WASHINGTON — CBS CEO and prexy Mel Karmazin and Clear Channel’s chairman and CEO Lowry Mays will announce Wednesday that they have created an investment fund that will make approximately $600 million available to help minorities break into the broadcasting industry.
The fund is a response to FCC chairman William Kennard’s concern that consolidation in the media industry is squeezing minorities out of the broadcasting industry. According to the latest statistics, minorities make up less than 3% of all radio and television station owners.
In addition to Clear Channel and CBS, other broadcasters are expected to participate in the fund, which includes cash from the two broadcasting companies and loans underwritten by Chase Manhattan Bank (Daily Variety, Aug. 13).
Some say it is no coincidence that Karmazin and Mays are leading the charge to respond to Kennard’s worries about minorities, since the two broadcasters are also leading forces when it comes to media consolidation and have pending deals in front of the FCC.
Karmazin is busy trying to win approval for his $35 billion plan to merge CBS with Viacom, and Mays is seeking regulatory approval for his $17.4 billion deal to buy, among other things, 830 stations from Texas-based AMFM.
Not only is Karmazin trying to win FCC support for his merger, but he also wants the agency to loosen broadcast ownership rules that limit the number of TV stations a single broadcaster can own. He would also like the FCC to change its rules to allow the merged CBS and Viacom to own both the Eye network and fledgling UPN. Current rules bar a major network such as CBS from owning a weblet.
Mays and Karmazin are not the first broadcasters to propose the creation of a fund to help minorities gain a greater presence in the broadcasting industry.
Both Paxson Communications’ Lowell “Bud” Paxson and News Corp.’s Rupert Murdoch have proposed creating multimillion-dollar funds. CBS’ Martin Franks, who headed the effort to create the minority investment fund, has insisted in the past that there is no link between relaxation of rules and the creation of the fund. But both Murdoch and Paxson viewed their proposals as a way to ease concern about media concentration and thus clear the way for regulatory reforms.
Karmazin and Mays have been trying to rally other networks to contribute to the fund, but as of Monday, it was unclear if any of the networks had accepted the invitation. Chase Manhattan Bank is no stranger to Karmazin, who used the bank for several of his media deals over the years.
Mays and Karmazin are expected to announce the fund at the National Assn. of Broadcasters headquarters in Washington. NAB prexy Eddie Fritts also has endorsed the creation of a minority investment fund and has taken the unusual step of committing $10 million to the effort.
One source familiar with the deal called the fund put together by Mays and Karmazin “a significant step.” However, the source cautioned that in today’s hot economy, where stations in medium-sized markets can cost up to $250 million, more funding is needed.
Another source said Wednesday’s announcement is just the first for the fund, which the source said is expected to expand as more broadcasters become contributors.