Why Pittman Won’t Quitman

A brief lesson in behavorial economics…

Well, that’s easy, right? He won’t quit because he’s making a s***load of money, and he gets paid to use his own private jet, and he’s got lots of power and perqs and that’s usually fun.

I know that because if it wasn’t, we wouldn’t have 87 year-old guys running to hold their seats in Congress where nothing ever gets accomplished and everyone hates you, but where you have lots of power and perqs. But enough about the least-liked people in America, and back to our economics lesson…

Sunk costs are costs that have already been incurred and cannot ever be recovered.

Clear Channel owes about $20 billion, give or take a billion, and they didn’t get a jumbo refi package that lets them pay 2.5% interest, which is why they keep trying to restructure their debt.

The interest they pay on their debt may be (meaning, almost certainly is) more than they are able to earn through advertising on their stations. The old negative equity loan. They not only don’t pay any of the principal, they don’t quite pay all the interest every year either.

Continually avoiding the reality of one’s debt by restructuring it for some future date is called kicking the can down the road. Our government (remember the old guys addicted to power and perqs that everyone detests?) does it, and our biggest radio group does it.

Delay. Delay, at all costs, because, in simple English (just in case anyone in Congress reads this) they can’t pay back $20 billion. Not now. Not in 10 years. Never.

The guys running Clear Channel are very smart. They know this, but they have what is known as an ‘incentive problem,’ because they are personally making money even while the company’s debt is growing larger.

But this economics lesson isn’t for them anyway. I don’t think Bob Pittman reads my blog, for obvious reasons.

I’m talking to all the rest of us, including the people who fund Clear Channel.

Because behavorial economics suggests that we are all prone to loss aversion and the framing effect and those psychological predilictions mean we don’t always behave rationally.

As consolidation in the United States takes some groups down an ever-less sustainable path, the costs to those of us who work in our business are clear. Radio is still shedding jobs, every year. That won’t stop unless at least one of the big consolidated companies is taken into bankruptcy.

Yes, we can hope.

I don’t rely on Clear Channel or Cumulus for one dollar of income, and if I did, I might think differently. I would probably write differently, but I hope not. I would think differently because of something called the sunk cost fallacy.

If you’ve put in 20 or 30 years in radio, it’s hard to walk away. Especially in this economy. Especially if you’re over 50. I get it. You’ve given your life to this. You want to hang on. You want to believe it will get better. You want to hope.

Just do yourself a favor:

  • Keep working on getting better, even if you don’t have a PD who critiques you, or cares much. Find a mentor, find someone with good ears who is honest and have them help you work on getting better.
  • Keep trying to join one of the “good” radio groups (Hubbard, Bonneville, Greater Media, South Central Media, the Alpha Group, et.al.)
  • Think about what you could do next and take real action to make that possible.

Be pro-active rather than re-active. Prepare yourself for what’s next, just in case, because “…your hour-by-hour mental conduct produces power for change in your life. Develop a train of thought on which to ride…”*

Radio itself is not the problem. Radio is healthy. Broadcast radio makes lots of money. But when you work for someone who is making millions to reduce costs, and whose plan for your station may (meaning: almost certainly does) include voice-tracking and job elimination, you need to think rationally, not emotionally.

You can probably do almost anything you want to do. The skill set you’ve honed during your career can translate to many other types of business. Think that through. Be ready.

Because Pittman won’t quit, man — and we probably wouldn’t either if we had his deal.



*See the full quote and author on the Home page of this site.


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