January 30, 2003
This hearing is the first in a series of hearings on media ownership. Members will examine consolidation in the radio industry. McCain will preside.
Honorable Russell Feingold
Thank you Mr. Chairman and ranking member Hollings for holding this hearing to examine the effects of radio station ownership consolidation. I also want to thank Senator Dorgan for his leadership on this issue. If Congress had heeded Senator Dorgan’s warnings about the effects of consolidation on many of our communities, perhaps we wouldn’t be here today. I'll start by saying that I love radio. It brought baseball play-by-play and Bob Dylan songs into my life, along with countless other enriching influences. I'm sure everyone in this room has his or her own version of that sentence, because radio always has been -- and continues to be, despite competition from assorted new technologies -- nothing less than the soundtrack of American life. Whatever our different experiences, we are all the beneficiaries of radio's basic, uncomplicated and utterly vital principle: Radio is a public medium that must serve the public good. Now, it's true that I am not an expert on radio -- not on advertising trends or radio transmitters, satellite feeds, playlists, syndicated shows or on the hiring and firing of drive-time DJs. But over the last year, I have learned that the rapid consolidation in ownership of the radio and concert industry has made it difficult for individuals, artists, and organizations to find outlets to express their creativity and promote diversity. A groundswell of anger is building in Wisconsin and across the country about these changes. People are actually angry about this. I know, of course, because when people are angry they call their senators. I received my first contact about this more than a year ago. Owners of a local concert promotion company said they were being pushed out of business by the anti-competitive practices of a large radio station and promotion company. Then I heard from a local radio station owner. He said his station had, without warning and without compensation, lost syndicated programming -- after investing a lot of years and a big chunk of money into building an audience for that programming -- to a station across town, a station recently bought by a large radio station ownership group. Both of these small, local businesses cited the same company – the Clear Channel Corporation. Then my friends started complaining about the paucity of local radio news, the firings of local radio reporters, the same-ness of radio playlists. Then my kids started complaining about rising concert ticket prices. Then their friends started complaining about not being able to hear bands they liked anywhere on the radio. It was remarkable, the number of people who approached me about this. What was really surprising, though, was that these people came from all parts of the industry and represented a variety of the listening public, yet they had all reached the same conclusion: Anti-competitive practices were hurting radio as a public medium. I first asked the Administration to look into anti-competitive activities and allegations that Clear Channel and other companies were trying to evade the already minimal local ownership limits. I didn’t hear back for quite a while. I did, however, get an earful from many others, especially after I spoke to a reporter from the Chicago Tribune. In the interview I expressed my concerns about these issues. I also mentioned that I was looking at possible legislation. The response to this was overwhelming and fervent. Songwriters, artists, promoters, managers, consumer groups, religious organization, unions and radio station owners all called or wrote, asking "What can I do to support your efforts?" In fact, in contrast to what happened during many of my past efforts -- such as my work to reform our campaign finance system -- a surprising number of powerful interests also came to my office to voice their support. Even the recording companies, which don't always have the reputation of looking out for the little guy, have joined in support of the legislation that I have now introduced. Any political observer will tell you that the variety and the intensity and the sheer amount of interest in this legislation is the definition of broad support. I hope that it can help move this bill forward. This legislation is not just about entertainment. More broadly, neither is this issue. I am here not just because I want to preserve radio as entertainment. I am here because we must preserve radio as a medium for democracy. I don't often get to control the music when I'm in the car with anyone in my family. But I did get to listen to a Dylan CD on a family vacation this summer, and I couldn't help but remember the importance of music in the 1960's anti-war and civil rights movements. Songs such as "The Times, They Are A-Changin'" helped speak for a generation. What if no more than a handful of companies had controlled the airwaves back then and had decided not to play these songs? Sure, we still would have had the records to listen to, but it was the fact that these songs were played in the public domain that made this music an engine of change, capable of driving a movement. Those songs were a testament to the power of music and to the power of radio. They still are. To think that other songs like them could be cut off from today's airwaves is a testament to just how much danger radio is in because of this increasing concentration of ownership. Music carried over the radio can and does help society to consider some of the most serious issues affecting our nation -- issues like war and peace, issues like social justice, issues like citizenship, personal responsibility, who we are and who we want to be. Yet there are fewer stations than ever before that are even remotely likely to play it. If the already dwindling numbers of gatekeepers of radio content choose not to air controversial music because they may lose advertising, then one of the most universal and important ways we have of engaging in a cross-town or cross-country dialogue will be lost. Regardless of our tastes, regardless that our points of view differ on the fairness of various FCC rulings or the efficiency of various FCC forms, we must join together to retain radio's ability to show the diverse range of voices that form our culture. I have had so many conversations with people about the danger of concentration in this