2001
News Analyst
Clear Channel
Communications, Inc., headquartered in San
Antonio, Texas, is a global leader in the out-of
home advertising industry with radio and
television stations, outdoor displays and
entertainment venues in 40 countries around the
world. Including announced transactions, Clear
Channel operates over 1,120 radio and 18
television stations in the United States and has
equity interests in over 240 radio stations
internationally.
The bet in the industry
is that Clear Channel will ultimately cut an
exclusive pact with Cincinnati-based Tri-State
Promotions, which is run by Michaels' longtime
friends Bill Skull and Lenny Lyons.
"We haven't made any
decisions yet," Michaels said. "Of course,
Tri-State is the devil I know, and on the trust
scale, they rate the highest in my book. I've
been doing business with them a long time, and
that's where the comfort zone is. But we are
still studying every option. Our plan is not
exactly ripe yet. It's a work in progress, but
we should be able to announce something within a
month."
More About
Clear
Channel
cc2002February
25, 2002
Clear Channel Size
is Drawing Complaints Empire Built on
Deregulation
After Congress eased
ownership limits. CEO L. Lowry Mays went
shopping, and to explain how deregulation can
turn an obscure businessman into a sudden power
broker, look no farther than Texas radio
billionaire L. Lowry Mays.
Six years ago, said LA
Times reporter, Jeff Leeds, "Lowry Mays, then
modest San Antonio-based chain Clear Channel
Communications Inc. owned 36 radio stations,
four under the legal limit. Then Congress did
away with most radio station ownership limits
and Mays went on a frantic shopping
spree.
Today, his sprawling
empire covers all 50 states, with 1,225 radio
stations, about 10% of the nation's total, plus
the country's biggest live-concert promotions
firm, 19 television stations and 770,000
billboards. In a decade, Clear Channel's sales
have jumped from $74 million to about $8 billion
last year, a stunning 100-fold increase. But
Clear Channel's rapid expansion is provoking
allegations that the radio giant is bullying
recording artists and skirting station ownership
rules. Consumer advocates point to the
conglomerate as a symbol of the results of media
deregulation--one that should be examined after
a federal court ruling last week that could open
the door to more consolidation in the television
and cable industries.
"Our worst fears have
been realized," Andrew Jay Schwartzman,
president of the watchdog organization Media
Access Project, said Friday. "A lot of the
things Clear Channel is doing are the
traditionally questionable industry practices,
now on steroids."
Clear Channel's
executives say they have done nothing improper
and tout the benefits of continued
deregulation.
Last month, Rep. Howard
L. Berman (D-Mission Hills) urged the Justice
Department and the Federal Communications
Commission to probe reports that Clear Channel
punished stars, such as Britney Spears, by
refusing to play their songs on Clear Channel
radio stations because the musicians declined to
hire the company as their tour
promoter.
If the allegations are
true, such acts would "exacerbate the negative
effects consolidation has had on recording
artists, copyright owners, advertisers and
consumers," wrote Berman, a senior Democrat on
the House Judiciary Committee.
Concern about Clear
Channel's vast size also has spread to Wall
Street. Struggling under $9billion in debt,
Clear Channel has racked up four straight
unprofitable quarters. It will report its annual
results Tuesday. Meanwhile, the company's stock
closed Friday at $48.39, about half its record
high of two years ago.
Clear Channel says that
cost cutting will cushion the company as it
slogs through the advertising slump and that it
eventually will see increased profit.
One cost-cutting
strategy Clear Channel is betting on is
repackaging radio shows across the country. The
conglomerate is using so-called voice tracking
on a scale that would have been unthinkable
before deregulation.
In 48 cities, millions
of radio listeners each week tune in to a
station in their market calling itself Kiss FM.
Many of the deejays are in Los Angeles, working
for Clear Channel's pop powerhouse KIIS-FM, but
listeners in smaller markets across the country
may hear Rick Dees joking about their local news
or Sean Valentine trumpeting upcoming concerts
at their local amphitheater, as well as a
similar playlist laden with bands such as 'N
Sync and Linkin Park.
"Kiss" programming
recorded in Los Angeles is exported to Des
Moines and Jacksonville, Fla., as a series of
taped moments, from phone calls to song intros,
that are spliced together to sound as if the
deejays are chatting from a studio down the
street.
The voice-tracked
segments, music and commercials can be whisked
from one station to another on a digital network
that is potentially available to 80% of Clear
Channel's stations. Producers cut and paste the
segments to create the appearance of deejays
taking live requests and calls from listeners,
or even record half of a conversation for a live
deejay to interact with.
Clear Channel touts
this as a technique that delivers big-city
deejay talent to small markets that couldn't
otherwise afford it.
Controversy Over Radio
Program Repackaging
"Our Kiss brand is like
McDonald's," said Todd Shannon, a Clear Channel
brand manager overseeing many of the stations.
"When you see the Kiss ball logo, there's no
mistaking what you're going to get. It's a Top
40 product, but they're all localized
inside."
But competitors say the
Kiss format doesn't benefit Clear Channel,
listeners or the radio industry.
In Chicago, Clear
Channel converted an oldies station to a Kiss
outlet that now only offers a local deejay
during the afternoon and evening shifts, company
officials said. "Everything else is the robot,"
said Todd Cavanah, program director of competing
pop station WBBM-FM.
