Radio Mergers Source of Static at Columbia, S.C., Stations (fwd)

[James Packard Love <love@cptech.org>]

  ---------- Forwarded message ----------
  Date: Sun, 22 Jun 1997 17:47:14 -0700
  
  Radio >>Mergers<< Source of Static at Columbia, S.C., Stations
  
  BY YON LAMBERT, THE STATE, COLUMBIA, S.C.
  Knight-Ridder/Tribune Business News
  
  Jun. 23--Bob Raleigh winds through a narrow hallway in the cramped, aging
  building on Millwood Avenue that houses radio stations WCOS-FM and
  WHKZ-FM. 
  
  The stations' program director strolls past studios and a series of
  imposing black monitors, almost as far back as one can go, before he
  enters a windowless office he jokingly calls ``the cave.''
  
  Raleigh might not have to make the trip too much longer. 
  
  The two country music stations are expected to move into a new building
  with four other local stations owned by the same company: Capstar
  Broadcasting Partners. 
  
  Given the seismic changes sweeping through the radio industry, where
  Raleigh's office sits is likely the least of his concerns. Like thousands
  of other programmers, he is adapting to a new way of doing business. 
  
  In the last year, radio has experienced an unprecedented wave of
  >>mergers<< because of the Telecommunications Act of 1996. Deregulation
  left just a few leviathan companies in control of the airwaves in most
  cities. It also has left an industry awash in questions: how programming
  methods will change, what will happen to advertising rates, which jobs
  will remain and whether there is enough competition. 
  
  Local radio is a very different place than it was in early 1996. 
  
  In Columbia, three corporations will soon own 13 of the city's top 15
  commercial stations. They will divide into what in the industry are called
  ``station clusters.''
  
  Two huge Texas groups, Capstar from Austin and San Antonio-based Clear
  Channel Communications, have been the major players here. A third,
  Bloomington Broadcasting Corp., owns three stations. 
  
  Once it gets approval from the Federal Communications Commission, Capstar
  will own six stations in Columbia. Lisa Dollinger, Capstar's director of
  corporate communications, said it does not plan any format changes
  although it is assessing sites for new studios. Capstar plans to close its
  deals by the end of this month. 
  
  Clear Channel already owns two Columbia stations: urban-formatted WWDM-FM
  and modern rock WARQ-FM. In late April, it agreed to buy urban WOIC-AM and
  classic rock WMFX-FM. That will give it the franchise in rock programming
  and a powerful grasp on urban listeners. WWDM and WARQ general manager
  Steve Patterson said he does not foresee any programming changes. 
  
  Bloomington, an Illinois-based company, has been quiet on the acquisitions
  front. But it still remains a major player here. 
  
  >>Merger<< mania is a relatively recent trend in radio. According to a
  December report by New York media investment banking firm Veronis, Suhler
  & Associates, ownership groups logged a record $13.4 billion in
  >>mergers<< and acquisitions during 1996. In 1995, that number was just
  $69 million. 
  
  And even though the pace of consolidation is slowing, some industry
  insiders found the speed with which it happened alarming. 
  
  ``We have gone from a well-diversified ownership base to one which is
  extremely consolidated and dominated by a few giants on Wall Street,''
  said Jon Sinton of Sinton, Barnes and Associates, a radio consulting firm
  in Atlanta. 
  
  However, many programmers such as WCOS-FM/WHKZ-FM's Raleigh see radio
  improving under the supergroups. 
  
  ``Right now, what we're seeing is a lot of these big groups coming in and
  scooping up stations to reach critical mass,'' Raleigh said. ``Once the
  dust settles, they'll figure out how to run them. 
  
  ``I compare this to situations we have already seen at Wal-Mart,
  McDonald's or even newspapers. For programmers it's good because we'll be
  able to trade information and develop the product better .f.f. but what we
  do as individual stations will determine our success.''
  
  The boon: Telcom. The Wal-Mart analogy is exactly what many media critics
  feared when lawmakers passed Telcom. In an industry where personality and
  localism matter, radio seemed poised for a perilous makeover that favored
  big business over diversity. 
  
