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Radio

Ownership

When Clear Channel expanded from 520 to more than 1,100 stations in 2000 the company became, almost overnight, the largest force in traditional radio. Clear Channel was seen as the unquestionable leader in the marketplace, influencing everything from innovations of technology to radio playlists. The media giant fueled fierce debates over the effect of consolidations on content and communities served, but the strictly financial strategy was mostly unquestioned. But heading into 2006, the industry seemed less sure whether bigger is the smartest financial move.

Number of Stations Owned by Top Broadcasting Companies

Source: BIAfn Media Access Pro
Number of News Stations based on number of stations including News as their primary format.

In 2004, there were some signs the answer might be no. Some radio groups further down the line in sheer physical size enjoyed overall ratings gains and, thanks to market positioning, greater revenues than some of their larger counterparts.

By 2005, one of the U.S.’s leading media companies appeared to be moving on the idea that smaller might be better. In June 2005 Viacom announced it would divide its massive cross-media holdings into CBS Corporation and a new Viacom. Infinity radio network would join UPN, Viacom Outdoor, Viacom Television Stations Group, Paramount Television, King World, Simon & Schuster, Showtime, Paramount Parks and the CBS Television network under the banner of CBS Corporation. The other company, operating under the Viacom name, would include the MTV Networks and their associated stations (VHI, Nickelodeon, Spike, TV Land), BET, Paramount Pictures, Paramount Home Entertainment and Famous Music. The divisions tailor Viacom into two more distinct entities. CBS Corporation is made up mostly of prominent, older technologies — book publishing, network television and radio, billboards, TV syndication. Viacom is made up, though not exclusively, of newer technologies — cable, video and music, with film thrown in.

Change in Stations Owned by the Top Companies

1999-2005

Design Your Own Chart

Source: BIAfn Media Access Pro, unpublished data

* Top companies by number of stations whose holdings include news format stations.

The Viacom split by no means signaled a clear pattern. Other owners, particularly those more clearly invested specifically in radio, pushed to acquire a greater number of stations. Cumulus Broadcasting joined with other investors (Bain Capital, Blackstone Group and Thomas H. Lee Partners) to form Cumulus Media Partners and purchase the 33 radio station holdings of Susquehanna Radio.¹ In February 2006, Citadel finalized a $2.7 billion deal with Disney to purchase 22 Disney-owned radio stations and ABC Radio Networks (Disney kept Radio Disney and ESPN Radio).² In early October 2005, Clear Channel’s Mark Mays was similarly in the news for renewing his call for Congress to loosen ownership regulations. Mays, in a speech to the Progress and Freedom Foundation, reportedly proposed that “broadcasters be able to own 10 stations instead of eight in markets where there are at least 60 stations and up to 12 stations in markets where at least 75 radio outlets operate." ³

A single company able to program multiple stations in a given geographic area, the reasoning goes, would be able to coordinate content to such a degree that it could capitalize on audiences seeking the same highly defined formats as they can currently find online or on their satellite receiver. Don’t just program a Spanish music station in Dallas ; program a Tejano station and a Spanish pop station and a Spanish-language sports station. With enough stations, an ownership group could do all this without having to lose the audience listening to the station that plays jazz or adult-contemporary English-language programming.

The question is whether size or diversification are important qualities in determining how well positioned a company is to survive the transformation from radio to audio. The new landscape is also leading some to seriously investigate, for the first time in a number of years, alternative programming.

Infinity’s⁴ response to the approaching departure of Howard Stern,⁵ which would leave slots to fill on 27 stations, offered one such kind of experiment. It announced in late October 2005 that it would create a pair of shows — one East Coast, one West Coast. The eastern show would be hosted by the former Van Halen star David Lee Roth and the western version by the comedian Adam Corolla (former star of “The Man Show” on cable’s Comedy Central and later of a comedy home improvement show on cable’s TLC). Other stations would fill in with several other, less nationally profiled programs.

The targeted or regional programming is a component of Infinity’s experiment with a new kind of radio content that it has dubbed “Free FM,” which the company describes as stations that “ will feature an eclectic mix of local and national personalities on a hybrid of provocative, political, pop culture, news, music and lifestyle formats.”⁶

The Big Get Bigger Cooperatively

Traditional radio was also trying to embolden itself in 2005, not by consolidation but by cooperation.

Much of the cooperation involves HD Radio, terrestrial radio’s most obvious opportunity to answer satellite. Not only does the technology provide the kind of sound quality satellite radio promised, it offers more programming opportunities for terrestrial broadcasters. And while HD still requires a dedicated receiver to pull down the split digital signals, HD radio does not currently require membership fees. It is simply an expansion of traditional commercial broadcast radio.

The possibilities of HD Radio and the increasing audio field led several of terrestrial radio’s larger players to come together to develop a strategy to make the greatest use of the new bandwidth and content possibilities HD can provide.⁷ The so-called HD Radio Consortium gained attention in the industry because it signaled an almost unprecedented coming together of companies more used to competing with one another for audience than developing a plan for peaceful, beneficial coexistence.

In early December 2005, the HD Digital Radio Alliance was launched. Based in Orlando , Fla., and with Peter Ferrara (previously with Clear Channel) as president and CEO, the alliance will be coordinating the promotion and launch of traditional radio stations’ HD frequencies. That will ensure, as Joel Hollander was quoted as saying by the Billboard Radio Monitor, that “all of a sudden, there aren’t 17 Z100s in New York .”⁸

Such strategic planning may prove critical to the success of HD radio. Unlike the satellite radio companies who program dozens of stations, multiple stations will eventually program HD radio frequencies. The danger for HD is that stations would all program the same, reducing the value of the receiver and re-creating the limited-playlist situation many feel exists on traditional radio.

