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Clear Channel Rules the World
How a small chain of once-struggling radio stations grew into a giant of the media/entertainment complex
by G.R. Anderson Jr., published Feb 16th, 2005, City Pages
Take a tour around downtown Minneapolis,and at various points you're going to come across something related to Clear Channel Communications. Flip on your car radio, and you'll probably tune in one of seven radio stations it owns. That billboard on Third Street and Park Avenue by the Metrodome? That's owned by Clear Channel, along with most of the other billboards scattered around the metro. The Metrodome itself is home to the Minnesota Vikings, whose radio broadcasts are heard on two of the company's stations in town. And the team is owned by Red McCombs, a Clear Channel co-founder.
- KDWB-FM (101.3) Top 40In just these regards, no single business has had a larger cultural impact on the Twin Cities, ever--let alone in less than 10 years.
But there are many other facets of Clear Channel's corporate personality. The company continues to branch out, forging a presence in everything from theater to photography exhibits to halftime shows at sporting events. And it has a syndication arm that produces the Rush Limbaugh and Dr. Laura Schlessinger programs.
In fact, there is a political bent to the company that has been quite conservative. After 9/11, for example, a widely circulated memo contained a list of suggested songs that station managers might want to consider too sensitive for listeners, including "Imagine" and "Peace Train." (During the controversy that followed, the company claimed that the list reflected the opinions of the executives who compiled it and did not constitute an official company blacklist.) After the U.S. invasion of Iraq, a number of Clear Channel stations sponsored "Support the Troops" rallies that critics called naked pro-war endorsements of the Bush administration. Additionally, the company, which does not have its own news division, recently dropped its affiliation with ABC News Radio and partnered with Fox News to air hourly updates on some stations.
The company's founder, L. Lowry Mays, is a close friend of the Bush family and has maintained professional and political ties with both Bush the elder and the son. When George W. was the governor of Texas, Mays was appointed to the state's technology council in 1996; he later contributed $51,000 to Bush's reelection campaign in 1998. Between 2000 and 2002, entities associated with Clear Channel--through PACs, soft money, and individual contributions--forked over $1 million to political campaigns, with 75 percent going to Republican candidates.
"You're dealing with a super-large tastemaker who can make or break people more than any other company in any industry," says Mick Spence, a Minneapolis entertainment lawyer. "'Tastemaker' has a positive connotation most of the time, but in this case, it's all determined on marketability of any product. That's what Clear Channel does."
"We're a big company, and you have the good and the bad," counters Dan Seeman, the vice president and general manager for Clear Channel Radio Minneapolis-St. Paul. "It's frustrating, because a lot of the perception is myth." Still, he allows, "We have a lot of resources, and we take advantage of those resources."
The company's critics are legion, including a number of high-profile media personalities. In early 2004, Howard Stern, the self-proclaimed King of All Media, was dropped from six Clear Channel stations on the grounds of profane language. Stern countered that the real reason he was dropped is that he turned against George W. Bush just as the presidential campaign was kicking into high gear. Stern, who was once a Bush supporter, repeatedly railed against the president for the war in Iraq, and against FCC chairman Michael Powell, a Bush appointee who had levied hundreds of thousands of dollars in fines against stations that carried Stern.
In November, post-election, Stern appeared on the David Letterman show, ostensibly to promote his impending move off the airwaves and onto satellite radio. But instead, Stern repeatedly talked about the threat to the First Amendment in the current era, one in which he says he cannot do or say things on the air that he did 20 years ago.
"I'm doing this because of Clear Channel," Stern told Letterman about moving to satellite. "There's nowhere else to do my radio program."
Clear Channel started humbly enough, when Texas A&M alum Mays bought KEEZ-FM in San Antonio in 1972. Mays, an ex-Air Force officer who was deeply entrenched in Texas Republican circles as an investment banker, ponied up $125,000 to buy the station.
His co-investor was a local used-car salesman by the name of B.J. "Red" McCombs. In 1975, the pair bought WOAI-AM, one of the old-school 50,000-watt behemoths of the AM dial, a station whose signal could be heard at night hundreds or even thousands of miles away--a "clear channel" station by virtue of its exclusive control of the frequency on which it broadcast.
In 1958, McCombs opened his first car dealership in San Antonio and saw it rack up the sixth-highest sales in the country in its very first year. He bought and sold several sports franchises, and along the way emerged as a major player in Texas oil and real estate. Among his friends is President George Bush I.
