Co.'s cost-cutting, alleged monopolistic practices is talk of the business
In the space of only five years, Clear Channel Communications managed to swallow the radio industry whole — with just a few, sizable bites.
Now, many in the media biz wonder if the 100,000-watt gorilla can be tamed.
Clear Channel quickly grew from a modest Texas broadcasting outpost to an impregnable media monolith, dwarfing its rivals and prompting nervous accusations of bullying and manipulation from many music insiders.
The company, which now boasts 1,200 radio stations, 120 live-entertainment venues and 650,000 outdoor ad displays, amassed its empire so quickly and with such ease that the industry is only now starting to wake up and realize what happened.
Clear Channel’s cost-cutting and alleged monopolistic practices have become the talk of the business. But while antitrust lawyers should seemingly be licking their lips at challenging Clear Channel, there has been surprisingly little interest from Washington.
D.C. lawmakers and federal agencies, currently caught up in another round of deregulatory fever, have had little to say publicly about growing concerns over Clear Channel’s operations.
That could change with a Democratic-controlled Senate. Commerce Committee chair Ernest Hollings (D-S.C.) has taken a harder stance against the ills of media consolidation.
But for now, just a handful of Davids have taken on the broadcasting Goliath.
In one of the latest battles, a concert promoter in Colorado filed an antitrust suit against the conglom this month, claiming that Clear Channel’s promotion arm, Clear Channel Entertainment, pushes rivals out of the picture to maintain its synergistic lock on both tour promotion and radio airplay nationwide.
The suit, filed by Denver-based promoter Nobody in Particular Presents, claims CCE effectively blocks other concert promoters from properly publicizing their shows on company-owned radio stations in the area.
NIPP’s action reps the first time anyone in the music biz has made an attempt in the courts to curb the company’s market power.
And if the words of NIPP co-owner Jesse Morreale are any indication, Clear Channel may have stumbled when it ignored the adage: Fear the man with nothing to lose.
“It’s a dire situation for us,” Morreale tells Variety. “Our ability to compete has been hindered to the point where we feel like we don’t have a choice other than to take it to court.”
However, CCE exec vice president Steve Smith calls the suit “completely without merit,” adding that the issues raised by Morreale are best resolved in the market, not a courtroom.
“The true story of the highly competitive landscape for live entertainment presentations, in which Clear Channel competes lawfully and with every intention to succeed (in the Denver market and throughout the U.S.), will soon be a matter of the public record,” he says.
Clear Channel’s road to market dominance began in 1996, when the Telecommunications Act effectively scrapped rules that once limited a radio company from owning more than a handful of stations nationwide.
“It’s over — radio is over as we know it,” says radio vet and station owner John Rook, who has filed his own antitrust lawsuit against Clear Channel.
Clear Channel seized the opportunities presented by the Telecom Act more aggressively than any other broadcaster: The company absorbed Jacor Communications in 1998, then archrival AM/FM in 2000 in a one-two punch of multibillion-dollar deals.
That year, Clear Channel also picked up concert promotion giant SFX Entertainment (later renamed CCE) for $4 billion.
“Clear Channel is not necessarily the bad guy,” says Nicole Sandler, who programmed the company’s Los Angeles station KACD-FM, which later turned into an Internet-only outlet (and has now shut down). “They’re taking advantage of a lousy loophole of a law passed in 1996. The Telecom Act sucks. It really ruined radio.”
After the act passed, entrepreneurs wasted little time changing the ragtag array of mom-and-pop radio outfits across the country into a handful of media monoliths.
Among them was swashbuckling Texas financier L. Lowry Mays, who had founded Clear Channel in 1972 after reviving troubled San Antonio station KAJA-FM. The company’s top management eventually included Mays’ sons, Mark and Randall.
With the Jacor acquisition in 1998 came Randy Michaels, an aggressive former Florida radio shock jock who worked his way up to chief exec and would become CEO of Clear Channel’s ballooning radio division.
