Media Curmudgeon

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April 24, 2006

Does The White House Know?

I won't go into why I was watching videos of seven comedians doing stand-up comedy on the Motherload section of the Comedy Central website. The comedy sets were three to five minutes long, I estimate, and before and after the sets the website pre- or post-rolled commercials. Five out of the seven comedians I watched did material that bashed the hell out of Bush and Cheney--mostly about the mistakes they made in the Iraq war. Guess what products the commercials were for?

As you might expect, McDonald's was one--clearly going after Comedy Central's 18-34 male audience. The other advertisers were the US Army, Navy, and Air Force recruiting. How's that for editorial environment for advertising--five minutes of a comedian riffing on how stupid the Commander and Chief is, how he lied to get the U.S. into a moronic war, and how horrible the war is followed by a commercial trying to sell young men into joining the Army and fighting in Iraq.

I have a good friend in a digital ad agency. I think he ought to get in touch with the person in charge of recruitment advertising for the Army, Navy, and Air Force and ask that person, "Does the White House know where your current agency is placing your recruitment advertising?"

If the White House finds out who placed that advertising before my friend gets to him or her, they'll probably have that person sent to a secret prison in Eastern Europe.

Posted by Charles Warner at 12:03 AM | Comments (0) | Print |

April 15, 2006

Buy, Sell, or Hold?

Why did Dick Parsons tell the National Cable & Telecommunications Convention attendees last Thursday, April 13, that "AOL needs to get in the game and be more competitive against Google and Yahoo to show that it's not dead?"

For Time Warner CEO Parsons this is a different tune from the one he sang last summer when he was negotiating to sell half of AOL to Microsoft. Parsons said then that AOL was a cash cow and was worth at least $20 billion. Microsoft dicked around and wouldn't close the deal, which it should have, and Google swooped in and for $1 billion bought five percent of AOL. Google played its poker hand brilliantly and blocked Microsoft from getting AOL's massive search traffic.

Last summer and fall Parsons couldn't be positive enough about AOL's cash flow and future. So why is he giving AOL's management the needle now and urging them to get competitive? Quite a different tune and a slap in the face. I believe this clearly signals that Parsons is not considering selling any more of AOL to Google or anyone else. When he wanted to sell AOL, he touted its value. So, now when he complains about AOL's value, you know he isn't trying to sell it. His strategy now is to hold.

But if he's going to hold, he wants AOL to get in the game and get competitive to show it's not dead. AOL may not be dead, but it's dying a slow death. AOL cannot sell enough advertising on its free portal, AOL.com, to offset the losses it's experiencing as about 850,000 subscribers to its dial-up service bail out each quarter. AOL finally raised the price of its dial-up service to $25.40 to match what it charges for its broadband service to encourage dial-up people to switch to broadband. But AOL made the move five years too late.

AOL is making a lot of innovative moves in providing original video content and is catching up…but not fast enough. There are still too many internal political power plays and too much internecine infighting going on at AOL--too many people vying to get credit and prove who's in charge--to catch up fast enough and match the innovation of Google and Yahoo. And Parsons knows it. He's given his warning.

If Jon Miller and other top AOL execs don't get into the game to Parsons' and stockholders' satisfaction (and I don't think it will happen), then expect some major top management changes in six months. By next Halloween there will be new names on the doors of the AOL executive suite. Mark the date on your calendars.

Posted by Charles Warner at 04:15 PM | Comments (0) | Print |

April 10, 2006

Katie and Howard

Howard Stern has always billed himself as the "King of All Media," and for the last year he has been--ever since he signed with Sirius Satellite Radio. Magazine covers, stories in the business press, and constant headlines. Well, Howard has more than met his match for media attention. Katie Couric is now the "Queen of All Media," and has surpassed Howard in media attention.

When Howard moved to Sirius for $500 million, media and business pundits speculated if he was worth it. I wrote a blog in October 2004, opining that I thought the deal made financial sense if just for the publicity alone.

No one I've read is questioning the economic value to CBS of Katie Couric's move, and CBS is getting Katie for a lot less than the $100 million a year Sirius is paying to Howard and his production company. Les Moonves is no dummy. He accomplished three things by hiring Couric: 1) He got an enormously popular personality to anchor his evening newscast--someone with a huge, loyal audiece that is sure to sample Katie in the evening. 2) He was able to hurt NBC's "Today" program by taking away its star, which might have more strategic impact and upside for CBS overall in the long run. 3) He has already got more than his money's worth in the massive publicty for CBS and it's "Evening News" that the move has generated.

But if Moonves was so smart in hiring Katie, why was he so dumb in suing Howard for $500 million for promoting his move to Sirius while he was still on the air on the CBS radio stations. CBS claims that "By engaging in continuous promotion of Sirius on CBS Radio airtime without any payment by Sirius to CBS for these advertisements and by pocketing over $200 million for his personal benefit, Stern misappropriated millions of dollars worth of CBS Radio aire for his own financial benefit," according to Red Herring.

Come on, is CBS claiming it didn't know what Stern was doing, that they didn't listen, that they were shocked, shocked that Howard was promoting his move to Sirius? Of course they knew. I'm sure they were furious, but greed got the better of them. They could have taken Stern off the air to stop him from talking about his move, but they would have lost millions of dollars in ad revenue, which they were not willing to do. So, CBS left Howard on the air, grudgingly, I'm sure.