Each time a McCombs business move paid dividends, he and Mays went on a shopping spree. The pair accrued a broadcasting mini-empire by snatching up financially fumbling stations and turning them into moneymakers. They did this mostly by changing the formats to religious or all-news programming. In 1988, the duo bought its first television station; at the time, they also owned six AM stations and six FM stations in seven cities.
In 1992 the FCC relaxed ownership regulations. Soon after, the FCC increased the number of television stations a media company could own. By the mid-1990s, Clear Channel Communications owned 43 radio and 16 TV stations.
Then came the Telecommunications Act of 1996. On its face, the bill was supposed to loosen regulations regarding access to telephone lines. Additionally, the new law was to open up restrictions on who could provide digital television services.
Tucked into the bill, however, was a provision that would further expand the number of radio stations a broadcast company could own in one market, and essentially do away with any limits on ownership nationwide. It allowed for a broadcaster to own as many as eight stations on either the AM or FM frequencies in a single market.
There was resistance on Capitol Hill, but broadcast conglomerates argued that more media concentration would actually improve the variety of radio programming. For instance, they claimed, if ABC Radio owned one "classic rock" station in a market, and ABC or, say, Infinity Broadcasting (two prominent rivals at the time), bought the other locally owned classic rock station in the market, there would be little reason for two classic rock stations. "Diversity" became the industry's buzzword for promoting the bill.
The industry had the ear of President Bill Clinton, who was seeking reelection that year. Clinton professed to be impressed by the arguments the broadcasters made, and was almost certainly impressed by the coin they contributed to his reelection campaign. The president pushed Congress to pass the measure, which he signed in February 1996.
What followed was an unprecedented wave of large corporations merging with large corporations. AOL fused with Time Warner. Viacom became one with Infinity Broadcasting, and then with CBS. ABC merged with Walt Disney. And so on.
For all the press these huge alliances garnered, there was a ripple effect among smaller owners as well. As the industry became deregulated, a mergers-and-acquisitions boom commenced in the industry. One of the first local harbingers of this effect came in 1992, when Colfax Communications, a south Minneapolis company headed by a WCCO radio general manager, bought WCTS-FM (100.3), which had been a Christian station, for $10 million. Then Colfax, with the help of investors who had made their cash off of the Craftsman tool company, purchased KQQL-FM (107.9), an oldies station.
In 1995, KDWB-FM (101.3), long considered one of the most influential top 40 stations not on either coast, was bought by Dallas-based Chancellor Communications for $22 million, a local record, and by the end of the year the company owned KTCZ-FM (97.1), KEEY-FM (102.1), and KFAN-AM (1130). The following year, Colfax bought nine more stations in Phoenix, Milwaukee, and Boise. Two months later, in August 1996, Colfax sold all 12 of its stations to Chancellor for $365 million. Suddenly Chancellor owned seven stations in the Twin Cities.
But the mergers didn't stop, and local radio listeners could be forgiven for losing track of who exactly was programming the music coming out of their car stereos. In 1997, Chancellor Broadcasting merged with another Texas-based broadcaster, Evergreen Media, and was christened Chancellor Media Group. The company owned 103 stations in 21 major markets. (The Twin Cities market is the 15th-largest in the U.S.) By the end of that year, Chancellor had formed a new national network called AMFM Radio.
During this age of consolidation, it became evident that nobody did mergers and acquisitions better than Clear Channel. Though the company had operated below big-media radar in its early years, its deep pockets and deal-spotting acumen left the company in a position to make major purchases at will. Clear Channel was taken public in 1984, and during the 1990s, its stock went from $4.60 a share in 1993 to $95 a share in 2000. (Mays's sons, Randall and Mark, have taken major roles in the company's management over time; Mark Mays is currently the CEO and president of Clear Channel, Randall the CFO and executive vice president.)
In 1996, Clear Channel bought 49 radio stations. The next year, it bought 70. In 1998, it bought Jacor Communications and its 206 radio stations to the tune of $6.5 billion. Clear Channel bought AMFM in October 1999. That acquisition, for $24 billion, netted Mays and Clear Channel 830 more stations. (To assuage the rumblings of antitrust regulators, Clear Channel quickly sold off an additional 100-plus stations for $4.2 billion.) The next closest radio competitor was Cumulus, which had a relatively paltry 230 stations at the time.
