[Senate Hearing 108-903]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-903

                            MEDIA OWNERSHIP

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            JANUARY 30, 2003

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

















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           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel





































                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on January 30, 2003.................................     1
Statement of Senator Brownback...................................    17
Statement of Senator Burns.......................................    12
    Prepared statement...........................................    13
Statement of Senator Dorgan......................................    14
Statement of Senator Ensign......................................    15
Statement of Senator Hollings....................................    11
    Prepared statement...........................................    11
Statement of Senator Hutchison...................................    70
Statement of Senator Lott........................................    64
Statement of Senator McCain......................................     1
    Prepared statement...........................................     1
Statement of Senator Smith.......................................    82
Statement of Senator Wyden.......................................    16
    Article from The Wall Street Journal, dated February 25, 
      2002, entitled, From a Distance: A Giant Radio Chain is 
      Perfecting the Art of Seeming Local........................    73

                               Witnesses

Berman, Hon. Howard L., U.S. Representative from California......     7
Feingold, Hon. Russell D., U.S. Senator from Wisconsin...........     2
    Prepared statement...........................................     5
Fritts, Edward O., President and CEO, National Association of 
  Broadcasters...................................................    24
    Prepared statement...........................................    26
Henley, Don, Recording Artists' Coalition........................    33
    Prepared statement...........................................    36
Mays, Lowry L., Chairman and CEO, Clear Channel Communications, 
  Inc............................................................    18
    Prepared statement...........................................    20
Short, Jr., Robert, President, Short Broadcasting Co., Inc.......    38
    Prepared statement...........................................    40
Toomey, Jenny, Executive Director, Future of Music Coalition.....    47
    Prepared statement...........................................    49
    Prepared statement of Thomas F. Lee, President, American 
      Federation of Musicians....................................    56
























 
                            MEDIA OWNERSHIP

                              ----------                              


                       THURSDAY, JANUARY 30, 2003

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:36 a.m. in room 
SR-253, Russell Senate Office Building, Hon. John McCain, 
Chairman of the Committee, presiding.

            OPENING STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    The Chairman. I tell the Members of the Committee we are 
waiting for three more Members to show up. In the meantime, 
perhaps in the interest of time, we could have Senator Feingold 
and Congressman Berman begin their opening statements. I may 
have to interrupt you. In fact, I hope I have to interrupt you, 
but please begin with your opening statement. Welcome Senator 
Feingold, Congressman Berman. Please proceed.
    [The prepared statement of Senator McCain follows:]

   Prepared Statement of Hon. John McCain, U.S. Senator from Arizona
    Today, the Committee begins a series of hearings examining media 
ownership. Later this year, the Federal Communications Commission will 
act on a proceeding that addresses a number of different media 
ownership issues. These decisions will have a significant impact on the 
American media landscape.
    I have always been a firm believer in free market principles. I 
continue to believe that anachronistic government regulations that do 
not reflect today's multimedia marketplace should be thoroughly 
reviewed by the FCC and repealed or modified wherever appropriate. 
Given the tremendous impact media can have in the everyday lives and 
thinking of Americans, however, we must approach these issues 
thoughtfully and it is important that the Committee hold hearings to 
better understand them.
    Today we will examine media ownership in the radio industry. After 
enactment of the Telecommunications Act of 1996, the radio industry saw 
unprecedented consolidation. Several station owners began to purchase 
stations across the United States and the largest owner, Clear Channel 
Communications, has grown from 60 stations in 1996 to over 1,200 
stations today. Many critics have voiced their concerns about radio 
consolidation and have alleged that some companies have been engaging 
in anticompetitive behavior.
    For instance, some have claimed that Clear Channel's vertical 
integration with its entertainment division has hurt independent 
concert promoters and artists. Some artists suggest that their refusal 
to use Clear Channel's promotion services has led to their music not 
being played on Clear Channel stations. I am concerned about these 
allegations and I look forward to hearing from the witnesses on these 
specific issues.
    Finally, I believe that, wherever possible, we should look to 
market-based approaches to ensure there is diversity in media 
ownership. Later today, I will re-introduce the ``The 
Telecommunications Ownership Diversification Act.'' The bill provides a 
tax deferral and other market-based incentives designed to ensure that 
our tax laws do not disadvantage small businesses that may be owned by 
women and minorities who can help to further viewpoint diversity in 
media. I hope that other Members of the Committee will join me on this 
important legislation.

            STATEMENT OF HON. RUSSELL D. FEINGOLD, 
                  U.S. SENATOR FROM WISCONSIN

    Senator Feingold. Thank you very much, Mr. Chairman, for 
holding this hearing and my thanks also to the ranking Member, 
Senator Hollings, for holding this hearing to examine the 
effects of radio station ownership consolidation. I appreciated 
the conversations I have had with both of you about this, and 
this is a very early time in the session to be able to bring up 
this issue, so I am grateful.
    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 would not have to be here today.
    Before I begin, I would ask, Mr. Chairman, that my full 
statement be allowed to be printed in the record.
    The Chairman. Without objection.
    Senator Feingold. Let me start by saying that like I am 
sure all of you, I love radio. It brought baseball play by play 
and Bob Dylan songs into my life, along with many other 
enriching influences. And I am sure everyone in this room has 
his or her own version of that sentence because radio has 
always 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 
beneficiaries of radio's basic, uncomplicated and utterly vital 
principle: radio is a public medium that must serve the public 
good.
    Over the last year, Mr. Chairman, 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. To be honest with you, Mr. Chairman, I find 
that a groundswell of anger is building in Wisconsin and across 
the country about these changes. People are actually angry 
about this. I know this, of course, because when people are 
angry, they tend to call up their Senators.
    I received the first contact about this more than a year 
ago. Owners of a local concert promotion company said that they 
were being pushed out of business by the anticompetitive 
practices of a large radio station and promotion company.
    Then I heard independently from a local radio station 
owner. He said that his station had, without warning and 
without compensation, lost syndicated programming, after 
investing lots of years and a big chunk of money into building 
an audience for that program, to a station across town, a 
station recently bought by a large radio station ownership 
group.
    Both of these small local businesses that I just mentioned 
cited the same company, the Clear Channel Corporation.
    Now, I first asked the Administration to look into 
anticompetitive activities and allegations that Clear Channel 
and other companies were trying to evade the already minimal 
local ownership limits, and I did not 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 simply expressed my concerns about these issues. I 
also mentioned that I was looking at possible legislation. And 
the response to this was overwhelming and fervent. Songwriters, 
artists, promoters, managers, consumer groups, religious 
organizations, unions, and radio station owners all called or 
wrote right away asking, what can I do to support your efforts?
    Mr. Chairman, 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 an entertainment. 
I am also here because we must preserve radio as a medium for 
democracy.
    There will likely be a number of conflicting views 
expressed about the levels and effects of radio ownership 
consolidation during the hearing today. After all, market power 
can be measured in a number of different ways. Some may argue 
that owning 1,000 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 Telecom Act became law, there were 
approximately 5,100 owners of radio stations. Today, Mr. 
Chairman, there are only about 3,800 owners, a reduction of 25 
percent.
    Minority ownership has also decreased. The number of 
African-American owners of radio stations has fallen by 14 
percent.
    Prior to 1996, one company could not own more than 20 AM 
stations and 20 FM stations. Now two companies--two companies, 
Mr. Chairman--control 42 percent of the content that reaches 
listeners and 45 percent of industry revenue. 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 the 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 our largest 
Milwaukee radio market.
    At the same time that national and local markets have been 
consolidated, I have heard really 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, Mr. Chairman, more than 
700,000 billboards and control venues across the United States, 
and it also owns the largest concert promotion company in the 
United States.
    During the last year and a half, I have also heard 
countless allegations about actually leveraging this cross-
ownership in an anticompetitive 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 their cross-ownership, 
especially using a public medium like radio, in an 
anticompetitive manner, it is simply unacceptable.
    Some will argue that there are consumer benefits. 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 will not tell you is that since many of these 
formats are owned by the same out-of-state companies, that they 
play the same songs and they share the same news, which 
actually reduces consumer choices.
    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 of the new and very daunting challenges they face 
when trying to get their songs played on 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 could not 
get a deejay to play your song in Cleveland, perhaps you could 
try in Pittsburgh, and if the song was a hit in Pittsburgh, the 
Cleveland deejay would probably hear about it. Now I am told, 
Mr. Chairman, that does not happen anymore. It really cannot. 
The same companies own the stations in both markets. If they do 
not want to play a song, they do not, anywhere. Opportunities 
for artists to try their music somewhere else just do not 
exist.
    I have also been hearing about a new shakedown system. The 
large radio stations allegedly require huge payments through 
independent promoters before they will put a song on the air. 
If you do not have the money to play in this system, you are 
shut out. Is this pay-for-play? If it is not, I would like to 
know what is.
    Consider also how the rise in ticket prices coincided with 
the passage of the 1996 Telecom 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 is 
almost 50 percentage points higher than the Consumer Price 
Index.
    Mr. Chairman, because of these concerns, I have 
reintroduced legislation, the Competition in the Radio and 
Concert Industries Act, which would address the levels of 
concentration, curb some of the anticompetitive practices, and 
end the alleged new payola system. The legislation prohibits 
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 will also help to curb further concentration 
that leads to these anticompetitive 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 percent of the Nation's listeners.
    The 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.
    And finally, 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.
    Mr. Chairman, these are not radical notions. All my 
legislation says is let us first get a handle on consolidation 
and crack down on alleged anticompetitive practices. Second, 
let us modernize our payola laws to make sure all forms of 
payola are banned.
    I hope that a lot of you will join me in cosponsoring this 
legislation, but I also hope that this hearing will flesh out 
other issues that are leading to many of the concerns that 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 do not act now, Mr. Chairman, 
further concentration of 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.
    So thank you so much, Mr. Chairman, for holding this 
hearing, and I look forward to working with you, the ranking 
Member, and all the other Members of the Committee.
    [The prepared statement of Senator Feingold follows:]

            Prepared Statement of Hon. Russell D. Feingold, 
                      U.S. Senator from Wisconsin
    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.
    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.
    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 organizations, unions and radio station owners all 
called or wrote, asking ``What can I do to support your efforts?''
    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.
    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 percent. Minority ownership 
has also decreased--the number of African-American owners of radio 
stations has fallen by 14 percent. Prior to 1996, one company couldn't 
own more than 20 AM stations and 20 FM stations. Now two companies 
control 42 percent of the content that reaches 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.
    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 
numerous 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 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 their cross ownership--especially using a 
public medium like radio--in an anti-competitive manner, it is simply 
unacceptable.
    Some will likely argue that consolidation benefits consumers. For 
example, they will often say that since 1996, there have been more 
formats, or type 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.
    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.
    Consider also how the rise in ticket prices coincided with the 
passage of the 1996 Telecom 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.
    There are a number of factors behind this rise in ticket prices. 
But the fact is that the largest radio station ownership group also is 
involved in over 60 percent of the concert industry, in terms of 
revenue, certainly begs the question--has consolidation within the 
radio and concert industry led to increased ticket prices?
    Because of these concerns, I have re-introduced legislation, the 
Competition in the Radio and Concert Industries Act, which would 
address the levels of concentration, curb some of the anti-competitive 
practices, and end the alleged new payola system.
    My legislation prohibits 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 will 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 percent 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.
    Again, Mr. Chairman, thank you for holding this hearing and I look 
forward to working with you and the other Members of this Committee.

    The Chairman. Thank you very much, Senator Feingold.
    [Recess.]
    The Chairman. And now Congressman Berman thank you for 
appearing. It is nice to see you again.

              STATEMENT OF HON. HOWARD L. BERMAN, 
              U.S. REPRESENTATIVE FROM CALIFORNIA

    Mr. Berman. Thank you, Mr. Chairman and Ranking Member 
Hollings and distinguished Committee Members. I appreciate very 
much your decision to hold this hearing on consolidation in the 
radio industry.
    I am deeply concerned that radio industry consolidation and 
related activities related to that consolidation are hurting 
songwriters, musicians, recording artists, concert promoters, 
radio listeners, and the music community as a whole. I believe 
the negative effects of radio industry consolidation merit 
serious Congressional scrutiny and should spur investigations 
by the Department of Justice and the Federal Communications 
Commission.
    Nearly a year ago, I wrote the DOJ and the FCC on this 
issue. I encouraged them to fully investigate the allegations I 
relayed and, if they found violations of law, to prosecute.
    The public reaction to my letter was utterly unexpected and 
totally overwhelming. Independent broadcasters, concert 
promoters, venue owners, radio deejays, musicians, bands 
agents, managers, theatrical producers, actors' 
representatives, and recording industry executives inundated me 
with calls, e-mails, and letters. Virtually all decried the 
evils of consolidation in the radio and concert industries. 
Many focused on the conduct of Clear Channel in particular. The 
breadth of their allegations was astounding and went far beyond 
the issues I had addressed in my January 2002 letter.
    Clear Channel representatives also contacted me and I met 
with Lowry and Mark Mays here in D.C. They denied the 
allegations of wrongdoing. Admitting to being hard-nosed 
businessmen, they explained the many complaints as the sour 
grapes of their failed competitors. And I am glad they are here 
today because I think they should have a chance to both hear 
and respond to some of the allegations that have been made to 
me.
    While many of these allegations are derived from firsthand 
accounts, you will have to use your own judgment about whether 
they warrant an investigation. But here are the most serious.
    Clear Channel denies or threatens to deny radio airplay to 
recording artists if they use companies other than Clear 
Channel Entertainment to promote their concerts, if they refuse 
to give local Clear Channel stations free concert tickets, or 
if they refuse to do interviews and free drop-by performances 
for Clear Channel stations.
    Clear Channel Entertainment refuses to let artists play 
venues it owns unless the artists agree to let Clear Channel 
Entertainment be the nationwide tour promoter or agree to use 
Clear Channel Entertainment venues in other markets.
    Clear Channel Entertainment uses predatory pricing to offer 
recording artists or events deals that independent concert and 
event promoters cannot offer.
    Clear Channel parks or warehouses radio and TV stations in 
certain markets in what seems like a violation of legal 
ownership caps.
    By threatening to boycott them, Clear Channel Entertainment 
signs exclusive deals with venues and thus ensures that 
competing concert promoters cannot use these venues.
    Clear Channel has removed Clear Channel-owned programming 
such as Rush Limbaugh from independent stations and then given 
competing Clear Channel-owned stations exclusive rights to 
carry this programming in a clear attempt to drive competing 
broadcasters out of business.
    And radio stations generally demand payment from record 
companies--Senator Feingold made reference to this--usually 
through middlemen known as independent music promoters in order 
to play the music of artists signed by those record companies.
    Regardless of their legality, these alleged activities may 
negatively affect consumers, musicians, independent 
broadcasters, and concert promoters. We as policy makers must 
decide whether these effects are likely and, if so, whether we 
should do something to counteract them.
    As you will hear from Jenny Toomey later, there is 
substantial evidence that the radio industry consolidation has 
reduced music programming diversity. Music programming 
homogeneity has particular implications for musicians and 
songwriters. Musicians rely on radio airplay to drive both CD 
sales and concert attendance which comprise their main source 
of revenue. Similarly, songwriters depend on airplay of their 
musical composition for performance royalties and to drive CD 
sales for which they receive mechanical royalties. To the 
extent that different radio stations share the same playlists, 
songwriters and musicians who are not on these narrower 
playlists thus suffer.
    The allegations concerning payola also have a variety of 
troubling implications. At its core, payola constitutes 
blackmail of musicians, songwriters, and record companies. If 
they fail to pay, they may be denied access to a public 
resource essential to their survival. Payola has long had a 
disproportionate effect on those little known or independent 
artists who lack the resources to either pay for play or to 
engage in major marketing campaigns.
    But as the radio industry has consolidated, the payola 
rates have evidently risen to the point where even the big guys 
cannot afford them. The proof is that the major record labels, 
independents, and several artist groups recently put aside 
their intramural squabbling and jointly called on the FCC and 
Congress to address payola.
    If, through its control of the airwaves and concert venues 
in certain markets, Clear Channel is forcing recording artists 
to sign with Clear Channel Entertainment in other markets, 
these tying arrangements could clearly have anticompetitive 
effects on independent concert promoters. While I personally 
believe that consolidation within an industry is not 
necessarily an evil, independent concert promoters should at 
least be given a level playing field on which to compete.
    While I believe the allegations and negative effects 
outlined above and additional ones that I detail in my written 
statement merit a full investigation, it does not appear that 
the agencies of jurisdiction will conduct one. The reaction of 
the DOJ has been most disappointing.
    In a meeting with my staff and in a written response to me 
3 months after I sent my letter, the DOJ encouraged me to 
forward any evidence of anticompetitive conduct in the concert 
promotion or radio industries. DOJ indicated it would initiate 
an investigation if it found such evidence credible.
    As a result, I encouraged all those who had contacted me 
with firsthand evidence to, in turn, contact the DOJ. To those 
who expressed skepticism, I asserted that DOJ would do its job 
by vigorously investigating allegations of antitrust violations 
and other illegal conduct.
    It is now one year later, and as far as I can tell, the DOJ 
has done nothing. And I do mean nothing. According to many of 
the folks I told to contact the DOJ, the DOJ has never 
responded to their overtures and never followed up as promised 
after an initial call. My staff has attempted to follow up with 
DOJ several times, but their calls have not been returned 
either.
    Some may say, I told you so. Since the day I sent my 
letter, many claimed that the Administration would not allow 
the DOJ to actively pursue antitrust investigations, but I do 
not think this is a sufficient explanation. The ongoing 
investigation of the Press Play and MusicNet ventures indicates 
the Bush DOJ is interested in probably pursuing a lengthy 
investigation of a somewhat speculative antitrust concern. If 
it has such grave antitrust concerns about new entities in the 
as-yet infinitesimally small market for legal online music, why 
is it not willing to pursue allegations of actual 
anticompetitive behavior in the radio and concert industries? I 
do not know the answer to this question, but judging by the 
responsiveness of the DOJ to date, I do not expect to get a 
response even if I ask.
    Anyway, that is why I am here, and I think this is an issue 
that Congress has to deal with and I am very grateful that you 
are beginning that process with this hearing. Thank you, Mr. 
Chairman.
    The Chairman. Thank you very much, Senator Feingold and 
Congressman Berman. We thank you for coming, and we appreciate 
your comments. They have been very helpful to the Committee. 
Thank you very much.
    Today the Committee begins a series of hearings examining 
media ownership. Later this year, the Federal Communications 
Commission will act on a proceeding that addresses a number of 
different media ownership issues. These decisions will have a 
significant impact on the American media landscape.
    I have always been a firm believer in free market 
principles, and I continue to believe that anachronistic 
Government regulations that do not reflect today's multi-media 
marketplace should be thoroughly reviewed by the FCC and 
repealed or modified wherever appropriate. Given the tremendous 
impact media can have in the everyday lives and thinking of 
Americans, however, we must approach these issues thoughtfully, 
and it is important that the Committee hold hearings to better 
understand them.
    Today we will examine the media ownership in the radio 
industry. After enactment of the Telecommunications Act of 
1996, the radio industry saw unprecedented consolidation. 
Several station owners began to purchase stations across the 
United States, and the largest owner, Clear Channel 
Communications, has grown from 60 stations in 1996 to over 
1,200 stations today. Many critics have voiced their concerns 
about radio consolidation and have alleged that some companies 
have been engaging in anticompetitive behavior.
    For instance, some have claimed that Clear Channel's 
vertical integration with its entertainment division has hurt 
independent concert promoters and artists. Some artists suggest 
that their refusal to use Clear Channel's promotion services 
has led to their music not being played on Clear Channel 
stations. I am concerned about these allegations and I look 
forward to hearing from the witnesses on these specific issues.
    Finally, I believe that, wherever possible, we should look 
to market-based approaches to ensure there is diversity in 
media ownership. Later today I will reintroduce the 
Telecommunications Ownership Diversification Act. The bill 
provides a tax deferral and other market-based incentives 
designed to ensure that our tax laws do not disadvantage small 
businesses that may be owned by women and minorities who can 
help to further viewpoint diversity in media. I hope that other 
Members of the Committee will examine this legislation and 
possibly join in its partnership.
    I want to thank the witnesses for coming today.
    Senator Hollings.

             STATEMENT OF HON. ERNEST F. HOLLINGS, 
                U.S. SENATOR FROM SOUTH CAROLINA

    Senator Hollings. Mr. Chairman, I will just file my 
statement with one comment, and that is, from the testimony of 
the distinguished Congressman and Senator Feingold, I think the 
Committee ought to bring the Department of Justice up here 
before we move on any legislation. It has always been my 
opinion that these antitrust provisions forbid exactly what 
they have attested to. And similarly, with respect to payola, 
we definitely passed a law with respect to payola some years 
back, and it ought to be enforced.
    Thank you.
    [The prepared statement of Senator Hollings follows:]

            Prepared Statement of Hon. Ernest F. Hollings, 
                    U.S. Senator from South Carolina
    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 2,100 radio 
stations changed hands. Today, according to one recent study, the top 
ten radio group owners control 67 percent of industry revenue and 65 
percent 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 percent decline in the number of 
owners, a 90 percent 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.

