FAKE NEWS AND THE BROKEN BUSINESS MODEL OF THE MEDIA

For those who wondered what happened to the mainstream media, it is not so much its engagement in toxic left versus right battles, but the failure of its original business model.

The old model was based on delivering information and analysis to individuals who had little or no access to contemporaneous news other than radio, the newspapers, and the longer form magazines. People had favorite sources and were pretty much loyal to their choices. Editorial content was divided into reportage and commentary and the commercial aspect of selling advertising rarely impacted editorial content. The sales ads for the various goods and services were numerous and repetitive. Classified advertising was a major moneymaker.

Enter the internet with its multiplicity of free information sources, many contemporaneous and many with accompanying audiovisual content.

Enter the internet with its ability to disintermediate, search and sort, classified advertising offers as well as offer long-form sales pitches that cost little or nothing to access.

Enter the corporate ownership of media outlets by companies that had other commercial interests regulated or dependent on government contracts. The pressure no longer came from advertising sponsors but from corporate executives fearful of jeopardizing government-derived income streams from grants, contracts, subsidies, tax relief, special interest legislation, and waiver relief from regulations and/or legislation.

With advertising income shifting towards online free classified advertising or the use of social media influences, reduced revenues impacted the bottom line. The content creators went hat-in-hand to the business side of the enterprise to plead for support. Unfortunately on a quid-pro-quo basis that changed the nature of the editorial content.

And, the last straw was the need to boost audience and ratings in this new environment. No longer could one claim immediacy, the excellency of analysis, or a unique selling proposition. There were too many sources freely available and one needed to rise above the noise to be noticed.

Hence, we are now presented with a business model that is dependent on outrageous assertions and the cult of personality to deliver an audience. The more outrageous the assertion, the more it is passed from person-to-person. And, hopefully, it will reach the holy grail of "going viral."

So unless the media can develop a new business model with fresh and valuable content, they will simply be disintermediated into nothingness. Meanwhile, the mainstream media will be filled with the bizarre and exploited news -- much of which is synthetically derived and can be legitimately described as fake news.

Are you wondering, Am I next?

NO LOVE AT iHEART COMMUNICATIONS OR CUMULUS MEDIA (09/11/24)

NOVEMBER 11, 2024 — IHEARTMEDIA STILL IN TROUBLE — HUNDREDS OF LAYOFFS

According to reputable published reports, the company is attempting another reorganization under a crushing debt burden. It has cut less than 5% of a workforce of more than 10,000 employees, amounting to hundreds of job losses as it streamlines its business and eliminates redundancies.

MARCH 15, 2008 — iHEART FILES FOR BANKRUPTCY

iHeartMedia Inc., the biggest U.S. radio broadcaster, filed for Chapter 11 bankruptcy protection after reaching an agreement in principle with investors over $10 billion in debt and a balance-sheet restructuring.  Private-equity firms Thomas H. Lee and Bain Capital's 2008 $26.7 billion purchase of Clear Channel Communications was overleveraged from the beginning.

OCTOBER 11, 2017 —   Original post…

The legendary conservative talk show host Rush Limbaugh is often credited with single-handedly saving AM talk radio with his unique ability to analyze the political scene and satisfy his audience. But who will save radio itself after an orgy of consolidation, restructuring, and refinancing? Expensive talent, the revenue generators in sales, management, and the people in engineering who keep the stations on the air are all at risk. Some believed technology was the solution, automating everything from commercial injection, playing of records, and centralizing traffic and weather reporting. Some believed that syndication was the answer and attempted to cobble together massive audiences which could be effectively merchandised to national, regional, and local advertisers. Few anticipated the impact of the internet where streaming music is constantly available – much of it individually selectable into your own pseudo-station and commercial free. Few anticipated a drop in the drive time audience as people moved closer to work and traded longer commutes for convenience. And certainly, the financial engineers in Wall Street did not expect the chickens to come home to roost when securitized debt began to mature, counting on a roll-over strategy to keep the Ponzi scheme afloat.

So what happens when you owe $20 BILLION in debt ...

iHeartMedia Liquidity and Financial Position

"As of March 31, 2017, we had $365.0 million of cash on our balance sheet, including $200.6 million of cash held by our subsidiary, CCOH. As of March 31, 2017, we had borrowed $305.0 million and had $38.3 million of outstanding letters of credit under iHeartCommunications’ receivables-based credit facility. As of March 31, 2017, this facility had a borrowing base of $421.2 million, resulting in $77.9 million of excess availability. However, any incremental borrowing under iHeartCommunciations’ receivables-based credit facility may be further limited by the terms contained in iHeartCommunications’ material financing agreements."