After years spent amassing its radio empire, Clear Channel began to move vertically in its acquisitions, buying up companies elsewhere in the media/entertainment supply chain. The real watershed came in 2000, when Clear Channel bought a promotions company called SFX. SFX had become a corporate raider in the booking business, buying such longstanding promotions companies as Bill Graham Presents. By 2000, SFX was staging more than 26,000 events annually. Clear Channel bought SFX for $4.4 billion, and folded it into Clear Channel Entertainment. Suddenly Clear Channel was booking thousands of concerts a year.
In addition to the radio and television stations, the concert venues and outdoor advertising, there are such holdings as Clear Channel Satellite, based in Colorado, providing a variety of satellite transmission services; Clear Channel Wireless, a high-speed internet service based in Cincinnati; Inside Radio, an industry trade publication; and Katz Media Group, an ad firm in New York City that works with 2,100 radio stations, 350 television stations, and 1,700 cable operators.
And the list goes on. Clear Channel owns Motor Sports Group, promoter of more than 600 car and cycle racing events a year. There's Premiere Radio Networks, which distributes Rush Limbaugh and other shows to 7,800 radio stations; Prophet Systems, a company that makes the technology that allows DJs to "voicetrack," or record radio shows in one city for several stations in other cities; and SFX Sports Group, a talent management and marketing agency that represents 500 professional athletes, including Michael Jordan and Andre Agassi. Another spin-off of Clear Channel produces the television shows Smallville and Arli$$. The company also has a stake in XM Satellite radio. And Clear Channel owns the touring rights to the Broadway productions of The Lion King, Hairspray, and a chunk of The Producers. In fact, the company owns prominent theaters both on Broadway and in Chicago.
Needless to say, it's a corporate portfolio that goes far beyond owning an unprecedented number of radio stations. As the e-mail signature line used by many local Clear Channel employees puts it, "What other markets or what other media can I help you with today?"
As Clear Channel grew, so did resentment toward what was deemed by many an evil empire. Pop music aficionados have long decried the homogenization of radio at the hands of the company, which, they say, uses market research to formulate repetitious, lowest-common-denominator playlists around the country. (Clear Channel Radio CEO John Hogan retorted in 2003 that the company had 6,700 playlists--a sentiment Seeman echoes. "All of our research and testing for all of our stations is done locally," he says.)
The complaints of the company's competitors and critics were exhaustively documented in a series of stories written by Eric Boehlert of Salon.com in 2001. Boehlert wrote of Clear Channel's alleged "pay for play" practices, recounted accusations that bands who booked shows with other concert promoters saw their airplay diminish on CC stations across the country, and compiled other charges of generally bad behavior. "Welcome to the world of Clear Channel," Boehlert wrote, "radio's big bully."
Like any conglomerate, Clear Channel has sought to make its size pay off by reducing management ranks on the road to consolidation. As it snatched up multiple stations in one market, the company would merge operations, resulting in many lost jobs. According to a report published by Cornell University a year ago that was commissioned by the AFL-CIO, "Clear Channel's cost-cutting practices" led to 1,500 to 4,500 jobs lost over four years.
This type of streamlining happened in the Twin Cities more than two years ago, when operations for all seven Clear Channel stations were uprooted. Stations that had been scattered throughout the metro were suddenly operating under one roof, in a giant office complex in St. Louis Park just off Highway 100 and I-394. Since then, a number of career radio employees have lost their jobs.
Seeman says that only 10 to 15 jobs have been lost locally in the transition. But according to some sources with knowledge of the downsizing, longtime employees were first assured the move would lead to no layoffs. Soon afterward, they claim, about 20 people were let go. Definitive numbers remain elusive, but additional layoffs appear to have happened since the move to St. Louis Park--perhaps totaling as many as 30 out of 250 radio jobs. "It was heartbreaking, and the local managers tried to save the jobs," says one former employee. "But Dan is a good person in a company guided by the whip of Wall Street."
In fact, Seeman is quick to point out that he grew up here and has worked in local radio for 20 years. By most accounts, Clear Channel behaves better here than it does in other markets. Still, as Clay Steinman, a media studies professor at Macalester College notes, "Even if the radio stations in town are staffed by local people, they still don't necessarily have the priorities of local ownership. At the end of the day, there's going to be an emphasis on what's good for the company, and it's all done in the name of the bottom line."
In some markets the company became notorious for allegedly bullying bands and managers into playing shows it sponsored. Critics charged that if an act came to town and had the audacity to book the show with another concert promoter, there was a good chance that advertising for that show wouldn't run on a Clear Channel station. Or if it did, they also claimed, it would be at a higher rate than that for a Clear Channel show. Additionally, the company was accused of dropping artists from its playlists nationwide if they didn't use CCE as their concert promoter.
