Inside Radio today lamented radio’s loss of Bear Stearns radio analyst Victor Miller. Inside Radio notes:
Miller’s departure comes as Wall Street firms have been shedding analysts assigned to covering radio. As Inside Radio reported in January, 24 analysts were assigned to radio a year ago compared to about half as many today as stock prices have plummeted and some of radio’s biggest companies are going private.
Radio & Records went even further writing:
Miller’s observations were respected and revered and played a pivotal role in the way institutional buyers looked at a broadcast property when making an investment. He also thanked broadcast executives and industry leaders who shared their knowledge and findings with him, let him grill them about their business and took his tough questions during seemingly endless quarterly teleconference calls that companies host for investors and analysts.
These stories bring to mind an old (and admittedly tasteless) joke that goes, "What do you call 10 dead lawyers at the bottom of the ocean? A good start." Yes, it is in poor taste, but the joke’s survival (and the web sites that perpetuate them) speaks to a universal mistrust of lawyers. And in some respects, what Wall Street analysts have done to radio is not unlike what some lawyers have done to the justice system.
While both Inside Radio and R&R lament the passing of radio's moment in Wall Street's limelight, The fact that Wall Street is abandoning radio says as much about Wall Street as it does radio. Wall Street introduced the notion of "shareholder value" into our lexicon. Suddenly listeners and advertisers didn’t matter as much. Shareholder value is a code word for the price of the company’s stock. To Wall Street what mattered most was that the stock price remained high, and since more than two dozen analysts wrote about radio groups every few months, the business became fixated on quarterly results.
If a group spent money in an effort to increase share and that led to a decline in quarterly profits (which it generally does over the short term), the analysts would write critical reports accusing the company of not showing enough concern about shareholder value.
Ultimately, radio became a hostage of Wall Street thinking. Radio abandoned any thought of investing in the product. The focus was on reducing costs, pricing for share,...and keeping the stock price up. Wall Street rewarded all this by then criticizing the business for not investing in the product. The very people who forced us to plan in three month increments accused the business of thinking too short term.
Noting that small market radio revenues were holding up better than revenues in larger markets, Jim Boyle, one of the few analysts that actually worked in radio, observed:
What we believe this strongly implies is that the unwieldy 'giant platforms' and near-sighted public groups that dominate the big markets are generally not a positive for the management-intensive, locally-centric industry.
Yet it was Wall Street that rewarded the mega-deals. Smaller groups like Cox were criticized and larger groups like Clear Channel and (then) Viacom were praised for their vision.
So pardon us if we don’t shed a tear for Wall Street’s abandonment of radio. Record low stock prices might be painful for the executives and shareholders of public radio groups, but perhaps radio needs a little invisibility on Wall Street so we can start paying attention to our listeners again.