Spinning trouble

By Bill Ramsey

Try to remember a time when commercial radio stations didn’t sound the same, from town to town, up and down the dial. If you long for the days when deejays played requests and when playlists at least pretended to reflect local listener demand, forget it. Those days are long gone.
You may not be old enough to remember such movies as FM and sitcoms such as WKRP in Cincinnati, which depicted the halcyon radio days of free-form ‘70s radio. But even the youngest of us can remember when President Clinton, under heavy pressure from a Republican-controlled Congress, signed the Telecommunications Act of 1996.
This law ended decades of regulations limiting the number of stations one company could own in any one market. From smallish towns such as Charlottesville to metropolitan megawatt cities, the act allowed commercial radio companies to create a pre-programmed, voice-tracked, market-researched, electronic beast. Amid this backdrop, one company, Texas-based Clear Channel Communications, came to program the songs that make the entire country sing— or beg for mercy.
Now the government is stepping back in to examine the ramifications of its actions. In late March, the FCC made Charlottesville and Clear Channel the focus of its scrutiny.
Finding the “potential for competitive harm,” the Federal Communications Commission has set a hearing on Clear Channel’s long-pending acquisition of WUMX, also known as Mix 107.5— something the commission hasn’t done for more than 30 years. If Clear Channel, which currently operates WUMX under what industry insiders term a “hostage” station— or a station managed, and even paid for by its suitor, but not approved by the FCC— thinks the deal will have smooth sailing, FCC Chairman Michael Powell may have news for them.
While the 1996 act allowed such “stewardship,” it clearly defined any one company’s ability to control market share. Making an example of WUMX, Powell says Clear Channel provides “no public interest benefits or mitigating circumstances. Indeed, the only significant evidence presented was that the transaction would create a market in which the top two owners would have a combined 94.2% market share.”
For the past 30 years, a handful of broadcasting companies have bided their time, knowing the day would come when federal regulations— designed to protect public airwaves from media monopolies— would be lifted. But the watershed act of 1996 turned the piranhas into great white sharks, and no company took advantage of deregulation more aggressively than Clear Channel.
A year earlier, this relatively unknown but profitable broadcasting company owned 36 radio stations across the country (four less than the maximum of 40 then permitted by law), primarily in small- and mid-size markets. With the stroke of Clinton’s pen, Clear Channel went shopping like a housemaid who had just won the lottery.
Today, the chain is more than the nation’s largest radio empire. In only six years, Clear Channel— its corporate name derived, ironically, from one of its early station’s historic status as an FCC-sanctioned “clear channel” frequency audible in dozens of states during a national emergency— spread its money and influence far and wide. Besides its more than 1,200 stations in all 50 states, including its Charlottesville presence, Clear Channel also owns 19 television stations, has a stake in 250 radio stations overseas, operates an enormous billboard chain, and is the nation’s leading concert promoter.
As The Los Angeles Times recently reported, Clear Channel’s sales have rocketed from $74 million just 10 years ago to $8 billion last year— a mind-boggling 100-fold increase.
During this spending spree, the company acquired most of its notable competition. In the checkout lane, Clear Channel purchased its competiton, radio conglomerates such as Jacor (whose 400 stations were purchased for $3.4 billion in 1998), the powerful AMFM network of stations (purchased in 1999 for $24 billion), and expanded its empire and influence by becoming the country’s largest concert promoter with its $4.4 billion purchase of SFX (now known as Clear Channel Entertainment) in 2000.
Those billion-dollar deals have left the company with an onerous $9 billion debt, far surpassing its stratospheric profits.
But is Clear Channel worried? No, not even with the advertising slump following September 11 and four consecutive quarters of losses (during which revenue slipped more than 11 percent from $2 billion in 2000 to $1.86 billion last year).
Clear Channel executives view the losses as a minor meteor shower in their galaxy. And, like many large corporations in the post-9/11 era, Clear Channel has plans to reverse the slide.
That doesn’t mean reining in its ravenous appetite for new acquisitions— the company has recently laid the groundwork to purchase the Seattle-based Ackerly Group, another radio, television, and billboard conglomerate— it means downsizing its most expensive component: voice talent: we call them disc-jockeys.
