Although the structure is the same, as it was built to scale. We added people where we thought it was necessary, and continue adding people. We have a very homogeneous operating culture and a very specific way of doing business. It’s rooted in the fundamentals across the board and so we manage with a set of systems and standards. We’re not a confederation of a bunch of different fiefdoms solely managed by individuals who by the power of their personalities manage as they see fit. We believe there are key success factors and time proven fundamentals to run a radio station (or any business for that matter) and that applies regardless of market size. Having been in this business for 27 years I’ve been exposed to a lot of stations and a lot of competitive situations and we’ve learned a lot from the 150 acquisitions we’ve done to build this business. We’ve learned from all of the people who have joined us and the management teams we’ve been exposed to and it’s a constant process to continue to improve and build these systems.

Cumulus has always been a company that defines its management philosophy from a deep set of internal roots. Has that been adaptable given the larger scale you’ve encountered?
In order to be successful as a consolidator or a large operator, you have to have a set of systems and standards that are consistent across the board. We’ve worked very hard to understand and identify the key fundamentals that drive success in areas like programming, sales and promotions, and infused them across the platform. It’s something we spend an awful lot of time on.
          We’ve developed all of our own enterprise software because we believed the available options out there didn’t serve our purposes and didn’t provide the depth of info we need to increase the span of control of our managers to make decisions on a timely basis. So in essence with the 225 stations we picked up from Citadel, we had to implement all of the software, all of our systems, and we had to teach people a new way of doing business, which by the way isn’t for everybody. There have been several instances where people preferred to do it their way and through no fault of anyone, the fit’s not there for us. It doesn’t make you a bad person, but it does make it a bad fit for our organization. These are cases where I’d rather have a meeting of the minds earlier than later.
          We’re very transparent with all our cards on the table as to how we do business. This is why we do it this way, and if you have a better way of doing it raise your hand and we’ll all learn from you. If not, we expect you to run the plays. If that doesn’t comport with what you want to do every day for a living, that’s cool, but we’re just going to have to agree to do it in different places. It’s not heavy handed, it is what it is, and it’s the way we operate our business.

What do you feel is the most significant event that occurred in the industry this year relating to all radio groups?
Hands down, it’s the newfound sense of cooperation and constructiveness among the major radio groups. Don’t be mistaken, everybody is still out there competing aggressively for listeners and advertisers. This business is hyper competitive and will always be that way. But the industry has been its worst enemy when it comes to improving its competitiveness against the rest of other media. I think that’s always held the industry down both in terms of its share and in its ability to innovate. It’s always been an inward focus, kind of non-cooperative approach. If you want to do that, it means I don’t want to do it type of attitude. We’re seeing that fading away, whether we were the catalyst for that or not, it doesn’t matter. There’s certainly no pride of authorship. Once we gained control of Citadel we did two important things. We immediately struck a big deal with Clear Channel with our e-commerce platform SweetJack and their content aggregation play iHeart Radio, and we subsequently struck another big deal with CBS to create a large sports competitor to ESPN. So here you have the top three groups, shortly after our merger this year, forming partnerships.

Do you forecast a residual impact of this newfound collaborative approach going forward?
I feel it has to and will. The result I’m seeing out of this is a bit of a thaw. I attended group head meetings in New York earlier this fall, and the attitude I’m sensing is much more constructive than in the past. This increased level of cooperation will ultimately improve the fundamentals of our industry and improve its prospects in several areas like ad revenue, regulatory, digital distribution/broadcasting, and most importantly, for competing against other media industries.
          The industry is starting to realize its collective power, reach and capabilities, and its structure is becoming more functional and taking on a different complexion than ever before. It’s a trend that’s picking up steam so I would look for this to continue into 2013. I want to underscore that it remains and will always be hyper-competitive for listeners and advertisers in the local markets. It’s just going to be a much more constructive industry approach with the goal of becoming more competitive versus the other media businesses so we can get a larger share of the $180 billion being spent annually.

What is the significance of the Clear Channel deal with your SweetJack platform?
Sweetjack is an e-commerce platform designed to be a major player against strong national competitors like Groupon, LivingSocial and Yelp, all trying to do the same thing with deals and coupons. It’s a memorable, clever, catchy brand that will break through the clutter. We’re up against everything else (50+ companies) with the word deal in it, and now we have the potential to be an enormous national brand. We will be fully distributed in 200 markets by the middle of December. This is being built very methodically and the partnership with Clear Channel is critical. It’s going to have half a billion dollars of promotion behind it over the next five years and be one of the most advertised brands on the radio during that span. It’s going to reach 250 million Americans by the first of the year! Everyone will know this brand and it’s going to be a great opportunity for us to create a potentially explosive business while using the radio business to do so.
          SweetJack is a way to take on-air listeners and drive online engagement in such a way that you can monetize it through commerce whether it’s through daily deals, coupons, marriage mail, listings, or loyalty and rewards. There are many different services that will be part of this platform. Again, we’re building it methodically. It’s not a venture-backed deal where we want to get as big as we can quickly and lose as much money as we can just to get size. There are many different services that will be part of this platform. Again, we’re building it methodically. It’s not a venture-backed deal where we want to get as big as we can quickly without regard to operating losses. It’s more of a calculated bet rather than a reckless gamble.