Band managers and artists are reluctant to talk about to what extent Clear Channel engages in this practice, but one booker told Denver's alternative weekly, Westword, in 2001, "Catch a cold in Denver, get the flu everywhere else." A lawsuit filed in Denver by a local promoter, Nobody In Particular Presents, detailed claims involving the band Eve 6. The band's management company purportedly told NIPP that Eve 6 would have to let Clear Channel promote their Denver show; otherwise the band would lose airplay. Clear Channel argued that the accusation was inadmissible hearsay, but the judge admitted it, ruling that NIPP had provided sufficient evidence that such practices may have occurred.
The company has always denied threatening artists with airplay cutbacks, and few musicians are even willing to talk about Clear Channel on the record. What's incontestable is that, since its purchase of SFX, Clear Channel has had a huge impact on the local club scene. The presence of Clear Channel Entertainment has meant that some clubs can no longer compete for touring acts. James Martin of E Company, who books the Cabooze and Lee's Liquor Lounge, sees Clear Channel's practices philosophically. "It's a lesser risk to them to book these artists," he says, referring to the company's deep pockets. "The band may blow up overnight, and they can book them in other towns, and [establish] them as Clear Channel artists.
"If they can do it, more power to them," Martin continues. "The main issue I have is that we can spend time nurturing a band, and then they want to go to the next step, or the management tells them to go with someone bigger, and we can't compete" the next time a band comes to town, he says. The effect is that Clear Channel will set a guarantee that other bookers can't match. Places like First Avenue and the Cabooze consider these $10,000 shows to be their bread and butter, but Clear Channel just sees them as brand-building.
The same thing happens on a national level. Prominent musicians like Neil Young and Steve Miller have started to speak out about the Clear Channel squeeze. And Don Henley has testified before Congress, insisting that through its radio and booking operations, the company has engaged in monopolistic practices.
In describing Clear Channel's power over the marketplace, Macalester's Steinman draws a parallel. "They've reached a point that's similar to the prohibition on movie studios owning local theaters," Steinman notes. "You can't deal directly with GM to buy a car. You have to have local dealers. Or you don't have people buying gas directly from oil companies. Historically, we have said that we don't want people at one end of the production process controlling how that product gets to people locally."
The first piece of anti-monopoly legislation, the Sherman Act, was passed in 1890, essentially guaranteeing that the federal government could regulate industry to ensure that there was no collusion or dominance of one company in any given sector. The act was the impetus for Theodore Roosevelt's trust-busting campaigns that reshaped the economy at the turn of the 20th century. In 1911, the Sherman Act was used to bust up the monopoly of Standard Oil.
In our lifetimes, the most compelling antitrust suits have involved communications. The Microsoft suit of the late 1990s, which rested on the idea of the company "bundling" its internet browser with the computers it manufactured, was merely a slap on the wrist when all was said and done. But the antitrust suit brought against AT&T and the system of "Baby Bells," which was hatched by fledgling telephone company and future rival MCI in the mid-1970s, ended the phone company as we knew it.
In Deal of the Century: The Breakup of AT&T, Steve Coll documents the case regulators made for "divestiture" of the phone system in 1984. In that suit, there was "something called the 'essential services' doctrine in antitrust law," Coll wrote in 1986. "If one company--say, AT&T--owned exclusive facilities that were essential to the business of another company--say, MCI--then the first company was required to give access to the second company." That principle of law, coupled with the fact that AT&T controlled the consumer "product" from start to end--the land lines, the switching stations, the local service, the long-distance service, even the telephones--was the unraveling of the company's monopoly.
These were essentially the grounds on which Nobody In Particular Presents took on the radio giant in August 2001. "Clear Channel has engaged in a vast array of anti-competitive, predatory, and exclusionary practices in the course of acquiring, maintaining, and extending its monopoly power," NIPP's complaint, filed in federal district court, began.
For starters, testimony and a trail of internal Clear Channel e-mails built a strong case that Clear Channel had, in effect, boycotted airplay on its Denver stations for artists and labels who had booked shows with other promoters in the Denver area. In 1999 and 2000, Clear Channel allegedly shut the door on Reprise Records, which had booked shows with NIPP. An e-mail from Michael O'Connor, the director of radio operations in the market, was particularly damning. "We are out of business with your label," court records say O'Connor wrote to label reps. "You can all fuck yourselves as far as I'm concerned."
