Grow Learfield

History of Learfield: A Buy-Sell Agreement

Recall the stock distribution we organized the business with in 1972:  Clyde 25%; Derry 25%; Baclesse 12.5%; Wunderlich 12.5%; Stiles 12.5% and Murphy 12.5%. Three years later, I wanted some sort of an agreement whereby stock owned by any of the shareholders would not go to their estates in the event of their deaths or withdrawal but instead would could be repurchased by the company or the remaining shareholders; we needed some sort of an agreed-upon orderly procedure. Candidly I'd worried about these eventualities for a year or more.  First, unlike the others, Derry and I had much at risk.  Second, we were beginning to see this business might make it. And, third, three of these shareholders were older. But Jack Murphy's death in July, 1975 set off exactly what we didn't want to have happen. 

As I posted on March 6th, after Jack's death the remaining shareholders made an offer to Jack's widow, Lela, to buy back his shares. She agreed, but changed her mind after consulting her lawyer.  His advice (Download PDF) was surely sound.  Further, if she could become a director, she'd earn monthly director's fees and it looked like the value of the business would only rise.  She became a good board member, but what would become of her stock upon her death?  Would it go to her nieces and nephews? 

Derry brought up the subject at the August,1976 meeting saying he didn't know what form this should take, but that something needed to be in writing in the case of the death of a shareholder.  George Stiles recommended his Kansas City lawyers, Gene Sands or Rex Fowler with the firm of Dietrich, David, Dicus, Rowlands and Schmitt. I went to Kansas City to meet them and they came to our board meeting the next month to discuss the first draft. Buell's lawyer offered suggested changes; Lela's attorney suggested she not sign any agreement. But at the December meeting--and upon a motion by Lela Murphy--a final document was presented, agreed to and signed. (Download PDF ).

The document served us well. Over the next nine years it provided the orderly transfer of ownership for four exiting shareholders.

--clyde

History of Learfield: Those Durn Line Costs

By far our largest expense in our early years was distribution costs:  what we paid AT&T for our leased lines.  In 1975 we paid AT&T $80,500 which was 25% of our expenses!  And, in 1976 it grew to $105,000 or 28%.

AT&T was a monopoly.  It was "the telephone company"--the only one.  "Baby-bells" like Southwestern Bell or Atlantic Bell operated regionally but were owned fully by AT&T.  Because we operated in multiple states we were under AT&T's tariffs--or rates--which were set by the FCC. The baby-bells' rate structures were overseen by state regulatory commissions.  (Isn't this something that's hard to imagine in today deregulated environment?)

Historically the FCC required Ma-Bell to average its costs across America to arrive at its rates.  Thus the per-mile rate for our lines was the same everywhere.  It cost the same everywhere to add a point based simply on mileage to the closest existing point on the network.  But AT&T wanted to change this rate structure.  They wanted to charge their customers based upon what it actually cost them to add a point.  No doubt that it cost them much more to add a rural point than an urban one.  Just think about the "size" of cables between two urban areas and the large number of customers to divide that cost.  On the other hand, it was expensive to add rural points because of the low density of usage.  It is sorta like postage.  No doubt it costs more to deliver a letter in rural areas than it does to a  dense apartment building.  But still in America postage is the same for everyone--averaged across all users. The AT&T rate adjustment case was called the "Hi-Lo" case because of High density vs Low density.  I'd never heard of the case.

But in March, 1976, I got a call from Michael Yourshaw of the Washington Office of Kirkland and Ellis convincing me that we'd be put out of business--or at the very least badly hurt--if this AT&T rate case prevailed.  He offered to represent us at no cost if he could use our company as an example of damage.  In doing so we joined "the Press Parties" in this case:  AP, UPI, Reuters, etc. Good company. And, the good guys won!  (By the way this was the first--and last--time a lawyer worked for us for nothing!!)