On the big map of radio stations dotted across the nation, Clear Channel’s 10 percent market share may not appear monopolistic. But market for market, not even its closest competitors (Infinity, Viacom, or Heritage) brokers its influence as brazenly as Clear Channel.
In February, company president Mark Mays, son of founder and CEO Lowry Mays, blamed severance packages paid to 2,000 employees axed after September 11 as much as 9/11 itself. Personnel is where the cuts slice deepest— just one reason why the company is known as “Cheap Channel” to many detractors and former employees.
“Clear Channel had a reputation of buying up markets, slim-lining the product, and diluting the talent to the point of homogenizing,” says former Charlottesville jock Hal Abrams, who was half of a morning drive team for WUMX. Abrams says he saw Clear Channel cost-cutting first-hand.
“As the transition of ownership took place,” says Abrams, “odd things started happening around the office. Little blue wires, Ethernet cables to be specific, started to appear from the acoustical panels in the ceiling. After 20 years in the business, you realize this is a good reason to fear your job.”
But it was allegations of low ratings— not replacement by computer— that caused Abrams and fellow morning personality Naomi Spimoni to be axed about a year ago as their contracts ended in favor of replacements Vinny Kice and Brooke Shealy. “As anyone in the business who has a brain knows,” says Abrams, “it takes more than one ratings period and support from their program director to succeed.”
Allegations of penny-pinching arose long before Abrams’ firing or 9/11. In fact, Clear Channel gleefully defends its radio revolution.
In what is known as “voice tracking,” the company takes the age-old practice of syndicating popular programs such as Casey Kasem’s “American Top 40” to a new level: putting its own core voice talent to work across its network and, through clever editing, making it appear as though such veteran star jocks as Rick “Disco Duck” Dees are spinning the hits and gabbing with rock stars in Your Hometown, USA.
Clear Channel defends the practice as a broadcasting revolution, pointing out that by virtue of its vast resources and talent, it can bring big market talent to small town America. Brad Eure, president of Eure Communications Inc., Clear Channel’s largest local competitor, says that voice tracking signals the demise of community-based radio and severely limits the ability of new talent to enter the field.
How, for example, will the next Rick Dees or Howard Stern break into the biz?
As Andrew Jay Schwartzman, president of the watchdog agency Media Access Project, told the Los Angeles Times: “Our worst fears have been realized. A lot of the things Clear Channel is doing are the traditionally questionable industry practices, but now on steroids.”
Such as self-censorship. This is the company that in the wake of 9/11 allegedly sent out the infamous songs-to-avoid list (“Walk Like an Egyptian,” “Stairway to Heaven,” and about 150 others) it has since denied issuing at all.
Once the subject of tongue-in-cheek articles in business publications mocking its Texas origins, the little ol’ radio company from San Antonio— much like George W. Bush— is no longer a laughing stock. And as W. has done, the man who started its meteoric rise to power may shock, stun, and surprise you.
Founder Lester Lowry Mays, a petroleum engineering graduate of Texas A&M with an MBA from Harvard, is a smart but stereotypical Texas businessman. Which is to say he’s more comfortable roaming his massive South Texas ranch than toiling in the company boardroom. In a 1992 Forbes profile, Mays is quoted claiming surprise at the course of his career: “I had no intention of getting into the broadcast business.”
In 1972, a 36-year-old Mays was running a small investment-banking operation in San Antonio when investors approached him for capital to fund a failing FM country station. Teaming with future Texas business legend Billy Joe “Red” McCombs (a car dealership magnate who now owns the Minnesota Vikings), Mays borrowed $175,000 from a local bank, while McCombs chipped in an additional $125,000. When the investors backed out of the deal and the dust cleared, Mays was thrust into a business he knew nothing about.
Others might have winced and swallowed the bitter pill of the gamble. Not Mays. He did his homework and decided to hitch his star to broadcasting. By the time of deregulation, Mays was rich beyond his wildest dreams.
So what drove this soft-spoken, spotlight-shunning Texan into the ranks of the John Kluges of the world? Ego? Avarice? Greed?
None of the above, if the stories can be believed. For Mays, Clear Channel may just as well have been Coca-Cola or Nike. With his focus on the bottom line, Mays couldn’t care less— then or now— about music. If Britney Spears sells umpteen millions of records, then dammit, the pop princess will be heard on Clear Channel stations— as long as she remains a profitable product.