"They're making radio
into spoon-fed generic" junk, said Mike Spencer,
who programs rival pop station KLUC-FM in Las
Vegas, where Clear Channel introduced a Kiss
station. "They're turning listeners off. It
gives listeners one more reason not to listen to
radio but to turn on their computer or use CDs,"
Spencer said.
Clear Channel's
campaign so far has yielded mixed results--newly
branded Kiss stations have upset dominant pop
stations in such markets as Cincinnati and
Boise, Idaho, but failed to gain much share in
some bigger markets, including
Chicago.
Voice tracking also has
prompted some concern among authorities in the
past. Two years ago, Clear Channel was fined
$80,000 by the Florida attorney general for
misleading radio listeners into thinking that a
national contest was local, in part because the
company dubbed a local deejay's voice into an
interview with a winner.
Clear Channel touts the
benefits of cross-promotion, or leveraging one
asset to benefit another. Yet critics say Clear
Channel's idea of synergy essentially means it
hoards radio programming, concert tickets,
access to stars and concert advertising dollars
for itself.
Clear Channel owns
Premiere Radio Networks, which has been shifting
its syndicated radio shows, such as Jim Rome's
sports talk fest and Rush Limbaugh's political
program, from competitors' to Clear Channel's
stations.
Artist managers also
are nervously eyeing Clear Channel's expansion
of station-sanctioned concerts, commonly known
as radio shows.
Representatives of
various artists have said for years that
broadcasters coerce acts into playing the shows
for little or no fee by refusing to air their
latest songs unless they appear.
Regulators have said
the practice of trading airplay for an artist's
appearance without disclosing the deal is a
violation of federal anti-payola laws. Since
1960, federal law has forbidden broadcasters
from accepting money or anything of value in
exchange for airplay without disclosing the
payment.
But Clear Channel
executives say their events, such as KYSR-FM's
annual "Not so Silent Night" concert, fairly
compensate acts and aren't forced upon them with
threats.
Running a radio
powerhouse is a far cry from Mays' early days,
when he studied petroleum engineering in
college. People who know Mays say the
65-year-old former investment banker never
imagined he would control such a sweeping
empire.
Salesmanship always has
been his forte, said John Barger, a former
executive of the company, who helped Mays and
partner B.J. "Red" McCombs, run their first
small radio stations.
Before building a radio
empire, Mays worked for a local investment house
and commuted to New York. The first stock he
pitched was that of a small photo processing
company, Barger recalls.
To identify prospective
investors, Mays paid a neighborhood youth $10 to
copy license plate numbers from cars parked in
front of the company's local store, then paid
another youth to visit the Department of Motor
Vehicles to pull addresses for each of the cars,
Barger said. Each one received a letter from
Mays suggesting they invest in the
company.
Mays got into the radio
business almost by accident.
In 1972, Mays and
McCombs purchased an unprofitable FM station
after a local furniture dealer convinced Mays of
its potential, Barger said. Two years later,
Mays purchased San Antonio's WOAI-AM--one of
about 25 designated "clear channel" stations,
granted a frequency free from interference. He
turned it into a news-talk station and slowly
added more properties.
Mays took the company
public in 1984 and started to buy up stations,
developing a reputation as a cost cutter. Even
now, critics deride the company as "Cheap
Channel."
Strong Ties to the Bush
Administration
Mays also has a
long-standing interest in politics, backing
candidates seeking everything from the San
Antonio mayor's office to the White
House.
While governor of
Texas, President Bush appointed Mays to a state
technology council in 1996. Mays contributed
$51,000 to Bush's 1998 gubernatorial
campaign.
Clear Channel also
contributed $106,000 to the Republican National
Committee during the presidential election
cycle, with Mays and his wife, Peggy, donating
an additional $37,000 to the party.
And the Justice
Department's current antitrust chief, Charles
James, formerly headed the antitrust department
at the Washington law firm that represented
Clear Channel when the company sought regulatory
approval of its purchase of radio broadcaster
AMFM Inc. in 2000, when it also purchased
concert promoter SFX.
Buying entertainment
giant SFX cost Clear Channel $4.4 billion,
making it instantly the nation's biggest
promoter with $2 billion in live-event revenue a
year.
Among the thousands of
concerts, family events, Broadway shows and
other events it took on after the SFX deal,
Clear Channel also found itself putting on
Supercross motorcycle races. But last year Clear
Channel and the motorcycle industry's trade
association began exchanging blows after
contract renewal talks broke down.
Senior officials at the
American Motorcyclist Assn., which sanctions
Supercross races, say Clear Channel has sought
to undermine the organization since the
association ended its contract with the
company.
Clear Channel now is
planning to promote its own Supercross series
with a European sanctioning body.
AMA officials hired a
new promotion firm to run its events, and they
say that Clear Channel is pressuring stadium
operators to sign deals guaranteeing the
conglomerate the exclusive right to promote
motor-sports events.
Ken Hudgens, vice
president for marketing at Clear Channel's
motor-sports division, said the AMA "can go out
and do whatever they want to do.... We do what's
right for our business."
MORE