Another, more lasting, benefit was the new relationship we had with a DC law firm.  Yourshaw and I became great friends.  He was so different from much of what I'd been around:  Exeter Academy, Harvard, Harvard Law, and now a silk-stocking firm.  He was off-the-wall bright, a good family man;  we enjoyed sumptuous lunches and dinners at the Prime Rib near their 1776 K Street Office.  (I  entertained the Team Services group there a year or so ago.)  Kirkland and Ellis was a Chicago firm with a long history in media.  Former FCC commissioner, Richard Wiley and some of his friends took K&E's Washington office maybe ten years ago and now it is known as Wiley Rein.  Another interesting tidbit is the fact that a good friend, Congressman Jim Slattery, went to Wiley Rein after he lost his bid to become governor of Kansas.  Now Slattery handles our account there--or did until he left to run for the US Senate from Kansas.  For 32 years we've been associated with our good friends at Wiley-Rein.  And it began over AT&T's efforts to raise their rates.

--clyde

Clarice's 30th Year at Learfield

Clarice Brown has been at Learfield 30 years! She's now over accounts payable and financial reporting, but through her 30 years she's been a secretary, receptionist and in charge of traffic. It was that traffic function where she really proved her worth handling all logs and billing too for all networks.  She learned and operated our first computer -- an Apple. Ask her about that!

Clarice grew up in Jamestown, MO. She is the daughter of Harold and Marie Gentzsch who still farm those rich Missouri River bottom lands.  She was married at 19 to Mike who died of a sudden coronary in 1997; they have two boys: Thomas, 23, and Jason, 20. Clarice still lives near Jamestown with her friend, Jesse Emmons, on a delightful farm complete with a lake and lots of flowers. Gardening is her passion -- particularly day lilies.

Right out of high school she went to work for the Missouri Public School Retirement System and two years later --at age 20-- joined us. When she started April 17, 1978, she was the 12th person on our staff joining me, Derry, Jim Lipsey, Dan Coons, Verni Brownfield, Beryl Rosenmiller, Jeff Smith and Matt Jarrett at the farm office and Bob Priddy, Ken MacNevin, and one other in Jefferson City. 

Needless to say, Clarice is a big part of our family. Call her at 573-556-1207 or drop her an e-mail at cbrown@learfield.com to congratulate her. 

--clyde

History of Learfield: Daily Stand-Up Meetings

In those early years, when we were much smaller, each morning the executive team would come to my office for a 10-minute stand-up meeting. Thats right, no sitting. We all stood around the room and everyone reported:  engineering, accounting, sales, affiliate relations, sports, news, ag, etc. So, everyday (when I was n town) we met in my office at 9 am sharp. Usually these were informative and inspirational.  Occasionally a fight would breakout. Not fisticuffs, but durn near. It was hugely valuable because this way everyone was up-to-speed on company goings-on.  Of course then, the whole company was smaller than most units today. 

Now, each manager manages how she or he feels is most effective.  Some have daily stand-up meetings, I'm sure. Others hold weekly, longer, sit down meetings. The purpose isn't so much problem solving, as it is communication. Everyone needs to know whats going on. I'd be interested to know how you communicate within your area.

I know Learfield Sports SVPs meet monthly for two days for communication.  Roger, Greg, Stan, Andy and I meet monthly (for three days usually) to communicate.  In fact, we met in Jefferson City Monday and Tuesday of this week.  Stan was in charge this time and he led us through personal growth exercises; it was fun and challenging. 

--clyde

PS: We know in our heart that Scott Adams wouldn't object to us posting his delightful strip if he knew it was part of our company's rich history. But just in case, his a link to his blog.

History of Learfield: Exclusive Rights

Mizzou AD, Mel Sheehan, must have attended an AD meeting somewhere in 1976 and learned how some schools were offering exclusive radio rights for their broadcasts, and making huge bucks in the process from the exclusive rights-holder.   Because in 1977 Sheehan sent out a formal RFP (Request for Proposal), seeking a vendor to handle his radio rights.  I recall being dismayed at the idea of paying the University for something they should be paying me for!  Heck, we were providing a great service and not making all that much. 

Recall that in 1974 we began subleasing our lines to the network.  In 1975 I sweetened the deal by asking for the 60-second commercial avail between quarters (which I sold to Pabst Blue Ribbon Beer).  In 1976 I asked for more inventory--and a pregame show, a half-time show and a post game broadcast.  The RFP asked how much I'd be willing to pay the University for these exclusive broadcast rights.  I replied: "nothing"; I put zeros in each blank.  Goose eggs; Nada.  And, since we were the only company to submit, we won!  (I shouldn't have been so cocky.)