"For the year ended December 31, 2016, we adopted a new accounting standard that requires us to evaluate on a quarterly basis whether there is substantial doubt about our ability to continue as a going concern for a period of 12 months following the date our financial statements are issued. A substantial amount of our cash requirements are for debt service obligations. Although we have generated operating income, we incurred net losses and had negative cash flows from operations for the years ended December 31, 2016, and 2015, as well as for the quarter ended March 31, 2017."

"Our current operating plan indicates we will continue to incur net losses and generate negative cash flows from operating activities given iHeartCommunications’ indebtedness and related interest expense. Based on the significance of the forecasted future negative cash flows, including the maturities of the $305.0 million receivables based credit facility and the $112.1 million 10% Senior Notes due January 15, 2018, and the uncertainty of the outcomes of the Exchange Offers and Term Loan Offers, management anticipates that our financial statements to be issued for the three months ended March 31, 2017 will include disclosure indicating there will be substantial doubt as to our ability to continue as a going concern for a period of 12 months following the date the first quarter 2017 financial statements are issued as a result of uncertainty around our ability to refinance or extend the maturity of our receivables based credit facility, to achieve our forecasted results, and to achieve sufficient cash interest savings from the pending Exchange Offers and Term Loan Offers. " <Source>

and the number 2 radio powerhouse also in major trouble?

Cumulus Media Inc. recently started talks with two separate groups of creditors who own big chunks of the company’s $2.4 billion in debt, according to people familiar with the matter. The radio broadcaster faces key deadlines when most of its debt matures in early 2019. The talks could lead to a bankruptcy filing, according to people familiar with the matter. <Source>

Bankruptcy and Situational Awareness

The answer is simple. You seek the protection of bankruptcy to blow the creditors off, sell the valuable assets (including licenses) to another generation of investors and continue on turning electricity into money – but without the tremendous debt load. Already belts have been tightened, programs canceled, stations reconfigured, and people laid off. If you are one of the remaining executives or employees, you reduce your personal expenses and keep your eyes open for other opportunities.

NO LOVE AT THE DISNEY/ABC TELEVISION GROUP / ESPN (11/05/20)

NOVEMBER 5, 2020 — 300 LAYOFFS AT ESPN PLUS 200 UNFILLED POSITIONS.

ESPN Chairman Jimmy Pitaro announced that 300 people will be laid off as parent company Disney implements directt-to-consumer streaming.

“As you know, we value transparency in our internal dialogue, and that means in both good and challenging times. After much consideration, we will be reducing our workforce, impacting approximately 300 valued team members, in addition to 200 open positions.”

Original post…

It should come as no surprise that media companies, especially those with a movie and television component are suffering from consumer fatigue. Not only are re-jiggered and socially engineered projects failing, but the costs appear to be remaining steady. 

As per published reports, the Walt Disney Company will undergo another round of restructuring that will lead to the layoffs of approximately 300 people, mostly with in the ABC television group. The target is said to be a reduction of 10% of the units operating costs for an estimated savings of approximately $300 million. On the horizon is a younger audience with no particular affinity for over-the-air broadcast television or cable news programs. With internet streaming, most users are becoming agnostic to the delivery medium and the immediacy of watching a program when it is broadcast. Even with a decrease in advertising revenue, many companies saw their bottom line protected by increased cable, satellite, and streaming programming fees. 

For some companies, America’s divisive politics has produced audience increases, albeit among the older crowd. Some companies, like sport’s network ESPN, also owned by Disney, tried the politically correct route only to discover that sports fans did not like their sports delivered with a side of political correctness. 

It is best to remember the old saying: talent may come and go, bottom-line production may come and go, but “suits” (executives) simply rotate through the system – grabbing everything they can while full well knowing that their longevity is linked to hit programs and the bottom line. 

This is not the first batch of layoffs for Disney who laid off a number of people in their consumer products and interactive media units in 2016 and was widely excoriated for outsourcing some of its IT work to foreign workers – while demanding that existing employees train their replacements in order to obtain their severance package.

However, the greatest competition is not coming from the major companies, but user-created content. With the price of high-quality digital cameras, software-based editing suites, and green-screen technology, the barrier to content creating has fallen significantly and companies such as YouTube are allowing advanced amateurs to monetize their product. Without major fixed overhead and high-priced talent, many smaller content creators are more than willing to settle for less money and to own their branded niche of the market.

Disruption is coming. Are you going to be the one asking, Am I Next?