How has the industry, outside of the Clear Channel deal, been reacting to Sweetjack?
We’re going to be announcing more people that are coming on board. Clear Channel has announced a number of people who have with iHeart. I think there’s an inextricable trend in making that a reality for our initiative as well.

How much of a challenge is it to compete with the massive audience scale of companies in the digital world like Google, Amazon and AOL?

I’ve been preaching this for a long time and now it seems to be all coming about. The key theme is as digital convergence continues and media continues to become much more complex, I firmly believe our industry is moving toward the realization that to compete in the digital world you need massive scale. When you’re competing against players that count their uniques in the hundreds of millions, you can’t think if you have a five market group that you can have any clout with a million listeners. You can’t even get on the radar. It’s big game hunting if you want to play in that arena. The only way to effectively do that is for the industry to back standards and get behind the network effect of each member coming on board and with each ensuing participant the value of the network increases.
          I think you have that with iHeart, which is why we felt that it made a lot more sense to join Clear Channel’s effort than to spend tens of millions of dollars to develop our own and at the end of the day be a very small fish in a big pond and not get noticed. So we felt it made sense to join them against the Pandora’s and Spotify’s of the world. I believe it makes good sense for everybody else in radio to get on board as well. It makes all the sense in the world for the industry to back a platform and use its great reach to extract as many dollars as you can whether it’s a local e-commerce play like SweetJack or a content aggregation play like iHeart.
          Then it becomes just a question of revenue sharing. We need to come up with something that’s equitable for the people who are participating so they can extract dollars out of it and play. Otherwise to try and do these things on your own is very costly, time consuming and it has little to no chance for success.

What can be extrapolated from this new found synergy regarding how radio managers in general should be doing their jobs going forward?
These larger ventures are hopefully shedding some light on broadcasters in general where you have to be focused on the reality that our world is changing rapidly around us. You have to be a customer focused business no matter what you do, and the world is increasingly not buying media in silos, but rather they are looking at marketing solutions. If you truly want to be valuable to your clients, you’re going to have to bring more solutions to the table than just selling a spot schedule. That’s another trend that should play out over the next few years and you’re going to see more comprehensive solutions being marketed as broadcasters come to that realization.

How are you instructing your managers and team members at Cumulus regarding how they should be thinking about their responsibilities?
Our responsibility is to ensure we do the right job in terms of framing what their responsibilities are. You don’t want your people to fail because they don’t know what’s expected of them. Job descriptions and responsibilities are evolving. The challenge for management today is to be highly communicative and crystal clear about what the roles, expectations, goals and metrics used to judge performance are. We spend a lot of time on that in our shop. Some of it is helped along by the systems we designed and implemented, because it helps to provide a framework to our people as to how they can add value to the equation. Ultimately you’re judged by what kind of a job you’re doing, how much value you’re adding, and your ability to provide feedback on coaching.
          We’ve worked very hard to understand what it takes to succeed in each of the functional areas of our business and to execute those fundamentals, specific skills are required. Hence we’ve worked very hard to understand what those skills are and we want to help our people develop those skills. If we can provide our people with the level of guidance and training they’re not getting elsewhere, then we’ll be more valuable to our employees and that will help with retention which is something we focus very hard on. If you fast forward (with the end in mind) I want people to think about us in this fashion: I can develop my skills and hone my craft there and I’m going to be better at what I do if I log some time over there. The best compliment we can get from somebody is that they are truly going to become a better professional by spending time with us whether it’s by being a traffic director, morning man, sales manager or chief engineer.


Two months ago in forty-seven markets Cumulus made the switch from ESPN to CBS Sports, a logical move given the company’s relationship with CBS Radio. What does this mean for both Cumulus and CBS Sports going forward?
The purpose of creating this joint venture with CBS is that we both brought distribution to the table. This is a key content vertical for Cumulus and shouldn’t be a surprise to people that we are using our distribution leverage to help make this network a success, just as CBS is doing. CBS is doing a wonderful job of developing the content for this. They’ve been excellent partners and we’re very excited to be working with them.
          On the other side, the guys at ESPN are friends and we were partners with them for a long time. It just makes sense at this stage of the game. As they become more vertically integrated and do their own thing in terms of sales, affiliations and content, it became increasingly less advantageous for Cumulus to be in that partnership because more of the responsibility and value was shifting to the other side. They’re a great company it just made more sense for us to seek a different partnership to create value for our shareholders with the assets we have.

