Will a White Knight Save Air America? - Newsweek Article [View All]

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http://www.msnbc.msn.com/id/16253873/site/newsweek/

Dead Air?
Less than three years after launch, Air America's last hope lies in finding a white knight.

Web Exclusive
By Matthew Philips
Newsweek
Updated: 11:57 a.m. PT

Dec. 17, 2006 - After filing for Chapter 11 bankruptcy in October, liberal talk radio network Air America has spent the past two months looking for someone to buy it out of the $40 million hole it has dug itself since launching in March 2004. With reports of potential buyers ranging from a group of investors led by two Showtime executives, to a small obscure media
company, this week the network finally confirmed that a letter of intent has been signed by an undisclosed potential buyer, and that negotiations have now turned to drafting a purchase agreement to divvy up the $20 million of debt the broadcaster owes to a roster of more than 100 creditors.

It’s still anyone’s guess as to what shape Air America will take if and when it re-emerges under new ownership, especially amid reports that one of its biggest stars, comedian Al Franken, may leave the network to launch a campaign for the Democratic nomination to challenge Minnesota Republican Sen. Norm Coleman in 2008. (Franken is currently on a USO tour in Iraq and Afghanistan, and couldn't be reached for comment.) The prevailing sense among media watchers, though, is that Air America is a failed enterprise. The only question is why.

A look at Air America’s bankruptcy filings offers insight into an impatient network that seemed bent on catching up to such industry mainstays as Rush Limbaugh practically overnight. Air America certainly spent like the big boys. Included among its $4 million of assets is a combined $1.2 million in broadcast and recording equipment, computers and office furniture. It still owes $327,000 in back rent on the sprawling 2,200-square-foot studio in New York's Chelsea area it built in 2005, as well as $1.4 million in wage and severance claims to on-air talent and high-priced executives. Franken alone is owed more than $360,000.

By the end of 2005, the network was more than $28 million in the red. Ten months later, it had lost an additional $13 million. After it filed for Chapter 11 on Oct. 13, 2006, RealNetworks CEO Robert Glaser, who owns 36 percent of Air America and who, at $9 million, remains its largest creditor, formed Democracy Allies, an investor group that offered up an additional $2.6 million in financing to keep the network afloat. “There was never a realistic business plan that appreciated the difficulty of building a 24/7 radio network from the ground up,” says one former Air America CEO who asked to remain nameless due to the network’s ongoing negotiations. He said that in the beginning, the network was plagued by infighting between those who saw it as a political cause that would take years of dedicated subsidizing, and those who saw it as a viable business venture capable of turning a profit off the bat. “The latter group of people were deluding themselves,” he said, noting that the programming costs never came close to matching up with revenue opportunities, particularly as companies such as Microsoft, Wal-Mart, Visa and Exxon began pulling advertising from Air America affiliates. “It was doomed by their lack of realism.” According to former and current Air America employees, the network was also undone by the tension that existed between the 100 or so moderately compensated production staffers, and the handful of well-paid executives.

“Within a few months of launching, our paychecks started to bounce,” says Martin Lynch, a former Air America producer who is at work on a book about his two and a half years at the network. “We were getting paid peanuts, sometimes not even that, while these executives were making six figures and up.”

Lynch says a key mistake was that Air America never hired a program director to keep radio hosts, many of whom had little or no broadcast experience, focused and on message. “A local radio station not having a program director is a bonehead move,” said Lynch. “For a national radio network not to have one, that’s like shooting yourself in the foot and trying to ski downhill.”

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