Under Michaels, Clear Channel’s radio division consolidated operations and cut costs to the bone (which earned the company the nickname “Cheap Channel”). And just days ago, the radio giant said it would retool its corporate structure, dividing its national empire into eight geographical regions to streamline management and boost ad sales.But the savings came at a cost: Working conditions and employee morale have taken a tumble, insiders say. “The production loads increased, but the salaries never did,” says one former insider.
Clear Channel prexy and operating chief Mark Mays sees the company’s actions differently.
“There’s a little bit of that,” he says, referring to consolidation of staff positions. “But at the same time, you’re hiring more people to do different things, like Internet promotion and nontraditional revenue streams.”
With all the pieces in place, Clear Channel was ready to start raking in the cash. Some of the conglom’s first and most aggressive efforts — including those decried by NIPP — originated at CCE.
Entrepreneur Robert F.X. Sillerman spent several years in the late ’90s snapping up such veteran promotion houses as Pace Entertainment and Delsener/Slater, with an eye toward creating a national one-stop shop for live events. The result was SFX, a concert promotion juggernaut running venues from Gotham’s Madison Square Garden to L.A.’s Hollywood Bowl and the exclusive U.S. home to virtually every major summer tour of 2001.
When Clear Channel bought his creation last year, company toppers saw a potential goldmine in cross-promotion with its radio stations (even naming an exec VP in charge of synergy), with advertising, giveaways and DJ chatter all aimed at hawking tickets.
Others in the concert biz, however, saw too much power in too few hands.
“They’re trying to enforce some guidelines that were not present before,” says a veteran tour promoter. “There’s an implied threat that if you don’t play SFX venues, you don’t get marketed on Clear Channel radio.”
On the flip side, non-Clear Channel radio stations are feeling the squeeze, as they’re frequently left out in the cold with SFX events. Clear Channel outlets typically get first dibs at tie-ins with major-league events.
Rival broadcasters aren’t the only ones feeling muscled by the radio conglom.
In April, Clear Channel got in a spat with radio data firm Arbitron over how much the broadcaster would pay for airplay reports, with Clear Channel threatening to drop the service in 130 markets just as Arbitron was to begin trading on the New York Stock Exchange.
It took months of negotiation before the two finally hammered out a deal.
But Arbitron is small potatoes compared with the music biz institution Clear Channel has now set its sights on.
For decades, the major record labels have relied on a small, well-paid group of independent promoters to make sure their songs get on the radio. “Indies” pay promotional fees to stations and collect from labels when their song gets played. The money sloshing through this system reaches into the tens of millions annually.
“It’s just a dressed-up way of paying for access to stations,” grumbles one label exec.
Now Clear Channel is angling for a bigger piece of the pie, negotiating with a few of the biggest indies to winnow the field of promoters that will have access to its stations, meaning labels could see indie fees climb even more in the absence of competition.
Kraig Kitchin, prexy of Clear Channel’s Premiere Radio Networks unit, declined to comment specifically on changes in Clear Channel’s relationship with the indies, except to say that “there are discussions underway.”
But in the end, Clear Channel could wind up hurting itself the most. Many say the company is throwing radio’s greatest selling point — its localism — out the window.
Single radio jocks are often simulcast digitally to a half-dozen stations, while on-air contests are frequently shared by Clear Channel outlets nationwide.
Mark Mays steadfastly denies that his company’s expansion has been at the expense of local service.
“From our perspective, we’re definitely not going to homogenize radio stations,” he says. “We know that local content is what gets people to tune in every day.”
But Lewis W. Dickey Jr., head of rival broadcasting group Cumulus Media, sees a chink in the corporate armor.
“They’ve left the door open for competitors,” Dickey says. “If the competition can do a better job of serving a local community, local listeners will gravitate toward them. Hopefully, that will provide a check and balance.”