I take no great pleasure in talking about Radio One’s misfortunes, but it is really a sad story. I came across an article written by the Washington Post that brings retells the breakdown at the black owned company in great detail.
I remember hearing about a star-studded event the company held, less than two years ago that included– media moguls, politicians, black leaders and an list of entertainers including Aretha Franklin and Beyoncé – who gathered at the J.W. Marriott for a black-tie gala to celebrate the 25th anniversary of Radio One, the black broadcasting empire that Cathy Hughes and her son had built from a single radio station in Washington, D.C. Cathy Hughes is worthy of admiration and respect because she was a trailblazer who provided the black community with its own media outlet. But there were problems lurking as they held that star-studded even. The company’s fortunes were falling and advertising sales beginning to slump as bigger competitors had moved aggressively into Radio One’s hip-hop and rhythm-and-blues formats, and listeners had begun to migrate from traditional radio.
The company was struggling under the weight of a heavy debt load taken on to buy up stations, many at the height of the telecom bubble, and later to finance its initial forays into television and the Internet. Its stock price, which had peaked at $20 a share in spring 2004, was down around $7. Last year, Radio One posted a net loss of $387 million after its sales fell even faster than those of the industry generally and it was forced to write down more than $400 million in the value of its radio licenses. Several of its top executives quit or were forced out, its credit rating was cut, and it was forced to sell off several stations to raise cash. Because of accounting errors, the company restated several years of earnings and has been caught up in the Securities and Exchange Commission inquiry into backdating of stock options. This is pretty bad and it looks dire for Radio One. I hope that the company will be able to turn itself around and attract investors or it will be bought out by another media company with deep pockets.
Radio One had come to symbolize the entrepreneurial aspirations of Washington’s black community. But we must be reminded that the story is also one of a management team and a tightknit board of directors who have overreached in their strategy, underperformed in executing it and sometimes put their own interests ahead of those of their public shareholders.
The most egregious example is the new compensation packages recently awarded by the board to Hughes and her son, Alfred C. Liggins III, the chief executive. Under the agreements, Hughes, as chairman of the board with no clearly defined executive responsibilities, will receive an annual base salary of $750,000, along with a potential bonus of $250,000. That compares with a 2007 salary and bonus of $560,000. They knew what the company faced and was up against, but they put their own self-interests above the shareholders and the other stakeholders.
Liggins, who in addition to his base salary of $575,370, last year earned a bonus of $468,720 for turning in the worst financial performance in company history. Going forward, the board has determined that Liggins is apparently so valuable and essential that his base salary has to be increased to $980,000, with a potential bonus of another $980,000. As the article states, maybe all this should have been expected at a company where, thanks to an unusual governance structure, Hughes and Liggins control 88.3 percent of the votes at the annual meeting. It certainly fits with the picture of a company that, in the past, has lent its top executives large sums to buy company stock – $21 million in Liggins’s case – and purchased radio assets from, or entered into programming agreements with, companies owned in part by members of its board. This is not illegal, but it is run as a private company, though it is a public one.
I guess maybe they should take the company private and stop stringing shareholders along, who believe in its vision. I think, like the article says, Cathy Hughes and son should find a private-equity firm or lender to buy them out, pay the shareholders a small premium and buy the company back. Let’s find a way to stop the bleeding and save the company in some form before it collapses and is worth virtually nothing to the shareholders and a helluva bargain to someone else. It is, indeed, a very sad story at what is occurring at Radio One. Cathy Hughes believed in her dream against seemingly insurmontable odds and she won, but she may have lost that vision somewhere along the line, coupled with the rough economic reality of operating in a narrow market. Just my thoughts, you be the judge…..
Filed under: Alfred C. Liggins III, black-owned radio station, Cathy Hughes, Radio One, TV One
Black Political Thought 