That profit-margin focus has come at a price. Mays, now 66, has morphed, in the eyes of critics, from an amiable Ben Cartwright into an evil Darth Vader whose Dark Star reaches into the smallest corners of the country. Like market #225: Charlottesville, Virginia.
As defined by Arbitron, the industry standard for radio ratings, there are 10 commercial radio stations in Charlottesville— a remarkable number for such a small market. Yet, in many ways, Charlottesville represents the sort of town Clear Channel built its empire on. Even before deregulation, Clear Channel’s strategy was alarmingly simple: enter a smallish market, purchase struggling stations, double the sales force, and market like mad.
In 1998, Clear Channel applied the strategy here. Almost instantly, the company scooped up five stations and has run and reaped advertising revenue from a sixth, WUMX 107.5, Mix  [See sidebar: “Who owns what”]
Clear Channel’s only substantial competition is Eure. Which is not to say that Eure’s programming is always less pre-programmed or ratings-driven. After all, after bringing them here, it was Eure executives who fired such seemingly popular talk-radio stars as Lee Fielding (1997) and Nancy King (2001). But at least Eure is locally owned. And that fact, according to the company’s top executives, remains a huge plus in the battle for Charlottesville.
    Before passage of the 1996 act, Eure owned only two stations: WCHV and WWWV. The company acquired other stations in a merger with Charlottesville Broadcasting Corporation: WINA, WKAV, and WQMZ— plus the operation of WUVA (“Kiss FM”)— the station it was denied from operating by the same laws that govern Clear Channel’s pending agreement to purchase WUMZ.
When the federal government uncorked the bottle and released the free-market genie, it also limited the number of wishes it allowed. Under a federal law designed to balance deregulation by capping not ownership but market share, Eure was grudgingly forced to release its sales agreement with WUVA. And in December 1999, Eure was ordered to sell WCHV.
The buyer: Clear Channel.
The battle lines have been drawn: it’s hometown Eure versus worldwide Clear Channel— only Eure is the little fish in its own pond, a position the company doesn’t like. Chief among its complaints is the WUMX “hostage” situation. Eure says it wouldn’t begrudge Clear Channel if it the same laws that forced it to release its hold on WUVA, the prized third coin in the Charlottesville radio market, were applied to Clear Channel’s lease of WUMX.
According to an industry news source, Duncan’s American Radio, Clear Channel led the Charlottesville market in 2000 with 45.8 percent of revenue, followed by Eure’s 38.5 percent, and WUMX, the so-called Clear Channel “hostage,” with another 9.9 percent. If Clear Channel acquires WUMX, it’s got a majority of the local market.
But that situation may change. On March 19, the FCC made an example of Clear Channel’s Charlottesville “hostage” situation. The FCC’s almost unprecedented hearing into the matter, and the resulting media attention will likely force the agency to re-examine the stack of complaints, petitions, and lawsuits piling up against Clear Channel at the FCC and the Department of Justice.
The FCC’s announcement of the Charlottesville hearing is good news for Eure. But the company still has a few beefs.
Eure vice president and general manager Dann Miller is peeved over the loss of Rush Limbaugh. The entertaining, if histrionic right-wing commentator was a mainstay of mid-day talk radio on Eure’s WINA— until last year when Clear Channel announced to its competitors that its franchise was moving to Clear Channel stations, in this case to WCHV. It was a stunning loss for WINA and other non-Clear Channel stations nationwide.
    Didn’t you know? Among its other holdings, Clear Channel also owns Premiere Radio Networks, syndicator of the nation’s most popular talk shows, including Limbaugh, Dr. Laura Schlessinger, Dr. Dean Edell, Art Bell, and Jim Rome..
As for the controversial use of voice tracking, or “cyber-jocking,” Clear Channel has eliminated thousands of DJs— and their high salaries— by having one jock send out his or her show to affiliates.
“Most Clear Channel DJs do shifts on two stations,” says Miller, “and at least three shifts come via email from other Clear Channel stations.”
