Limbaugh and Cumulus must renegotiate their contract terms by the end of the year, so it's not surprising that they're jockeying for leverage.
But a source tells us that Cumulus has less to lose in this battle than most people think, and may even gain financially from Limbaugh's departure.
First, the back story: Cumulus CEO Lew Dickey recently told investors that the ad boycott of Limbaugh's show — after Rush called a Georgetown college student a "slut" on air because she favored contraception coverage in healthcare — may have cost him up to $2.4 million in sales. (Overall revenue declined $5.6 million.)
Another source in Cumulus just leaked to Radio Ink that 48 out of 50 of its advertisers had "no Rush" instructions on their media placements.
Limbaugh fired back, saying that Dickey is blaming him for his own sales failings. He's threatened to pull his show from Cumulus, which has a reported 15 million-person audience and $363 million in ad sales running on it.
Why would Dickey risk all that cash? Why not just re-sign Limbaugh and keep the business?
Our source says that if Limbaugh left, Cumulus would regain control of a huge chunk of its on-air ad inventory, time that currently belongs to Limbaugh. In that scenario, Cumulus' total sales dollars would actually go up as long as the replacement show — Mike Huckabee — held at least 50% of Rush's audience. Our source says:
Limbaugh is actually licensed by Clear Channel. Cumulus has to give up 50% of their on-air inventory to Clear Channel in order to run Limbaugh. These national "stop sets" are the "Rush" advertisers. So a company like Sleep Number buys advertising from the Rush Limbaugh ad team and it runs on all stations that run Rush every other commercial break. Cumulus doesn't get paid on this inventory. So by cutting Limbaugh Cumulus gets 50% of their inventory back plus any licensing fees.
Assuming the audience for Huckabee doesn't drop by 50% there is no loss in revs. Also Cumulus has been cutting any Clear Channel syndicated talent from their stations for a while. Cumulus is the second largest radio holding company in the US, so they view Clear Channel as a competitor. Also their revenues are sagging so they are looking for any way to boost them. They can't afford to give up the inventory for Limbaugh.
This is speculation, of course. It may all be mere pre-contract posturing. And the other side of this coin is that inventory doesn't sell itself — big stars with big audiences bring in the advertisers. It won't simply be the case that Cumulus can swap in some new voice to Limbaugh's slot and continue selling the same inventory at the same prices.
Clear Channel declined to comment for the record. We asked Cumulus for comment but did not get a response. We'll update this item if we hear back.
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