Are Cumulus Media’s NASH Plans Serious, or Just Sizzle?

nashYou see the brown ‘N’ to the right there? If Cumulus Media and its CEO Lew Dickey have their way, in the coming years it will be one of the most recognized brands in North America, especially if you’re a country music fan. The plans that Lew Dickey has for that big brown ‘N’ are ambitious to say the least, and look to permeate just about every segment of the consumer culture of the United States.

Though the flagship for the NASH brand is the Cumulus stable of 70 country radio stations, with access to another 390 Cumulus-owned stations across the country and 1,500 more through the Westwood One radio network, Cumulus and Lew Dickey have made it known that they want to have the NASH brand travel much farther than radio. Cumulus has already secured a deal with long-running periodical Country Weekly to rebrand to NASH Magazine. They have also announced their plans for NASH-branded restaurants and food to solidify the big ‘N’ outside of music. They also reportedly want to make NASH-branded consumer products such as clothing, furniture, and even designer paint. NASH trim packages for trucks could be on the way, and all this goes together with NASH branded tours and musical events, TV specials and online streaming events.

And recently announced, NASH is partnering with Scott Borchetta’s Big Machine Label Group to create a new home for older country artists from the last 25 years called NASH Icons, with the intent of taking talent forgotten by country music’s current Top 40 formula and giving them a new home on the radio, while also releasing new music from older artists through the NASH Icons record label. This talk has country music in a tizzy about how the partnership could enact a format split in country music.

Yes, there’s a whole lot of NASH going on.

Though there has certainly been a rise in interest in country music over the last few years as the genre has branched out to lure in fans of rock, pop, and hip-hop, the plans Cumulus Media have for NASH still come across as quite grandiose and involved, especially for a company that is saddled with tremendous debt, and is facing across-the-board double-digit ratings declines in many of its key markets, including with some of its key NASH stations. It’s flagship country station in New York is floundering, its high debt is eating into any positive revenue news, and it all makes one stand back and wonder, is all this NASH rhetoric real, or is it all smoke and mirrors? Is NASH simply “sizzle” to keep the Cumulus investors and partners believing in Lew Dickey’s vision, or is it the next big event in country music?

Let’s take a look.

The Debt and Revenue Issues

To say that Cumulus is leveraged heavy with debt doesn’t even begin to explain the half of it. The company currently owes roughly $2.23 billion to its debtors, and simply the interest on those loans sufficiently eats into the company’s profits on a quarterly basis. Cumulus is in a situation where even when revenues increase, debt interest still cuts deeply into profits. In December of 2013, Cumulus was able to refinance their debt in a move that will save them roughly $30 to $35 million in interest costs according to Moody’s, but the sheer size of the debt promises to weigh the company down and any of their plans for the near and long term.

As for revenue, for the first quarter of 2014, Cumulus reported a net loss of $9.27 million. This is worse than the $8.99 million loss from the first quarter of 2013, meaning Cumulus continues to lose money, and lose money at a growing rate. There is a small silver lining though. Revenue is actually up for the company. It increased $10.5 million to $292.0 million in the first quarter of 2014 from $281.5 million from Q1 of 2013. The reason for the discrepancy between revenue and net profit? The company’s debt and other expenses eat into any income. Leveraging even more debt and expenses through expenditures or acquisitions may turn the current financial formula even more unfavorably against Cumulus if more spending is necessary to see their plans for the NASH brand materialize.

The Ratings Issue

Simply put, the ratings for many Cumulus Media radio stations are awful. A recent move to replace conservative talk stalwarts Rush Limbaugh and Sean Hannity on Cumulus with the less-combative Michael Savage has seen a massive ratings dive for the company’s stalwart talk radio franchise. Ratings are down for many of the Cumulus NASH stations as well, including the flagship in New York City where NASH’s syndicated “America’s Morning Show” originates. The show is currently pulling a 1.9 share in New York, which is only good enough for 19th place in the city. In many markets, Clear Channel’s Bobby Bones Show is handedly beating its Cumulus counterpart. In Nashville for example, NASH’s affiliate WKDF-FM 103.3’s ratings are down 45% from a year before, partly due to the fact that Bobby Bones, who bases his show out of Nashville, and has taken over the market’s #1 spot.

Here is a breakdown of some other Cumulus stations, and their precipitous slide:

  • WABC/NY down 44%
  • KABC/LA down 52%
  • WLS/CHI down 57%
  • KGO/SF down 58%
  • KSFO/SF down 38%
  • WBAP/DAL down 32%
  • WLS-FM/CHI (Classic Hits) down 45.9%
  • KLOS-FM/LA (Classic Rock) down 24.6%
  • WGVX-FM/MN (Sports) down 80.8%
  • WKDF-FM/Nashville (Country) down 45.2%
  • WDVD-FM/Detroit (Hot Adult Contemporary) down 38.3%
  • KBEE-FM/SLC (Hot Adult Contemporary) down 50%

 

The Signing of Artists for NASH Icons

Who Scott Borchetta of Big Machine can sign to the recently-revealed NASH Icons label is going to be key to the success or failure to the venture, or its potential in instigating a format split for country music. On May 27th, in a moment that smacked of publicity sizzle, Lew Dickey announced that Scott Borchetta was aggressively looking to sign Garth Brooks, Faith Hill, Alan Jackson, Shania Twain, and other big-name country stars to the NASH Icons label. “I would look for Scott to make an announcement in the next 30 days,” Lew said, but is Lew just name dropping, and does any label owner, even one with the power of Scott Borchetta, really have the ability to sign a whole stable of big stars in such a short period?