 Another commonplace, though hardly original, Clear Channel tactic is the big giveaway. Even if they don’t like the music, a lot of listeners will tune in if a station is giving away big bucks, a trip to the Grammys, or some other fantastic prize. Local broadcasters such as Eure can give away dozens of CDs and restaurant dinner, but it simply can’t compete with Clear Channel’s war chest of big-ticket goodies.
Here’s the rub: If a Clear Channel station in Charlottesville runs a big-money contest, say giving away $1 million, as they have recently, what callers may not realize is that they are competing not only with other local hopefuls, but with listeners all over the country.
“We were very concerned at first because Clear Channel made it sound as if each station was giving away the prize being promoted,” says Miller. Clear Channel insists it made it clear that the contest was national in scope and that listeners were not duped. Legal? Yes. Ethical? Depends on your point of view.
But more weighty and serious matters are now facing Clear Channel.
Though the company continues to defend its business practices as “aggressive but legal,” others such as Congressman Howard L. Berman (D-CA) disagree. On January 22, Berman fired off requests to U.S. Attorney General John Ashcroft and FCC Chairman Powell calling for an investigation into the negative effects of consolidation in the radio and concert promotion business— specifically citing Clear Channel.
    “I am particularly concerned about widely reported allegations that Clear Channel has ‘punished’ recording artists who have not used its concert promotion service by denying them radio airplay,” said Berman.
“Also of great concern are reports of ‘parking’ or ‘warehousing’ of radio and television stations by Clear Channel. Press accounts and pending FCC complaints state that Clear Channel is trying to exceed legal limits of ownership of radio and TV stations by using third parties, shell corporations, or related entities to make the purchases,” Berman’s letter states. “If true, this practice is both against the public interest and hurts competitors.” The Congressman asked the Department of Justice and the FCC to investigate and to vigorously prosecute any wrongdoing.
Berman gets an “A” for effort. But will it happen?
“There’s been some communication between the Justice Department and the FCC,” says a Berman spokesman who asked not to be identified.
    Washington, D.C., attorney Arthur Belenduik, who specializes in communications law and represents Eure and an advertiser in Ohio suing Clear Channel, holds his cards close to his vest, but admits the company is near the edge of the safety zone, a lesson such Bush pals as Enron CEO Ken Lay have learned all too well.
    A lifelong Republican with a history of putting his wallet behind the GOP, Lowry Mays may not invite media attention personally, but behind the political scenes, the man is no shrinking violet. His political preferences and checkbook have always leaned right— from San Antonio to the Texas Governor’s Mansion to 1600 Pennsylvania Avenue.
As the Los Angeles Times points out, while governor of Texas, President Bush appointed Mays to a state technology council in 1996. In return, Mays contributed $51,000 to Bush’s victorious 1998 re-election campaign. When W. became a serious candidate for president, Clear Channel sent a healthy $106,000 check to the Republican National Committee, while Mays personally contributed $37,000 to the party. Will Bush pal Ashcroft really go after Mays?
Ranking House Democrat John Conyers of Michigan has said he wants to hold hearings on allegations that record companies are making covert payments to radio stations to ensure that music from their artists gets airtime. As the Wall Street Journal reported in January, such hearings would focus on whether record companies are funneling tens of millions of dollars through third parties to get around a federal ban on “payola.” But it’s probably unlikely that Conyers’ request stands a chance of actually derailing a company with the heft of Clear Channel.
Why? In an award-winning series for internet magazine Salon.com, reporter Eric Boehlert found that high-priced record promoters called “indies” do the dirty work for record labels. In larger markets, indies pitch records weekly and are paid directly by labels for each “add” to a station’s playlist, sometimes as much as $2,000, according to Boehlert.
Sleazy, sure, but the bad news doesn’t stop there for competing commercial stations.
For better or worse, Charlottesville— which doesn’t have big concert venues— feels the sting every time Clear Channel Entertainment entices Charlottesville’s youthful college audience to shows in Washington, D.C., Baltimore, Richmond, and Raleigh, North Carolina. In many markets, Clear Channel either owns or has a stake in the venues where its acts perform and have an exclusive agreement with Ticketmaster, the nation’s largest concert ticket seller.
