Who's buying Ackerley: Clear Channel's reputation is raising alarms
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To see how deregulation can turn an obscure businessman into a sudden power broker, look no further than Texas radio billionaire L. Lowry Mays.
Six years ago, his modest San Antonio-based chain, Clear Channel Communications, owned 36 radio stations, four under the legal limit. Then Congress did away with most station-ownership limits, and Mays went on a shopping spree.
Today, his sprawling empire covers all 50 states with 1,225 radio stations, about 10 percent 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.
The company awaits Federal Communications Commission approval of its $800 million Seattle-area deal to buy The Ackerley Group, including its five local radio stations. Announced in October, the deal was approved by Ackerley shareholders last month.
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, U.S. Rep. Howard Berman, D-Calif., urged the Justice Department and the FCC to probe reports that Clear Channel punished stars, such as Britney Spears, by refusing to play their songs on its 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 $9 billion in debt, Clear Channel has racked up four straight unprofitable quarters and will report its annual results today. Meanwhile, the company's stock closed yesterday at $49.36, 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 disc jockeys are based 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 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.
KIIS programming recorded in Los Angeles is exported to Des Moines, Iowa, and Jacksonville, Fla., as a series of taped moments, from phone calls to song intros, that are spliced together to sound as if the DJs are 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 percent of Clear Channel's stations. Producers cut and paste the segments to make it sound as if DJs are taking live requests and calls from listeners, or even recording one-half of a conversation for a live DJ to interact with.
"If (they) can put a show from Portland on in L.A. in the afternoon drive time to save money, guess what you have coming in Seattle," said Jerry Del Colliano, publisher of the industry trade magazine Inside Radio.
Clear Channel touts this as a technique that delivers big-city DJ talent to small markets.
"Our KIIS brand is like McDonald's," said Todd Shannon, a Clear Channel brand manager overseeing many of the stations. "When you see the KIIS 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 KIIS format doesn't benefit Clear Channel, listeners or the radio industry.
In Chicago, Clear Channel converted an oldies station to a KIIS outlet that now only offers a local DJ 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.
Clear Channel's campaign so far has yielded mixed results: Newly branded KIIS stations have upset dominant pop stations in markets such as Cincinnati and Boise but failed to gain much share in some bigger markets, including Chicago.
Voice-tracking also has prompted some concern among authorities. 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 had dubbed local DJ's voices 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 music 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 talkfest or Rush Limbaugh's political program, from competitors' to Clear Channel's stations.
Sports programming may be a bigger concern in Seattle. The contract to broadcast Mariners baseball games is expiring soon. Entercom's KIRO-AM radio station has the contract now.
"If Clear Channel decides to keep the sports-talk format on KJR, and they want the Mariners, you bet they're going to bid for them," said Eric Corman, assistant programming director of "The Buzz," KQBZ-FM, also owned by Entercom. "They've got deep pockets. They're going to raise the bar."
Artist managers also are nervously eyeing Clear Channel's expansion of station-sanctioned concerts, commonly known as radio shows. Representatives for various artists have said for years that broadcasters coerced 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 KIIS-FM's annual Wango Tango event, fairly compensate acts and aren't forced upon them with threats.
Mays, a 65-year-old former investment banker, 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 antitrust chief, Charles James, formerly headed the antitrust department at the Washington, D.C., law firm that represented Clear Channel when the company sought regulatory approval of its purchase of radio broadcaster AMFM in 2000 .
Seattle Times staff reporter Mark Rahner contributed to this report.