    The Chairman. Senator Burns.

                STATEMENT OF HON. CONRAD BURNS, 
                   U.S. SENATOR FROM MONTANA

    Senator Burns. Thank you, Mr. Chairman. Thank you for the 
hearing today. I also will file my full statement.
    I do want to bring out a point, though, that sort of 
addresses the concerns of both Congressman Berman and Senator 
Feingold. I am wondering if they have given the same attention 
to the situation where we find grocery stores who sell shelf 
space in their stores to one company to display their articles 
or their food products or whatever. That is a practice that is 
going on across this country too, and I think that needs to be 
looked at about as much as what we hear of here.
    Also, I got to bring before the Committee a recent Arbitron 
study. Now, I come out of radio. I am sort of familiar with 
radio. Of course, my years were in farm broadcast, which is 
sort of a niche in the market, that I enjoyed very much. I 
would have gone into hard news, but I could not read and that 
is noted here on this Committee just about every time we meet.
    [Laughter.]
    The Chairman. It is not a requirement of Committee 
membership.
    [Laughter.]
    Senator Burns. It is not a requirement?
    I always liked the idea that I am probably one of the very 
few that did not have a college degree in this group, and I got 
intimidated by the people who had letters in back of their 
names when I arrived in this town. So I come up with my own 
letters. I put N.D.B.A., no degree but boss anyway.
    [Laughter.]
    Senator Burns. I like that idea.
    We are all familiar with the Arbitron surveys and we all 
lived by them when we were in the radio business. But I was 
caught the other day by a note that 74 percent of the consumers 
believe radio does a good job, a very good job, in providing 
the type of programming that they want to hear. I am sure that 
they would be less satisfied with what they get on television 
or the recording industry, but nonetheless radio seems to be 
doing a very good job this time.
    And yes, maybe we have some concentration in some areas 
that are troubling to some of us, but we have antitrust laws, 
as Senator Hollings pointed out, that should be looked at.
    But radio has come a long way in the last 5 or 6 years in 
improving their own financial viability. There was a time when 
you might have owned a license that was not worth very much and 
it was just a short time ago.
    So I would say that the 1996 Telco Act has actually worked, 
and I do not want that reopened or bothered at the present 
time. We have the laws in place. Enforcement of those laws may 
be a little bit lax in some areas, but it is not because the 
policy is not maybe at the right proportion right now as we 
find it in the industry.
    So I am happy about this hearing. I am happy about the 
information that will come out of it. I think probably there 
are always complaints from competitors and those complaints 
will always be there in a free market system. But I would 
suggest that we did good work in that 1996 Act as far as the 
AM/FM radio broadcast industry was concerned. And I thank you, 
Mr. Chairman, for holding the hearing.
    [The prepared statement of Senator Burns follows:]

   Prepared Statement of Hon. Conrad Burns, U.S. Senator from Montana
    Mr. Chairman, thank you for calling for this hearing in what I 
understand is to be the first in a line of hearings on media ownership. 
Today's focus will be on the state of competition in the radio 
marketplace.
    As many of you know, I have a fondness for radio stemming from my 
days when I was a farm broadcaster in both radio and television. Given 
my interest in agriculture and Montana, I decided to launch my own 
radio network based on the issue of agriculture, and in 1975, I founded 
four radio stations that I named the Northern Ag Network.
    Those four stations grew to serve a total of 31 radio and 
television stations across Montana and Wyoming continuing to focus on 
agriculture. There is no question in my mind, with my own personal 
history, that the state of radio itself today is much more sound 
financially and much more diverse in programming choices.
    I note a recent Arbitron study that shows 74 percent of consumers 
believe radio does a good or very good job providing the type of 
programming they want to hear. I am sure the same public would be less 
satisfied with what they get on television, cable or with the recording 
industry.
    The radio industry has certainly rebounded from some difficult 
times in the not-too-distant past. In fact, in the early 1990s, half of 
all the Nation's radio stations in America were losing money. So what 
happened that has made the radio industry significantly more 
financially stable and even more robust today, especially when one 
considers the economic downturn over the last three years? The answer 
is simple: the 1996 Telecommunications Act.
    The Telecom Act and the wave of sensible deregulation it ushered in 
has brought a breath of fresh air and fiscal sense to the radio market. 
The deregulation of radio ownership allowed private businesses to enjoy 
financial efficiencies.
    By allowing radio owners to expand their holdings in local markets 
and on a national scale, radio companies could make more efficient use 
of capital to deliver a better product.
    The revolution in radio technology that has erupted beginning in 
the late 1990s can be directly attributable to the Telecom Act. In 
fact, today's radio stations look nothing like the ones I helped create 
more than 27 years ago. The ability to expand in local markets has also 
allowed radio owners to expand into different formats. In the past, 
when one could only own a couple of stations in a local market, the 
temptation was to go after the largest single audience no matter what, 
which typically was the pop music audience in most markets. You would 
then get three or four owners that would be playing the same kind of 
programming hoping to attract that largest audience group possible.
    I would also like to address the current ban on newspaper/broadcast 
cross-ownership. The FCC's newspaper/broadcast cross-ownership rule is 
clearly outdated and unnecessary in light of the abundance of 
competitive outlets in today's media marketplace. The rule was adopted 
at a time when the media environment was dominated by just three over-
the-air networks and their affiliates. In the intervening years, 
explosive growth in the number of traditional media outlets--combined 
with a flood of new entrants, including an extraordinary variety of 
cable, DBS, and Internet sources--has transformed the marketplace and 
given consumers a vast array of news and information choices.
    Even in a market as small as Miles City, Montana, where Star 
Printing Company has continued to own and operate a ``grandfathered'' 
newspaper/AM radio combination since the cross-ownership rule was 
adopted in 1975, there are plenty of alternative outlets to ensure 
adequate viewpoint diversity. In fact, the number of competitors in the 
market has grown steadily since 1975. Today, there are five separately 
owned television stations in the Designated Market Area, five radio 
stations in Miles City alone (four of which are under separate 
ownership), numerous radio stations in neighboring communities, a 
competing daily newspaper in Billings, and a cable television franchise 
offering at least thirty channels.
    As a result of the explosive growth in the media marketplace over 
the last quarter century, the FCC, Congress, and the courts have 
eliminated or substantially relaxed all of the Commission's other media 
ownership restrictions. However, newspaper publishers have been forced 
to stand on the sidelines as their competitors have pursued acquisition 
opportunities and entered into more efficient and cost-effective 
operating agreements. Repeal of this discriminatory restriction is 
necessary in order to place newspapers and broadcasters on an even 
playing field with their multi-channel, multi-media competitors. In 
addition, I believe that eliminating the ban will advance the public 
interest by enhancing the quality and quantity of news and other 
informational services available at the local level.
    I look forward to the testimony of the witnesses on these and other 
key issues before the Committee today.
    Thank you, Mr. Chairman.

    The Chairman. Thank you.
    Senator Dorgan.

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman, thank you very much. I am 
going to have to step away for a few minutes, but I intend to 
come back for the bulk of the hearing today. This is, I think, 
an important hearing.
    I have some disagreement perhaps with my friend from 
Montana. I think since 1996 we have had galloping concentration 
in radio and television. Frankly, I think we ought to raise a 
lot of questions about it. Free markets are very important, but 
free markets are less free when you have concentration, I 
believe.
    Let me make a couple of points.
    I do not think big is necessarily bad or small is 
necessarily beautiful. But I do think what makes the market 
system work is robust, aggressive competition, and I do think 
that in most cases concentration, left unchecked, clogs the 
arteries of competition and clogs the arteries of the 
marketplace.
    Attached to licenses that we provide for broadcast is the 
requirement to serve local interests, localism. That is 
something I am very concerned about.
    I want to mention one thing. In 1996 when we took the 
limits off radio ownership and relaxed the limits on television 
station ownership, the only vote that occurred was a vote that 
I forced on the Senate about 4 o'clock one afternoon to try to 
restore the limits on television station ownership back to the 
25 percent level. I actually won that vote; I think by 3 or 4 
votes at 4:30 in the afternoon.
    And then we had a reconsideration of the vote about 3 hours 
later following dinner, and several of my colleagues had an 
epiphany over dinner, I guess. I believe our colleague, Senator 
Dole, was on the other side, and I was surprised to have beaten 
him actually, but I only beat him for 3 hours because after 
dinner we had a second vote, and I lost by three or four votes. 
I have no idea what was served that evening.
    [Laughter.]
    Senator Dorgan. But whatever it was, it was very effective 
for my colleague's position because I lost.
    But I raised the points then, in 1996, because I was 
concerned about where I thought this was headed. And, I am 
concerned today. Again, let me say, I do not think big is 
necessarily always bad. You cannot build a 757 airplane in a 
garage in Regent, North Dakota. You need economies of scale and 
so on. But with respect to broadcast, I am very concerned about 
where we are headed in television and radio and the substantial 
concentration that has occurred since 1996.
    The question is, where does it end? Is it if someone wants 
to buy 3,000 stations, if someone wants to capture most of the 
television market in most of the metropolitan areas? Where does 
it end? Where are the practical limits?
    And those are the public policy questions we should 
address, and I am very appreciative, Senator McCain, that you 
have called this hearing. I think we should be thoughtful about 
it and move through it. A number of questions have been raised 
this morning that are very interesting to me, and I do not have 
the foggiest idea what the answers are. But I know we are going 
to have people testifying today and we can ask those questions 
of them. So I appreciate the hearing, Senator McCain.
    The Chairman. Thank you very much.
    Senator Ensign.

                STATEMENT OF HON. JOHN ENSIGN, 
                    U.S. SENATOR FROM NEVADA

    Senator Ensign. I think we can agree that diversity in 
radio markets is important. Our constituents want and need 
access to diverse, quality programming. Over the past 10 years, 
1,283 new radio stations were licensed by the FCC. That is 
about 25 new radio stations per state. In my home town of Las 
Vegas, almost every frequency on the FM band is occupied with 
the choice of country, rock, rap, R&B, alternative, easy 
listening, instrumental, classical, talk radio, or sports 
programming; not to mention Hispanic radio stations in Las 
Vegas. While I may not always be able to hear my favorite song 
while listening, there is certainly diversity in programming. I 
am confident that any music fan would be able to find something 
to listen to in our local markets.
    Recently there has been much discussion regarding ownership 
of such radio stations; specifically, whether such ownership is 
beneficial for our constituents' ability to access quality 
diverse programming. I believe that we got it right in 1996 by 
substantially deregulating restrictions on radio ownership.
    While diversity in the market is vital, think back to where 
we were technologically in the early 1990s. Those of us who had 
seen the Internet saw only a text-based browser. Neither 
Internet nor satellite radio had yet come to market. Legitimate 
online music services such as Press Play, where you can 
purchase tracks from CDs in a digital format for a nominal fee, 
had not yet been invented. Digital radio was not even on the 
horizon. Indeed, radio technology has advanced significantly 
over the last decade and music fans are winning.
    I was pleased that Chairman Powell is taking a close look 
at these outdated, antiquated ownership restrictions. I urge 
both Chairman Powell and the FCC to continue on the path toward 
unleashing market forces, thereby allowing the market to 
determine the winners and losers, not bureaucrats in 
Washington, D.C.
    While I understand the concerns of some of our witnesses 
regarding concentration in radio markets, I would like to 
remind them of antitrust laws already on the books that 
prohibit anticompetitive behavior in free markets or collusion 
among businesses.
    I would also like to point out that since the 1996 Act, 
when ownership restrictions were further deregulated, 720 new 
stations were added to the airwaves, further increasing 
diversity of programming on the airwaves. Moreover, since I 
have been elected to the Senate, I have not heard from a single 
Nevadan complaining about the access to quality, diverse radio 
programming, perhaps because we have better radio programming 
than we did just a few years ago.
    Just a couple of comments on a personal level, Mr. 
Chairman. I read the testimony of Don Henley, who is one of my 
favorite artists, and I hate to be on the other side of an 
issue than one of my favorite artists. However, when he was 
talking in his testimony about how on certain radio stations in 
years past, a listener would hear a lot of different types of 
formats or a lot of different types of music on a single radio 
station. That increased and challenged the musicians and 
artists to broaden what they were producing. As a listener, it 
used to drive me crazy when I wanted to listen to a certain 
type of music and a radio station aired other types of music.
    I love the fact that today you can listen to exactly what 
you want to listen to. If you want to listen to country music--
I am big country music fan. I love to listen to it. When I want 
to listen to that, I want to listen to that. When I want to 
listen to alternative rock, I listen to alternative rock. When 
I want to listen to sports, I listen to sports, and so on. I 
think that, for the consumer, the choices are greater than 
ever, and we have to recognize the role that choice plays in 
the radio marketplace today.
    Thank you, Mr. Chairman, for holding this hearing.
    The Chairman. Senator Wyden.

                 STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you, Mr. Chairman.
    Mr. Chairman and colleagues, since 1996, when Congress 
lifted the radio ownership caps, radio concentration shot up 
virtually immediately. I have been told that there have been 
about 10,000 radio transactions worth about $100 billion. It 
just seems to me that there is an important lesson to be 
learned here, and that is, that media consolidation races ahead 
if you let it.
    I think this is a very important hearing, Mr. Chairman, 
because it seems to me that we are now faced with the prospect 
that the Federal Communications Commission wishes to repeat an 
experiment that the evidence suggests has created as many 
problems as it has solved. I think we ought to be very 
reluctant to repeat the experiment that Congress gave the green 
light to in 1996 in other areas of the media.
    I want to note that one of the FCC commissioners, Mr. 
Adelstein, when he appeared recently, said that radio was in 
his view the canary in the coal mine. I think Congress ought to 
take a careful look at what the canary has to tell us.
    And I will tell you that I am very reluctant to allow this 
train of consolidation that is going forward down at the 
Federal Communications Commission to go forward unchecked 
because I think it would allow the repeat of an experiment that 
was begun by the Congress in 1996 which has caused problems for 
competition, which has caused problems for localism, and 
Congress should be reluctant to allow it to continue.
    Thank you, Mr. Chairman.
    The Chairman. Senator Brownback.

               STATEMENT OF HON. SAM BROWNBACK, 
                    U.S. SENATOR FROM KANSAS

    Senator Brownback. Thank you, Mr. Chairman, for holding the 
hearing.
    I will just note a couple of things, some of which has been 
noted already, but I want to also take off on another area.
    In the over-the-air radio market, while ownership of 
stations has consolidated, consumers have access to more 
diverse programming than ever before. In addition, many 
consumers also have access to radio streamed over the Internet 
by webcasters and news satellite services. I think those would 
need to be looked at all together.
    Terrestrial radio is, of course, perfectly harmonious with 
consumers' interest where price is concerned because it is 
free. Webcasting in its infancy has also provided many 
consumers with free access to music. And I am going to be 
paying close attention to see how webcasting royalties impact 
this nascent market for opportunities and for consumers. As 
with all new technologies and services, the price of satellite 
radio will continue to drop, making it ever more affordable for 
consumers.
    Now, the point of the hearing, regulatory legislation that 
seeks to create competitive advantages in certain areas instead 
of permitting market forces to function naturally in 
combination with antitrust laws, which I think are a very 
important aspect of this, are uniquely situated to address 
radio consolidation concerns on a fact-intensive, market-by-
market basis.
    This is not the kind of competition policy this Committee 
should support where we go in and re-regulate. We have spent 
the last 7 years dealing with just such an artificial policy in 
other segments of the telecom space, and I will not support 
exporting such a policy to other segments of the economy where 
we seek to regulate that economy.
    Recently the recording companies created a coalition with 
others in an effort to advance webcasting royalty legislation 
that ultimately could have driven many small webcasters out of 
business. It is my understanding that some people that are 
testifying here today supported this bill as a way of forcing 
an increase in the royalties charged by BMI and ASCAP.
    Webcasting, whether provided through wireline Internet 
connections or especially wireless Internet connections when 
such capability developed, is exactly the kind of distribution 
outlet that could be invaluable for publicizing new and unknown 
artists, increasing artists' direct access to the public 
without middlemen, and further increasing competition in the 
radio industry generally. So if that is the area that we are 
interested in, if that is the particular problem, I think the 
answer is one that we should look at more in the area of 
webcasting.
    Mr. Chairman, thank you very much for holding this hearing. 
I think it is an important subject, and I look forward to the 
testimony. I am going to have to slip out myself. I hope I will 
be able to get back for some of it.
    The Chairman. Thank you, Senator Brownback.
    Our next panel is Mr. Lowry L. Mays, Chairman and CEO of 
Clear Channel Communications. Would you all please come 
forward. Mr. Edward Fritts, President and CEO of the National 
Association of Broadcasters; Mr. Don Henley, singer and 
songwriter; Mr. Robert Short, President, Short Broadcasting; 
and Ms. Jenny Toomey, Executive Director of Future of Music 
Coalition.
    As our witnesses are coming forward, I am entertained by 
the continued suggestion that we go to the Department of 
Justice when we have a Federal Communications Commission that 
was set up and funded with hundreds of millions of dollars to 
regulate the industry. That any problem could be handled by the 
Department of Justice is entertaining. I hope that that same 
approach will be used to other matters that concern Members of 
the Committee.
    Mr. Mays, we will begin with you, sir. Welcome before the 
Committee.

  STATEMENT OF LOWRY L. MAYS, CHAIRMAN AND CEO, CLEAR CHANNEL 
                      COMMUNICATIONS, INC.

    Mr. Mays. Good morning, Chairman McCain--Senator Hollings I 
am sorry has left--and Members of the Committee. It is my 
pleasure and privilege to appear before you today. I welcome 
this opportunity to discuss the radio business with you because 
it has been a passion of mine for over 30 years.
    Far from being a cautionary tale of the dangers of 
deregulation, radio has a great story to tell. The industry is 
healthier and more robust today than ever before. That would 
not be true if radio stations like ours across the country were 
not pleasing their listeners each and every day.
    Radio has changed in many ways since Richard Nixon and 
George McGovern faced off in 1972. That was the year I bought 
my first radio station in San Antonio, Texas. I knew very 
little about the business then but I understood the core 
principle that makes any radio station a success: you must be 
locally focused and delight and inform the listener every hour 
of every day.
    While radio may have changed in many ways over the past 30 
years, the key lesson I learned then still applies today. That 
means Clear Channel must continue to serve our local 
communities in the very best way that we can.
    Remember back to the early 1990s for a moment. The 
competition from cable, broadcast television, and hundreds of 
new FM stations forced literally half of the Nation's radio 
stations into the red, and many others were operating close to 
it. In 1989 and 1990 alone, AM stations' profits plummeted 50 
percent and FM profits by a third. Stations often had to cut 
back on news and other local programming to survive.
    All of that began to change with deregulation. With the 
ability to own more stations both locally and nationally, 
stations could cut costs and compete more effectively for media 
advertising dollars. Owners could reinvest more in their 
stations, improving their facilities, increasing the quantity 
and quality of their programming, and hiring better on-air 
talent.
    Study after study has demonstrated that there are now more 
formats available to listeners to choose from in local markets 
across the Nation.
    In addition, more stations today are owned by minorities 
than in 1996, the year that Congress passed the 
Telecommunications Act. Clear Channel is committed to 
encouraging diversity in media ownership. In connection with 
our acquisition of AM/FM a few years ago, we sold more than 
$1.5 billion in radio properties to minority buyers. We also 
committed $15 million to the Quetzal/Chase Fund which invests 
in minority-owned media. And, Mr. Chairman, we strongly support 
your bill to provide tax incentives to increase media ownership 
by small business. We have done all of this not because it is a 
benefit to Clear Channel, because we think it is the right 
thing to do.
    Still, some say that deregulation has gone too far, that 
the industry is too consolidated. Let us stop for a moment and 
put those numbers in perspective.
    Radio is by far the least consolidated of any of the media 
and entertainment industries. The 10 largest radio operators 
account for only 44 percent of the industry's advertising 
revenues. The top 10, 44 percent. Compare that to the top five 
record companies. They control 84 percent; cable companies, 89 
percent; movie studios, 99 percent.
    Even though the number sounds large, Clear Channel's 1,200 
radio stations represent only 9 percent of all of the stations 
in this country. That means that over 90 percent of the 
Nation's radio stations are owned by nearly 4,000 companies 
other than Clear Channel.
    Some object, however, whatever the radio percentages are, 
that Clear Channel has too much power in the music industry and 
power over musicians. We heard some of that this morning. The 
fact is that major artists wield monopoly power of their own. 
If we cannot meet their terms, they will simply go to another 
local, regional, or national competitor.
    Finally, I would like to take the opportunity to dispel the 
myth that Clear Channel, or any other concert promoter for that 
matter, is responsible for the steep rise in concert ticket 
prices. That presumes we actually set the price of the ticket, 
which we do not. The reality is that the artists not only set 
the price of the ticket, but then they set large guarantees 
which have been affecting small concert promoters. The artists 
are demanding more and more money from touring because their 
album sales are decreasing. It is not unusual for Clear 
Channel, or any other promoter for that matter, to receive only 
5 to less than 10 percent of the door.
    Let me conclude by going back to the beginning. We succeed 
when our radio stations serve the needs and interests of their 
local communities. I am pleased that according to recent 
surveys, we are doing just that. While I am pleased with these 
surveys, I think we can always do better.
    I look forward, Mr. Chairman, to joining the dialogue that 
we are beginning here today. Thank you.
    [The prepared statement of Mr. Mays follows:]