What is NBC going to do with Katie? She doesn't start with CBS until September, so is NBC going to leave her on the "Today" show for the next four-and-a-half months? Couric doesn't have to say a word about her move to CBS because everyone in the world knows she's moving, but the continuing exposure will add to her popularity and help CBS. Meredith Vieira has already signed on as Katie's replacement, so wouldn't it be better to bring her on now and let Katie cool her heels for the summer?

Or maybe NBC will do what CBS did, be greedy and keep Katie on the air and then, after her move to CBS, sue her for $150 million for misappropriating NBC's airtime.

I'm betting that greed wins out over common sense--it will every time. I think NBC will leave Katie on the air. If it were me, I'd ease her out of the "Today" show as quickly as possible and ease Meredith in. But that probably explains why I'm not running NBC and Jeff Zucker is.

Finally, I think the biggest winner in all of this is Bob Schieffer, who didn't want the CBS anchor job permanently in the first place and probably is delighted to stop communting to New York from his home in Washington. He goes out a winner, having increased the ratings from when Dan Rather was in the anchor chair, and it's got to be satisfying that CBS had to replace him with a cute personality (and, who knows, she might be a good journalist) who makes about five times what he makes.

Posted by Charles Warner at 10:05 PM | Comments (2) | Print |

Media Curmudgeon at April 11, 2006 03:38 PM writes:

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ray ellin at April 11, 2006 12:29 PM writes:

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Radio Shoots Itself in the Foot

I was away in Panama for spring vacation--May 25 through April --and I've been trying to catch up since I got back. The day I returned, I noticed two items in the New York Times that were on opposite pages in the Business Day section, but they should have been side by side.

An article on page B2 by Jeff Leeds had the headline, "Music Industry Sales Post Their Sixth Year of Decline." The first two paragraphs of the story read:

"Global sales of music CD's and DVD's dipped for the sixth consecutive year last year and surging digital music sales failed to offset the decline, an industry trade group said yesterday.

Global music sales, including 'physical' and digital formats, fell to about $21 billion in wholesale revenue, a decline of 3 percent. Measured in units, CD's fell 3.4 percent and music DVD's were flat, according to an annual report released by the trade group, the International Federation of the Phonographic Industry.

Sales of digital music, included in the annual report for the first time, are rising sharply but did not compensate for the decline of CD's, which have been the industry mainstay for two decades. The number of single songs downloaded online or to mobile phones rose more than 190 percent, to 470 million units, the report said. Revenue from digital sales nearly tripled, to $1.1 billion from $400 million."

On page B3, another story by Jeff Leeds had the headline, "Radio Industry Said to Seek Deal to Settle Payoff Accusations." Here's how the first several paragraphs of that story read:

"The nation's biggest radio broadcasters are in discussions with the Federal Communications Commission to resolve accusations that station programmers accepted improper payments from record companies in exchange for playing specific songs, officials involved in the talks said last night.

But the talks have stalled on questions about how much money the companies -- Clear Channel Communications, CBS Radio, Entercom Communications and the Citadel Broadcasting Corporation -- might have to pay to settle the case, said these officials, who insisted on anonymity because the talks are at a delicate stage.

Clear Channel, which operates about 1,200 stations and is the industry's biggest player, has been pressing for the agency to agree to a range that would place its financial penalty at $1.5 million to $3 million, according to a person involved in the talks. F.C.C. officials had balked at its earlier offers of $500,000 and $1 million, the officials said."

Put those two stories together with Erik Sass'a April 4th report in Media Post titled, "Radio Reports Another Weak Month, Wall Steet Downgrades Medium." Sass wrote:

"Amid reports of stagnant or declining radio ad revenues, the Radio Advertising Bureau claimed a small victory as national sales climbed 4 percent in February 2006...but local ad dollars--radio's main source of revenue--dropped 3 percent compared to last year, dragging revenues down for a 2 percent overall decline from 2005." The Media Post story went on to indicate that Wall Street downgraded its expectations for the first quarter to no growth.

Why is radio revenue down? The Media Post article quoted a Merrill Lynch analyst who singled out "sagging automotive ad spending as a major factor" in radio's decline. But why is automotive ad spending down in radio? I believe it's primarily because the audience for radio stations that play music is down. Audiences for sports, news, and talk radio are up slighly, so it's clearly the music stations that are dragging down the medium and causing auto advertisers to switch their dollars to the Internet.

Why are music radio station's audiences down? I believe it's because the major chains such as Clear Channel, CBS Radio (formerly Infinity, built by Mel Karmizan), Entercomm Communications, and Citadel Broadcasting (all named in the NY Times payola story), have taken payola and played music they were paid to play by the record companies.

In the good old days of radio, music stations that won in the ratings were stations that played the hits as determined by what people bought, as indicated by the charts, and by what call-in and auditorium research told stations people liked. It was a mantra of successful radio programmers such as Bob Pittman (probably the most successful program director in radio in his time) "shut up and play the hits," which meant, "don't play unfamiliar and unpopular music the record companies want you to play."

Therefore, when record companies pay stations to play lousy records, typically based on how much they cost the companies to pay some has-been artist and to produce, not based on popularity, greedy (and dumb) stations play for pay, not for popularity and, thus lose audience to downloaded music that young people can control and listen to without commercials on their iPods. No wonder Apple has sold almost 30 million iPods. No wonder music stations are losing listeners.

The radio industry's answer to increasing profits? Try to haggle with the FCC to reduce fines, not, it seems, to play better music.

Posted by Charles Warner at 12:15 AM | Comments (0) | Print |