However, in 1978 things came under scrutiny.  We had a new athletic director, Dave Hart, who canceled our contract and rebid.  He'd been "around the block" and was shocked at how little Missouri was getting for their statewide radio network contract.  So there was a new RFP issued early in 1979 to begin that fall. 

There were three bidders:  Us; KSD Radio, St. Louis and an outfit called Sports Network, Inc. (SNI) comprised of three individuals:  Frank Bick of Suburban Newspapers, Greg Maracek, a sports columnist for Bick's papers, and St. Louis Football Cardinals kicker, Jim Baakken.  We teamed with KSD so that effectively took them out of play. SNI said their flagship was KMOX and offered the University $143,000.  We offered $145,200 per year for the two-year deal.   In spite of our larger cash bid, Hart awarded the exclusive rights to SNI primarily because of their association with KMOX and the play-by-play of Dan Kelly. 

I was dejected.  But I went to SNI hat-in-hand and sold them our lines on Saturday afternoons.  And, I told myself, we'd win next time. 

--clyde

History of Learfield: Learfield Sports

Many ask me:  "So, how'd you get from farm broadcasting to sports?" The answer is simple:  we had full-time leased lines and the University of Missouri network wanted to use them on Saturday afternoons. They were paying about $12,000 a year, I told them I'd charge them $6,000. All of my stations were carrying the games anyway; so it was a win-win deal. Now a little history.

The Missouri Sports Network had been around since 1948 growing to 33 affiliates through the 50s. It was surely one of the earliest college radio networks in the nation. Coach Dan Devine's successes in 1960 with an undefeated season and a national ranking and continued success through the decade helped the network reach 56 affiliates. Only eight stations carried basketball. Until 1973 the "flagship" of the network was Columbia's KFRU, and its owner, Mahlon Aldredge, did the play-by-play with "Sparky" Stalcup on color. In 1973, after encouragement by Athletic Director, Mel Sheehan, KMOX took over as flagship. Nothing was exclusive as KCMO in Kansas City also carried its own description of the home games and KSD, St. Louis, provided play-by-play some years. 

Judd Wyatt was the colorful, elderly, Director of Advertising, for MFA, Inc., the corporate sponsor of the network broadcasts. He contacted me in 1974 and asked if I'd be interested in sub-leasing my lines on Saturdays and that's how the deal was struck. By the fall, we'd moved studios from our offices on Dunklin Street to "the farm." But because the telephone company couldn't run the game broadcast "back-haul" loop to Centertown, I sat up shop in an old house on Dunklin for those games. I'd go in each Saturday and make the connection--between the backhaul and the network's "head end". We didn't have anything to do with the broadcast other than this connection--no commercials, no programming. 

But it was the beginning of something really big. And, as you'll see over the next several weeks on this blog, it was fun and competitive. So, as they say, stay tuned.

--clyde

History of Learfield: Steve Curran

The head of advertising for a good potential client, Missouri Rural Electric Cooperatives, was a guy named Tom Curran. He was kinda slick, if you know what I mean, and had refused to buy us. One evening he held a block party at his home and invited Sue and me. One of the bartenders was his brother, Steve.

The next day, I called Tom, thanking him for the evening. The conversation turned to his brother Steve, barely out of high school; who it turned out had left home in Tulsa, moved to Jefferson City and needed a job. Tom asked me to hire him. Well, we were in no position to hire anyone but Tom made me an offer I couldn't refuse: If I'd hire Steve, he'd get me an order from MREC that would more than compensate me for my trouble. So I did. And, so began a 32-year friendship. Steve's now in St. Louis. He shares memories of his time at Learfield.

I know now what I did in accepting this advertising contract was wrong.  Several years later--and after Tom had been canned--I confessed my mistake to Frank Stork, the President of MREC.

--clyde

History of Learfield: First AE

I was our first salesman.  And Jim Lipsey was our second.  But the two of us did lots of other things as well.  Our plates were full.  In November of 1975 I asked the Board for permission to hire a full-time sales executive and in December I hired a young man who'd previously sold books for Southwestern named Steve Counts.  He was from West Central Missouri; and a good guy.  We opened an office in Kansas City for him and he was to also work New York and Chicago. He lasted five months.  So, at the May meeting...