 Prepared Statement of Lowry L. Mays, Chairman and CEO, Clear Channel 
                          Communications, Inc.
    Good morning Chairman McCain, Senator Hollings, and Members of the 
Committee, it is my pleasure and privilege to appear before you today. 
My name is Lowry Mays, and I am the Chairman and CEO of Clear Channel 
Communications. I want to thank you for inviting me to discuss the 
radio business with you, because it has been my passion for over thirty 
years.
Radio: A Great Story
    Far from being a ``cautionary tale'' of the dangers of 
deregulation, radio has a great story to tell. The industry is 
healthier and more robust today than ever before. And that just 
wouldn't be true if radio stations across the country weren't pleasing 
listeners each and every day. In fact, according to a recent survey, 
the industry is doing just that. Nearly 3 out of 4 listeners believe 
radio does a good or very good job providing the music, news and 
information they want to hear. And 60 percent said they believe radio 
is getting even better.
    Radio has changed in many ways since Richard Nixon and George 
McGovern faced off in 1972, and Don McLean's American Pie was number 
one on the charts. That was also the year Clear Channel bought its 
first radio station in San Antonio, Texas. I knew very little about the 
business then, but I did understand the core principle that makes any 
radio station a success. You must delight the listener, every hour of 
every day.
    That's why, in 1975, we made our radio station the first all news 
format in San Antonio. Listeners were drawn to the local news, weather, 
and sports we offered. And when we broadcast live from local places of 
business, listeners would flock to see our on-air talent in person and 
learn more about the merchant's goods and services. Everyone benefited, 
and it was great radio.
Benefits of Deregulation
    Radio is, without a doubt, healthier today as a result of 
deregulation, and the public clearly benefits as a result. Recall for a 
moment the financial health of radio in the early 1990s, before the 
passage of the Telecommunications Act of 1996. Competition from cable 
and broadcast television and hundreds of newly authorized FM stations 
had forced half of the Nation's radio stations into the red. Many 
others were operating close to it.
    In 1989 and 1990 alone, AM station profits plummeted 50 percent, 
and FM station profits dropped by one-third. Investment capital dried 
up, causing facilities modernization to grind to a halt, and stations 
owners who wanted to sell couldn't find buyers. Radio stations 
struggled to compete with televisions and newspapers, and found it 
increasingly difficult--if not impossible--to survive periodic 
downturns in the local economy. Many radio stations resorted to cutting 
their news budgets or other local programming. Some eliminated local 
news departments altogether.
    All of that began to change with deregulation. With the ability to 
own more stations, both locally and nationally, radio companies could 
create economies of scale and benefit from the substantial cost savings 
that result. An owner of multiple stations in a market could diversify 
formats and, for the first time since the advent of television, compete 
successfully in the total market for media advertising dollars.
    From 1975 to 1995, for example, radio labored with only about 7 
percent of the total advertising pie. Since deregulation, there has 
been growth in that share, with radio finally moving above 8 percent in 
1999 and continuing to increase in 2000. Radio operators can reinvest 
those savings in their stations, improving technical facilities, 
increasing the quantity and quality of local programming, and hiring 
more and better on-air talent.
    In Syracuse, New York, for example, Clear Channel saves 
approximately $200,000 a year by operating its stations as a unit 
instead of as standalone properties. We have reinvested much of that 
savings in the stations, upgrading the WSYR transmitter, acquiring a 
booster for WPHR, and installing state-of-the-art studio equipment. We 
increased local news programming on WSYR by one hour a day, and produce 
the area's only local listener call-in show. WWHT now provides local 
news, but did not before Clear Channel entered the market.
    Deregulation has been good for radio in other significant ways. 
Today, more stations are owned by minority-owned businesses than in 
1996 when the Telecommunications Act was passed. Clear Channel is 
committed to encouraging diverse media ownership, and I am proud to say 
that we have been able to make significant contributions toward that 
worthy goal. In connection with our acquisition of AM/FM a few years 
ago, we sold more than $1.5 billion in radio properties to minority 
buyers. That represented one-third of all the stations we had to divest 
to obtain regulatory approval of the transaction. In addition, we have 
committed $15 million to the Quetzal/Chase Fund, which invests in 
minority-owned media. And, Mr. Chairman, we strongly support your bill 
to provide tax incentives to increase media ownership by small 
businesses and new entrants. We have done all of this not because of 
any direct benefit to Clear Channel, but because it is the right thing 
to do.
    Deregulation has benefited listeners as well as owners. Study after 
study, by academics and market analysts, demonstrate that consolidation 
has led to increases in the diversity of formats available to listeners 
in local markets, large and small. One recent study by Bear Stearns 
found that the number of core formats has risen 7 percent since 1996. 
It's easy to see why this is true. Owners with several stations are 
better able to diversify their programming to serve the variety of 
demographics that are present in the market. That is just what we did 
in Syracuse, which did not have an urban formatted station when we 
entered the market. By drawing upon our resources, we were able to 
target this underserved audience and turn WPHR-FM into a successful 
urban formatted station.
Deregulation: The Bigger Picture
    Despite these benefits of deregulation, which are in evidence in 
local markets of all sizes, some say that deregulation has gone too 
far. They say the industry is too consolidated. And they contend that 
Clear Channel, as the Nation's largest operator, has too much market 
power. Let's stop for a moment and put the numbers in perspective. 
Let's generate some light to accompany the heat.
    Radio is by far the least consolidated segment of the media and 
entertainment industry. The ten largest radio operators account for 
only 48 percent of the industry's advertising revenues. Compare that to 
the recording industry, where the top five record companies control 84 
percent of all album sales.
    It's also interesting to note that in cable television, the ten 
largest companies account for 89 percent of the revenues. For movie 
studios it's a whopping 99 percent. And, though the number sounds 
large, Clear Channel's 1,200 radio stations represent only 9 percent of 
all the stations in the country. That means that over 90 percent of the 
Nation's radio stations are owned by companies other than Clear 
Channel.
    When these numbers are evaluated objectively, it quickly becomes 
apparent that radio does not pose a media concentration threat. In 
fact, the drafters of the 1996 Act made certain of that by limiting any 
individual company to a maximum of eight stations per market, and only 
then in markets containing 45 or more radio stations.
Serving Local Listeners
    While radio may have changed in many ways over my three decades in 
the business, the key lessons I learned from that first San Antonio 
radio station still apply today. Stations must serve the needs and 
interests of their local communities, listeners and advertisers alike. 
Radio is inherently a local medium and always will be. That means Clear 
Channel--along with nearly 4,000 other owners of radio stations in the 
U.S.--must continually strive to serve our local communities in the 
best ways we can.
    Some have suggested, however, that the commitment to local 
listeners has been lost as a result of deregulation--lost in a mad dash 
of consolidation. Let me assure you nothing could be further from the 
truth. Listeners want to hear a variety of music, news, local affairs 
and other entertainment programming that appeals to their individual 
tastes. And in today's multimedia world, those listeners are very 
discerning. If they don't like what they hear, they will turn the dial, 
burn a CD, or download an .mp3 recording that is more to their taste. 
It's that simple, and that risky to our financial health.
    That's why Clear Channel will always be in tune with what local 
listeners want to hear. One tired song, a commercial that lasts too 
long, or a failure to provide timely news, weather or traffic, and the 
listener is gone. After all, radio is the only business I know of where 
you can lose a customer with the push of a button at 60 miles per hour.
    We may have grown from that single AM station in San Antonio into 
the largest radio operator in the country, but we haven't outgrown our 
commitment to localism and diversity. Contrary to what some would 
suggest, our radio play lists are not put together at headquarters, 
hundreds or even thousands of miles away from the communities in which 
they are played. Far from it. Our play lists are developed by local 
station managers, program directors, and on-air talent, and are based 
on extensive audience research, listener feedback, and our employees' 
knowledge of local tastes and culture.
    While we make sure that our radio stations have access to the 
highest quality news and information sources, we do not dictate the 
quantity or content of news and information from our San Antonio 
headquarters. Our local managers decide how to use the tools we give 
them to meet the needs of their audience. The result is that over 80 
percent of what airs on Clear Channel stations is produced locally.
    We simply couldn't operate any other way. The preferences of 
listeners vary from market to market, and we must respond to those 
differences if we are to succeed. That is why a song like ``Screaming 
Infidelities'' by Dashboard Confessional received hundreds of spins on 
our Dallas station last year, but just a handful in Indianapolis and 
here in Washington, D.C. Standardized play lists just don't exist at 
Clear Channel.
Committed to Our Local Communities
    But we don't just serve our communities by playing the music our 
listeners want to hear. Clear Channel stations around the country are 
deeply involved in supporting and promoting a wide variety of local 
civic and charitable events. Consider just one market--Syracuse, New 
York--where Clear Channel stations routinely help the community 
whenever the need arises. For example, last year the State of New York 
cited the Blodgett Library, located in one of the poorest neighborhoods 
in the country, as a safety hazard. Clear Channel raised over $80,000 
in a radiothon to help create the ``Dream Center,'' a state-of-the-art 
library and dynamic learning center at a local elementary school.
    Our local news/talk station in Syracuse, WSYR, produced a ten-part 
series on child abuse and raised money to help create the McMahon/Ryan 
Child Advocacy Site. The station also raised $35,000 for the Child 
Abuse Referral and Evaluation program at University Hospital, and 
published a guide to help prevent child abuse. The National Association 
of Broadcasters awarded WSYR its ``Service to America'' award for this 
series.
    These are just two small examples of the countless number of 
contributions Clear Channel radio stations make every day to the 
communities we serve in over 300 U.S. markets. From radiothons to 10K 
races, our stations help raise money for important charities like 
breast cancer research, child literacy, and AIDS research, to name a 
few.
Radio and the Concert Business: Effect on the Artist
    I've heard some say that Clear Channel has too much power in the 
music industry. They say that the combination of our radio stations and 
our involvement in the live entertainment business, through concert 
promotion and ownership of concert venues, gives us unprecedented 
clout. They claim we can leverage those businesses to intimidate 
artists, force out competing concert promoters, and drive up ticket 
prices.
    Well, I don't know if any of these critics have had the privilege 
of negotiating a concert deal with Cher. Well, we have--and I can 
assure you she is not intimidated by us one bit. And the same goes for 
Madonna, Paul McCartney, and the Rolling Stones. The artists themselves 
wield monopoly power. After all, there is only one Cher.
    The truth is that major artists dictate nearly every aspect of 
their tours--increasingly large performance fees, choice of venues, 
tiered ticket pricing, percentage of merchandising, even the color of 
the roses and brand of bottled water in their dressing rooms. If we 
can't meet their terms, they won't think twice about signing with any 
one of the local, regional and national concert promoters that compete 
with us. And when we do sign to promote a tour, we are often not the 
exclusive promoter. Many artists split promotion of their tour between 
Clear Channel and other national or local competitors.
    Speaking of our radio stations, let me say clearly, and for the 
record, that Clear Channel does not use the threat of reduced airplay 
to force musicians to tour with us or retaliate against competing 
concert promoters by failing to promote their shows on the air. Anyone 
who would make such allegations simply doesn't understand our business. 
The fact is live entertainment accounts for less than 7 percent of 
Clear Channel's revenue. Radio is the bread and butter of our business, 
and we simply wouldn't risk the ratings of any station by refusing to 
play or promote a popular artist who isn't touring with us, or by 
overplaying a less popular artist who is.
    To cite just one example, Britney Spears actually received 73 
percent more airplay on Clear Channel radio stations in 2002, when she 
was touring with a competing promoter Concerts West, than she got in 
2001 when she was touring with us. Why? Because Britney Spears was one 
of America's most popular music artists in 2002, and our radio stations 
hardly could ignore her songs and still meet the needs of our 
listeners. Remember, if we are not playing what people want to hear, 
they will quickly vote against us by pressing another button on their 
radio. It couldn't be easier--or more risky to our financial health.
    Even when the artist is lesser known, we cannot, and would not, 
take advantage of any perceived change in the negotiating dynamic. It 
is not in our interest to do so. It happens that Clear Channel 
Entertainment depends on small and mid-size venues for a substantial 
portion of its revenue, and so we have a vested interest in booking the 
up and coming artists that frequent these smaller stages. In fact, in 
2001 Clear Channel hosted over 3,100 acts, of which nearly 70 percent 
were staged at clubs and other smaller venues. Of all these acts, two-
thirds were not affiliated with a major record label, and almost one-
quarter were not signed to any label at all. Like our radio stations, 
Clear Channel Entertainment is absolutely committed to promoting new 
artists and their music.
Developing New Artists
    Our commitment to local audiences involves introducing them to new 
artists and their music. Make no mistake: new artists and music are the 
lifeblood of many of our radio stations, whether they play country, 
adult contemporary, rock or hip-hop. Unfortunately, the five major 
record companies increasingly are failing to take the risks necessary 
to sign, produce, and promote talented newcomers. Sadly, the result is 
less new albums each year than listeners (and radio stations) would 
like. But there is one thing you can count on: if the public wants to 
hear a new song, Clear Channel will strive to be first to put it on the 
air.
    That's why Clear Channel has taken great pains to develop new 
artists on our own. In September 2001, we began an Internet pilot 
program called the Artist and Repertoire Network, which is dedicated to 
providing music industry professionals with information about high 
quality, unsigned artists from around the globe who have great 
potential to succeed. The ``A&R Network'' (located at 
www.anrnetwork.com) provides information such as the type of deal an 
act is seeking, its biography and discography, tour information, and 
more. I am proud to say that in just one year since its inception, the 
A&R Network has played a key role in helping thirteen new artists sign 
major and/or independent label record deals.
    Then, on September 26, 2002, we launched another artist development 
initiative, a not-for-profit, Internet-based forum for performers, 
industry professionals, and fans called the New Music Network (located 
at www.clearchannelnewmusicnetwork.com). This website allows unsigned 
bands to upload their songs in .mp3 format to the Internet. It is a 
free way for these artists to reach new audiences, promote their music, 
and network with recording industry executives. Again, I am proud to 
say that, even at this early stage, the New Music Network is a 
phenomenal success. After just four months, we have already registered 
more than 1,000 promising new musicians in genres as diverse as blues, 
classical, folk, funk, punk, tejano, and gospel.
    Our passion for discovering and developing new artists doesn't stop 
there. At nearly 60 radio stations in 40 markets across the country, 
Clear Channel's local managers are devoting airtime to showcase up and 
coming talent in their local communities. In Detroit, for example, our 
WJLB-FM plays new music by local artists every night for an hour 
beginning at 9:05 p.m. Any original music that listeners request can 
and does end up on the station's regular play lists.
    And right here in Washington, D.C., every Sunday night WWDC-FM 
produces the ``DC 101 New Music Mart.'' This hour-long program, which 
has been on the air for eight years, features new music, including 
releases from smaller labels, which our local managers select by hand. 
And if the music is popular, it can make all the difference for a new 
band. For example, Carbonleaf, an unsigned band out of Richmond, 
Virginia, saw its music move from the Sunday night show to DC 101's so-
called ``power rotation,'' which includes the station's most heavily-
played songs.
    Clear Channel's new music programs can have a national effect as 
well. Stu Sobol, of Spivak Sobol Entertainment, gives the DC program 
credit for breaking the new band The Calling, whose album went on to 
become multi-platinum. Our radio stations sponsor local new music 
programs in a host of diverse markets from Anchorage, Alaska to 
Medford, Oregon to Sioux City, Iowa.
Rising Ticket Prices
    A common misperception is that Clear Channel is responsible for the 
steep rise in concert ticket prices over the past ten years. That 
presumes that Clear Channel, or any concert promoter, actually controls 
the price of the ticket. Unfortunately, that is not the case. I say 
unfortunately because if ticket prices were controlled by us, we'd set 
them low in the hope of getting more people through the door. That's 
because our company makes very little income from ticket sales--rather, 
our revenue comes primarily from ancillary services at the shows, such 
as parking, concessions, and sponsorships. In fact, it is not uncommon 
for us, or any promoter, to receive just 5-10 percent of the ``door,'' 
with the rest going to the artist.
    The reality is that artists not only establish the ticket price, 
and do so for all tiers (including the so-called ``golden circle''), 
but also demand a set performance fee or ``guarantee'' from the 
promoter. And artists are demanding more money from touring than ever 
before, presumably due to a marked decrease in album sales. In fact, of 
the top twenty touring artists in 2002, 62 percent of their income came 
from concerts. Compare that to the 22 percent of their income that came 
from album sales.
    [It is interesting to note, by the way, that the Seattle Times, in 
an article dated November 3, 2002, wrote that the escalation of concert 
ticket prices began ``in 1994 when the long-feuding Eagles reunited for 
their ``Hell Freezes Over'' tour. That outing launched a tiered system, 
in which the best seats--commonly dubbed `golden circle' seats--cost 
more. Ticket prices topped $100 for the first time.'']
Working Together to Improve Radio
    Let me conclude by going back to the beginning. Clear Channel 
succeeds when our radio stations serve the needs and interests of their 
local communities. And I am pleased that, according to recent surveys, 
we are doing just that. In one survey, 74 percent of respondents said 
radio does a good or very good job of playing the kinds of music they 
like. Seventy percent said radio does a good or very good job of 
providing the kinds of news and information they want. And almost 60 
percent said radio is getting better lately. Yes, I'm pleased by these 
responses, but I'm not satisfied. There is always more that we can do 
to improve radio. I look forward, Mr. Chairman, to joining the dialogue 
that you are beginning here today.

    The Chairman. Thank you very much, Mr. Mays.
    Mr. Fritts.