industry, and each has underscored the ways that people value radio. We use it to connect us, each to the other, in our local communities. We use it to connect to our culture. We use it to connect to our nation's political life. When I met with Russell Simmons a few months ago, for example, he spoke passionately about the need for radio to address local issues such as funding for education, and protecting freedom of speech. He helped me understand that localism is one way that radio helps keep communities strong. Without localism, he asked, will it be difficult to promote or discuss local issues? Will an out-of-state owner choose not to cover local debate because it's not interesting to him or her? Or because the local reporters have been replaced by a conglomerate news service or by a news director who now serves several stations? Or because the local issue doesn't fit the corporation's focus-grouped format? Or because it's deemed too controversial? I'd love it if these were theoretical questions, but unfortunately, given the decline in the numbers of locally owned radio stations, this is actually more like multiple choice. Mr. Simmons also emphasized the importance of access to the airwaves for local artists and for a variety of artists. Whether it's hip-hop or country or the dreaded progressive rock, music helps build awareness of other cultures and other views. We must have the opportunity to listen. People might not like the reality that poverty and violence exist in our culture, but if controversial music is what tells the story of what is going on in our communities, we must have the opportunity to listen. Music is really a unique medium. Through it, every American can learn a lot about the entirety of our culture. But only if we have the opportunity to listen. I also heard a great deal on this issue from a number of religious organizations. They said that consolidation of ownership has harmed their ability to reach out in their communities. They, too, said that we must get to the root of this problem by curbing anti-competitive practices that make it difficult for locally owned, independent radio stations to prosper. Engaging on this issue has taught me a great deal, including a lot about different areas of the music industry. I've also learned some things about just how low the expectations of my younger staff are when it comes to my knowledge of popular culture. Apparently they think a senator can't help but be a little behind the times. When the staff member who helps me with telecommunications issues informed me about Phat Farm -- the line of clothing Mr. Simmons markets -- he also felt it necessary to clarify that Phat is pronounced with an F and means, as he told me, "cool" or "good" but not "that someone is overweight." I thanked him for this information and said that I was aware of the pronunciation and the meaning. He now refers to me as the Def Senator, showing me the respect I've earned by knowing the meaning of the word Phat. Radio is also a very important means of strengthening our democracy, and there are any number of examples of this in our nation's history. I'll give you one, the story of Everett Parker. During the civil rights movement of the 1960s, Dr. Parker was a pioneering defender of the public interest in broadcasting. In his most famous crusade, Dr. Parker and the United Church of Christ went to Jackson, Mississippi, to challenge the license renewal of stations there that had refused to cover the civil rights movement. Their refusal was significant because African-Americans constituted almost 50 percent of the audience for those stations. And it was significant because when those stations failed to cover the civil rights movement they failed all citizens of Jackson by limiting their access to information on an issue of public importance. Dr. Parker joined with the local NAACP and the group went to the Federal Communications Commission to challenge the licenses of those Jackson stations. The case went all the way to the District of Columbia Circuit Court of Appeals, and the commission took away the stations' licenses. And *that* was significant because Dr. Parker's was the case that established the right of every American to petition the FCC, instead of limiting such petitions to those filed by commercial interests. The way that radio connects us to the democratic process is that important. At the annual Congressional Black Caucus last year, Eddie Edwards and Tony Gray, two people who have been involved in radio for decades, gave me an example of the real-life importance of diversity in radio. They spoke of how locally owned radio stations helped raise public awareness about the campaign of the late Harold Washington when he was running to become the first African-American mayor of Chicago. They said that the main avenue for many in the central city -- the main way those voters heard about the campaign -- was through locally owned radio stations. At the end of our talk, Mr. Edwards and Mr. Gray had two questions. The first was this: If an out-of-state corporation had controlled the programming of those radio stations, would Harold Washington, political pioneer that he was, have received the same coverage? There are other disturbing ways in which the concentration of ownership is changing what we hear on the radio. Singers, musicians and managers have talked with my staff and with me about some new and very daunting challenges they face when trying to get their songs onto the airwaves. These people are very concerned that playlists are no longer based on quality -- subjective as that is -- but are sold to the highest bidder instead. They told me how, in the past, if you couldn't get a DJ in Cleveland to play your song, you could try to find one in Pittsburgh who would. And if the song was a hit in Pittsburgh, the Cleveland DJ would hear about it. I am told that doesn't happen any more. It can't. The same companies own stations in both markets. If they don't want to play a song, they don't. Anywhere. Opportunities for artists to try their music "somewhere else" just don't exist. I have been hearing about a shakedown system, where large radio stations allegedly require huge payments through independent promoters before they'll put a song on the air. If you don't have the money to play in this system, you are shut out. Is this "pay for play"? If it isn't, I'd like to know what is. Then there are the problems of concentration of ownership and anti-competitive practices as they