Radio Daze: Interep Hires Three, Then 150, Away From Competitor Katz

Weeks after Katz Radio Group raided one of Interep's biggest clients, the two biggest players in national radio representation opened up in pitch battle with a mass defection of Katz employees and executives to Interep.

More than 100 and as many as 150 employees have resigned from Katz since Friday, when three of the Clear Channel owned rep firm's executives jumped ship. Many if not all of the employees who left Katz joined Interep. The big question is why, since the move apparently took most people in the industry - not to mention Katz's top executive Stu Olds - by surprise. But it amounts to nuclear war between Katz and Interep in a battle for market share in national spot radio, which is about 20 percent of radio's overall revenues.

On Friday, Interep announced that Steve Shaw, Tucker Flood and Mark Gray had been hired for senior positions at the New York-based rep firm. Shaw, who has 18 years of experience, was named co-president and co-chief operating officer. Flood and Gray, who have up to 18 years of experience each, will occupy unspecified positions at the company.



The three executives' move to Interep came as a shock to the radio industry, which is so used to Clear Channel's dominant position in the marketplace that it's difficult to imagine the tables turning in such a dramatic way. Interep has felt the presence of Katz and Clear Channel in the past, most notably with radio station owner Citadel Broadcasting Corp.'s recent decision to move its business from Interep to Katz. That took away about 7 percent of Interep's annual revenues and sparked legal action against Citadel, which Interep said had stopped making payments set forth in its contract.

Interep and Katz are the two biggest players in the media representation business, which act as agents between media outlets and national advertisers. Katz has its roots in the late 19th century, when it became the first rep firm, dealing in newspaper advertising coast to coast. Katz moved into radio in the 1930s and television in 1949. Interep's origins began decades ago as Daren McGavren Radio and have continued through various iterations to Interep, which booked $85 million in spot-radio commission in 2002 through its various units. Katz's commissions are included in the overall results at Clear Channel.

Friday's defection was nothing compared to some of the other rumors that began to make the rounds, among them that more than 100 employees followed Shaw, Flood and Gray out the door between Friday (when the trio gave notice at Katz) and Monday. That rumor was confirmed by both Interep and Katz, with Guild putting the total at more than 100 (including 96 sales and support personnel). A Katz official said that 150 employees had left. It wasn't clear an exact headcount remaining at Katz, although a letter to clients from Olds said that the company would open with "58 managers/sellers." The departures threw Katz into crisis mode, with reports that Clear Channel radio salespeople were answering the phones at the radio rep firm. It couldn 't be determined Monday afternoon why the mass departure had occurred, or what if anything had led up to it.

"We are disappointed by these employees' decision to attempt to disrupt our business operations and we are investigating every appropriate response," said Olds in a prepared statement. In a letter to clients, Olds said the three departed executives had coordinated the departure. Olds and his former employee Shaw didn't return calls seeking comment Monday.

At Interep, Guild told the MediaDailyNews that Shaw, Flood and Gray spoke to him about two weeks ago and said they were interested in leaving Katz and wanted to know if he wanted to talk to them.

"Of course, I said yes," Guild said Monday afternoon. He said that after meetings over a week, the three were signed to long-term employment contracts and gave their notice at Katz on Friday. The other shoe dropped soon afterward, as people who worked for the three at Katz decided to join their former bosses at their new place of employment.

"I don't think people like working for Clear Channel," Guild said of why so many might leave. At the same time, Guild said he didn't want to say anything bad about Katz. "They're a fine organization," he said. Guild declined to discuss the reasons why Shaw, Flood, Gray and the others had left.

Interep's new three executives and 100-some employees were building their own rep firm under Interep's wing. He said that starting Monday, they were beginning to contact clients and try to get them to join Interep. It wasn't clear how much business would be in play.

Guild said that, in recent years, Interep had shifted its strategy to move away from trying to take business away from its competitor.

"We had really toned down and practically stopped our solicitation of Katz clients because we felt it was in the best interests of the industry to stop competing" with each other and focus on taking market share away from local television, newspapers and other mediums. But he said that Katz had started going after Interep's clients, most notably in the successful shift of Citadel.

Guild said that Interep had no alternative but to fight back.

Olds said anticipated no difficulties in serving existing Katz Radio Group customers.

"The Katz Radio and Christal Radio unit employees working with us today are consummate and talented professionals providing the high quality service our clients have come to expect from our company," Olds said.

Planners and buyers contacted by the MediaDailyNews were hesitant to discuss the Katz-Interep battle, and talked off the record about what it did for both companies and the industry at large. One buyer said flat out it didn't make the industry look good.

"I think what will probably happen is that the various radio groups that Katz represents will take a serious look at how well their interests are being represented and decide what to do from there," the buyer said.

Another agency person, who also declined to be named, wondered how it could be coordinated en masse.

"This is a major move for Interep," the agency person said. "These are the only two players in the radio rep game, and assuming the business follows the personnel, this would lead to a truly lopsided competitive landscape."

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