UNITED RADIO BROADCASTERS

The consortium wasn’t the only time that Clear Channel’s Mays and Entercom’s Field came together in 2005. Immediately following Hurricane Katrina — when the immense value of radio’s portability came sharply to the fore as citizens of the flood-ravaged Gulf Coast turned to battery-operated radios for information — Entercom and Clear Channel joined together to create United Radio Broadcast.

There was a certain irony. Clear Channel came under stinging criticism in January 2002 following a train derailment in Minot , N.D. , that resulted in a cloud of anhydrous ammonia. The town’s Clear Channel-operated station did not issue an emergency broadcast signal because it was running automated content. While Clear Channel insisted that the problem arose because local law enforcement didn’t know how to activate the system, critics of consolidation used the incident as an example of the potential public danger of massive media ownership. (See Ownership, State of the News Media, 2004).

The year 2005, then, offered an example of how size could become an invaluable resource in the event of an emergency.

While much media attention following Hurricane Katrina was turned to telling the story of WWL-TV, the only television station to remain continuously on the air when Katrina hit New Orleans , Entercom kept four of its six New Orleans-area stations on the air. One of those was WWL-AM. During the storm, the news/talk station managed to provide a continuous stream of information to citizens even as winds blew out the studio’s windows. Finally, after two days of broadcasts, WWL’s radio news staff was forced to evacuate their Hyatt Regency studios (the hotel had already been evacuated).

Clear Channel, which operates seven music-formatted stations in the Big Easy, had been able to repair the transmitter it lost during the storm (thanks to a helicopter and a team of technicians) but lacked a news team. WWL had a team of reporters with nowhere to go. As reported on the October 21, 2005 edition of the National Public Radio program “On the Media,” the two companies struck a partnership and, by husbanding the resources of some 15 Clear Channel, Entercom and independent stations in the area, created the United Radio Broadcasters. The group began broadcasting on September 1, 2005 , at 10:00 p.m. central time from Clear Channel’s Baton Rouge studios.

The cooperative radio network, which continued to air until early November 2005, broadcast emergency information and took calls from listeners unable to reach 911 but able to get through to the station. It also conducted the now famous radio interview in which Mayor Ray Nagin demanded action, not press conferences, from federal officials. As the tragedy shifted from imminent danger to the long-term rebuilding process, United Radio Broadcasters shifted its focus to public service announcements and information on insurance and job opportunities.

At one point, the content produced by the partnership was broadcast over WWL and simulcast over multiple stations. During the “On the Media” piece reporting on the United Radio Broadcasters partnership, Dick Lewis, regional vice president of Clear Channel Communications, and David Cohen, news director of Entercom’s WWL-AM, both took a position that is rare in discussions about radio and the public interest: Consolidation can be positive.

“Dave Cohen: There are valid criticisms and debates to be had over allowing one company to own so many radio stations… But in this case, there’s no way this could have happened, no way, had we not had two big media companies that owned this many radio stations.”⁹

Beyond the sheer number of stations, there is also the sharp reality of costs. According to the “On the Media” story, estimates are that the cost of the operation will be in the millions. Once again, the size of the two companies, even during this time of radio’s unclear fiscal future, provided a kind of cushioning unrealized in the past.

“Dick Lewis: It’s because of the consolidation that Clear Channel and Entercom have the resources to do this. If it were as it was prior to consolidation and we were all small independent companies, we’d be off the air. We’d be bankrupt. We’d be gone.”¹⁰

Whether or not a collection of smaller stations would have banded together is something that will never be known for certain. Almost certainly, the answer changes depending on which side of the consolidation question the respondent represents. What is clear is that the question of media consolidation is a complicated one that will likely garner even greater attention from the companies themselves as they contemplate their best strategy against the new audio.

Footnotes

1. Atlanta Business Chronicle, “Cumulus grows with Susquehanna acquisition,” October 31, 2005.

2. David Lieberman, “$2.7B deal would put Disney radio unit in Citadel’s hands,” USA Today, February 6, 2006.

3. Jeremy Polofsky, “Clear Channel renews bid to ease ownership limits,” Reuters, October 3, 2005.

4. Now known as CBS Radio following the split of the parent company, Viacom, into the CBS Corporation and Viacom.

5. On Friday, December 16, 2005, the shock jock Howard Stern, the self-proclaimed “King of All Media,” ended his twenty-year run on traditional radio. Stern, whose program has been targeted by the FCC for what many consider indecent content, made the decision to move to Sirius satellite earlier in 2005 in a move that many in the industry are watching with great curiosity.

6. From an announcement made by Joel Hollander, Chairman and Chief Executive Officer, Infinity.

7. The group included Clear Channel’s CEO Mark Mays; Jeff Smulyan, Chairman of Emmis Communications (Emmis has stations in the top radio markets of New York City, Los Angeles and Chicago) and Entercom Communications’ CEO David Field (Entercom owns 103 radio stations in 21 markets).

8. Paul Heine, “Hollander: A Radio Shift is Underway,” Billboard Radio Monitor, September 27, 2005.

9. On the Media, “Up from the Wreckage,” Oct 21, 2005, taken from the program transcript, www.onthemedia.org/transcripts/transcripts_102105_wreckage.html