Sunday, September 21, 2003

Clear Channel clearly center of controversy

By Lisa Singhania
The Associated Press

In the past 12 months, Clear Channel Communications has been accused of everything from monopolizing and homogenizing the radio industry to banning the Dixie Chicks and being a right-wing mouthpiece.

The negative publicity has meant that the largest owner of U.S. radio stations spends a great deal of time defending itself against what it says are lies spread mostly by critics, competitors and people who have lost jobs amid changes in the radio industry in the past few years. But Clear Channel, which denies any wrongdoing, says the bad PR won't change the way it does business or stop it from buying more stations.

"I'd be kidding you if I'd say the scrutiny hasn't had an effect. We have to do a better job of communicating our position, telling our story," John Hogan, chief executive of Clear Channel's radio division, said. But "we don't program the stations based on what Washington has to say or what The New York Times has to say. We program them on what our local listeners want to hear."

Still, the critics are hard to ignore. Consumer groups ranging from the Center for Public Integrity to the Consumer Federation of America have accused Clear Channel of stifling local voices and diversity on the radio. The radio conglomerate has also been attacked for promoting a Republican agenda and using the influence of its 1,200-plus radio stations to decide what gets on the air; playing the music of artists who do business with its entertainment, advertising and TV divisions, while punishing those who don't.

Even louder is the reproach from Washington. In June, federal regulators relaxed overall media ownership rules but more tightly restricted radio ownership. The fate of those rules is now uncertain because of moves by the courts and Congress against the TV and newspaper ownership changes, but Clear Channel still has other problems. The Justice Department is investigating the company and, though it won't say why, the speculation is the inquiry is about alleged anticompetitive practices.

The controversies illustrate what a magnet for criticism the company has become.

Clear Channel is now trying to repair its reputation by meeting with reporters and correcting what it calls myths: The company says it did not ban the Dixie Chicks from airplay after one of the group's members criticized President Bush and the war in Iraq (that was rival Cumulus Media, and the temporary prohibition only applied to its country music stations.) Clear Channel also says pro-war rallies held by some stations during the Iraq war were the work of individual radio hosts and managers, rather than a corporate directive.

A key complaint has been Clear Channel's ownership of radio stations. The conglomerate owns about 9 percent of the 13,000 total U.S. radio stations. But the concentration is much greater in some markets. For example, Clear Channel owns 13, or about 24 percent, of the 53 broadcast stations in the Lexington, Ky., area, according to the Center for Public Integrity, a consumer advocacy group.

Hogan says the company has done nothing illegal and that he won't let critics hinder Clear Channel's growth.

"If there was more inventory available in terms of stations, and the pricing was more attractive and it was the best use of our free cash flow, we'd be all over it," Hogan said. "I'm certainly aware of the interest that various politicians have in us, but I'm very, very comfortable with our position and opportunities going forward."

Company founder and chief executive Lowry Mays declined to be interviewed for this story. But earlier this year, Mays told Fortune magazine, "We're not in the business of providing news and information. We're not in the business of providing well-researched music. We're simply in the business of selling our customers' products."

Clear Channel's critics say that attitude is the whole problem. Although the conglomerate's actions appear to have all been legal and it is not the only media company to have multiple stations in some markets, they say the company should be more sensitive to public opinion.

"There's a public responsibility to those who use these airwaves, and if you just completely ignore it and say, 'I'm just in it for the money and just in it for the shareholders,' the way their CEO has, you're going to get yourself in trouble, and you're going to deserve it," said John Dunbar, director of the telecommunications project at the Center for Public Integrity.

The Mays family's involvement with the Republican party - Lowry Mays has been a big financial backer of President Bush - has also caused concern, despite Hogan's assertion that mixing politics with business is bad business.

"If you have a politically active CEO who is of a particularly ideological bent, you become worried that if they control entire markets, which Clear Channel does, that ideology might make into some of the coverage," Dunbar said.

Even Wall Street thinks Clear Channel might need to keep a low profile for a while. Earnings have slipped because of a slump in radio advertising. The stock is currently trading in the low $40 range, after trading as high as $50 and as low as $30 in the last 15 months.

Although profit margins remain high in its radio business - around 40 to 50 percent by most estimates - few on Wall Street expect many high-profile moves from Clear Channel any time soon.

"Congress is looking at these guys with a microscope," Edward J. Atorino, an analyst with Blaylock & Partners L.P., said. "They're pretty much stuck."

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