Big radio rules in small markets

Introduction

The greatest concentration of ownership in the radio industry can be found in smaller and medium-sized markets and not in large cities, with broadcast leviathan Clear Channel Communications Inc. by far the most dominant player in America’s heartland, according to a new study by the Center for Public Integrity.

The radio ownership survey shows that among the 25 metropolitan areas most dominated by a single radio broadcast company, only Florida’s Sarasota-Bradenton area cracks the list of 100 largest markets.

Number one on the ownership concentration list is Mansfield, Ohio, where Clear Channel owns 11 of the metro area’s 17 radio stations. Second is Corvallis, Ore., and third is Albany, Ga. Of the 25 markets most heavily controlled by a single owner, Clear Channel is the top owner in 20 of them and Cumulus Media Inc. (the nation’s second largest owner of radio stations) controls five.

According to the Center’s study, a single company owns nine or more stations in 34 different metropolitan areas. The limit for even the largest markets in the nation, including New York and Los Angeles, is eight stations.

The Center also found that such ownership concentration is not, as the industry has suggested, merely an anomaly limited to a handful of areas. Indeed, in 43 different metropolitan areas across the nation, a single company owns at least a third of all stations, the survey shows.

How we did it

Using geographic software and an in-house database compiled primarily from FCC records, the Center looked at the nation’s 337 metropolitan statistical areas as defined by the United States Census Bureau and plotted the location of broadcast radio transmitters for the 10 largest radio companies.

We then counted how many total commercial stations were located within 10 miles of each MSA and which companies owned them. Each market was analyzed and ranked based on the percentage of stations owned by each company.

Despite the remarkable ownership concentration by such a small number of broadcasters—which would appear on its face to violate federal limits—broadcasters are actually operating within the law thanks to the FCC’s reliance on a counting method its own staff has called “unrealistic and irrational.”

On June 2, 2003, the Commission voted to throw out the system in favor of one derived by Arbitron Inc., a private media and marketing research firm that calculates ratings for virtually all radio stations in the nation. Arbitron markets are based on MSAs, but there are differences. (For example, Mansfield, which is ranked 228 among MSAs and Corvallis, ranked 334, are not listed as Arbitron markets.)

The rule change is expected to significantly limit the number of stations a single company can own in a particular region. But the rules contain a grandfather clause that will allow companies to hang on to the stations they owned at the time of the rule change. There is currently a bill under consideration in the Senate by Commerce and Technology Committee Chairman John McCain, R-Ariz., that would eliminate the clause.

News or overhead?

Ownership consolidation in the radio business skyrocketed after passage of the Telecommunications Act of 1996, which eliminated a national cap on ownership and greatly loosened market limits. With roughly 1,200 stations, Clear Channel owns well over four times as many outlets as its largest competitor.

Clear Channel and other competitors often focus on mid-size and smaller markets in their acquisition strategy. Citadel Communications Corp., another large publicly owned company, buys in smaller markets because they are “less competitive, have fewer signals, derive a significant portion of their revenue from local advertisers and offer substantial opportunities for further consolidation,” according to the company.

Owning multiple stations in single markets saves money and helps the bottom line. “By owning multiple stations in a market we are also able to operate our stations with more highly skilled local management teams and eliminate duplicative operating and overhead expenses,” Clear Channel writes in its most recent annual 10K report filed with the SEC.

Of course, eliminating “overhead” often means reducing staff, which is of particular concern when it comes to reporting local news and keeping the public apprised during bad weather and other emergencies. That was a problem in the Mansfield area, according to Ron Simon, a 35-year veteran newspaper reporter there. “When we did have a really frightening weather situation here, you couldn’t find out a damn thing about it on radio,” he told the Center. During that storm last spring, only one station aired national reports and put callers on the air to report the dangerous weather, he added.

“It used to be a lot more competitive,” Simon said.

Albany and the Chicks

Albany, Ga., ranks number 3 on the list of markets dominated by a single company. Cumulus Media Inc., which generated considerable publicity by banning the Dixie Chicks country music trio from its play lists when one of its members criticized the president, owns eight of 15 stations in the Southern city, according to the Center survey. Clear Channel owns another three stations.

Cumulus owns more stations (about 260) than any company but Clear Channel, but ranks far lower in total revenue than many companies with fewer stations because it operates in smaller markets.

The Chicks were banned after singer Natalie Maines, a Texan, told a London audience that she was ashamed President George W. Bush was from Texas.

Cumulus CEO Lewis Dickey Jr. was lambasted by the Senate Commerce, Science and Transportation Committee in July because of the ban, which McCain dubbed “an incredible, incredible act” and an affront to the First Amendment.

Carlton Fletcher was an editor at the Albany Herald when the Dixie Chicks debacle occurred. Fletcher wrote a column supporting the Chicks’ right to free speech. He was swamped with letters and emails, ranging from “‘You Commie why don’t you go to Iraq’ to ‘You’re a hundred percent right,'” he said.

Fletcher said taking the music trio off the play list was nothing less than a threat to democracy. “To me that’s more dangerous than anybody saying anything anti-Bush,” he said.

Cumulus did not return a call seeking comment for this report.

The most notorious example of the perils of excessive concentration is in Minot, N.D., where Clear Channel owns six of eight commercial stations. Emergency workers were unable to reach a live person at the stations to warn the public during a chemical spill in January 2002, an incident that generated terrible publicity for the company.

Minot is not included in the Center’s analysis because it is too small to be a metropolitan statistical area. (The Center’s main ownership database, however, does have detailed information on every market, including Minot.)

Clear Channel did not return several calls for comment for this report. But company spokesman Andrew Levin told the New York Times that “Radio has got a bad rap.” He called it “an urban myth” that the industry’s ownership had become concentrated.

Oligopolies prevalent

In addition to examining markets where a single broadcast company dominates, the Center also examined markets where a handful of stations control most of the market.

Tops on that list is Wichita Falls, Texas, where seven of the city’s eight stations are owned by just two companies. Cumulus owns four stations and Clear Channel owns three.

Second is Albany, Ga., (again). Ten of its 15 stations are owned by two companies: eight by Cumulus, as previously mentioned, and two more by Clear Channel.

Tied for second with Albany is Bangor, Maine, where two companies own eight of the area’s 12 stations: five by Clear Channel and three by Cumulus.

The Center analysis uses metropolitan areas, which may not always be perfect representations of markets. However, they are very similar to the widely relied upon Arbitron markets, which the FCC plans to use in the future.

The Commission is also working on new rules to deal with markets that are too small to be measured by Arbitron, like Minot.

However, a federal district court in Philadelphia has issued a stay, effectively blocking all the rules the FCC voted on June 2 from going into effect. At the same time, Congress is considering legislation that would throw the rules out altogether.