apply to the venues -- the halls and arenas and coliseums where people go to enjoy live music. My kids are among the many young people I know who are up in arms about rising concert ticket prices and about cutbacks in the number of tickets available to musicians' fan clubs. They're joined by many of the artists I've talked with, who add that there's a growing gap between what consumers are paying and what the artists are actually receiving. Throughout my time in the Senate, I have seen this phenomenon take place when a part of an industry becomes concentrated. Those producing the product -- the artists -- and those buying the product -- the consumers -- get squeezed by the corporations -- the radio station owners and the mega-promoters, which hold all the power. I hope you'll note that I qualify my comments by saying "large" promoters. I do so because local concert promoters are also feeling the pain of this concentration of power. My staff and I have heard countless stories of Clear Channel using questionable business practices to push local promoters around and, sometimes, out of business. To even begin to roll back the power of the companies that are pressing the life and vitality out of the radio and concert industries, we must address some of the negative consequences of the 1996 Telecommunications Act, which opened the floodgates for concentration in these industries. There will likely be a number of conflicting views expressed about both the levels and effects of radio ownership consolidation during this hearing today. After all the market power can be measured in a number of different ways. Some may argue that owning a thousand stations is only a fraction of the total number of stations in the United States. While this statement is true, I think it is important to view any ownership numbers in recent historical perspective. When the 1996 Telecommunications Act became law there were approximately 5,100 owners of radio stations. Today, there are only about 3,800 owners, a reduction of about 25%. Minority ownership has also decreased – the number of African American owners of radio stations has fallen by 14%. Prior to 1996, one company couldn’t own more than 20 AM stations and 20 FM stations. Now two companies control 42 percent of listeners and 45 percent of industry revenues. The concentration of ownership is perhaps most startling when we look at radio station ownership in local markets. Four radio station companies control nearly 80 percent of the New York Market. Three of these same four companies own nearly 60 percent of the market share in Chicago. In my home state of Wisconsin, four companies own 86 percent of the market share in the Milwaukee radio market. Some will likely argue that consolidation benefits consumers. For example, they will often say that since 1996, there have been more formats, or types of radio stations, in almost every market. But what they won’t tell you is that since many of these same “formats” are owned by the same out of state companies that play the same songs and share the same news – which actually reduces consumer choices. Evidence that the Act has done real damage is mounting daily. Consider how the rise in ticket prices coincided with the passage of that Act. More precisely, consider that ticket prices went through the roof. Before the Act was passed, ticket prices were increasing at a rate that was slightly higher than the Consumer Price Index. Since the Act became law, ticket prices have increased at a rate that's almost 50 percentage points higher than the Consumer Price Index. From 1996-2001, concert ticket prices rose by more than 61 percent, while the Consumer Price Index increased by just 13 percent. During the debate, before the Act was passed, I joined a number of my colleagues in opposing the deregulation of radio ownership rules. I did so because of serious and substantial concerns about the effect the Act would have on consumers, performers, artists, independent radio stations, and local communities. In this and in many other ways, the Act, as proposed and as passed, had a substantial anti-consumer and anti-localism bias. I could not have predicted, though, that this one particular provision of the Act would have caused as much harm as it has, and to as diverse a range of interests as it has. The wave of consolidation triggered by the Act has, it turns out, harmed consumers, artists, concert-goers, local radio station owners and local promoters. It has disrupted radio as a public medium and interfered with radio as a public trust. It has left us, to paraphrase Tom Petty's "The Last DJ," with less freedom of choice and fewer shades of the human voice. At the same time that national and local markets have been consolidated, I have heard countless stories of how some of the large radio station ownership groups also wield increasing power through their ownership of a growing number of businesses related to the music industry. Take Clear Channel as an example. This corporation owns more than 1,200 radio companies, more than 700,000 billboards, and controls venues across the United States. It also owns the largest concert promotion company in the United States. During the last year and a half, I have heard countless allegations about its leveraging its cross ownership in an anti-competitive manner. I have heard from small businesses in Wisconsin – local promoters and local radio stations – who talk about large radio and promotion companies tying in radio and promotion services to push them out of business. These local businesses are happy to compete in a free marketplace, but when a company uses its cross ownership – especially using a public medium like radio – in an anti-competitive manner, it is simply unacceptable. The passage of the Telecommunications Act was an unfortunate example of the influence of soft money in the political process. I have consistently said, and I'll say here again, that this Act was bought and paid for by soft money -- by unlimited contributions of corporations, unions and wealthy individuals to the political parties. Everyone was at this table, except the consumers. They couldn't afford to pay to play. In November we began to rid the system of the soft money loophole. Now we must also repair the damage it did. I have re-introduced legislation, the Competition in the Radio and Concert Industries Act, which would address the levels of concentration, curbs some of the anti-competitive practices, and end the alleged new