Just because a label wants to sign artists, doesn’t mean they can. Though the contract situations of any artist can be complicated, and buyouts and other such deals are always possible, as first pointed out by Windmills Country, Alan Jackson appears to still be signed with EMI Nashville, hypothetically making him untouchable by NASH Icons. Shania Twain is still signed with Mercury Nashville, and Faith Hill likely still owes Warner Nashville an album. So even if Scott wanted to sign three of these four artists tied to NASH Icons, it might take some serious money or maneuvering. Scott Borchetta has worked with Garth Brooks in the past, and country’s biggest ever superstar is poised for a big comeback at any moment now that his daughter has graduated high school. But it can’t be presumed Garth would work with Borchetta who may not want to sign up for Garth’s no iTunes cause, or a bevy of other major sticking points that could arise between the two big personalities.

For Lew Dickey to drop such prodigious names and expect big signings announced in the manner of a month seems presumptive at the least, and maybe misleading. We’ll see.

 The Lew Dickey Issue

lew-dickey

Lew Dickey

To say that Lew Dickey is unliked is an understatement when talking about certain sectors of the radio world and the media. Granted, many of Lew Dickey’s detractors can be found in the conservative media, and stem from Dickey’s handling of Rush Limbaugh and blaming Rush specifically for the precipitous backsliding of the company. Lew Dickey said Rush cost the company “millions” in the aftermath of a brushup between the talk show host and feminine activist Sandra Fluke in February of 2012.

But the Lew Dickey hatred goes deeper. Many radio personalities and insiders have a disagreeable view of Dickey for cutting local jobs to implement syndicated national programming, and generally gaming the radio system without regard for the future of the format.

There is a clear sentiment out there in portions of radio land that Lew Dickey is just puffing his chest out with NASH, and many of the promises for the name won’t be fulfilled, if only because the company won’t have the capital, financial flexibility, or managerial muscle to do it.

What is NASH, Really?

Even if Cumulus and Lew Dickey’s NASH dream becomes fully realized, there won’t be factories erected by Cumulus churning out pallets of NASH paint and leather couches with NASH’s big ‘N’ on the back. These products will likely be made through licensing deals Cumulus will strike with other companies to manufacture the actual products. While this scenario means it’s more likely the dream of an army of NASH products will find their way to a store shelf near you will actually happen, it also means the sale of those products won’t be as financially lucrative for Cumulus as they are for the actual manufacturers if they are successful. Lew Dickey’s bet is that the name recognition is what will pay off in the long run. Or, there may be very limited runs of these NASH products simply to help create a buzz. Or, it all just may be noise to create interest and support around the NASH endeavor and the Lew Dickey regime.

“Dickey is into branding just like on cows. And he is stamping the ‘Nash’ emblem on everything country,” says nationally recognized radio and media insider Jerry Del Colliano, who published a critical piece on Cumulus, Lew Dickey, and the company’s NASH plans on May 19th called “Tough Shareholder Questions for Lew Dickey“. “He may start selling products, or it may be bullshit. With Dickey, you never know.”

According to Del Colliano, NASH Icons is simply an excuse to consolidate more country radio stations under syndicated programming. Though on the surface it may somewhat solve the issue of “classic” country artists getting pushed out of the country radio format prematurely, it will exacerbate the issue raised by radio research company Edison Research at the Country Radio Seminar in February, that the lack of local focus and syndication by Cumulus and Clear Channel in country radio is killing the format.

“Where Cumulus now has a successful country station, [Lew Dickey] is forcing the morning talent out and replacing them with a weak nationally syndicated morning show that is not local,” says Jerry Del Colliano. “Dickey should have no problem keeping big investors on board because they don’t understand the radio industry and probably don’t listen to any kind of country music. They hear the sound of money from a shrewd CEO who is selling sizzle, because if ratings or revenue is a yardstick, he is failing.”

“[Cumulus] throws nickels around like manhole covers they aren’t going to spend ANY money on NASH,” continues Del Colliano. “It is one format for 100 plus stations some day. In other words, they pay for one station and fire everyone else. How is that investing in country?  It is hurting country by eliminating the local person center connection that is so unique to country music and artists. NASH is pop radio country style. NASH Icons will be traditional country but in a watered down cheap version. Icons is to be blunt just another format that will allow Cumulus to fire lots of local people and install a money saving 2nd national format. It could be Gregorian Chants for all the Dickeys care. This has little to do with country and lots to do with saving money by syndicating cheap national formats.”

As for why Scott Borchetta would deal with Lew Dickey and Cumulus, Jerry Del Colliano concludes, “Dickey is offering the promise of promotion that Borchetta likes, which is why he has similar deals with Clear Channel. Cumulus gets what it wants and Borchetta gets airplay. And what does Dickey want? Artists for on-air promotion, exclusives and free appearances in return.”

The next shoe to fall will be if, and who Scott Borchetta signs to NASH Icons in the next 2 1/2 week period laid out by Lew Dickey of when we could expect an announcement. In the meantime, what the true extent of what NASH, and NASH Icons will be, and if it could mean a new “classic” format for country radio will have to wait to be seen. For Cumulus, the venture may have no choice but to be wildly successful, because in the face of the implosion of their conservative talk business, and the move by many consumers to streaming alternatives to radio, NASH appears to be the centerpiece of the Cumulus plan to pull the company out of its current tailspin.

Jerry Del Colliano will be speaking at the “Talkers Conference in New York on June 20th.