"Lear reported upon the resignation of Steve Counts, manager of the Kansas City office.  Lear suggested three moves be undertaken:  First, closing the Kansas City office; replacing sales efforts there and in Chicago and New York by himself; the hiring of a second secretary so that some of the administrative workload could be transferred to the clerical staff; a search be instituted for another salesman...but that no urgency be put upon this so that a good man could be found.  Lear said that Steve Curran would be used some in Kansas City."

Sorry, ladies we were definitely sexist back then.  And, I'll write more about Steve Curran in a future blog.

--clyde

History of Learfield: Dick McHargue Network

We were a thorn in the side of the Missouri Farm Bureau for two reasons.  First the MFB had its own market reporting service that provided any radio stations with market reports via telephone--free.  The simple credit "reporting from the Missouri Farm Bureau" was the only tag line they wanted.  They liked the promotional benefit.  Now radio stations were carrying Derry Brownfield's network and they were out.  Second, they couldn't control Derry; he'd say what he thought.  That attitude caused bad blood between the two.

So when they learned they couldn't buy us, they'd compete. They hired Dick McHargue of KHMO, Hannibal, and started "The Dick McHargue Network."  Also delivered by land lines, the difference was the way they did business:  They were a "representative/programming network"  It was a smart move on their part.  Recall, we were a full-network in that we kept every dollar we sold.  The station got a local availability, but no money on the sale of spots carried from us on their station. Further, the advertisers had to buy the full network--all or nothing.  McHargue's Network was different in that it sold advertisers only the stations they wanted and then rebated to the station a portion of the money.  That way the station made money and the advertisers only had to buy the stations they wanted--no waste. I stood to lose all my strong affiliates. McHargue was going in to each of my best affiliates telling them they'd get paid for spots if they'd go with him.  I stood to lose my business entirely.  Drastic action was called for.

I successfully blunted the effort.  But it took creativity.  First, I knew they'd only go after the really strong stations in the best farm areas such as KMMO in Marshall; one of the top-producing counties in Missouri. I knew they didn't want those radio stations serving marginal ag counties.  Second, I knew advertisers were willing to pay hefty prices for only the best-located radio stations.  So, I started by ranking affiliates according to quality to my advertisers and then paying those affiliates on a sliding scale.  It was a complicated scheme.  And, I admitted to station managers why I was doing this.  They liked me and went along.  While it eroded profits on the short run, it both saved the business and it allowed me to increase my card to advertisers.  Soon McHargue and the Farm Bureau went away. 

What did I learn?  (1) Being in the marketplace first is critical; (2) You've got to be nimble and quick in business; (3) Don't be so prideful you won't change; (4) strong relationships built over time serve you well in hard situations; (5) Marketplace knowledge will carry the day, and (6) you may need to sacrifice today to eat tomorrow.

---clyde

History of Learfield: Full Recourse Loans

Bankers want lots of security.  They aren't in the risk business.  They're more than willing to loan a business money but they want to be darn sure they can get it back--with interest.  So, they take as security (collateral) a business's inventory, its property, its accounts receivable, its equity and when all that isn't enough, they ask the owners to personally pledge everything they own.  Even today, I have personally pledged all my personal assets to secure Learfield's debts.  These debts are called "full recourse loans" in the banking business. And our pledge of personal assets is called a "personal guaranty". 

When we first started, we'd never been able to make a go of it without the personal guaranties of Buell, Jack, George and Jim.  Derry and I simply didn't have personal wealth.  But these guys did.  And bankers--being as they are--also required the wives to sign as guarantors.  That makes getting to the money in the case of a default much easier.  Further, each was secured jointly and severely.  That means that the bank can get all of its money from the wealthiest; it doesn't have to get equal parts from each.  (I know it sounds wrong and it is)  So, you can see that we appreciate these guys, and their wives, for their willingness to jump in and to sign on to this debt.  Without them, we'd never made it. 

Another funny story:  On a routine note renewal, I circulated the guaranty form for each of the six of us and our wives to sign.  I had everyone's signature but for Jack and Lela Murphy's.  So, I called him and drove over to his Columbia office to get them.  After he signed, I explained I also needed Lela's.  He grunted and ask me to ride with him out to his house.  We pulled up to his beautiful home and I started to get out, but he asked me to stay in the car and wait.  Maybe 30-minutes later he returned, got in, handed me the form, yet unsigned by Lela.  "She won't sign" was all he said.  And, she never did.  I'd loved to have heard that conversation, wouldn't you?

--clyde