NIPP cited other such examples for the court, including a period of time when a Clear Channel station had played a single by Puddle of Mudd more than 20 times a week for 3 months. After the band played an NIPP show, the promoter claimed, the station played the single only 11 times, and by the following week, wasn't playing it at all.
Aside from radio spins, NIPP further alleged that bands suffered from lack of promotion on Clear Channel stations if they were playing a non-Clear Channel show. Judge Edward Nottingham, in his 72-page opinion, allowed that NIPP had provided sufficient evidence to refer many of its claims to trial. Nottingham noted the number of "alter egos" Clear Channel uses in the music business, most specifically SFX, and concluded that, though the company argued they were separate entities, a jury might find them to be one and the same. "When the parent controls, directs, or encourages the subsidiary's anti-competitive conduct, the parent engages in sufficient independent conduct to be held directly liable as a single enterprise with the subsidiary under the Sherman Act," the judge wrote last April.
Judge Nottingham added that "a market share of 70 percent demonstrates monopoly power," and noted that Clear Channel controlled 73 percent of the rock radio advertising market. Further, the court concluded that Clear Channel may have denied advertising to NIPP and may have engaged in "anti-competitive conduct." He allowed that there was evidence that Clear Channel had denied NIPP the use of essential services--its radio stations. "Taken as a whole," Nottingham wrote, "the court concludes that NIPP has demonstrated sufficient evidence of attempted monopolization that a reasonable jury could find in favor of NIPP."
Parts of the suit were dismissed. The judge ruled, for instance, that NIPP did not demonstrate that Clear Channel had damaged the reputation of its competitor. And, the court noted, no one came forth to testify that airplay had been denied by Clear Channel simply for booking a show with NIPP (though the court record did include anecdotes claiming as much.)
But, ultimately, Clear Channel's motion to have the suit dismissed was denied, and a jury trial was set. Nottingham concluded, "Antitrust law is the only mechanism by which Clear Channel's behavior may be policed."
In June 2004, Clear Channel settled with NIPP before the case reached trial.
In December 2004, FCC commissioner Jonathan Adelstein came to St. Paul to participate in a forum on the state of the media. Adelstein had been touring the country with another commissioner since the summer of 2003, when Michael Powell and two other commissioners were proposing further loosening of media ownership rules. (Powell, who recently announced his resignation, got his way in the FCC vote, but an appellate court overturned the FCC decision.)
But don't expect the FCC to rein in Clear Channel's power, Adelstein told me afterward. "We, as a body, very seldom re-regulate what has already been deregulated," he said. "Clear Channel is within the law of ownership. Once it happens, that's it. You can't put toothpaste back in the tube."
But what about all of Clear Channel's other acquisitions in the media/entertainment supply chain? "The only thing we can really control is the newspaper/ radio/television ownership regulations," Adelstein said. "Clear Channel isn't violating any of those regulations. Most of those other businesses they're involved in are out of the purview of the FCC."
And it's for this reason that local attorney Spence believes the company will keep to its present course. "They'll keep expanding and controlling how a large number of us get our music, our art, our entertainment," he says. "They're not going to stop themselves."
Back in November, at the Minneapolis City Council meeting, some council members voiced a reluctance to deal with Clear Channel. Council President Paul Ostrow (First Ward) made a number of amendments that were all voted down. The proposed agreement to negotiate a contract that would run for 30 years and then turn the keys over to Clear Channel's nonprofit business partner, the Hennepin Theatre Trust, left some people leery that Clear Channel would one day own the theaters.
"There is the thought that Clear Channel would have a significant financial stake in the theaters, backing $22 million in bonds," Ostrow says now. "I'm not saying Clear Channel is good or evil. It's a broader question of protecting public assets. There are significant legal rights [at stake] in terms of the operation of these theaters, and hopefully we clarified that going into negotiations."
Either way, the council voted 7 to 4 to enter into negotiations with HTT/HTG/ Clear Channel to run the theaters, with any niggling details to be hashed out by March.
Ostrow's concerns may not be misguided, if the words of the company's own founder are any barometer. "I define competition, at least as far as our company is concerned, as getting all the money," Lowry Mays told the Texas A&M Aggie Daily in 2000 after receiving a distinguished alumni award. And Mays told Fortune magazine in 2003, "We're not in the business of providing news and information. We're not in the business of providing well-researched music. We're simply in the business of selling our customers products."
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