What are your thoughts on the Facebook business model and are there opportunities there for radio to exploit that could enhance its position further?
You have to separate the category from the application. I believe the verdict is out on Facebook in terms of what ultimately is the utility for a business to maintain a page or drive a lot of traffic or try to execute their marketing, promotion and communication strategy through that platform. It’s a terrific application for what it originally was intended to be which is for communities of people that are organized around a lot of different interests for friends and families to stay in touch with each other. Ultimately is that the best way to launch a new energy drink? I’m skeptical of that. You might be trying to fit a round penny into a square hole. Just because you have a community of users doesn’t mean it’s conducive to being monetized to the extent that they need to grow into their valuation, particularly as things move to mobile. Obviously the mobile device is not very conducive to a lot of advertising that’s taking place on the desktop display right now.
          When it comes to the digital social platform business models, commerce and search are the two keys. Regarding search (forget about it) Google owns it. On the commerce front, that platform side is wide open and that’s what we’re doing with our SweetJack play, we feel we can compete there.

Given this year’s “primary election year” status and the inherent media revenue spike accompanying it, how did radio’s take fare versus other forms of media?
I believe radio’s take was about $250 million. There was a lot of money being raised in this cycle, but radio’s share actually decreased in the cycle. Part of the reason is because the general economy is soft, so the television industry was taking more of its share than it normally would because it didn’t have other higher priced spots to take its place. Ordinarily it’s not one of these all you can eat deals for television. They generally are pretty disciplined as to how much they’ll take and that means there’s some spill for radio, but given the tough retail environment television took more leaving less for radio.
          Then you have online that’s been taking an increasing share as people are using it for fundraising and voter registration efforts. Online hasn’t been very effective at branding, but it has been effective in these other two areas.

How do you rate radio’s efficacy regarding marketing its value to political campaigns?
Radio needs to do a much better job in this area and the time to do this is not when these guys are in the heat of battle trying to win an election. The time to do it is 2013 and during the off years when you could educate people about the value of the product and how their hard fought campaign contributions can go a heck of a lot further with our medium than others. How it could be highly targeted with greater frequency and you can have a conversation with listeners when they’re driving to and from work about who they’re going to vote for. We definitely have to do a better job as an industry of selling ourselves.

Does Cumulus have any plans to secure comprehensive royalty deals with music labels as Clear Channel has with Big Machine and Glassnote Records?
We’re in the early stages of evaluation so we really don’t have any religion about this one way or the other. It’ll probably be a six month evaluation process.

What are your feelings about Cumulus’ relationship with the music industry, and are there any plans for Cumulus to be more proactive with labels regarding artist integration programs as other major radio groups have?
First of all, 2012 has been an abnormal year for us because we’ve been so preoccupied with our corporate integration. As we get into next year and beyond, there are going to be several initiatives we will be pursuing on the content side. I think what Clear Channel is doing with their artist programs is very smart and I believe they are innovating a new collaborative-partnership with the creative community. It’s one we’re watching with great interest and as we start to turn our attention to content development, with the nuts and bolts of integration behind us, we’re going to take a very close look at these things, see what we can learn and see where we can put some of this to work with our crew and follow suit. We’re hoping to do a little innovating of our own.

If you were to craft a road map to success going forward for radio professionals in all fields, what is the best piece of advice you can impart to them?
Regardless of your entry point and frame of reference, you need to be fully aware that the media landscape is evolving very rapidly. You have to approach your job with the understanding that it’s going to change and evolve right along with it. You have to be open minded, flexible and willing to be innovative in order to succeed today, now more than ever. We had an industry that really didn’t change all too much relative to other industries like technology, healthcare or energy. We thought we had big changes with consolidation in the ‘90s but in the end they really weren’t major changes at all. But as we entered the 21st century and digital really started to take off, especially over the past five years or so where the pace has accelerated dramatically, big changes were necessitated. I look for that trend and pace to continue over the next five years. The rate of change will be even greater during that period. Whatever you’re doing at the radio station today is going to look very different five years from now. It’s something you have to enthusiastically embrace if you want to be successful. If not, you’re just going to be disappointed in that you’re going to wake up and realize your job is different than what you were doing. You need to look at ways you can innovate and excel in order for job satisfaction to be there. It’s going to take that kind of a mindset to be successful. You need to be overly prepared when you show up at work everyday. We are all very fortunate to have a career in radio and we have a responsibility to help evolve the industry to ensure its relevance for generations to come.

 

[eQB Content By Fred Deane]



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