       STATEMENT OF EDWARD O. FRITTS, PRESIDENT AND CEO, 
              NATIONAL ASSOCIATION OF BROADCASTERS

    Mr. Fritts. Thank you, Mr. Chairman. I am Eddie Fritts, 
President and CEO of the National Association of Broadcasters. 
NAB represents America's free over-the-air radio and television 
stations, and today there are nearly 4,000 separate owners of 
the some 13,000 local radio stations that serve America's 
listeners. I am pleased to testify on their behalf.
    While the industry continues to change, one thing has 
remained constant, radio's commitment to serving local 
communities. This attribute distinguishes us from all 
competitors. From online music to satellite radio, local 
service to the community is that which separates us from the 
competition.
    Radio broadcasters are proud of their commitment to 
localism. A recent NAB study found that in 2001 alone, radio 
stations contributed $7 billion worth of public service to 
their communities. That number includes the value of public 
service announcements, as well as monies raised for charities, 
disaster relief, and for the needy.
    While this is an impressive figure, it does not tell the 
whole story. Radio's local connection allows it to offer 
services that cannot be measured in just dollars and cents. 
Take, for instance, the Amber Alert program. Over 40 abducted 
children have been returned to their families largely due to 
radio, and the Amber program, which I note that Senator 
Hutchison has been a prime sponsor of, has recently passed the 
Senate with our support. I do not think one can put a price tag 
on the return of an abducted child.
    Radio underscored its value also in helping solve the D.C. 
sniper case. After hearing the vehicle description and the tag 
number on the radio, a listener called authorities resulting in 
the immediate arrest of the suspects.
    And no dollar figure can account for radio's work following 
the events of 9/11. Stations across the country raised 
donations for rescue equipment for victims, organized blood 
drives, and overall reassured and informed Americans during 
that dark hour.
    These, of course, are just a few examples and I could go 
on.
    Today the industry has rebounded financially, but just 10 
years ago--just 10 years ago--60 percent of all radio stations 
were losing money. Many had to go off the air depriving 
communities of local service upon which they had come to rely. 
It was that state of affairs that the Congress and the FCC 
revised radio ownership rules. NAB believes the limits 
implemented through the 1996 Telecommunications Act enabled 
radio to better serve local audiences across the country, as 
well as strengthening the industry economically.
    As radio deregulation has moved forward, radio's critics 
have tended to overstate the effects of industry trends. 
Compared to other industry choices, radio is perhaps the least 
consolidated sector. Take, for instance, the Hollywood movie 
studios, the record companies, direct broadcast satellite, 
cable systems, newspapers, even the Internet. All have more of 
their revenue share concentrated among the top 10 owners than 
does radio.
    Of course, radio's diversity is not measured by revenue 
shares. Radio broadcasters recognize the importance of 
diversity. Chairman McCain's proposal, which he announced 
today, will have great support from the NAB because it will 
help foster diversity through tax deferrals. We look forward to 
working with the Chairman and this Committee and the Senate in 
moving this legislation forward.
    Already today, radio formats mirror the diversities we have 
in our American society. Spanish language formats have 
increased by over 80 percent in the last decade. Other 
ethnicities are well represented on the dial. From Persian to 
Polish to Chinese to Haitian, the list goes on in specialty 
programming.
    Radio also remains the most trusted source for music. 
According to Arbitron, two-thirds of Americans say radio is 
where they first heard new music. Ninety-five percent of 
Americans listen to the radio every week. Our listeners have 
good reason for tuning in, for last year alone radio debuted 
3,000 new songs of some 550 new artists.
    In sum, Mr. Chairman, the Telecommunications Act has been a 
success for our listeners, and what is good for our listeners 
is good for our industry. It was a goal of Congress, when 
formulating the Act, to keep radio a viable, vibrant and local 
medium. That objective, we believe, has been met. Radio today 
is more financially stable. Radio's programming is as diverse 
as its audience, and today, radio remains the ultimate local 
community medium. We look forward to continuing that proud 
tradition into the future. I appreciate the fact that we were 
able to testify at this hearing, and I look forward to 
answering your questions. Thank you.
    [The prepared statement of Mr. Fritts follows:]

  Prepared Statement of Edward O. Fritts, President and CEO, National 
                      Association of Broadcasters
Introduction
    This testimony represents the views of the National Association of 
Broadcasters (NAB) on the current state of the radio industry. The 
testimony examines how regulatory changes implemented by the FCC in 
1992 and by Congress in 1996 have advantaged both the industry's 
financial health and its ability to serve listeners. We then examine 
the current state of programming diversity in the industry, refuting 
critics' charges that consolidation has resulted in homogenized 
programming and had a deleterious effect upon radio's connection with 
local community. Finally, this testimony comments on recent 
Congressional proposals to re-regulate the industry, paying special 
heed to the ``The Competition in Radio and Concert Industries Act'' (S. 
2691), which was introduced by Senator Russ Feingold in June of 2002.
Deregulatory Actions of the 1990s Have Improved Both Radio's Economic 
        Health and Its Ability to Serve Listeners
1992: The Commission Moves to Deregulate Radio Ownership
    Prior to the deregulatory gains of the 1990s, radio was encumbered 
with anachronistic ownership limitations that restricted the industry's 
ability to effectively compete with other mediums.
    When the Commission issued its 1992 ruling liberalizing ownership 
regulations, the industry was in serious decline. Radio's share of the 
local advertising market was flat throughout the 1980s even as the 
respective shares of directly competitive media, most notably cable, 
increased. In fact, radio's share of the local advertising share, 
remained at 12 percent from 1980 to 1990.\1\
---------------------------------------------------------------------------
    \1\ FCC Report and Order. MM Docket No. 91-140. Released April 10, 
1992. 7 FCC Rcd 2759.
---------------------------------------------------------------------------
    Small market radio stations were particularly hard hit. More than 
half of all stations, primarily those with less than $1 million in 
sales, were losing money. Most disconcerting, the FCC has found that 
almost 300 stations had ceased transmitting (due largely to financial 
pressures).\2\
---------------------------------------------------------------------------
    \2\ Id. at 2760.
---------------------------------------------------------------------------
    It was with these concerns in mind that the Commission adopted new 
ownership regulations in 1992. The new regulations modestly increased 
the number of radio stations that could be owned by a single licensee 
both nationally and in local markets, depending upon market size.\3\
---------------------------------------------------------------------------
    \3\ FCC Memorandum Opinion and Order. MM Docket No. 91-140. 
Released September 4, 1992. 7 FCC Rcd 6387.
---------------------------------------------------------------------------
1996: Congress Further Deregulates Radio
    In formulating the 1996 Act, Congress updated ownership regulations 
again. While debating the 1996 Act, it was a primary concern of 
Congress that radio remain an economically viable medium in an 
environment with a host of new mediums competing for the same limited 
pool of advertising dollars. For instance, in support of the 1996 Act's 
radio ownership provisions, Senator Conrad Burns stated, ``For the 
longest time we have viewed radio as competing only with itself . . . 
Radio goes head-on with other forms of mass media for the audience and 
for those advertising dollars. We need to start acknowledging this 
important distinction and give radio the tools it needs to compete with 
all other information providers.'' \4\ As will be evidenced below, the 
Telecommunications Act has met this Congressional objective as radio 
continues to prosper in the face of new competitors.
---------------------------------------------------------------------------
    \4\ See Senate Congressional Record, June 15, 1995, S. 8424.
---------------------------------------------------------------------------
    Under the 1996 Act, radio owners are now allowed to own as many 
stations as they like nationally. The Act also developed prudent 
regulations for local ownership based upon market size. Under the 
provisions of the 1996 Act, stations may own as many as 8 commercial 
stations in a market with 45 commercial stations; markets with between 
30 and 44 stations have a cap of 7 commercial stations for a single 
owner; markets with 15 to 29 stations are limited to owning 6 stations 
in the market; and in radio markets with fewer than 14 stations, a 
party may own up to 5 commercial stations (but not more than half of 
the stations in that market). In addition to these guidelines, the Act 
regulates how many of these commonly owned stations may be in the same 
band.
    The Congressionally enumerated regulations for radio ownership have 
improved local radio from both an industry economic perspective and 
from the perspective of listeners.
    Numerous private and governmental studies (including FCC studies 
\5\) have well documented the economic as well as public interest 
benefits flowing from joint ownership of media entities in a market. 
Radio stations are no exception. Many of radio stations' costs are 
fixed and can be significantly reduced through common ownership. For 
instance, commonly owned radio stations in single markets may share a 
single general manager, management personnel and clerical staff. 
Commonly owned stations may also avail themselves of ``[B]ulk discounts 
on services and supplies, shared operating facilities, advertising and 
promotional expenses, and combined technical facilities.'' \6\
---------------------------------------------------------------------------
    \5\ See, e.g., Report and Order in MM Docket Nos. 91-221 and 87-88, 
14 Rcd 12903 (1999) (in loosening the television duopoly rule, the FCC 
discussed the ``significant efficiencies inherent in joint ownership 
and operation of television station in the same market,'' and how 
``[t]hese efficiencies can contribute to programming and other 
benefits.'').
    \6\ R.B Ekelund, Jr., G.S. Ford, and T. Koutsky, Market Power in 
Radio Markets: An Empirical Analysis of Local and National 
Concentration, 43 J. Law & Econ. 157 (2000).
---------------------------------------------------------------------------
    Even before the full market effects of the 1996 Act were felt, 
several observers documented the financial advantages of in-market 
radio ownership concentration. As early as 1997, a study by BIA 
Research, Inc. found, ``The average station involved in a duopoly 
combination in the Top 50 markets generated revenue of over $4.6 
million. For the average non-duopoly station [also in Top 50 markets] . 
. . revenues were under $2.6 million.'' \7\
---------------------------------------------------------------------------
    \7\ BIA Research, Inc., Radio State of the Industry, 1997.
---------------------------------------------------------------------------
    The significant cost savings and enhanced profitability stemming 
from consolidation have rescued the radio industry from economic 
failure. Even during 2001, a devastating year for all advertising 
supported mediums, radio's share of the entire mass media advertising 
revenue pie remained strong, ranking third with a seventh of all 
spending among other advertising mediums such as newspaper and 
television.\8\ Moreover, early projections indicate that local radio 
advertising revenues will continue to grow by as much as 5 percent 
during 2003.\9\
---------------------------------------------------------------------------
    \8\ BIAfn, Inc. State of the Radio Industry: Radio Revenues; Is the 
Bloom Back? Page 14.
    \9\ Robert Cohen, Insider's Report Presentation on Advertising 
Expenditures, December 2002, Universal McCann, page 4
---------------------------------------------------------------------------
State of the Dial: In Addition to Remaining Economically Vibrant, the 
        Radio Industry Has Become More Diverse Since Consolidation
    While the deregulatory gains made by the Commission in 1992 and by 
Congress in 1996 have, as expected, resulted in ownership 
concentration, NAB strongly disputes that these trends have negatively 
impacted diversity on the dial. In fact, radio continues adapting to 
represent America's evolving demographics and changing musical tastes.
    As an initial matter, before demonstrating the positive causal 
connection between in-market concentration and enhanced programming 
diversity, NAB must stress that recent consolidation trends in the 
radio industry may be less dramatic than is commonly assumed. A recent 
NAB study found that a large number of commercial radio stations remain 
``standalones,'' or are part of local duopolies, in their respective 
markets. The study found that nationally, as of November 2001, 1,510 
stations (or 23.6 percent of the 6,403 commercial stations operating in 
Arbitron markets at the time) are the only stations owned within their 
respective market by stations' owners; an additional 1,064 stations 
(16.6 percent) are part of duopolies within their respective markets. 
Thus, while there has been a decline in ``standalone'' and duopoly 
stations, it remains the case that a large number of stations in 
Arbitron markets are ``independent voices'' in their markets. This 
large number of stand-alone and duopoly stations also provide a path to 
entry for new radio broadcasters.
    Examining the industry from the perspective of revenue share 
reinforces the point that the industry is less consolidated than 
critics commonly assume. A Wachovia Securities analysis (Attachment A 
*) of the top ten owners in ten media sectors found radio to be the 
least consolidated, with the top ten owners controlling only 44 percent 
of revenue share. By way of comparison, in the movie studio, Direct 
Broadcast Satellite and Theme Park industries, the top ten owners 
controlled over 90 percent of industry revenue share. For cable MSOs 
and outdoor advertisers, over 80 percent of revenue is concentrated 
among the top ten players. Moreover, 3,400 separate entities control 
radio stations in the United States.\10\ While there has of course been 
consolidation in the industry since 1996--that was the intended effect 
of the 1996 Act--NAB submits that critics of deregulation have vastly 
overstated the effects of recent ownership trends.
---------------------------------------------------------------------------
    \10\ Radio Industry Review 2002: Trends in Ownership, Format and 
Finance. George Williams and Scott Roberts. FCC Media Bureau staff 
research paper. Page 3.
---------------------------------------------------------------------------
    Furthermore, listeners' choices continue to grow. Thirty years ago, 
there were but a handful of radio formats on the dial. Today, listeners 
may choose from over 250 discrete formats.\11\ Moreover, the available 
data would indicate a correlation between deregulation and expansion in 
the number of available formats. For instance, an analysis of available 
``core'' formats (the most common classifications) found that format 
diversity increased by 7 percent between fall of 1996 (prior to passage 
of the Act) and the fall of 2001.\12\
---------------------------------------------------------------------------
    \11\ Format Diversity: More or Less. Bear Stearns. November 4, 
2002.
    \12\ Ibid.
---------------------------------------------------------------------------
    The link between in-market ownership concentration and enhanced 
programming choice was originally postulated by economist Peter Steiner 
in his 1952 seminal work, ``Program Patterns and Preferences, and the 
Workability of Competition in Radio Broadcasting.'' \13\ Steiner argues 
that multiple ownership of stations in a market by a single entity acts 
as a natural disincentive towards duplicative programming. After all, 
station owners would not want their commonly owned stations competing 
for the same audience share. As a result, greater ownership 
concentration within a market encourages owners to experiment with 
different formats to attract different and untapped listening bases.
---------------------------------------------------------------------------
    \13\ Quarterly Journal of Economics. 66. 1952.
---------------------------------------------------------------------------
    A series of more recent studies have validated Steiner's theory. A 
1999 study concluded that, ``[b]etween 1993 and 1997 ownership 
concentration and programming variety available in local radio markets 
both increased substantially,'' consequently ``suggest[ing] that the 
increased concentration has been good for listeners.'' \14\ The same 
study found that ``increased concentration caused an increase in 
available programming variety.'' \15\
---------------------------------------------------------------------------
    \14\ Steven Berry and Joel Waldfogel, Merger, Station Entry, and 
Programming Variety in Radio Broadcasting, National Bureau of Economic 
Research, Working Paper 7080 at 25-26 (April 1999).
    \15\ Id. at 25 (emphasis added).
---------------------------------------------------------------------------
    Most recently, BIA Financial Networks issued a study \16\ on the 
state of format diversity demonstrating that the number of programming 
formats in Arbitron markets has continued to increase and that a causal 
link exists between increased ownership concentration and increased 
programming diversity. (The full BIA Study is attached as Attachment B 
*). Specifically, the study finds that, since 1998, the average number 
of general programming formats offered in all Arbitron surveyed markets 
has increased by 8 percent, and the average number of specific 
programming by 11.1 percent.\17\ This study therefore clearly shows 
that diversity of radio programming has continued to rise in markets of 
all sizes.\18\
---------------------------------------------------------------------------
    \16\ Has Format Diversity Continued to Increase? BIA Financial 
Network, June 5, 2002.
    \17\ Ibid. at 5 and 7. This larger increase in the number of 
specific programming formats is particularly significant, as it shows 
that stations have continued to adopt new and different subformats that 
an aggregated measure of formats using general format categories does 
not capture.
    \18\ Id. at 5-6. The smallest Arbitron markets (rank 101 and 
higher) receive, on average, 9.5 general and 12.3 specific programming 
formats. The largest markets (rank 1-10) receive, on average, 17.0 
general and 38.6 specific programming formats.
---------------------------------------------------------------------------
    Interestingly, the BIA Financial Networks study also found that the 
above analysis actually understates the level of programming diversity 
because it fails to take into account ``out of market'' listening. On 
average, the study finds, less than three-quarters (71.1 percent) of 
the listening within a market is attributable to commercial radio 
stations listed by Arbitron as being ``home'' to that market. The 
effect of ``out of market'' listening is most pronounced in smaller 
markets where this ``distant'' listening is most common.\19\
---------------------------------------------------------------------------
    \19\ Id at 9.
---------------------------------------------------------------------------
    On multiple occasions, the FCC itself has recognized the 
relationship between concentration and format diversity. When 
liberalizing inter-market ownership regulations in 1992, the Commission 
envisioned that consolidated ownership would promote ``program service 
diversity and the development of new broadcast services.'' \20\
---------------------------------------------------------------------------
    \20\ 1992 Radio Ownership Order, 7 FCC Rcd at 2757.
---------------------------------------------------------------------------
    In short, not only is there a preponderance of evidence to back the 
assertion that greater levels of ownership concentration promote 
programming diversity rather than hinder it, but there is also 
empirical evidence that this theory has played out in reality since the 
deregulatory moves by the Commission in 1992 and by Congress in 1996. 
Additionally, industry growth has further contributed to diversity. The 
number of FM stations has tripled in the last 30 years and, in 2001 
alone, 73 new FM stations went on-air.\21\
---------------------------------------------------------------------------
    \21\ Radio Today: How America Listens to Radio, Arbitron Study, 
2001.
---------------------------------------------------------------------------
    Finally, in addition to the range of choices terrestrial radio 
affords listeners (that is largely resultant of ownership 
deregulation), technological innovation has further broadened 
consumers' options with several newly arrived competitors that were not 
even considered when the Telecommunications Act was formulated. 
Internet-only radio continues to blossom as a competitor to traditional 
radio. Estimates suggest that more than half of all American households 
are online.\22\ As more Americans become Internet savvy, this new 
outlet will only grow in importance. The 2001 and 2002 launches of XM 
and Sirius satellite radio, each transmitting over 100 channels of 
niche radio programming, provide consumers with yet more options. With 
over 1 million listeners expected to be subscribing to XM alone by 
year-end 2003,\23\ and Sirius having over 16,000 subscribers as of 
October 2002,\24\ satellite radio clearly provides another vigorous 
competitor. Additionally, according to the FCC's website, there are 70 
Low Power FM stations currently licensed.\25\ The FCC's continued roll 
out of this service will further expand listening alternatives. In 
short, technology will only serve to enrich listeners' already diverse 
range of choices in the years ahead.
---------------------------------------------------------------------------
    \22\ Knowledge Networks/SRI Home Technology Monitor Ownership 
Report, Spring 2002.
    \23\ XM reaches 360,000 subscribers. XM Satellite Radio Press 
Release. January 8, 2003.
    \24\ Sirius Announces Third Quarter Financial and Operating 
Results. Sirius Satellite Radio Press Release. November 14, 2002.
    \25\ http://svartifoss2.fcc.gov/cgi-bin/ws.exe/prod/cdbs/pubacc/
prod/sta_list.pl.
---------------------------------------------------------------------------
The Enhanced Diversity Resulting From the Telecommunications Act 
        Benefits the Listening Public
    Listeners have benefited from expanded diversity in a number of 
ways. In recent years, radio has closely mirrored America's evolving 
demography. The past decade, for instance, has seen an 82 percent 
increase in Spanish language formatted stations.\26\ Other ethnicities 
are well represented on the dial. Today, listeners may experience 
Korean language stations, Farsi language radio, Chinese radio 
programming, Polish-American programming, Arab language formats, 
Vietnamese and Russian language programming, and Haitian targeted 
programming. Moreover, these stations are not located exclusively in 
major markets; as the American suburbs diversify demographically, 
suburban American radio has responded with programming targeted to 
these new audiences.\27\ These ethnically targeted stations play an 
irreplaceable role in America's ethnic communities. In reference to 
KIRN-AM 670, a Farsi language station in Los Angeles, one listener 
said, ``The station is a kind of town hall. It became a clearinghouse 
of information . . . 670 has become a meeting place for the Iranian 
community.'' \28\
---------------------------------------------------------------------------
    \26\ M Street Directory. 2002.
    \27\ See All Languages, All the Time, and All Over the Suburban 
Dial. New York Times, July 21, 2001. 21.
    \28\ See Iranian Anger on AM Dial: Persian station KIRN serves as a 
forum for immigrants upset by Dec. 16 detentions. Los Angeles Times. 
December 29, 2002. Part 2; Page 1.
---------------------------------------------------------------------------
    Terrestrial radio also continues to be American's dominant source 
for emerging trends in popular music. In 2002 alone, over 3,000 new 
songs debuted on local radio and over 550 new artists received 
airplay.\29\ A recent FCC study of ``playlist'' diversity on radio 
stations found that, while song diversity overall remained stable 
between 1996 and 2001, the playlists for stations with the same general 
formats competing in the same local market ``have diverged, so that 
listeners in local radio markets may have experienced increasing song 
diversity.'' \30\
---------------------------------------------------------------------------
    \29\ Media Base 2002. http://www.mediabase.com/Note: Airplay 
defined as at least 50 plays.
    \30\ FCC, George Williams, Keith Brown and Pete Alexander, Radio 
Market Structure and Music Diversity at 17-18 (September 2002).
---------------------------------------------------------------------------
    Accordingly, listeners trust radio as their primary source for 
music. Arbitron has found that over two-thirds of listeners said that 
radio is where they turn first to hear new artists.\31\ A December 
survey by the Washington polling firm the Mellman Group found that 77 
percent of consumers believe their favorite local radio stations 
provide the music that they like either all of the time, most of the 
time or some of the time. Only 13 percent of radio listeners believe 
that local stations rarely or never carry music that they like. (The 
Mellman Group's Analysis is attached as Attachment C *.)
---------------------------------------------------------------------------
    \31\ Internet 9: The Media and Entertainment World of Online 
Consumers. Arbitron/Edison Media. July, 2002.
---------------------------------------------------------------------------
    The Mellman survey also found that consumer satisfaction with the 
medium is not limited to music. Seventy-eight percent of respondents to 
the survey felt that radio played a ``very important'' or ``somewhat 
important'' role in providing valuable news and information. Consumers 
also rate radio highly in comparison to other mediums. The Arbitron 
study found that consumers (aged 12 and higher) rated only the 
ubiquitous television as more essential to their lives.\32\
---------------------------------------------------------------------------
    \32\ Ibid at 3.
---------------------------------------------------------------------------
    It should not be surprising that consumers rely so heavily upon 
radio for music, news and community information despite the arrival of 
other information and entertainment outlets (e.g., broadcast, cable and 
satellite television and, more recently, the Internet and satellite 
radio). Arguably, radio is perhaps the medium most responsive to 
consumers' changing tastes. Stations spend millions of dollars every 
year researching consumer preferences and with station revenues linked 
directly to regularly issued ratings reports, radio acts in the best 
tradition of the free market, providing consumers with the programming 
they want, when they want it.
    Equally important to radio's strong retention of consumer loyalty, 
is that radio, even in the twenty-first century, remains first and 
foremost a local, community-oriented medium. This remains true even 
after consolidation. Radio stations, regardless of their ownership 
status, continue to tailor their programming and news to local 
audiences' preferences and needs. In 2002, for instance, radio aired 
over 11,000 sporting events targeted to local communities. Local 
interests also largely determine music selected for airplay. The song 
``Screaming Infidelities'' by Dashboard Confessional, for instance, had 
hundreds of plays in Dallas, Texas during 2002, but only a handful in 
Washington, D.C.\33\
---------------------------------------------------------------------------
    \33\ MediaBase, 2002.
---------------------------------------------------------------------------
    Perhaps more importantly, radio stations use their strong local 
connection to improve the communities in which they operate. Through 
the airing of Public Service Announcements (PSAs), by acting as a forum 
for discussion of community issues, by raising money to address local 
(and for that matter national) problems and in countless other ways, 
radio stations endeavor to serve their communities. The recent 
successes of the AMBER Plan system, which uses the Emergency Alert 
System to assist law enforcement in the recovery of abducted children, 
speaks to the unique role radio plays in serving communities.
    Radio broadcasters' community service efforts add up quickly. A 
2002 study by the National Association of Broadcasters found that 
during a single year (2001), local radio contributed $7 billion dollars 
worth of public service. This dollar amount represented the value of 
PSAs contributed by broadcasters as well as monies raised for 
charities, disaster relief, and needy individuals.\34\
---------------------------------------------------------------------------
    \34\ A National Report on Local Broadcasters' Community Service. 
June 2002.
---------------------------------------------------------------------------
    Clearly, the radio industry has a bright future as it continues to 
serve local needs and interests. This service will be augmented as the 
industry rolls-out HD (high-definition) radioTM which will 
offer listeners CD-quality sound on FM, and FM-quality sound on AM, all 
for free. Over 40 markets are expected to be broadcasting in the IBOC 
digital format by the end of 2003 \35\ and broadcasters look forward to 
harnessing this technology to better serve American consumers.
---------------------------------------------------------------------------
    \35\ 40 Markets to Broadcast HD Radio in Early 2003. Ibiquity 
Digital Radio Press Release. January 10, 2003.
---------------------------------------------------------------------------
The ``Competition in Radio and Concert Industries Act'' Would Not 
        Further the Causes of Diversity or Competition but Could 
        Engender Severe 
        Unintended Consequences
    For the many reasons explained above, the National Association of 
Broadcasters believes that the Congressionally enumerated ownership 
regulations contained in the Telecommunications Act of 1996 have 
positively impacted the radio industry's economic health and its 
ability to better serve local communities. As such, NAB is skeptical 
that the recently introduced ``Competition in Radio and Concert 
Industries Act'' would affect any positive change. NAB believes the 
bill could potentially have several severe unintended consequences.
    Several aspects of the bill are duplicative of existing safeguards 
and would simply create unnecessary work for already burdened 
regulators. Section 3 of the bill prohibits radio stations, concert 
promoters, and concert venue operators from engaging in allegedly 
anticompetitive conduct. The bill instructs the FCC to revoke the 
license of any radio station that uses its cross-ownership of radio 
stations, promotion services or venues to discriminate against concert 
promoters, content providers, or other stations.
    These provisions are unnecessary in light of the existing 
regulatory framework. The Federal Trade Commission and the Department 
of Justice are already equipped to identify and address anticompetitive 
conduct. Under current statute, the FTC and DOJ have the authority to 
remedy anticompetitive behavior through preliminary or permanent 
injunctive relief. Since passage of the 1996 Act, the DOJ has 
diligently reviewed allegations of consumer harm caused by 
consolidation in the radio industry, often requiring divestiture of 
stations.\36\
---------------------------------------------------------------------------
    \36\ The Antitrust Division of the Department of Justice has 
actively regulated the radio industry to address competitive concerns. 
For example, the Antitrust Division forced Sinclair Broadcasting to 
restructure a transaction to exclude a radio station that raised 
antitrust concerns; challenged the merger between Jacor and 
Citicasters, leading to an agreement to divest a station; challenged 
the proposed acquisition of three stations by American Radio Systems 
from the Lincoln Group, leading to the divestiture of three stations; 
challenged the $4.9 billion acquisition of Infinity Broadcasting by 
Westinghouse, requiring the divestiture of stations; challenged the 
proposed acquisition of three stations by Gulfstar Communications, 
which led the parties to abandon the deal; challenged Chancellor's 
acquisition of four stations, resulting in abandonment of the deal and 
Chancellor terminating a local marketing agreement under which 
Chancellor had been operating the stations in anticipation of the 
acquisition; challenged the $1.6 billion acquisition of American Radio 
Systems by CBS, requiring CBS to divest seven stations; and challenged 
the $2.1 billion acquisition of SFX Broadcasting by Capstar 
Broadcasting Partners, Inc., requiring Capstar to divest 11 radio 
stations. 1999 Antitrust Division, United States Department of Justice, 
Annual Report. This is but a small sampling of the active involvement 
of the Department of Justice in regulating competitive concerns in the 
radio industry since the passage of the 1996 Act.
---------------------------------------------------------------------------
    Section 7 of the bill is also redundant in light of current law. 
The Section requires the Commission to modify ``pay-for-play'' or 
payola regulations. Under the overbroad language, a licensee would be 
prohibited from garnering consideration, directly or indirectly, from 
record companies, artists or concert promoters. Moreover, the language 
could be construed to prohibit broadcasters from accepting advertising 
from record companies.
    NAB believes that the payola laws enacted in 1960 remain effective 
today and that no Congressional intervention is required. The system of 
independent promoters is largely of the record companies' creation and 
the record companies should be responsible for ending the practice 
should they feel unfairly burdened by it. Moreover, NAB submits that 
the radio industry is in compliance with current statute and, if there 
were indeed violations of the law, evidence of those violations would 
most certainly have been presented to the FCC or Department of Justice. 
No such complaints have been made and NAB questions the wisdom of 
passing duplicative legislation to remedy non-existent problems.
    While Sections 3 and 7 of the bill are largely duplicative of 
current law, other provisions in the bill are more onerous. NAB is 
strongly opposed to sections of the bill that would impose new 
ownership regulations. Section 4(b) of the bill directs the FCC to 
amend its regulations to prohibit any transfer when the applicant would 
control stations with more than 35 percent of the audience or 
advertising revenue in a local market. By doing so, the bill could 
potentially lock into place permanent competitive imbalances. In 
markets where one entity already commands over 35 percent of audience 
share (presumably these entities would be grandfathered as the 
legislation contains no provisions for divestiture), other station 
owners would be permanently disadvantaged as the bill would prohibit 
these new competitors from growing their advertising or audience share 
beyond the newly established 35 percent threshold. As such, the ``early 
consolidator'' that is grandfathered in behind the 35 percent cap would 
retain a permanent in-market advantage.
    Already, the FCC's policy of ``flagging'' for further scrutiny any 
proposed radio transactions that would result in a single radio group 
controlling 50 percent or more of the advertising revenues, or two 
radio groups accounting for 70 percent or more of the advertising 
revenues in that market, has contributed to competitive imbalances.\37\ 
Section 4(b) of the bill would go well beyond the FCC's ``50/70'' test 
and reproduce this unhappy phenomenon in countless other markets.
---------------------------------------------------------------------------
    \37\ See NAB's FCC Comments on MM Docket Nos. 01-317 and 00-244. 
March 27, 2002. Page 48.
---------------------------------------------------------------------------
    Additionally, by requiring the Commission to conduct a hearing on 
any transfer application that, if granted, would result in the 
applicant having a national audience reach in excess of 60 percent 
(Section 4 (a)(1)), the legislation would arbitrarily target a new 
requirement at one company. Only one company, Clear Channel 
Communications, is even remotely close to approaching a 60 percent 
national audience share.
    Regardless of the dangerous precedent involved in crafting new 
regulations aimed at penalizing a single entity, the provision would 
unfairly burden any company to which the new regulation would apply. By 
designating for hearing any ``application for the grant, transfer, 
assignment, or renewal of a license'' that would result in a company 
exceeding 60 percent national audience share, the bill would mandate 
hearings for routine license renewals, for transactions involving the 
purchase of single stations, and even for the construction of new 
stations.
    Moreover, setting an arbitrary threshold (such as 60 percent) seems 
unwise given the dynamic nature of media markets. As new mediums such 
as satellite radio and online music come to full gestation, regulators 
will need more latitude, not less, in regulating radio ownership and 
how radio competes with other media.
    NAB also opposes section 5 of the bill, which would require the 
Commission to review the ``advisability of its continuing to utilize 
privately-controlled audience measurement systems to determine the 
local markets of radio stations.'' In fact, at this time, the FCC does 
not utilize Arbitron or any privately controlled services to determine 
markets for purposes of its radio ownership rules. Currently, the 
Commission relies on overlapping station contours to determine 
geographic markets, although it has sought comment on the subject as 
part of its ongoing rulemaking.\38\
---------------------------------------------------------------------------
    \38\ In FCC filings in February 2001, March 2002, and January 2003, 
NAB strongly advised the Commission against changing the way in which 
it defines radio markets, and particularly advised the Commission not 
to adopt Arbitron's market definitions. The current methodology for 
defining radio markets was in effect in 1996 and was unchanged by 
Congress when it revised the radio ownership rules. Further, while the 
widely varied nature of radio stations inevitably means that any market 
definition will result in some anomalies, the number of perceived 
anomalies with the FCC's existing method is quite small and there is no 
evidence that any alternative would result in fewer. The large amount 
of out-of-market listening described above also suggests that the 
current definitions, based on predicted contours, is actually 
conservative and there may be more competing stations than the current 
definition recognizes.
---------------------------------------------------------------------------
    In sum, ``The Competition in Radio and Concert Industries Act'' 
imposes a number of new, unneeded and cumbersome regulations upon radio 
licensees. NAB believes that any problems the bill seeks to remedy are 
already adequately addressed in current law. Implementation of the bill 
would unnecessarily burden the FCC with duties it is ill equipped to 
fulfill, unfairly penalize broadcasters and engender several 
unintended, severe, and anticompetitive consequences.
Broadcasters Support ``The Telecommunications Ownership Diversification 
        Act''
    While the NAB must oppose Senator Feingold's bill, we recognize 
that radio's greatest strengths have always been its connection to 
local community and the diversity of its owners and, therefore, its 
programming. That is why NAB has commended Chairman McCain for 
introducing the ``Telecommunications Ownership Diversification Act of 
2002'' (S. 3112). Through use of the tax code, this legislation would 
foster ownership diversity and encourage minority acquisition of radio 
as well as other telecommunications outlets. NAB encourages the 
Committee and Congress to further explore such innovative approaches in 
the future.
Conclusion
    Since the first station went on the air in the 1920s, American 
radio has been defined by its dedication to localism and community. As 
technology has offered new competitors, the government has granted 
radio the flexibility to more effectively compete for advertising 
dollars. These deregulatory gains, implemented first in 1992 by the 
Commission and furthered by Congress in 1996, have allowed the industry 
to flourish financially. Additionally, recent ownership trends 
involving greater concentration within local markets have acted as a 
natural incentive towards greater programming diversity.
    Clearly, the steps taken by the Commission and Congress have 
provided radio with the necessary tools to compete with other outlets 
in the information age. As such, NAB opposes the ``Competition in Radio 
and Concert Industries Act'' which would, in many cases, duplicate 
current law and in other cases engender several severe unintended 
consequences. NAB urges Congress to retain the prudent ownership 
regulations instated through the Telecommunications Act of 1996 in 
order to advance the financial health of the industry, promote 
diversity on the airwaves, and allow radio to continue providing local 
communities with the service upon which they have come to rely.
* The Attachments referred to (in this prepared statement) have been 
        retained in Committee files.