  This isn't the first time a loosening of federal regulations has resulted
  in consolidation. 
  
  Before 1993, a company could own only 12 FM and 12 AM stations and just
  one of each within a market. The FCC revised that rule with a premise
  called duopoly. It allowed operators to own two AM and two FM stations in
  any market and up to 20 on each band. 
  
  Then Telcom rewrote the rules for every industry associated with
  telecommunications and led to further deregulation in radio. 
  
  It enabled the FCC to revise its ``multiple ownership rules'' and lift its
  cap on how many stations one company can own nationally. Locally, the rule
  is more complex. In a market the size of Columbia (the 88th largest in the
  U.S.), companies may own no more than seven commercial stations or four on
  the same service (AM or FM). 
  
  That revision led directly to this wave of >>mergers<< and sparked much
  interest, most notably in the Justice Department. Its >>antitrust<<
  division began investigating whether the >>mergers<< might trigger a surge
  in radio advertising rates. 
  
  In some cases, Justice blocked >>mergers<< it believed would allow one
  company to control more than 40 percent of the total radio advertising
  revenues in a market. A spokesperson in the >>antitrust<< division said he
  did not know of plans to oppose the >>mergers<< in Columbia. 
  
  That likely pleases Bill McElveen, general manager at WTCB-FM, WOMG-FM and
  WISW-AM. He is on the board of directors for the National Association of
  Broadcasters, which is at odds with Justice over the issue. 
  
  ``We think a safeguard (against >>antitrust<< issues) was already built in
  because we're only allowing a company to own seven stations in a market
  the size of Columbia,'' McElveen said. 
  
  McElveen also points out that radio makes up only about 7 percent of all
  the money spent on advertising in the media. He says that would make it
  difficult for a >>merger<< in one city to spark >>antitrust<< concerns. 
  Sales staffs, he said, have too much competition. 
  
  However, industry analysts say the large chains see potential to increase
  radio's share of all advertising revenues to 10 percent. 
  
  ``That may not sound like a lot,'' said Jack Messmer, a senior editor at
  the Virginia-based trade publication Radio Business Report. ``But on the
  whole that means billions of dollars. Radio wants a bigger piece of the
  pie.''
  
  Unintended consequences. That's not the only issue worrying those who find
  the >>mergers<< unsettling. 
  
  ``The intended consequence (of Telcom) was more competition,'' said
  Sinton, the consultant from Atlanta. ``The unintended consequence is there
  are now 10 companies that matter in radio.''
  
      [....]
  
  The economics of corporate ownership are so powerful critics fear it may
  homogenize programming even further. 
  
  Most operators know of duopoly situations where owners realized they could
  ``flank'' or ``buffer'' larger, money-making stations with smaller ones. 
  Sintonsaid his firm purposely advised some stations to program music that
  would help it ``lose'' listeners to other similarly formatted stations
  owned by the same company. 
  
  Columbia listeners might recognize a similar situation. 
  
  A year after it went country in 1991, the 6,000-watt WHKZ had risen from
  last place in the Arbitron Ratings Co. book to sixth. Its exciting, young
  country format posed a serious challenge to a demographic held by the
  larger, traditional country power, WCOS. The two stations waged a yearlong
  marketing and promotions battle that was great for listeners but expensive
  for owners. 
  
  But in June 1993, Benchmark Communications completed a deal to buy both
  country stations and create Columbia's first duopoly. By the fall of 1994,
  WHKZ was mired at the bottom of Columbia's ratings. It has remained in the
  lower echelon ever since. 
  
  McElveen and others agree WHKZ was likely a victim of a poorly managed
  duopoly: owners who made low-maintenance programming and marketing
  decisions while WCOS continued to rake in advertising dollars and stay in
  the public eye. Meanwhile, no other owner in Columbia dared to risk a
  fight because Benchmark could ``turn up'' WHKZ's profile. 
  
  
     ...