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Clear Channel: It's crystal-clear who controls the nation's radio markets

Sunday, June 23, 2002

By Paul Farhi, The Washington Post

Bennett Zier has a fine idea for a new radio format. His eyes light up as he tells you about it. "We play Sinatra, Sammy Davis Jr., Dean Martin, Bobby Darin," he says. "The great thing about it is what we call it. You ready?" He pauses. "Vegas Radio! Is that great or what?"

Zier can imagine the whole scene -- the disc jockeys, the jingles, the ironic retro-swinger patter. It's his music, the kind he plays in his car. He's in love with this idea, and with his natural salesman's charm, he's making you love it, too.

Clear Channel sets the pace in Pittsburgh entertainment

Is Pittsburgh any different from Washington, D.C., when it comes to Clear Channel's hold on the market? Absolutely not. If anything, Clear Channel has an even greater reach here, as evidenced by its forays into programming outside the realm of radio.

Voted first in its class of "800-pound gorillas" in the Post-Gazette's recent report on Pittsburgh's Top 50 Cultural Forces, Clear Channel has holdings that extend far beyond its six local stations -- WDVE, WXDX, WJJJ, WWSW and WKST on the FM side, plus WBGG-AM.

Four years ago this summer, the media behemoth gobbled up Pittsburgh's DiCesare-Engler Productions, along with a host of other national concert promoters. In addition to its outdoor advertising displays and concert venues in 63 countries, its local holdings include a pair of Pittsburgh amphitheaters -- the Post-Gazette Pavilion and Amphitheatre at Station Square.

Clear Channel also produces Broadway shows and tours, booking and sometimes managing those tours in dozens of cities, among them Pittsburgh, where its junior partners in the Pittsburgh Broadway Series are the Cultural Trust and the Symphony Society.

And there's a sports division, responsible for monster truck shows and similar events.

To summarize: Clear Channel has the means to produce a show, book it, tour it, manage it, put it on one of its stages and promote it relentlessly -- all in Pittsburgh.


So why doesn't Zier, the biggest executive at the biggest radio company in the Washington, D.C., area, make it happen? He's in charge of eight stations, from soft-rock WASH-FM to hard-rock DC-101, from Top-40 Hot 99.5 to oldies station Big 100.3. Stations switch formats all the time. Surely, "Vegas Radio" could find a home somewhere on all that air. Surely ...

Zier's eyes lose their sparkle. It's not that simple, he says. He's the first to tell you: At Big Radio these days, it doesn't quite work that way.

Then and now

Radio used to be a simpler business. Back when, small companies -- mom and pops, almost literally -- dominated the field. There were a few big companies, but until 1996 no single broadcaster could own more than 40 stations nationwide, or more than four in one city.

Radio was most assuredly "local" -- usually undercapitalized, sometimes idiosyncratic, typically owned by people who lived in and presumably cared about the community. For decades, the federal government liked it that way; under vaguely defined notions like "serving the public interest" and "preserving diverse voices," official Washington kept radio small and decentralized.

Much of that changed with an act of Congress. The passage of the Telecommunications Act of 1996 swept aside many of the old ownership limits and ignited the business like a firecracker. Small owners started selling, and larger companies began feverishly merging. Six years later, radio is a big business, with publicly traded companies now dominating ownership of the nation's 11,400 commercial stations.

The biggest of the big is Clear Channel Communications Inc., based in San Antonio but on the air everywhere. Thanks to a succession of mergers involving nearly 70 companies in the past six years, Clear Channel has grown from just 30 stations to more than 1,220 -- more than one of every 10 in the nation. It's also the nation's largest concert promoter and one of the largest billboard companies.

Even that understates the group's reach. In some cities, the company's radio stations attract as much as half the audience and advertising dollars.

But if Clear Channel is a colossus, it's a colossus under the gun.

The company lost money every quarter last year, piling up an annual loss of $1.1 billion. Clear Channel also is shouldering $8 billion in debt -- the legacy of its deal-a-minute expansion spree. With a long advertising slump afoot, the company's stock is selling at about half its peak price of two years ago.

Last month, Clear Channel reported that it lost $16.9 billion during the first three months of 2002, mostly as a result of writing off devalued assets.

These cold financial facts form the vise-squeezing managers like Bennett Zier. They also provide strong clues about why Clear Channel's stations sound the way they do. If nothing else, they tell you why you probably won't hear Vegas Radio anytime soon.

As regional vice president of Clear Channel's eight big Washington-area stations, Zier has little room for experimentation. "Every issue we discuss, every decision we make," he says in his Rockville office, "comes down to a simple test: Will it increase ratings or revenue? If it doesn't, let's move on."

As such, Zier, 45, is guided by two basic imperatives: Keep the ads rolling in and the costs in line. That means Clear Channel's stations are lean, no-frills machines. You won't hear much on the five FM stations other than mass-appeal music. Even live human beings are out of the question during late-night and pre-dawn hours, when the stations fill the air with "automated" programs.

You're also likely to hear a lot of commercials. During peak periods, Clear Channel's stations carry anywhere from 16 to 20 minutes of ads per hour.

On the AM side, Clear Channel's three D.C.-area stations -- WRC, WTEM and WTNT -- rely heavily on syndicated fare heard across the country, such as Don Imus's morning program. Some companies even pay Clear Channel to run their programs, in effect making them program-length commercials.

Clear Channel has no formal news department. The company buys news reports from other sources, such as CNN Radio, producing none of its own. Thus, when the Pentagon was attacked on Sept. 11, the stations didn't have the personnel to cover the emergency in their own back yard. They had to resort to simulcasting the audio portion from WRC-TV, with whom Clear Channel has a business relationship.