    The Chairman. Thank you very much.
    Mr. Henley, welcome.

     STATEMENT OF DON HENLEY, RECORDING ARTISTS' COALITION

    Mr. Henley. Thank you, sir. I am honored to be here and I 
thank you and all the other Members of the Committee for 
letting me speak today on behalf of the Recording Artists' 
Coalition.
    Before I begin my testimony, I feel compelled to speak to a 
statement that was made a little bit earlier by Senator 
Brownback. I very much feel it is important that I address some 
of the comments he made not only in this room, but in a press 
release from his office that came out this morning. So if I 
may, I would like to address that and then I will begin my 
testimony.
    Senator Brownback's news release said ``It is my 
understanding that the Future of Music Coalition and Mr. Henley 
are here today to address how consolidation is preventing 
artists' access to the airwaves and the public.
    Recently the artist community banded together with 
recording companies in an effort to advance webcasting royalty 
legislation that ultimately could have driven many small 
webcasters out of business. It is my understanding that artists 
supported this bill as a way of forcing an increase in the 
royalties charged by BMI and ASCAP.''
    And I would like to state for the record that nothing could 
be further from the truth. In fact, we pushed for a small 
webcaster bill from day one when the Copyright Office released 
its rates. We were on the radio the very next day condoning 
that and saying that we were all for it.
    First of all, the small webcaster bill kept people in the 
business, and for the very first time, artists were paid a 
performance royalty for webcasting. We are not traditionally 
paid. Because of the power of Mr. Fritts' lobby here in 
Washington, we are not traditionally paid a performance royalty 
for terrestrial broadcasts. We are the only country in the free 
world that does not pay an artist a performance royalty when a 
singer sings on the radio, and we are penalized for that around 
the world.
    So we worked closely with Senator Leahy and Senator Hatch, 
and we were totally in favor of a viable small webcaster bill 
for people who have businesses and who pay all their royalties. 
So I just wanted to clear that up. Thank you for letting me do 
that.
    It is often said that radio airplay determines whether a 
recording artist will succeed or fail, and even with the 
ascendancy of the Internet and webcasting, radio airplay is 
still the most important factor in an artist's career. And this 
is especially true for new and younger artists. Getting on the 
radio, in one way or another, is the holy grail of our 
business. And in a perfect world, merit would determine which 
records get played on the radio, but this is far from a perfect 
world.
    When I started in this business some 35 years ago, radio, 
and especially FM radio, offered a wide variety of stations, 
each presenting an interesting array of musical genres. A 
listener could tune into a single FM station and hear rock 
music, rhythm and blues, folk music, soul music, pop music, and 
everything in between. The breadth of music on the airwaves was 
varied and exciting, and genres were not compartmentalized and 
put into little boxes. Listeners were encouraged to explore 
different styles and to stretch the boundaries of their tastes. 
The idea was not to fragment society into what is now called 
demographics, but rather to bring people together. The benefit 
to the public and to our culture and to our economy was 
enormous. Artists could spread their wings and reach audiences 
never reached before and create self-sustaining careers on an 
unprecedented scale.
    But slowly the radio world and, along with it, the music 
industry changed. As local and independent radio stations were 
purchased by larger corporations, radio playlists started to 
contract and become much more uniform. In an effort to gain 
more control over the music industry, radio conglomerates 
started to narrow their playlists and to centralize the radio 
programming function that had traditionally been done 
independently by each individual station. Radio consolidation 
made it increasingly more difficult for an artist to get radio 
airplay. Radio network programmers became more powerful and 
demanding. And not only did they erode the vitality of American 
music, they placed themselves in a singularly powerful position 
to extract additional concessions from the labels and the 
artists.
    Payola is not new. It has been around for a very long time, 
going back at least to the 1950s. It has always been here. But 
today, as a result of this unprecedented consolidation, record 
labels must now hire independent promoters on an even grander 
scale to help convince radio networks and stations to play 
certain records. Millions and millions of dollars are spent 
annually on what is called ``independent radio promotion.'' The 
unspoken rule is that some form of special promotional or 
marketing consideration must be provided by the independent 
promoters to the radio station. The more consideration, the 
better chance a record has of being represented by the 
independent promoter and then getting airplay. So we all 
accept, with great sadness, the fact that merit plays only a 
small part in the equation, if it plays any part at all. A 
recording artist has a much better chance of getting on the 
radio if the promotional budget for a record is large than if 
the record is good. And then, adding insult to injury, the 
promotional fees paid to the independent promoters are recouped 
either in whole or in part against the artist's royalties. So 
essentially, the artist is still paying for radio airplay and 
paying more than ever.
    The 1996 Telecommunications Act strengthened the 
conglomerates' position tenfold when it loosened the 
restrictions even further. The consideration sought for radio 
airplay increased because there was less competition among 
radio stations and networks. The more powerful the radio 
network, the greater the pressure on artists and labels to 
spend independent promotion money. These days, many radio 
stations are now demanding exclusive promotional concerts from 
certain artists who are on their way up the ladder of success. 
And this is just another form of payola. When these up and 
coming artists refuse to do these promotional concerts, there 
can be negative repercussions, as evidenced in some of the 
materials that I have provided or will be providing to the 
Committee staff.
    In recent years, the problem has escalated unimaginably 
because some of the same conglomerates that are buying radio 
stations at an unprecedented pace have also embarked on a 
buying spree of venues, agencies, and concert promotion 
companies. So, the company determining whether or not a record 
is played on the air may be the very same company that owns the 
venue and books the tour.
    There was an incident not too long ago involving my manager 
and one of the other artists that he manages and Clear Channel 
Entertainment. This artist was asked to do a promotional 
concert for Clear Channel Entertainment. She had done a couple 
of these things before. She declined in this instance for a 
very good reason. She was in the studio trying to finish an 
album on deadline. The record label was breathing down her neck 
and she declined to play this promotional concert.
    My manager received a phone call from a gentleman named 
Michael Martin, who is a San Francisco programmer for Clear 
Channel, requesting this appearance by the artist. Also on the 
phone was an independent promotion man. My manager was told, 
after he declined the artist's participation, that Michael 
Martin programmed all 40 rhythm stations owned by Clear 
Channel. And to make a long story short, the artist's next 
single was basically boycotted.
    I have an exchange of letters that some of you have seen. 
Clear Channel, of course, denies this. My manager would be glad 
to speak to any of you about this incident.
    So, this institutionalized conflict of interest places the 
artist in a vastly uncompetitive and weak position. What 
happens when an artist refuses to perform in venues that are 
owned by the radio network or chooses not to go on tour with a 
promotion company not owned by the same company that owns the 
radio network? Will the artist's records be played on that 
network, or will the company reduce or eliminate radio airplay? 
Most artists cannot afford to find out.
    In fact, I come here today at my own peril. There is a very 
good chance that my records or that records of The Eagles could 
be reduced in airplay or eliminated altogether. I do not know.
    This unprecedented control over the music industry by the 
conglomerates is hurting the music business and it is hurting 
the culture. It is preventing talented new artists from 
emerging and it is generally casting a pall over a business 
that has already been decimated by peer-to-peer file sharing, a 
faltering economy and fierce competition from other 
entertainment industries.
    Artists, managers, and record labels are not the only ones 
speaking out about this. Mr. William Safire, one of the most 
well-known conservative columnists in the country, has strongly 
condemned the unbridled consolidation of the radio industry in 
a recent New York Times editorial. Mr. Safire persuasively 
makes the case that further deregulation will hasten the demise 
of diversity and competition on the airwaves.
    Because of the 1996 Act and subsequent FCC deregulation, 
the two largest radio chains in 1996 owned 115 stations. Today 
those two own more than 1,400 stations. The top five radio 
chains used to generate only 20 percent of industry revenue. 
Now, they generate 55 percent of all money spent on local 
radio.
    Mr. Mays claims that his company owns a very small 
percentage of the total stations in the country. Yet he fails 
to break down their ownership by format. He fails to point out 
that they are 50 percent of the pop airplay in the United 
States of America, which is the crucial ``make it or break it'' 
format. They are 50 percent.
    The number of station owners has plummeted by a third and, 
as a result, as Mr. Safire says, ``the great cacophony of 
different sounds and voices on the radio is being amalgamated 
and homogenized.''
    As Mr. Safire also points out, the radio airwaves are 
loaned by the public to the radio station owners. The radio 
airwaves cannot be equated with grocery store shelves. The 
airwaves belong to the public, just as national forests belong 
to the public, and they are supposed to be used to benefit the 
public as well as to foster economic growth.
    When radio station owners engage in unbridled, unregulated 
consolidation, clearly the public interest is not served and 
the industry as a whole stagnates. Deregulation in this regard 
is not pro-business. It is anticompetitive. And like Teddy 
Roosevelt before him, Mr. Safire's conservative economic 
religion is founded on the rock of competition, and endless 
consolidation harms competition. Regulation does not always 
have to be anti-business.
    The problem of radio consolidation will only get worse if 
the FCC is allowed to remove the last limitations on ownership. 
The Recording Artists' Coalition not only strongly opposes the 
proposed FCC action, we strongly advocate for a reexamination 
of the effect of the 1996 Telecommunications Act, and with that 
reexamination, propose the implementation of new restrictions 
on the conglomerates. Artists can no longer stand for the 
exorbitant radio promotion costs, nor can we tolerate the overt 
or covert threats posed by companies owning radio stations and 
venues and agencies. The public interest is only served when 
the airwaves provide diverse and exciting programming which 
benefits both our culture and our economy, and this will only 
be possible when artists are free to compete in an open 
marketplace, not shackled by anticompetitive practices of the 
conglomerates.
    And in conclusion, I want to say this. What is the 
definition of liberty and freedom? What is the definition of a 
free market? Is it being able to own as much as you can own 
even if it runs counter and contrary to the public interest? 
Historically, the FCC's definition of the public interest is 
threefold: diversity, localism, and competition. And we believe 
that consolidation is undermining this.
    The radio conglomerates have usurped and they have coopted 
the people's airwaves. And they get them for free. They build 
multi- billion dollar empires on the public airwaves for free. 
You talk about a ``takings'' issue. To me this is a ``taking.''
    So, Congress must address these issues as quickly as 
possible because the future of musical creativity and artistic 
expression in this Nation depends upon your action. And I thank 
you again for this opportunity to discuss these important 
issues.
    [The prepared statement of Mr. Henley follows:]

 Prepared Statement of Don Henley, Representing the Recording Artists' 
                               Coalition
Mr. Chairman and Members of the Committee:

    I am honored to be here and I thank you for the opportunity to 
speak today on behalf of recording artists and the Recording Artists' 
Coalition (RAC).
    It is often said that radio airplay determines whether a recording 
artist will succeed or fail. Even with the ascendancy of the Internet, 
radio airplay is still the most important factor in an artist's career, 
and this is especially true for new and younger artists. Getting on the 
radio, in one way or another, is the holy grail of our business. In a 
perfect world, merit would determine which records get played on radio, 
but this is far from a perfect world.
    When I started in this business, radio, especially FM radio, 
offered a wide variety of stations, each presenting an interesting 
array of musical genres. A listener could tune into a single FM station 
and hear rock music, rhythm and blues music, folk music, soul music, 
pop music and everything in between. The breadth of music on the 
airwaves was varied and exciting and genres were not compartmentalized 
and put into little boxes. Listeners were encouraged to explore 
different styles and to stretch the boundaries of their tastes. The 
idea was not to fragment society into what is now called demographics, 
but rather to bring people together. The benefit to the public, our 
culture and economy, was enormous. Artists could spread their wings, 
reach audiences never reached before, and create self-sustaining 
careers on an unprecedented scale.
    But slowly the radio world along with the music industry has 
changed. As local and independent radio stations were purchased by 
larger corporations, radio playlists started to contract and become 
much more uniform. In an effort to gain more control over the music 
industry, radio conglomerates started to narrow playlists and 
centralize the radio programming function that had traditionally been 
done independently by each individual station. Radio consolidation made 
it increasingly more difficult for an artist to get radio airplay. 
Radio network programmers became more powerful and demanding. And not 
only did they erode the vitality of American music, they placed 
themselves in a singularly powerful position to extract additional 
concessions from the labels and the artists.
    As a result of this unprecedented consolidation, record labels must 
now hire independent promoters on an even grander scale to help 
convince radio networks and stations to play certain records. The 
unspoken rule is that some form of special promotional or marketing 
consideration must be provided by the independent promoters to the 
radio station. The more consideration, the better chance a record has 
of being represented by the independent promoter and getting airplay. 
So, we all accept with great sadness the fact that merit plays only a 
small part in the equation, if it plays any part at all. A recording 
artist has a much better chance of getting radio airplay if the 
promotional budget for a record is large, than if the record is good. 
And then adding insult to injury, the promotional fees paid to the 
independent promoters are recouped either in whole or in part, against 
the artist's royalties. So essentially, the artist is still paying for 
radio airplay--and paying more than ever.
    The 1996 Telecommunications Act strengthened the conglomerates 
position tenfold when it loosened the restrictions even further. The 
consideration sought for radio airplay increased because there was less 
competition among radio stations and networks--the more powerful the 
radio network, the greater the pressure on artists and labels to spend 
independent promotion money. These days, many radio stations are now 
demanding exclusive promotional concerts from certain artists who are 
on their way up the ladder of success. When these up and coming artists 
refuse, there can be negative repercussions as evidenced in some of the 
materials that I have provided--or will be providing--to Committee 
staff.
    In recent years, the problem has escalated unimaginably because 
some of the same conglomerates that are buying radio stations at an 
unprecedented pace have also embarked on a buying spree of venues, 
agencies, and concert promotion companies. So, the company determining 
whether or not a record is played on the air may be the same company 
owning the venue and booking the tour.
    This institutionalized conflict of interest places the artist in a 
vastly uncompetitive and weak position. What happens when an artist 
refuses to perform in venues that are owned by the radio network, or 
chooses to go on tour with a promotion company not owned by the same 
company that owns the radio network? Will the artist's records be 
played on that network or will the company reduce or eliminate radio 
airplay? Most artists cannot afford to find out.
    This unprecedented control over the music industry by the 
conglomerates is hurting the music business and the culture. It is 
preventing talented, new artists from emerging and is generally casting 
a pall over a business that has already been decimated by peer to peer 
sharing, a faltering economy and fierce competition from other 
entertainment industries.
    Artists, managers and record labels are not the only ones speaking 
out. William Safire, one of the most well-known, conservative 
columnists in the country, has strongly condemned the unbridled 
consolidation of the radio industry in a recent New York Times 
editorial. Mr. Safire persuasively makes the case that further 
deregulation will hasten the demise of diversity and competition on the 
airwaves.
    Because of the 1996 Act, and subsequent FCC deregulation, the two 
largest radio chains in 1996 owned 115 stations. Today, those two own 
more than 1,400. The top five radio chains used to generate only 20 
percent of industry revenue; now they generate 55 percent of all money 
spent on local radio. The number of station owners has plummeted by a 
third. As a result, ``the great cacophony of different sounds and 
voices on the radio is being amalgamated and homogenized.'' As Mr. 
Safire points out, the radio airwaves are loaned by the public to the 
radio station owners for the benefit of the public, as well as to 
foster economic growth. When radio station owners engage in unbridled, 
unregulated consolidation, clearly the public interest is not served, 
and the industry as a whole stagnates. Deregulation in this regard is 
not pro-business, it is anti-competitive, and like Teddy Roosevelt 
before him, Mr. Safire's conservative economic religion is founded on 
the rock of competition and endless consolidation harms competition. 
Regulation does not always have to be anti-business.
    The problem of radio consolidation will only get worse if the FCC 
is allowed to remove the last limitations on ownership. The RAC not 
only strongly opposes the proposed FCC action, we strongly advocate for 
a reexamination of the effect of the 1996 Telecommunications Act, and 
with that reexamination, propose the implementation of new restrictions 
on the conglomerates. Artists can no longer stand for the exorbitant 
radio promotion costs nor can we tolerate the overt or covert threats 
posed by companies owning radio stations, venues and agencies. The 
public interest is only served when the airwaves provide diverse and 
exciting programming--our culture benefits and the economy is 
strengthened. This will only be possible when artists are free to 
compete in an open marketplace, not shackled by the anti-competitive 
practices of the conglomerates. Congress must address these issues as 
quickly as possible. The future of musical creativity and artistic 
expression in this Nation depends upon your action.
    I thank you again for this opportunity to discuss these important 
issues with the Committee.

    The Chairman. Thank you very much, Mr. Henley.
    Mr. Short, welcome.

 STATEMENT OF ROBERT SHORT, JR., PRESIDENT, SHORT BROADCASTING 
                           CO., INC.

    Mr. Short. Thank you. Good morning, Mr. Chairman McCain and 
Members of the Committee. My name is Robert Short, Jr., and I 
am the president of Short Broadcasting Company, Incorporated. I 
am also a former member of the board of directors of the 
National Association of Black Owned Broadcasters, Incorporated, 
NABOB.
    I thank you for inviting me to testify this morning. It is 
a pleasure to have the opportunity to talk about the negative 
effects on the American public of the excessive consolidation 
of ownership in the broadcast industry since the passage of the 
Telecommunications Act of 1996.
    Short Broadcasting is a victim of the Telecommunications 
Act of 1996. Short Broadcasting sold our only broadcast station 
WRDS, Syracuse, New York in 2000 after a brief five-and-a-half 
years on the air. We were a stand-alone radio station providing 
a locally owned and programmed voice for the African-American 
community of Syracuse. We provided local news and public 
affairs programming without regard to oversight from any 
distant corporate parent. WRDS carried news stories that other 
media ignored. Through the public affairs programs that we 
offered, we allowed individuals on our station who were not 
invited to speak on other stations. We hired people with no 
broadcast experience and we taught them the business.
    It was not my desire to sell WRDS when we did. We sold 
because we were unable to compete with Clear Channel. Clear 
Channel had and continues to have more than a 50 percent 
revenue share in the Syracuse market. With its ownership of 
over 1,200 radio stations nationwide and 7 radio stations in 
the Syracuse market, Clear Channel was able to exercise market 
power with advertisers in a manner which rendered us unable to 
compete. In addition, Citadel, which now has over 200 radio 
stations across the country, had 4 stations in the Syracuse 
market, and a 25 percent share of the revenue. The market 
dominance of Clear Channel and Citadel made it impossible for 
WRDS to continue to operate in this market.
    WRDS went on the air in 1995 with an urban format and 
became an instant success with the Syracuse urban community. 
WRDS offered quality urban programming and lifestyle 
information that had never before been available to the 
Syracuse urban community. WRDS served the urban community on a 
daily basis and was the most effective medium to reach the 
African-American community in Syracuse. For many local business 
owners, WRDS was the only viable outlet to reach their target 
demographic at an affordable price. Yet, with all of the 
community success that we experienced, it was difficult for 
WRDS to survive.
    WRDS was very successful in the Arbitron ratings. We ranked 
number 1 or 2 with adults 18 to 34 years old in some day-parts, 
and we usually had the highest time spent listening in the 
market. Nevertheless, WRDS found it very difficult to convert 
this audience rating success into advertising revenue and 
financial success. WRDS was a stand-alone station that was 
forced to compete against media giants with multiple stations 
in the Syracuse market.
    From the time Clear Channel entered the market in Syracuse, 
it began the process of squeezing Short Broadcasting out of the 
market. Among the most egregious acts were the following:
    One, in 1996, as soon as Clear Channel came into the 
market, they converted a country station to a format that 
competed with WRDS.
    Number two, Clear Channel used its national advertising 
dominance to dominate local advertising in Syracuse.
    Three, Clear Channel owns Katz Media, one of only two 
national rep firms. This allowed Clear Channel to control 
national advertising in Syracuse.
    Number four, Clear Channel offered advertisers sales 
packages in which, if they purchased the package, they could 
receive advertising on stations that competed with WRDS at 
little or no charge.
    Today WRDS no longer exists. After nearly five-and-a-half 
years of being unable to compete from a revenue and operational 
standpoint, I was forced to sell WRDS to Galaxy Communications. 
The Syracuse community lost an important source of diversity 
when WRDS was sold. Now the only urban format in Syracuse is 
WPHR, which is owned by Clear Channel, and the African-American 
community in Syracuse is not as well served by this change. 
Clear Channel, unlike Short Broadcasting, allows disc jockeys 
to use profanity on the air. Clear Channel, unlike Short 
Broadcasting, uses on-air positioning statements that contain 
profanity. Additionally, much of the rap music that airs on 
Clear Channel's urban and top 40 stations also has profanity in 
it. These lax standards result in unsuitable programming for 
children and teens. It is distasteful and degrading to women 
and self-respecting African-Americans.
    The issue now before Congress is this. Minorities were 
virtually shut out of the ownership in the broadcast industry 
until 1978 when, with Congressional approval, the FCC adopted a 
policy to promote minority ownership of broadcast stations. The 
Telecommunications Act of 1996 in a few short years has 
eliminated many of the gains of the preceding 18 years. Now one 
company, Clear Channel, touts itself as the largest programmer 
to minority audiences. However, it has achieved this position 
by driving small minority and local broadcasters out of the 
business, and it has driven these small broadcasters out of the 
business using questionable tactics, such as the discounted 
group sales strategy that it used in Syracuse. Congress should 
not allow one company to dominate the radio industry to the 
exclusion of the small, minority-owned companies, and it should 
not allow the American people to have their programming 
dictated to them by a single company.
    I am pleased that Senator Feingold has introduced 
legislation to slow the continued consolidation in the radio 
industry. I believe the legislation is long overdue and I hope 
that it will be enacted so that other small minority 
broadcasters will not be forced out of the business as I was. 
The First Amendment guarantees that all Americans should have 
diversity of viewpoint. We need your help to preserve and 
guarantee that this right exists for all Americans, not just a 
select few.
    Thank you for giving me this opportunity to appear before 
you today.
    [The prepared statement of Mr. Short follows:]

