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Senate looks at radio station ownership rules

Wednesday, February 5, 2003

To Don Henley's ears, the FM dial has been transformed from a bazaar of choices to a place where "everybody gets the same McDonald's hamburger."

Taking issue with the musician on Capitol Hill last week, the chairman of a company that operates 1,200 stations said it makes a point of offering a variety of formats, from talk to country to rock to Spanish language.

At issue is the Telecommunications Act of 1996, which loosened restrictions on owning multiple stations. Henley, who achieved fame with the Eagles, testified before the Senate Commerce, Science and Transportation Committee in favor a bill aimed at slowing consolidation in the radio and concert industries.

The Bush administration, however, appears to be leaning toward easing the remaining ownership rules. The Federal Communications Commission is reviewing them and the agency's chairman, Michael Powell, has expressed concern that many are no longer relevant.

Multiple-ownership can mean the difference between stations being profitable and going bankrupt.

"Several smaller radio stations have folded under financial pressures. So operating with a cluster, as we call them, allows stations to operate with pooled resources much more efficiently," Mike Peterson, owner of Crossroads Communication, Inc., said.

Terre Haute stations historically have been unconsolidated and the area is not involved with big conglomerates he said. Emmis Communications owns two channels, Bright Communications owns two channels and Crossroads owns five channels after the recent purchase of WLEZ. Until the sale closes, sometime around May 1, the station is operating under a local marketing agreement Peterson said.

"We'll research the market to try to determine what types of format will maximize revenue. Right now WLEZ fills a void in adult soft contemporary that no other local station offers, so there are no immediate plans to change the format," he said.

All of Crossroads Communications, Inc. stations have undergone evolutionary changes, Peterson said. WSDM went from classic country to oldies and WSDX went from gospel to sports.

The committee debated legislation sponsored by Sen. Russ Feingold, D-Wis., that would strengthen government oversight of radio station mergers and would ban arrangements in which recording companies pay radio stations' promoters for air time.

The new bill is aimed at Clear Channel, the country's largest radio station chain and biggest concert promoter, with more than 1,200 stations, or about one of every nine across the United States.

The chairman and chief executive of the San Antonio- based company, Lowry Mays, said that far from stifling diversity, Clear Channel has made a point of offering many formats.

But Jenny Toomey, executive director of the Future of Music Coalition, which seeks stricter ownership rules, said that was a fallacious argument.

"Measuring music diversity by counting the number of radio formats is like measuring the variety of food in your pantry by counting the number of cans without looking at what is inside them," she said.

The committee chairman, Sen. John McCain, R-Ariz., engaged in a testy exchange with Mays over whether Clear Channel had plans to buy more stations.

Mays evaded the question several times, leading McCain to ask: "Do you have any plans to obtain more radio stations? I'd like to ask the question for the third time."

Responded Mays: "If we can serve the local community better and we see an opportunity, yes."

McCain also took on Clear Channel over its presence in San Diego. While federal rules prevent a company from owning more than eight stations in a market, Clear Channel has the maximum in San Diego while owning five in Mexico that broadcast into San Diego.

"It's clearly in violation of the intent of the law," McCain said.

Critics of consolidation say ownership of so many stations in one market drives up advertising rates and limits choices.

Other committee members expressed concern about Clear Channel's practices.

"When you pump in homogenized programming, isn't that troubling in terms of localism?" asked Sen. Byron Dorgan, D-N.D. He noted that Clear Channel owns all six commercial radio stations in Minot, N.D.

Mays said that after his company bought the stations, the number of formats increased from two to six.

The legislation being considered was greeted with skepticism by some Republicans.

"I think there are probably always complaints from competitors," said Sen. Conrad Burns, R-Montana. He asked why the committee was not investigating the sale of shelf space in supermarkets to the highest bidder.

"Radio airwaves cannot be equated with grocery store shelves," Henley said. "They are owned by the public."

The singer also complained that he is essentially charged money to get his music on the air, because his recording company pays an independent promoter to get his songs on radio stations.

Although Mays conceded that his company receives payments from these promoters, he said it was in exchange for research information. He insisted the company has a strict policy against "pay-for-play."

Mays disputed allegations that his company will not air songs from artists unless they tour with Clear Channel's concert promotion business. Mays said it would make no business sense to do that because concert promotion accounted for only 7 percent of Clear Channel's business.

"Seven percent of your income is how much?" McCain asked. "Five million? Ten million? Fifty million?"

"Maybe $100 million," Mays said.

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On the Net:

Clear Channel:

http://www.clearchannel.com/

Senate Commerce, Science and Transportation Committee: http://commerce.senate.gov/



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