While local Clear Channel stations doled out tickets to such shows as Dave Matthews’ April 4 spring tour opener at the MCI Center in Washington, D.C., Eure’s stations could pay for tickets to give away, but do little more than stand on the sidelines.
Though Clear Channel’s local operations director maintains that his stations purchase the tickets they give away on the air, it’s a barely kept secret that Clear Channel has $2 million invested in Musictoday.com, the Ivy-based online merchandising company set up by Dave Matthews Band manager Coran Capshaw. The thousands of dollars Clear Channel spends purchasing tickets from Capshaw are a drop in the bucket compared to the windfall of profits from the shows and the expensive merchandise rabidly purchased by fans.
A year ago, Hank Kestenbaum, 48, a 25-year radio veteran, was ready to land in cozy Charlottesville. He was also the man Clear Channel wanted to “clean house,” and shore up its sales operations in town, some of which were reputedly less than productive.
A former DJ, program director, and station owner, Kestenbaum says he had more or less peaked in the radio business by the time he arrived in Charlottesville. The owner of several stations in Tallahassee, Florida, which competed against Clear Channel, he says that the company’s offer, along with the sale of his stations, was the right move at the right time.
Congenial but prepared to parry with any thrust at Clear Channel from a reporter, Kestenbaum says his job is to make his advertisers happy and to educate them in the proper use of radio advertising.
His position on voice tracking?
“It’s a better product than what I can produce locally. If the product suffered,” Kestenbaum, says, “I’d spend the extra money to hire local DJs.”
Yes, he remembers the “good old days”; sure, he’s in the business of making his company money; and yes, if such elements as voice tracking deliver a better product than he can offer by paying a local DJ as much, then he pleads guilty.
    “Radio,” he says, in a moment of clarity not associated with business, “is theater. It’s what comes out of the speakers. It’s all imagination.”
    He says it’s easy to point the finger at big, bad Clear Channel, a company Boehlert called a “big bully,” but what’s not so easy is the matter of keeping radio— and not just Clear Channel stations— on the air.
“We’re not perfect,” says Kestenbaum, “but we’re getting better. Deregulation was good. It kept hundreds of stations on the air that would have gone dark. That’s good for radio.”
This isn’t just about money or market domination. Commercial radio thrives on attracting the largest audience possible to make its station(s) attractive to advertisers. But as long as indies dictate the playlists of Clear Channel or Eure (which both insist is not the case) or any station, and voice tracking becomes the cost-cutting standard, a large segment of listeners may increasingly turn to alternatives such as WNRN, the six-year old independent station Mike Friend (known as Mike Seay on the air) started and still successfully runs.
“Syndicated, voice-tracked, satellite-delivered, cookie-cutter radio drives away educated listeners,” says Friend. “Commercial radio listening has dropped every year since the late 1980s,” he says citing industry reports. “In that time, non-commercial radio listening has tripled.”
Friend says that such National Public Radio drive-time shows as “Morning Edition” and “All Things Considered” find a healthy audience among those weary of hearing the latest Creed hit played three times an hour. “In places like Charlottesville where there is an option like WNRN,” says Friend, “that option tends to do very well. Even fare such as that produced by stations like WTJU does okay if it’s competently executed and promoted.”
    As for the future of commercial radio and the music industry, Friend offers little hope. “For cutting-edge aficionados of various music genres,” he says, “commercial radio has been irrelevant for a generation.”
On its way to publication, a funny thing happened to this article.
Waldo Jaquith mentioned the FCC’s action on his online chatroom, cvillenews.com, and got over a dozen comments almost immediately. Even Jaquith himself chimed in: “This company is truly evil. If you don’t know about Clear Channel, I highly recommend that you read at least one of the articles from Salon.com.”
Charlottesville can consider itself fortunate, perhaps, that the creator of WKRP, the show that depicted radio as it could be— absolutely local and absolutely loveable— lives here. We called Hugh Wilson to see what he thinks of the Clear Channel influence and radio in general.
Wilson says he doesn’t even listen to the rock stations he captured so crisply with WKRP. “I’m of a certain age,” says Wilson, “where I listen to talk radio— and NPR.”
But at least the feds seem to be listening. And it’s been a long time coming.

Bill Ramsey writes the monthly DMBeat column for The Hook. This is his first feature story for the paper.