Prepared Statement of Robert Short, Jr., President, Short Broadcasting 
                               Co., Inc.
    Good Morning Chairman McCain and Members of the Committee. My name 
is Robert Short, Jr., and I am the President of Short Broadcasting Co., 
Inc. I am also a former member of the Board of Directors of the 
National Association of Black Owned Broadcasters, Inc. (NABOB). I thank 
you for inviting me to testify this morning. It is a pleasure to have 
the opportunity to talk about the negative effects upon the American 
public resulting from the excessive consolidation of ownership in the 
broadcast industry since the passage of the Telecommunications Act of 
1996.
1. Summary
    Short Broadcasting sold our only broadcast station, WRDS, Syracuse, 
New York, in 2000, after a brief five-and-a-half-years on the air. WRDS 
is a victim of the Telecommunications Act of 1996. We were a stand-
alone radio station providing a locally owned and programmed voice for 
the African-American community of Syracuse. We provided local news and 
public affairs programming without regard to oversight from any distant 
corporate parent. WRDS carried news stories that other media ignored. 
We allowed individuals on our station in our public affairs programming 
who were not invited to speak on other stations. We hired people with 
no broadcast experience and taught them the business.
    I understand that the Committee is considering whether 
consolidation under the Telecommunications Act has resulted in excess 
concentration of ownership in the broadcast industry. I also understand 
the FCC is considering how it can demonstrate to the courts through 
evidence to be developed by economists and lawyers whether there is a 
need to have any rules limiting broadcast ownership. I know that NABOB 
has addressed these issues in its Comments in the FCC's rulemaking 
proceeding examining its ownership rules. NABOB identified several 
research studies that demonstrated that minority ownership of broadcast 
stations promotes diversity of viewpoints.
    What I would like to do today is give you a specific example of the 
diversity of viewpoint provided by my station, WRDS in Syracuse, New 
York, and the market forces that forced us to sell. It was not my 
desire to sell WRDS when we did. We sold because we were unable to 
compete with Clear Channel. Clear Channel had, and continues to have, 
more than a fifty percent revenue share in the Syracuse market. With 
its ownership of over 1,200 radio stations nationwide, and seven radio 
stations in the Syracuse market, Clear Channel was able to exercise 
market power with advertisers in a manner with which we were unable to 
compete. In addition, Citadel, which has over 200 radio stations across 
the country, had four stations in the market and a twenty five percent 
revenue share. The market dominance of Clear Channel and Citadel made 
it impossible for WRDS to continue to operate in the market.
    I believe the story of WRDS demonstrates clearly that Congress 
should limit any further consolidation in the radio industry, and 
should reverse some of the excesses that have been created by the 
Telecommunications Act of 1996. The story of WRDS shows that one of the 
principal reasons Congress should prevent any further consolidation in 
the radio industry is because the ills of consolidation cannot be 
measured by economists and lawyers. No one retains records of which 
news stories stations cover. No one retains records of who is invited 
to speak on the public affairs programs of radio stations. However, 
from the letters, phone calls, and in-person expressions of thanks and 
congratulations we received during our time on the air, I know that we 
were able to provide a voice in Syracuse that had not been provided 
before our arrival, and has not been provided since our sale.
2. Background
    Short Broadcasting was formed in May of 1988, when I filed an 
application at the Federal Communications Commission (FCC) for a 
construction permit to build an FM radio station licensed to Phoenix, 
New York, which is part of the greater Syracuse metropolitan area. I 
was one of seven original applicants to compete for the new station. I 
was required to participate before the FCC in a costly and time-
consuming comparative hearing. In November 1993, the FCC ruled that I 
was the winning applicant for the new FM channel. In May 1995, I 
completed the construction of the new station and was granted the call 
sign WRDS.
    WRDS-FM was locally owned and operated, and was the first African-
American owned radio station in Syracuse history. When WRDS debuted, it 
was one of only three African-American owned commercial FM radio 
stations in the State of New York. The other two African-American owned 
commercial FM stations in New York State at that time were WBLS in New 
York City and WDKX in Rochester.
3. The Format
    WRDS had an urban format and became an instant success with the 
Syracuse urban community. WRDS offered quality urban programming and 
lifestyle information that had never before been available to the 
Syracuse urban community. WRDS provided local entertainment programming 
daily with a local live air staff, consisting of six air personalities. 
Our local air personalities reported local news, traffic and weather 
every half hour during morning drive-time, and we provided local 
traffic and weather during afternoon drive-time.
    We provided public affairs programming throughout the broadcast 
day. Our air personalities would discuss issues of importance to the 
local community as those issues arose during our regular programming. 
These public affairs discussions would range from discussions of 
current news stories to solicitation of funds for community 
organizations. These impromptu discussions of public affairs were in 
addition to the broadcast of programs specifically devoted to public 
affairs, which we also did.
    In addition, WRDS connected African-Americans in Syracuse to 
African-Americans nationally by providing nationally syndicated shows 
such as The Tom Joyner Morning Show, The Doug Banks Show, On The Air 
With Russ Parr, and was an affiliate of ABC Radio Networks, the 
American Urban Radio Network, and Superadio Network.
    I was the general manager and program director for WRDS. I 
exercised ultimate control over all programming and music. We did not 
play songs that were overly controversial or had explicit lyrics. In 
many cases, we refused to play songs that were hits across other parts 
of the Nation, solely because we strongly believed the songs would be 
considered offensive by the majority of our audience.
4. The Benefits of Diversity
    WRDS brought diversity to the Syracuse airwaves. WRDS served the 
urban community on a daily basis, and was the most effective medium 
available to reach African-Americans in Syracuse. Public service 
announcements were being aired on WRDS that no other radio or 
television station carried. For many local business owners WRDS was the 
only viable outlet to reach their target demographic at an affordable 
price.
    With the exception of the years that I was in college, I have lived 
in Syracuse, New York since 1968. I used my long-standing residency to 
build a strong working relationship between WRDS and the Syracuse 
community.
    WRDS specialized in providing programming designed specifically for 
the Syracuse urban community. News stories that were unreported or 
considered minor stories by other mainstream media outlets were often 
the lead story on the WRDS morning news. WRDS preempted regularly 
scheduled programming to cover issues of local concern on a frequent 
basis.
    It was common practice for WRDS to interview African-American 
elected officials, as well as those who were running for office, during 
our drive time programs, regardless of whether it was during an 
election period. When problems such as gun violence or bomb threats 
became commonplace in the inner city schools and neighborhoods, I would 
personally give editorials or put professional counselors on the air to 
address these issues and offer strategies and solutions to these types 
of problems.
    WRDS was a business partner with the Syracuse City School District. 
WRDS frequently publicized issues and activities regarding the public 
schools. WRDS sponsored numerous Syracuse City School field trips and 
provided tours of the radio station for elementary students. WRDS 
offered teenagers and young adults the opportunity to shadow our staff 
so that they could learn first hand about the job duties and 
responsibilities of a radio broadcaster. WRDS sponsored many other 
youth oriented events such as a citywide Halloween Party at the 
Carousel Center, Syracuse's largest mall. I was invited to speak at 
most of the Syracuse public high schools, as well as at middle schools 
and elementary schools. At Solace Elementary School, I was asked to 
speak numerous times, including at graduation.
    WRDS sponsored an on-air promotion that sent approximately five 
hundred youth to see an NBA exhibition basketball game between the New 
York Knicks and the Cleveland Cavaliers at the Carrier Dome. WRDS also 
sent an estimated one thousand young children and their parents to an 
ice hockey game with the Syracuse Crunch, a minor league professional 
hockey team. After the game, all of the children were invited to skate 
on the ice with the Syracuse Crunch players and given a souvenir.
    WRDS promoted on-air and sponsored family and unity days at a 
county park, along with numerous plays, concerts, dance recitals, and 
comedy shows. WRDS co-sponsored events hosted by civic organizations, 
such as the NAACP and the Urban League. In 1999, I was the keynote 
speaker for the Utica, New York NAACP Annual Awards Banquet.
    For three years, I represented WRDS by serving on the board of 
directors for the Urban League of Onondaga County. WRDS worked closely 
with the Urban League and the NAACP to discuss on-air events such as 
voter registration drives, and attempts to find missing persons, such 
as in the case of April Gregory, a young woman who was missing for a 
year before being found dead. While I served on the board of directors 
for the Urban League, WRDS also co-sponsored an urban job fair that led 
to African-Americans being hired at area companies. WRDS also teamed up 
with the Urban League to sponsor a family picnic at Kirk Park, which is 
in the heart of the inner city of Syracuse.
    WRDS promoted on-air and sponsored several health fairs in 
conjunction with the Syracuse Community Heath Center and the Veterans 
Administration Hospital. At the health fairs, WRDS worked with 
corporate partners to provide free immunizations to low-income 
individuals and free bicycle helmets for children under sixteen to 
increase safety during the summer months. WRDS assisted individuals 
being tested for diabetes, high blood pressure, and gave out 
information about ways to prevent the spread of HIV and AIDS.
    WRDS air personalities regularly promoted on-air and served as 
masters and mistresses of ceremonies for events such as the Urban 
League's Harriet Tubman Awards Dinner and nearly every major urban 
concert or gospel play that came to Syracuse. When, Dr. Jennifer 
Daniels, an African-American and native Syracusan, had her medical 
license suspended by the State of New York, WRDS brought the issue 
before the entire urban community, hosted rallies, and spoke on her 
behalf. WRDS took the position that Dr. Daniels was the only doctor 
with a private medical practice in the heart of the inner city, and 
argued that the State's decision to revoke her license to practice 
medicine was unjust, given that all charges stemmed from her prescribed 
treatment to just one patient. We pointed out that she had many inner 
city patients, all of whom were satisfied with her services. WRDS 
assisted Dr. Daniels with her appeal that went before Governor George 
Pataki.
    While operating WRDS, I also served on the board of directors for 
the Inner City Little League. WRDS solicited funds on-air and donated 
money to the Inner City Little League in order to allow the teams to 
purchase uniforms and equipment, provide insurance for the players and 
assist with covering the cost to have league umpires. We did this 
because many of the youngsters came from families that were unable to 
pay the required league fees.
    We assisted the Inner City Baseball League with letter writing and 
visits to the Syracuse Commissioner of Parks and Recreation, city 
counsel members, and ultimately the mayor, in order to get an outfield 
fence and portable toilets installed at Homer Wheaton Park, the home 
field for Inner City Little League. I also coached a team in the Inner 
City League for three years. WRDS has also sponsored the Biddy 
Basketball League at the Syracuse Boys and Girls Club. Each year WRDS 
purchased uniforms or trophies for each player. WRDS would also 
broadcast live from the Syracuse Boys and Girls Club and give away 
promotional items to the children. WRDS used this opportunity to allow 
its disc jockeys to talk to the children about the importance of 
abstinence from drugs, sex and violence. We also encouraged the 
children at the Syracuse Boys and Girls Club not to drop out of school.
    On several occasions, I was invited to speak to students at the 
Syracuse University Newhouse School of Communications about what will 
be expected of them upon graduation and their entrance into the 
broadcast industry. I also spoke at Le Moyne College, of Syracuse, at 
an Upward Bound Program about how to prepare yourself for college and 
success.
    WRDS also co-promoted on-air Black College Fairs with local 
African-American sororities. WRDS assisted fraternities such as Kappa 
Alpha Psi and Omega Psi Phi with scholarship fundraisers. WRDS co-
sponsored organizations such as Fire Fighters of Color United in 
Syracuse with scholarship drives.
5. The Disadvantages Created by Consolidation
    Yet, with all of the community success that we experienced, it was 
difficult for WRDS to survive. Because of all of our hard work to serve 
the community and develop a connection with the community, WRDS was 
very successful in the Arbitron ratings. Initially, we usually received 
approximately about a 3.5 to 4.0 audience share, which would rank us 
approximately 10th out of the 19 stations Arbitron listed in the 
market. In our last year of operation, we managed to obtain a 5.1 
share. In addition, we ranked number 1 or 2 with adults 18-34 years old 
in some day-parts, and we usually had the highest time-spent-listening 
in the market. Nevertheless, WRDS found it very difficult to convert 
this audience rating success into advertising revenue and financial 
success.
    WRDS was a stand-alone station that was forced to compete against 
media giants with multiple stations in the Syracuse market. Clear 
Channel Communications is one of the giants that competed directly 
against WRDS. Clear Channel had two stations in the Syracuse market 
that competed for the WRDS audience. These stations were, WWHT, a top 
forty pop/rhythmic channel that played many of today's young urban 
artists, and WHCD, now WPHR, which was an urban/smooth jazz station. 
WHCD played many of the adult urban artists with a blend of 
contemporary jazz.
    As a stand-alone operator, WRDS was always at a huge disadvantage. 
WRDS could only offer advertisers one audience, and even then, it was 
fragmented by age groups. WRDS was day-parted to reach different age 
groups during specific times of the day. This was done in order to 
serve the entire urban community. In the mornings and middays, WRDS 
targeted adults, and during the afternoons and evenings, it targeted 
young adults and teenagers.
    WRDS's group owner competitors, particularly Clear Channel, 
Citadel, and Radio Corporation (now Galaxy), were able to deliver a 
specific age demographic all of the time by targeting a station to each 
of their desired target audiences, which was often the same age group 
as that targeted by WRDS. This allowed WRDS's competition the 
opportunity to combine the ratings from each of their stations, and 
then show advertisers how many more listeners they attracted than WRDS.
    It is reported that Clear Channel captured more than fifty percent 
of all radio advertising dollars in Syracuse, and that Citadel brought 
in at least twenty-five percent. Radio Corporation captured an 
estimated thirteen percent of the radio ad revenue. Buckley 
Broadcasting took in an estimated nine percent of the market. This left 
only a very small amount of ad revenue for the remaining broadcasters, 
including Short Broadcasting, Salt City (also African-American owned), 
Crawford Broadcasting, and CRAM Broadcasting.
6. Lack of Access to Station Representation Firms
    Radio stations receive their advertising revenue from national, 
regional and local advertisers. In order to reach national and regional 
advertisers, radio stations hire station representation firms, which 
have offices in the major advertising markets around the country, such 
as New York City, Los Angeles and Chicago. The rep firms act as the 
sales agent for the stations in these distant cities to obtain 
advertising from advertising agencies and national advertisers with 
offices in these cities. Without a national rep firm, it is virtually 
impossible for a radio station in Syracuse, or any market, to obtain 
national advertising.
    As a stand-alone operator in Syracuse, it was impossible for WRDS 
to obtain representation from a national rep firm. There are only two 
major national rep firms, Interep and Katz. Katz is owned by Clear 
Channel and, not surprisingly, treats representation of Clear Channel 
owned stations as its primary business. While Katz represents other 
non-Clear Channel owned stations, many broadcasters question whether 
Katz's other clients receive representation equal to that provided to 
the Clear Channel owned stations. However, this was never a direct 
problem for WRDS, because, as a standalone station, WDRS was rejected 
by both Katz and Interep in favor of representation of stations owned 
by group owners, Clear Channel and Citadel. Interep and Katz would 
enter into non-compete agreements, preventing them from also 
representing independents such as Short Broadcasting.
7. Advertising Woes and Promotional Gimmicks
    As noted above, usually the larger fortune five hundred companies 
spend most of their advertising budgets working through national 
advertising agencies and national rep firms, such as Interep or Katz, 
to place their buys. With such a system in place, the small independent 
broadcaster rarely gets significant national ad revenue. Unfortunately, 
WRDS faced this same problem at both the national and local levels. 
Locally, most of the ad agencies took an approach similar to that taken 
by the national ad agencies. The local ad agencies regularly placed ads 
for the biggest local advertisers on Clear Channel and Citadel stations 
because they offered a large package of stations.
    My sales staff heard that Clear Channel would offer sales packages 
to advertisers that priced their urban radio station far below what 
WRDS was charging for advertising. It appears to me that such a 
practice should be prohibited by the antitrust laws. Unfortunately, 
Short Broadcasting was not in a financial position to take on Clear 
Channel, so we were never able to follow-up on these reports. Instead, 
we attempted to survive on small advertisers. Rarely, did WRDS receive 
advertising from the large local ad agencies.
    In addition to the difficulties that WRDS experienced attracting 
major national and local advertisers, it was faced with the challenge 
of offering competitive on air promotions. Clear Channel and the other 
large broadcasting companies offered listeners chances to win large 
sums of money. In some cases, the prize advertised in the Syracuse 
market was up to $1,000,000. These types of contests are deceptive and 
often misleading. Generally, big prize contests are tied into a 
national promotional campaign, with many listeners believing that the 
contest is local. These tactics often influence listeners and the 
ratings, because a contestant must listen to the station with the big 
prize for the clues and the signal in order to win. This hurts 
independently owned and operated stations such as WRDS, which cannot 
offer similar big prizes.
8. Denial of Access to Capital
    As the owner of WRDS, I experienced many difficulties attracting 
capital from local and national banks, venture capital firms and 
private investors. It was very difficult to attract capital from these 
sources, because operating a stand-alone station was a high-risk 
investment. Most investors wanted to invest in broadcast companies that 
owned a significant share of both market revenue and audience. This 
prevented WRDS from being able to expand like its competition.
9. Joint Sales Agreements
    Many of the services that we wanted to add, such as a local talk 
show, expanded news coverage, etc., could not be added because the 
capital was not available to do so. At one point, Short Broadcasting 
entered into Joint Sales Agreements with Salt City Communications and 
Radio Corporation in an effort to counter the stranglehold Clear 
Channel and Citadel held on the market. Under both Joint Sales 
Agreements, WRDS maintained control over its programming, but allowed 
Salt City Communications and Radio Corporation to sell WRDS's 
commercial time rate and agreed upon commission rate.
    Arbitron requires each station in a Joint Sales Agreement to 
subscribe to its service if at least one station is an Arbitron 
subscriber. Because Radio Corporation was a subscriber, WRDS was 
required to subscribe to Arbitron. This created an additional annual 
expense of $55,000 for a period of two years. The net impact of this 
added expense exceeded the total volume of sales brought in by Radio 
Corporation and Salt City combined. This set WRDS further back 
financially than it was when it entered into the Joint Sales 
Agreements.
    Because of the lack of success of the Joint Sales Agreements, Short 
Broadcasting was not able to pay Arbitron. Arbitron threatened to force 
the sale of WRDS if necessary, to recover the money owed to them. WRDS 
was forced to borrow money from Radio Corporation in order to pay 
Arbitron. This created a problem with the structure of the Joint Sales 
Agreement between Short Broadcasting and Radio Corporation. 
Consequently, because of the debt owed to Radio Corporation, WRDS was 
forced to let Radio Corporation keep all revenue it generated from the 
sale of airtime on WRDS until the loan we took out with Radio 
Corporation to pay off Arbitron was fully repaid. This meant many 
months passed during which WRDS received no commission from any sales 
made by Radio Corporation for WRDS. This strategy proved to be a major 
setback for WRDS and eventually led to the termination of the Joint 
Sales Agreements.
10. No Room for Stand-Alones to Make any Mistakes
    I learned at this point that the greatest reality facing the small 
independent stand-alone operator is that mistakes can result in having 
to get out of the business. If the stand-alone operator loses a 
substantial sum in any given year, that company may be forced to sell 
the station to avoid experiencing bankruptcy both on the business and 
personal side. This is especially so if the stand-alone operator does 
not have a line of credit or access to capital. On the other hand, 
major companies who are publicly traded are able to absorb tremendous 
losses and slowdowns in the economy and remain in business. When this 
happens, there is very little that the stand-alone operator can do to 
recover.
11. WRDS is Gone
    Today, WRDS no longer exists. After nearly five and a half years of 
being unable to compete from a revenue and operational standpoint, I 
was forced to sell WRDS to Radio Corporation, now renamed Galaxy 
Communications. Interestingly, Galaxy, a company that owned six 
stations in the Syracuse market, felt it needed to purchase WRDS in 
order for it to compete against Clear Channel and Citadel.
    Since purchasing WDRS, Galaxy has changed its call letters to WZUN 
and has changed its format three times in an unsuccessful effort to 
capture a sizeable audience. In fact, the WZUN ratings are now among 
the lowest in the market, significantly lower than when it was WRDS. 
Now, Galaxy has nine stations in the Syracuse market, none of which 
caters to the urban community. In addition, none of the four stations 
owned by Citadel cater to the urban community, and Buckley Broadcasting 
has two stations in this market and neither of its stations caters to 
the urban community.
    Clear Channel Communications has seven stations in the Syracuse 
market, one of which, WPHR, has an urban format. With Clear Channel's 
recent purchase of a television station in Syracuse, the FCC has ruled 
that Clear Channel has exceeded the ownership limits in the Syracuse 
market and must divest either one of its radio stations or its Syracuse 
television station. If Clear Channel divests WPHR, there is a 
possibility that the new owner would change its format and leave the 
Syracuse community without an urban station, once again.
12. Short Broadcasting Co., Inc. vs. Clear Channel Communications
    When WRDS was African-American owned and urban formatted, it better 
served the Syracuse community than Clear Channel is currently doing 
with WPHR. WRDS was much more than a station that simply played hit 
music. Clear Channel, unlike Short Broadcasting, allows its disc jockey 
to use profanity on the air. Clear Channel, unlike Short Broadcasting 
uses on air positioning statements that contain profanity. 
Additionally, much of the rap music that airs on Clear Channel's urban 
and top forty stations has profanity in it. These lax standards result 
in unsuitable programming for children and teens. It is distasteful and 
degrading to women and self-respecting African-Americans.
    In addition, radio in Syracuse is quickly becoming a high tech 
jukebox with piped in syndicated programs that displace local broadcast 
professionals. Many of these stations appear to be heavily cluttered 
with frequent and lengthy clusters of commercials. I believe these 
factors are being driven by more stringent demands from corporate 
management and stockholders to generate higher profits and possibly due 
to heavy debt service obligations with the banks and investors. 
Certainly, the public at large is not the beneficiary of canned music 
programming combined with a bombardment of commercials. The 
broadcasters desire to cut costs and increase profit margin is coming 
greatly at the public's expense.
13. Conclusion
    The Telecommunications Act of 1996 was a terrible change in the law 
that has resulted in taking the control of the airwaves out of the 
hands of local residents, and placing control into the hands of a few 
national media giants. Short Broadcasting, and many other minority 
owned companies have attempted over the years to serve the minority 
community. NABOB cited the FCC's own study which concluded that there 
is ``empirical evidence of a link between race or ethnicity of 
broadcast station owners and contribution to diversity of news and 
public affairs programming across the broadcast spectrum.'' The study 
focused on news and public affairs programming, rather than 
entertainment programming, because it is news and public affairs 
programming which is most important to promotion of the Commission's 
diversity goals. The study provided empirical evidence that minority 
owned stations: (1) tailored their coverage of national news stories to 
address minority concerns, (2) covered major news stories their 
competitors did not cover. Minority owned stations pay special 
attention in public affairs programming to events or issues of greater 
concern to ethnic or racial minority audiences. Minority owned stations 
place greater effort into live coverage of government meetings, and 
into coverage of issues concerning women, particularly health issues, 
and to broadcasts in languages other than English. Minority owned 
stations staff their public affairs programming with minority 
employees, and use call-in formats, which enhance audience 
participation. Minority owned stations participate in minority-related 
events in their communities.
    Approximately 11 percent of Americans report that radio is their 
primary source for news. This is about 24 million Americans. The 
primary source of news for 24 million Americans should not be in the 
hands of a small group of companies. Diversity in ownership will bring 
more local programming back to the airwaves. Diversity of ownership 
will create healthy business competition among broadcasters that will 
benefit the public at large.
    The Telecommunications Act of 1996 caused nearly half of the 
country's 12,000 radio stations to change hands by the end of 1998 and 
led to many African-Americans and other minorities being forced out of 
the broadcasting industry. Aside from the current loss of service to 
the public this loss of African-American owners reflects, it also has 
negative implications for the future of minorities in new technologies. 
The companies that are leading the way in new technologies are 
primarily the companies currently in technology businesses. The loss of 
minority owned companies in the current technologies means that these 
companies will not be in place to lead the way into the new 
technologies.
    The facts are clear and indisputable. The majority of all radio 
audiences receive programming provided by a handful of companies. In 
addition, the majority of all radio ad revenue is controlled by a few 
companies. Greed, control and power, have landed in the hands of a 
select few broadcasters at the expense of the American public.
    The issue now before the Congress is this. Minorities were 
virtually shut out of ownership of the broadcast industry until 1978, 
when, with Congressional approval, the FCC adopted a policy to promote 
minority ownership of broadcast stations. The Telecommunications Act of 
1996, in a few short years, has eliminated many of the gains of the 
preceding eighteen years. Now, one company, Clear Channel, touts itself 
as the largest programmer to minority audiences. However, it has done 
this by driving small, minority and local broadcasters out of the 
industry. And, it has driven these small broadcasters out of the 
business using questionable tactics, such as the discounted group sales 
strategies it used in Syracuse. Congress should not allow one company 
to dominate the radio industry to the exclusion of small, minority 
owned companies, and it should not allow the American people to have 
their programming dictated to them by a single company.
    I am pleased to see that Senator Feingold has introduced 
legislation to slow the continued consolidation in the radio industry. 
I believe the legislation is long overdue, and I hope that it will be 
enacted so that other small and minority broadcasters will not be 
forced out of the business as I was. The First Amendment guarantees all 
Americans diversity of viewpoint. We need your help to preserve and 
guarantee that this right exists for all Americans, not just a select 
few.
    Thank you for the opportunity to appear before you today.

    The Chairman. Thank you very much, Mr. Short.
    Ms. Toomey, welcome.

STATEMENT OF JENNY TOOMEY, EXECUTIVE DIRECTOR, FUTURE OF MUSIC 
                           COALITION

    Ms. Toomey. Thank you very much.
    I, too, must respectfully disagree with Senator Brownback. 
There are at least three documents on the Future of Music 
website that are current with the webcasting conflict which 
explain clearly that we are granted licenses which would 
protect the rights of small webcasters. And one of our board 
members is also an active webcaster. So we would not do what 
Senator Brownback alleges.
    Good morning. On behalf of the Future of Music Coalition, I 
want to thank you for the honor of testifying today. This 
hearing is much needed and we applaud you for holding it.
    My name is Jenny Toomey. I am a rocker, a businesswoman, 
and an activist. I speak to you today as a working artist and 
the Executive Director of the Future of Music Coalition, which 
is a nonprofit think tank that pursues initiatives to benefit 
citizens and musicians.
    Most working musicians are not superstars. Rather, they are 
independent and local. For the past 3 years, FMC has worked 
with musicians and citizens groups on issues from webcasting to 
health care, but one issue unites our entire constituency and 
that is access to commercial radio.
    Given these concerns, last February we began an 8-month 
research project to examine the problem. In the study we asked 
the basic questions. How has ownership of commercial radio 
changed and does the radio still serve the essential regulatory 
principles of localism, competition, and diversity?
    The radio study is over 150 pages, and we have entered it 
in the record today and filed it as public comment with the 
FCC. And it is available on our website at 
www.futureofmusic.org for all to see. The lead authors of the 
study, Kristin Thomson and Peter DiCola, are here to clarify 
any questions you might have. And I cannot summarize this in 5 
minutes, so I am going to confine my comments to three themes 
that must alter the focus of future debate on radio 
concentration.
    First, the broadcast industry defends the radical 
restructuring of the radio by pointing at the other 
entertainment industries and saying, ``hey, we are not as bad 
as those guys.'' But they are not those guys. Radio is not 
private property. It is a public resource regulated by the 
government on behalf of citizens. For decades it was based on a 
model of local ownership. In 1996, the national cap was 40 
stations per conglomerate. So it is distressing that in only 6 
years, Clear Channel owns 1,240 and five other groups each own 
over 100 stations. At the same time, we have also lost 1,700 
radio station owners since 1996.
    But the more distressing numbers are those of local 
concentration. In New York City, 79 percent of revenue is 
controlled by four companies. In Washington, D.C., 79 percent. 
In New Orleans, 90 percent. In Austin, 92 percent. In virtually 
every local market of the country, four companies or fewer 
control 70 percent of the market. In many cases these owners 
are not locally based. This means we have less competition 
since deregulation, not more.
    Second, the broadcast industry claims that deregulation has 
brought us more formats and thus more diversity. But formats 
are a poor measure of diversity. Measuring music diversity by 
counting the number of radio formats is like measuring the 
variety of food in your pantry by counting the number of cans 
without looking at what is inside them.
    We found substantial overlap between supposedly distinct 
formats. In the most extreme case, in the week of August 2, 
2002, the national charts for two distinct formats overlapped 
at a 76 percent level, which means that 38 of the 50 songs on 
both formats were the same.
    Third, the broadcast industry claims that fewer owners in a 
market leads to more diversity. They say that radio companies 
will avoid competing against themselves in a single format.
    On the surface, this makes sense. Why would a company that 
owns seven stations in a market want to compete with 
themselves? But this misses the fundamental logic of the value 
of a station group. The primary goals of a radio group are: 
one, to attract the largest number of listeners in the most 
attractive demographics; and two, to ensure that if a listener 
changes the station, they will change to another station owned 
by the parent company.
    The economic incentive is not to provide diversity of 
programming. Rather, radio companies seek to assemble 
overlapping and economically lucrative audiences that will 
generate the most revenue. On the expense side, the incentive 
for radio companies is to centralize operations using more 
syndicated programming and apply new technologies like voice 
tracking to cut costs.
    For example, in Denver, Colorado, Clear Channel owns seven 
stations. Instead of offering blues, classical, jazz, folk, 
bluegrass, zydeco, or other formats, this is what they program: 
talk, news/talk, rock, classic rock, modern rock, contemporary 
hit radio, and adult alternative.
    We know that radio companies spend enormous resources to 
draw the largest possible audience in preferred demographics. 
But is that really how we define the public interest?
    We have heard concern about radio consolidation expressed 
by musicians, unions, record labels, consumer and religious 
groups, small broadcasters, industry employees, and elected 
officials. There has been concern about the loss of local 
voices, concern that stations are burying public service 
announcements in off hours, allegations of pay-for-play, 
concern about increased advertising time, concern that public 
officials have fewer outlets to reach citizens, allegations 
that talk shows will not allow questions from callers who sound 
old because it alienates young listeners, concern that 
community-based low power radio licenses were scaled back 
because of a powerful broadcast lobby, and concern that 
musicians who publicly criticize the industry might be 
blackballed.
    But the burden of proof should fall on the broadcast 
industry who pushed for these changes and now they must explain 
how these changes serve localism, competition, and diversity.
    I want to thank Chairman McCain and the Committee. Mr. 
Chairman, we can do better. I hope today's hearing inspires 
citizens around the country to contact Members of this 
Committee and explain that our communities need access to the 
radio. There are hundreds of thousands of musicians in this 
country, and while they may not all have a hit record in them, 
each of them has a vote. And while they disagree about many 
things, they agree that something is tragically wrong with what 
has happened to radio and they agree it has to change.
    Thank you again for inviting me to testify today. I look 
forward to answering your questions.
    [The prepared statements of Ms. Toomey and Mr. Lee follow:]