payola system. My legislation would prohibit those who own radio stations and concert promotion services or venues from leveraging their cross-ownership to hinder competition in the industry. For example, if an owner of a radio station and a promotion service hinders access to the airwaves of a rival promoter or artist, then the owner would be subject to penalties. My legislation would also help to curb further concentration that leads to these anti-competitive practices. It would strengthen the FCC merger review process by requiring the FCC to scrutinize the mergers of any radio station ownership group that reaches more than 60% of the nation. My legislation would also curb consolidation on the local level by preventing any upward revision of the limitation on multiple ownership of radio stations in local markets. The bill would also prohibit the alleged new payola system, where the big radio corporations are said to leverage their market power to require payments from artists in exchange for playing their songs. These are not radical notions. All my legislation says is that first let’s get a handle on consolidation and crack down on alleged anti-competitive practices. Second, let’s modernize our payola laws to make sure all forms of payola are banned. I hope many of you will join me in cosponsoring this legislation, but I also hope that this hearing will flush out other issues that are leading to many of the concerns I have been hearing. Americans should be able to hear new and different voices, and those voices deserve a place on the publicly-owned airwaves. Radio is one of the most vibrant mediums we have for the exchange of ideas and for artistic expression. This public medium has long served the public good, and we must ensure that it continues to do so. If we don’t act now, further concentration in the industry will guarantee that the range of voices we listen for when we turn on the radio, the voices of democracy that make radio unique, will continue to fade away. Thank you.
Honorable Howard Berman
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Senator Fritz Hollings
Thank you, Mr. Chairman. I appreciate your leadership in scheduling this, the first in a series of hearings on media consolidation. These discussions come at a critical time in the history of American media. In many quarters, the core values of competition, diversity, and localism that have long served as fundamental pillars of our democracy, are today under attack. They are under attack by an industry that appears unsatisfied with the tremendous consolidation that has already taken place; by the courts, who seem to ignore Supreme Court precedent about the government's strong interest in preserving a "multiplicity of information sources"; and, most importantly, by FCC Commissioners who seem intent on relaxing or eliminating many of the existing ownership rules without regard to the tremendous consolidation that has already occurred. Likewise, it is fitting we begin with radio – where a tidal wave of mergers over the last six years has left both consumers and the medium with visible scars. Since 1934, when radio broadcasts were the only broadcasts on the public airwaves, the FCC has been charged with ensuring that use of the public airwaves is consistent with the "public interest, convenience, and necessity." Historically, this obligation has required the Commission to go beyond the bounds of traditional antitrust analysis in order to promote the diversity of owners and viewpoints; to ensure public access to multiple sources of information; and to meet the needs of local communities that are the true "owners" of the airwaves. This attention to diversity and localism has served America well by expanding economic opportunity and energizing civic discourse. Indeed, it is the preservation of diversity and localism that promotes competition and choices for advertisers; that creates opportunities for small companies, minorities, and women; that allows innovative programming to find an outlet; and that ensures that the interests of each community is served by the license of this public asset. Consequently, soon after the 1934 Act's inception, this public interest responsibility led the FCC to create sensible restrictions on the number of radio stations that a single party could own, both nationally and on the local level. Unfortunately, the compromise required to ensure passage of the Telecommunications Act of 1996 eliminated the FCC's national ownership cap for radio and changed the local limit, which now permits a single licensee to own up to 8 stations in some markets. Predictably, radio broadcasters went into in a feeding frenzy. In the first year after the 1996 Act, more than 2100 radio stations changed hands. Today, according to one recent study, the top ten radio group owners control 67% of industry revenue and 65% of radio listeners. At the top of the heap is Clear Channel, which has grown in six short years from a small cluster of 39 stations with $495 million in revenues into a nationwide radio conglomerate with 1,211 stations, earning $3.2 Billion in revenues. As a result, Clear Channel now reaches more listeners in the U.S. than its second, third, fourth, and fifth competitors combined. And beyond the impact that such consolidation has had within the radio industry, there are troubling allegations that Clear Channel unfairly uses its control over sizable portions of the airwaves, its approximately 135 concert venues, and its over 700,000 outdoor billboards to engage in anti-competitive practices that harm independent promoters, music artists and consumers. In sum, while investors on Wall Street have profited handsomely from these mergers, consumers on Main Street have suffered. Radio consolidation has contributed to a 34% decline in the number of owners, a 90% rise in the cost of advertising rates, a rise in indecent broadcasts, and the replacement of local news and community programming with remote "voice tracking" and syndicated hollering that ill-serves the public interest. If ever there were a cautionary tale, this is it.
Mr. Edward FrittsPresident and CEONational Association of Broadcasters
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Mr. Don Henley
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Mr. Robert Short
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Ms. Jenny Toomey
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Mr. L. Lowry Mays
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