Lew Dickey owns Cumulus, Second Only to Clear Channel

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Lew Dickey owns Cumulus, Second Only to Clear Channel

Postby jon » Sun May 27, 2012 8:04 pm

The following is from a BusinessWeek article about Cumulus' best shot at unseating Rush Limbaugh, the Mike Huckabee Show. I've included the bio of Lew Dickey, a man with radio in his veins, but a very different point of view.

The full article is here: http://www.businessweek.com/articles/20 ... n-limbaugh

Lew Dickey is 49 years old, with blue-gray eyes and blond hair parted on the right. Seated in his office overlooking the neighborhood of Buckhead, Atlanta’s downtown in the distance, he speaks in quick sentences about transforming Cumulus from a collection of radio stations to a diversified media company delivering content through television, the Web, and social networks.

In addition to the Huckabee show, Cumulus has launched Geraldo, Dr. Sanjay Gupta’s medical show, and Radio Perez, a celebrity gossip show with Perez Hilton. The company has also started a national weather and traffic reporting service, which will be syndicated, like all its new programming, both to Cumulus-owned stations and to those operated by competitors.

Dickey believes that he can use radio to launch a multimedia empire. This may sound grandiose, but consider his success so far. “Lew doesn’t sleep very much,” says his brother John, co-COO of Cumulus Media. “It’s hard to keep up with him.”

Dickey was born into the radio business and treats it like science. His father Lew Dickey Sr. bought his first local radio stations in West Virginia and Ohio in the late 1950s. Lew Jr. worked at the stations, but his first love was golf, and he was good enough to secure a scholarship to Stanford University. After graduating, he returned to Toledo, an English major with a head for figures but no clear idea of what he wanted to do, until he realized there was money to be made providing radio stations with better information about their listeners. “I always considered myself an amateur sociologist,” he says. “I was always interested in consumer behavior.”

In 1986, the 24-year-old Dickey founded Stratford Research, which provided music and program research to radio stations throughout the Midwest. (Stratford now functions as the research division for Cumulus.) You can blame Dickey for the rigid stratification of formats that took hold in the late 1980s, forcing listeners into classic rock or urban contemporary ghettos where the playlists don’t vary—and where you will never hear a song that hasn’t been tested by hours of research. “More of what you want, more often, and less of what you don’t want” is how Dickey describes his broadcast model.

With just six employees, Stratford generated a few million dollars a year and allowed Lew to forge relationships with hundreds of radio station owners and programmers across the U.S. While he was at Harvard Business School in the late ’80s, he continued to run his company from his dorm room. Two years after getting his MBA, in the fall of 1992, Dickey put together his first acquisition, buying two bankrupt radio stations in Atlanta, WCNN and WALR.

After interviewing 750 Atlanta listeners, Dickey relaunched WALR as an urban contemporary station, playing hip-hop artists like Master P and Dr. Dre and renaming it KISS 104.1. Within 90 days, the station had gone from fifteenth to fourth in the market. It has been in the Top Five ever since. In 2000 he sold WALR to Cox Communications for $288 million.

Dickey also took advantage of deregulation, which allowed one owner to control up to eight radio stations in a market and lifted the cap on the number of stations an operator could own nationally. In 1997 he and venture capitalist Richard Weening raised $120 million through debt and equity to found Cumulus. Dickey focused on buying smaller stations in midsize markets. “I was doing two or three deals a week,” he recalls. “It was the Wild West. These weren’t offering memorandums served up by an investment bank. This was a commuter flight and then a rental car and then a long drive down a dirt road to go see septuagenarians who had had these stations in their families for generations.” By 2000, Cumulus had acquired 300 stations.

As Dickey and his brother bought and consolidated stations, they earned their reputation as efficient cost-cutters. “I don’t relish that reputation,” says John Dickey. “You don’t want to be good at it, but you have to be.” Of his approach to business, Lew Dickey says, “We’re dead-ass focused.” It helps that Dickey doesn’t have many distractions. He lives alone in a five-bedroom house in Buckhead, not far from Cumulus’s headquarters. In 1997 he jilted his fiancée, local television reporter Kimberley Kennedy, calling her into the priest’s office at the church, according to Kennedy’s 2009 book Left at the Altar, to tell her, “I just can’t do it.” Dickey ended up taking his brother on his honeymoon trip to the south of France.

In September 2011, after Citadel Media, owner of the old ABC radio network of large market stations, emerged from bankruptcy, Dickey bid $2.4 billion for it. Citadel was debt-free and immediately delivered an additional $254 million in earnings to Cumulus. “As soon as we saw that balance sheet, we knew we wanted those assets,” he says. It was a rare case where the acquirer ended up with a stronger balance sheet after the deal. In what The Deal magazine called the “M&A deal of the year,” Cumulus doubled in size. Dickey rewarded himself with a huge bump in compensation, taking $20 million in cash and equity in 2011.

The acquisition made Cumulus Media the U.S.’s second-largest owner and operator of radio stations, with a presence in virtually every major market. Creating nationally syndicated programming to take on the giant of the industry—Rush—is just one part of Dickey’s strategy to challenge 40-year-old Clear Channel and its 850 stations. Another is SweetJack, a coupon and deal-of-the-day website, launching this month, which will use Cumulus’s national radio network to drive traffic to the site. “To compete in the digital world, you need massive scale,” says Dickey. “You can’t launch your own social network in just Buffalo, N.Y., and think you have a chance. Well, we have that scale.”

The plan is simple: Cumulus radio stations will be broadcasting local ads in every market, offering, say, a great deal on Ray’s Pizza in New York City through its WABC station. Several times a day, ads will push listeners who want that deal to go to SweetJack and sign up, just as one does at Groupon (GRPN) or LivingSocial, and then download their coupon and go shopping. Cumulus wins by building SweetJack and charging the local business. “No radio station sells 100 percent of its advertising time,” Dickey says. “We can profitably use up unsold time and create a new platform to reach advertisers who couldn’t otherwise afford us.”

Dickey is so confident about SweetJack’s prospects that he is hiring 400 staffers to work exclusively on the project. He has even partnered with the enemy: In exchange for $80 million in advertising on Clear Channel stations, Cumulus will give digital streaming rights for its radio stations to Clear Channel’s digital initiative, IHeartRadio. Dickey’s goal is to transform Cumulus into a digital media company, with the attendant valuation of such businesses. “If we can demonstrate that radio can be used to build these new brands, then of course we will be valued differently,” he says.

“Of course, we have to execute on all of this. The Mike Huckabee Show. SweetJack. But we will. We will.” The first Arbitron (ARB) ratings that will include The Mike Huckabee Show will come out in June.
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