All this leads to a common criticism of Clear Channel: that the company has methodically bled its stations of any kind of distinctive personality, that in the drive to hold down expenses the stations are losing their local identity.

"A Clear Channel station in Washington sounds like a Clear Channel station in Chicago or New York City," asserts Mark O'Brien, who was program director at WASH-FM and DC-101 before joining Z104-FM as vice president and general manager. "They're all pretty homogenous and not really very local. That's a cheaper way of doing business. The jury's still out on whether that's a successful way of doing it."

You will, of course, get an argument about this from Zier.

"You don't build great radio stations if you don't build a great local presence," he says, rattling off a variety of station-sponsored community events, contests and fundraisers. "It's a key element. The philosophy here is, find a parade and get in front of it. If there's no parade, start one."

Testing, testing ...

The funny thing about Big Radio is how small it really is up close.

Clear Channel's regional headquarters is on two floors of a generic modern office building, above a Brazilian restaurant on Rockville Pike. There's no looming broadcast tower out front and no signs offer a hint to passers-by that this is the home of some of their favorite stations. Inside, a visitor can breeze past all five of Clear Channel's FM outlets in a couple of minutes; the stations broadcast from a warren of small studios on the fourth and sixth floors.

In the cubicles surrounding the DJs, staffers sell ads, develop promotional spots, maintain the stations' Web sites and handle the mail for all five outlets. Zier oversees it all from a fine, though hardly baronial, corner office that looks out on the Doubletree Hotel across the pike.

The technological heart of it all is Clear Channel's master control room. A spotless, windowless, humanless computer farm. The place looks like Mission Control, minus the technicians. From here, the stations' signals are passed from the building to transmission towers scattered throughout the region.

This tidy little radio beehive illustrates one of the primary business motives behind merger mania: centralization. By consolidating functions, five stations can be run almost as cheaply as one.

There's no need for each station to have its own engineers, receptionists and sales people when these positions can be shared by the group. It takes just 200 full-time employees to keep Clear Channel's local stations on the air around the clock. As Zier points out, "Everyone here has at least two or three jobs."

In fact, Jeff Wyatt, Hot 99.5's program director, doubles as program director of WMZQ, which means he's responsible for the music, DJs and commercials on a Top-40 station and a country station. That's a typical Clear Channel arrangement. The eight stations are programmed by just four people.

Clear Channel's close-to-the-bone operating style has had ripple effects on the entire radio market. A rival station manager who asked not to be identified says the company's cost-cutting has helped bring down every station's costs. "When you have twice as many people looking for half as many jobs," he says, "it reduces the price pressure on your [personnel] expenses."

But this same manager also worries: "You have to balance that against the harm it does to the emotional well-being of the people in your organization."

Fortunately for Wyatt and his fellow Clear Channel programmers, they don't have to spend long hours auditioning CDs to figure out what to put on the air. There's research for that. Little of what's on Clear Channel's stations is left to whim or chance. Each week, the program directors review national sales data and Billboard's charts. Focus groups are assembled and phone polls are taken. Is a tune familiar enough? Do people like it? Are they tired of it? Each track is assigned a "burn" score, a measure of how "burned out" the target audience has become; when the score passes a certain level, the tune disappears.

The testing is designed to keep Clear Channel's stations firmly in the mainstream of musical tastes. You're not likely to be surprised by something you hear played on a Clear Channel station. And that's the whole point.

"If every program director just played [his] record collection, we'd be in trouble," Zier says. "There's an old saying: You don't get hurt by what you don't play."

Staking out territory

These days, Zier's management bible is a thick white binder that he keeps in a left-hand drawer of his desk. It's Clear Channel's, and Zier's, master plan. It contains detailed data spelling out the company's "strategic vision" -- each station's revenue goals, cross-promotional schemes, ratings targets, etc.

It all boils down to this, Zier says: Set yourself apart. "Every station has its 'est' -- the 'youngest' station, the 'danciest' station, the 'rocking-est' station," Zier says. "You need a clear differentiation between you and your competition. Then you have to emotionally, passionately and vigorously defend your hill."

In theory, that's what Clear Channel has been doing. Its stations occupy non-overlapping formats -- country, rock, "soft" rock, oldies, etc. With its massive size, the company is "the 800-pound gorilla of this market," says one industry source. "When you've got one of every three [stations] in the market, it's hard to compete against that."

But Clear Channel's conquest is far from certain. Last year was a tough one for all media, but tougher still on Clear Channel; the company's share of Washington's $350 million radio ad market fell slightly, from 28.8 percent to 27.7 percent.

Zier maintains that Clear Channel is roaring back, that the stations are rebounding with the local economy. He's buoyant, upbeat, the natural salesman again.

But you wonder: Are revenue targets and expense controls and mainstream formats all there is? Wasn't radio more ... fun back when he was starting out?

Well, he concedes, there's more pressure now, and the business has certainly changed. But he quickly brightens. "Yes, it's different," he says. "But I tell people who say that to get over it. It's going to change again. Change is good! Change is the future! It's not supposed to be the way it was. C'mon, get over it!"

Indeed, radio is changing. Arbitron reports that Americans are listening to it less each year. The ratings service estimates that on average people spend 10 percent less time with it now than in 1996.

That, of course, was the year Congress deregulated radio and unleashed companies like Clear Channel. Maybe the decline in listening since then is just a coincidence.

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