Prepared Statement of Jenny Toomey, Executive Director, Future of Music 
                               Coalition
    Good morning. On behalf of the Future of Music Coalition, it is my 
honor to testify this morning on the critical issue of how radio 
consolidation is affecting musicians and citizens. This is a timely 
hearing, and we applaud you for holding it. We also applaud the 
participation of the other witnesses, as we firmly believe that the 
public deserves an open, honest discussion about these issues, 
especially in an environment where further deregulation is under 
consideration at the FCC.
    First, I will provide a quick background about myself and the 
Future of Music Coalition. Second, I will outline some of the 
conclusions of our recently released study on the impact of radio 
consolidation on musicians and citizens. Finally, I will talk about the 
importance of radio as a medium, and what we can do to make it better.
About Jenny Toomey and the Future of Music Coalition
    My name is Jenny Toomey. I am a musician, entrepreneur and 
activist. I have released seven albums and toured extensively across 
the United States and Europe. For eight years, I co-ran an independent 
record label called Simple Machines. I know first hand both the 
difficulties that independent artists face in getting their music 
played on commercial radio and the opportunities that are presented by 
non-commercial radio stations that--thankfully--have been very 
supportive over the years.
    I speak to you today both as a working artist and as Executive 
Director of the Future of Music Coalition, a not-for-profit think tank 
I co-founded three years ago with Michael Bracy, Walter McDonough and 
Brian Zisk. The Future of Music Coalition examines issues at the 
intersection of music, technology, law, economics and policy, in search 
of policies, technologies and business models that can benefit 
musicians and music fans. The FMC is built on the idea that the music 
industry is broken at a very basic level, as the very artists who 
create the works that are the hallmark of our culture struggle against 
structural impediments that make it difficult to achieve economic 
survival. It is our hope that increased awareness and engagement among 
artists, combined with thoughtful implementation of new technologies, 
will lead to new structures in a digital future that won't replicate 
the failures of our terrestrial present.
The Importance of Understanding the Effects of Radio Deregulation
    As our organization began working on a wide range of issues--major 
label contract reform, healthcare for artists, webcasting royalties, 
peer-to-peer file trading--one issue continued to rise to the top: 
commercial radio. Everywhere we turned, there seemed to be another 
article, another letter to the editor, another emerging artist 
complaining about what was happening with radio in his or her specific 
community.
    Radio is, of course, a critical hub of communications, 
entertainment and information in our society. The technology is 
ubiquitous--nearly all Americans own a radio. Historically, radio has 
been the most effective means of making new music available to local 
audiences, as program directors and disc jockeys kept the pulse of the 
industry in search of the next new act or the next new sound. When you 
read interviews with great musicians, they often reflect on the 
inspiration they found in their youth as radio connected them with 
sounds and words from across the world.
    For many others, radio is primarily a business, where corporations 
seek to maximize profits by offering targeted programming intended to 
reach specific audience demographics preferred by advertisers. In this 
model, the argument goes, the public is served because broadcasters 
research what their targeted audience wants to hear, then deliver 
programming designed to maximize listener share.
    We argue, however, that this is not the reason that radio has 
become such an important part of American culture. Rather, radio has 
worked over time because of the fundamental regulatory priorities of 
localism, diversity and competition. Certainly, we believe the 
strongest demonstrations of localism and diversity are found in non-
commercial radio, where a wide range of musical genres and public 
affairs programs flourish. We encourage the Congress to pursue 
strategies that maximize the potential of non-commercial radio 
regardless of this discussion of consolidation of ownership.
    In November 2002, the Future of Music Coalition released a study 
entitled ``Radio Deregulation: Has it Served Citizens and Musicians?'' 
The lead authors of the study, FMC board members Kristin Thomson and 
Peter DiCola, are both here today. We would like to enter the study 
into the record along with our testimony. The study is also available 
on our website at http://www.futureofmusic.org, and was entered as a 
public comment in the FCC's media ownership proceeding.
Background: The Goals of Deregulation
    Radio is a public resource managed on citizens' behalf by the 
Federal Government. This was established back in 1934 when Congress 
passed the Communications Act. This Act both created the Federal 
Communications Commission (FCC) and laid the ground rules for the 
regulation of radio. The Act also determined that the spectrum would be 
managed according to a ``trusteeship'' model. Broadcasters received 
fixed-term, renewable licenses that gave them exclusive use of a slice 
of the spectrum for free. In exchange, broadcasters were required to 
serve the ``public interest, convenience and necessity.'' Though they 
laid their trust in the mechanics of the marketplace, legislators did 
not turn the entire spectrum over to commercial broadcasters. The 1934 
Act included some key provisions that were designed to foster localism 
and encourage diversity in programming.
    Although changes were made to limits on ownership and FCC 
regulatory control in years hence, the Communications Act of 1934 
remained essentially intact until it was thoroughly overhauled in1996 
with the signing of the Telecommunications Act. But even before 
President Clinton signed the Telecommunications Act into law in 
February 1996, numerous predictions were made regarding its effect on 
the radio industry:
Fewer Owners
    First, industry analysts predicted that the number of individual 
radio station owners would decrease. Those in the industry with enough 
capital would begin to snatch up valuable but under-performing stations 
in many markets--big and small.
Greater Financial Benefits for Radio
    Second, station owners--given the ability to purchase more stations 
both locally and nationally--would benefit from economies of scale. 
Radio runs on many fixed costs; equipment, operations and staffing 
costs are the same whether broadcasting to one person or 1 million. 
Owners knew that if they could control more than one station in a 
market, they could consolidate operations and reduce fixed expenses. 
Lower costs would mean increased profit potential. This would, in turn, 
make for more financially sound radio stations which would be able to 
compete more effectively against new media competitors: cable TV and 
the Internet.
More Diversity
    Third, there was a prediction based on a theory posited by a 1950s 
economist named Peter Steiner that increased ownership consolidation on 
the local level would lead to a subsequent increase in the number of 
radio format choices available to the listening public. According to 
Steiner's theory, a single owner with multiple stations in a local 
market wouldn't want to compete against himself. Instead, he would 
program each station differently to meet the tastes of a variety of 
listeners.
The Results of the Telecommunications Act
    These were the predictions made prior to the passage of the 
Telecommunications Act, and clearly part of the argument made by 
broadcasters and their representatives on the importance of 
deregulation to the health of their industry. But what really happened? 
Enough time has lapsed to evaluate early predictions and note actual 
outcomes for the radio industry, musicians and citizens. Let's revisit 
these assumptions:
More Stations, Fewer Owners
    Well, one prediction certainly came true: the 1996 Act opened the 
floodgates for ownership consolidation to occur. Deregulation has 
allowed a few large radio companies to swallow many of the small ones. 
Ten parent companies now dominate the radio spectrum, radio 
listenership and radio revenues, controlling two-thirds of both 
listeners and revenue nationwide.


    Source data: Media Access Pro, BIA Financial Networks, data as of 
May 16, 2002.

     You can see from the revenue pie chart that ten firms control 67 
percent of industry revenue. The rest of the industry--a total of 4,600 
owners--controls just 33 percent.
    One gets much the same picture from the numbers on listenership. 
The same Top 10 firms control 65 percent of radio listeners:

        Top 10 Parents, Listeners and Listener Share, Winter 2002
------------------------------------------------------------------------
                                                            Nationwide
                                            Arbitron         share of
Listener rank       Parent company       listeners (in    listeners  (in
                                           millions)         percent)
------------------------------------------------------------------------
1              Clear Channel                      103.4             27.0
2              Viacom                              59.1             15.4
3              Cox                                 13.2              3.5
4              Entercom                            13.1              3.4
5              ABC Radio                           12.6              3.3
6              Radio One                           11.3              2.9
7              Emmis                               10.6              2.8
8              Citadel                             10.5              2.7
9              Hispanic Brdcstg.                    8.7              2.3
10             Cumulus                              7.2              1.9
------------------------------------------------------------------------
Source data: Media Access Pro, BIA Financial Networks, data as of May
  16, 2002. The statistic for listeners is known in the radio industry
  as ``Metro Cume Listeners.'' Generally speaking, the BIA database has
  metro cume listener figures only for stations in the Top 289 Arbitron-
  rated markets. Many stations with religious formats do not appear to
  report listenership or revenue figures to BIA.

    An industry is an oligopoly in our terminology if the four largest 
companies control more than 50 percent market share. As you can see 
from the charts, the top four companies in radio control 52 percent of 
the revenue, making the radio industry an oligopoly. This means that we 
have less competition than before deregulation, not more. Oligopolistic 
control and socially beneficial competition are opposites. In general 
oligopolies can raise prices above competitive levels, restrict 
quantities of goods offered to the public, and--as we'll see in the 
radio industry--reduce the quality of what's offered to the public.
    Two parent companies in particular--Clear Channel and Viacom--
together control 42 percent of listeners and 45 percent of industry 
revenues. Clear Channel has grown from 40 stations to 1,240 stations--
30 times more than Congressional regulation previously allowed. No 
potential competitor owns even one-quarter the number of Clear Channel 
stations. With over 100 million listeners, Clear Channel reaches over 
one-third of the U.S. population. These two firms tower over the radio 
industry, and even over the other consolidators. Both own businesses in 
other media and advertising-based industries, such as network 
television, cable television, concert venues, and billboards.
Radio at the Local Level
    Even bleaker is the picture at the local level, where oligopolies 
control almost every geographic market. In smaller markets, 
consolidation is more extreme where the largest four firms in most 
small markets control 90 percent of market share or more. These 
companies are sometimes regional or national station groups and not 
locally owned.
    This next chart shows the extent of consolidation in these market 
size categories. Each market size category is broken down by the extent 
of consolidation in its markets. Let's take an example. Among the 
markets ranked 101-289, 40 percent of the markets have four companies 
controlling 100 percent of the market share. Twenty-four percent of the 
markets have four companies controlling 95 to 100 percent. Eighteen 
percent of the markets have four companies controlling 90 to 95 
percent, and so on. Clearly consolidation is most extensive in the 
smallest markets.


    Source data: Media Access Pro, BIA Financial Networks, data as of 
May 16, 2002.

    But the larger point is that consolidation is extensive in all 
sizes of local markets. In 98 percent of all local markets, the top 
four companies control a 70 percent market share or greater. Such large 
shares for the biggest companies indicate that very strong oligopolies 
exist locally.
Benefits From Economies of Scale Aren't for Everyone
    What about those benefits of economies of scale? They've certainly 
borne out for some, but not for everyone. Only the few radio station 
owners with enough capital to buy additional stations have benefited 
from deregulation. Station owners have consolidated their operations on 
a local level, frequently running a number of stations out of a single 
building, sharing a single advertising staff, technicians and on-air 
talent. In some cases, radio station groups have further reduced costs 
by eliminating the local component almost entirely. These group owners 
are benefiting from economies of scale, but what are the drawbacks? 
Local DJs and program directors are being replaced by regional 
directors or even by voice-tracked or syndicated programming, 
explaining a marked decrease in the number of people employed in the 
radio industry. Listeners are losing as well. With an emphasis on cost 
cutting and an effort to move decision-making out of the hands of local 
station staff, much of radio has become bland and formulaic.\1\
---------------------------------------------------------------------------
    \1\ See the following articles for more information about voice-
tracking, loss of localism, and regional-based programming: Anna 
Mathews, ``Think Your DJ is Local? Think Again.'' Wall Street Journal, 
February 25, 2002. Randy Dotinga, ``Good Morning [Your Town Here],'' 
Wired.com, August 6, 2002. http://www.wired.com/news/business/
0,1367,54037,00.html. Denny Lee, ``Disc Jockeys Are Resisting Taking 
the Local Out of Local Radio,'' New York Times, August 25, 2002. Eric 
Boehlert, ``Radio's Big Bully,'' Salon.com, April 30, 2001, http://
www.salon.com/ent/feature/2001/04/30/clear_channel/index.html. Greg 
Kot, ``Rocking Radio's World,'' Chicago Tribune, April 14, 2002. Jeff 
Leeds, ``Clear Channel: An Empire Built on Deregulation,'' Los Angeles 
Times, February 25, 2002. Todd Spencer, ``Radio Killed the Radio 
Star,'' Salon.com, October 1, 2002 http://www.salon.com/tech/feature/
2002/10/01/nab/print.html. Dale Smith, ``Hello Honolulu and Amarillo, 
my Austin Secret is... I'm Your DJ,'' Austin American-Statesman, July 
22, 1999.
---------------------------------------------------------------------------
Less Regulation Has Not Led to Greater Market Competition
    The economic argument for the need for increased competition in the 
radio industry is specious. Prior to 1996, radio was among the least 
concentrated and most economically competitive of the media industries. 
In 1990, no company owned more than 14 of the 10,000 stations 
nationwide, with no more than two in a single local market. But we 
found that local markets have consolidated to the point now that just 
four major radio groups control about 50 percent of the total listener 
audience and revenue. Clearly, deregulation has reduced competition 
within the radio industry.
More Diversity?
    Finally, we raise questions about Steiner's theory that an owner 
would not want to compete against himself and would, therefore, operate 
stations with different programming. Our analysis of the data finds 
otherwise. Radio companies regularly operate two or more stations with 
the same format in the same geographic market. Using stations' self-
reported formats, we found 561 instances of format redundancy 
nationwide--a parent company operating two or more stations in the same 
market, with the same format--involving 1,190 stations in Arbitron-
rated markets, as of May 2002.\2\ This amounts to massive missed 
opportunities for format variety, which might in turn enhance 
programming diversity.
---------------------------------------------------------------------------
    \2\ Source data: Media Access Pro, BIA Financial Networks, data as 
of May 16, 2002.
---------------------------------------------------------------------------
Format Variety versus Format Diversity
    In addition, we need to be clear about the difference between 
format variety and format diversity. Often, the radio industry measures 
diversity in programming by counting the number of formats available in 
each local market. In our report we show, in accordance with other 
studies, that format variety counted this way increased for a while 
after deregulation. But we also find that format variety has become 
stagnant over the last two years.\3\
---------------------------------------------------------------------------
    \3\ For an analysis of format variety 1996--2002 please see ``Radio 
Deregulation: Has it Served Citizens and Musicians?'' Chapter 3 pp. 44-
48.
---------------------------------------------------------------------------
    Regardless, format variety is a flawed measure that doesn't capture 
the more relevant concept of programming diversity. A format is just a 
label--it doesn't necessarily describe the contents or imply that the 
contents are different than anything else. Increased format variety 
does not ensure increased programming diversity.
    We tested this theory by analyzing data from charts in Radio and 
Records and Billboard's Airplay Monitor. Using radio playlist data, 
Radio and Records magazine computes weekly charts for 13 categories of 
music formats. We took these charts from one week in August 2002--which 
show the top 30, 40, or 50 songs played on a given format--and 
calculated the number of overlapping songs between formats.


    The charts revealed considerable format homogeneity--playlist 
overlap between supposedly distinct formats. Note that the formats are 
grouped in clusters. First, there's the pop cluster. It features seven 
overlapping formats. For example, Urban and CHR/Rhythmic overlap at a 
76 percent level. Thirty-eight of their top 50 songs are the same. 
Then, there's the rock cluster. Rock, Alternative, and Album-Oriented 
Rock overlap considerably, between 36 percent and 58 percent depending 
on which pair among those three you consider. Only Country, Christian, 
and Smooth Jazz stand alone.
    This high level of homogeneity shows that simply counting format 
names will overstate programming diversity. Adding a CHR/Rhythmic 
station to a market that already has an Urban station adds format 
variety. But it doesn't add any programming diversity. Thus, the radio 
industry has measured itself--and encouraged policy makers to measure 
it--with an inadequate statistic. If the FCC or the NAB are sincerely 
trying to measure ``diversity'' the quantity of formats is a flawed 
measure. That's like counting the number of jars on a shelf without 
taking the time to look inside.
Format Oligopolies
    In addition, viewing each format as its own product market, every 
format category charted by Radio and Records is controlled by an 
oligopoly.
    We studied format oligopolies by considering the radio stations 
nationwide within each format as a separate market. We simply tallied 
the listener share and revenue share within each format nationwide. As 
you can see from this chart, every format is controlled by four 
companies with a 50 percent market share or greater.

              Format Consolidation in the 13 Radio and Records-based Categories, by Listener Share
----------------------------------------------------------------------------------------------------------------
                                  Listeners  (in                                                    Top 4 share
       ``R & R'' Category            millions)               Top 4 firms, by listeners             (in percent)
----------------------------------------------------------------------------------------------------------------
AC                                          38.5  Clear Channel, Viacom, Bonneville, Entercom               56.3
CHR Pop                                     37.3  Clear Channel, Viacom, Entercom, Citadel                  69.8
Country                                     33.9  Clear Channel, Viacom, Citadel, Cox                       52.6
Rock                                        28.8  Clear Channel, Viacom, Citadel, ABC Radio                 52.3
Hot AC                                      19.3  Clear Channel, Viacom, ABC Radio, Entercom                57.9
Alternative                                 17.8  Viacom, Clear Channel, Emmis, Citadel                     60.5
Urban                                       15.5  Radio One, Clear Channel, Inner City, Viacom              64.9
CHR Rhythmic                                14.4  Clear Channel, Viacom, Emmis, Cox                         71.8
Urban AC                                    13.1  Clear Channel, Radio One, Emmis, Cox                      67.1
Active Rock                                  9.2  Clear Channel, Viacom, Entercom, Greater Media            65.5
Smooth Jazz                                  6.1  Clear Channel, Viacom, Radio One, ABC Radio               69.7
AAA                                          3.6  Viacom, Clear Channel, Susquehanna, Entercom              53.8
Christian Contemp.                           2.7  Salem, Crista Ministries, Crawford, Clear                 68.9
                                                   Channel
----------------------------------------------------------------------------------------------------------------
Source data: Radio and Records website, www.radioandrecords.com, and Media Access Pro, BIA Financial Networks,
  data as of May 16, 2002.

    The format oligopolies reinforce the homogeneity of the product 
offered to listeners. They also result in a small number of gatekeepers 
deciding which musicians have their music played on the air. 
Importantly, these format oligopolies include many of the same 
companies. For instance, Clear Channel is one of the top four firms in 
each of these 13 formats. Viacom is one of the top four firms in 11 of 
these formats.
    In fact, only 15 companies populate this chart of format 
oligopolies. These 15 gatekeepers determine to a very large extent what 
programming will reach the airwaves. And this just looks at music. Four 
companies own a 67 percent share of News format listeners nationwide. 
Consolidation has not resulted in a greater number of viewpoints 
represented on the air; instead, it has reduced the diversity of 
viewpoints considerably.
    This final point may be the most critical one as we face an FCC 
that is poised to deregulate media even further in the next few months. 
It is time to put to bed the commonly held yet fundamentally flawed 
notion that consolidation promotes diversity as that radio station 
owners who own two stations within a marketplace will not be tempted to 
program both stations with similar formats.
    In sum, consolidation has resulted in a small number of dominant 
companies, not competition; it has resulted in extensive local 
oligopolies, not localism; it has resulted in format homogeneity, not 
diversity in programming; and it has resulted in small number of 
gatekeepers for music and news, not a diversity of viewpoints. Clearly 
something has gone wrong. From the perspective of citizens and 
musicians, deregulation has failed to achieve its goals. Radio needs a 
new direction to restore its status as a live, local, diversely owned 
and diversely programmed medium.
Where Do We Go From Here?
    Over the past year, we have heard concern about radio consolidation 
expressed by musicians, unions, record labels, consumer groups, 
religious groups, small broadcasters, current and former industry 
employees and elected officials. Concern about the loss of local 
voices. Concern about business practices like ``pay for play'' that 
appear to make eligibility for radio play contingent on an artist or 
label coming forward with huge ``promotional'' fees. Concern that the 
local stations that used to provide a platform for public service 
announcements now turn them away. Concern about the seemingly incessant 
advertising. Concern that small stations that have programmed an 
eclectic mix are changing formats or selling out because they can't 
compete. Concern that elected officials have fewer outlets available to 
communicate directly with voters. Concern that talk radio stations 
won't allow questions from callers who ``sound old'' because it will 
send the signal that their station is targeted for older consumers. 
Concern that parents can't listen to the radio with their kids in the 
car because the content has become so overtly sexual. Concern that 
alternate models to commercial radio, like community-based Low Power 
FM, are scaled back because of the power of the broadcast lobby. And 
concern that musicians who speak publicly about troubling business 
practices will be in essence signing the death warrant for their 
careers.
    In the end, we come back to this point: radio is a public resource. 
It belongs to the citizens of the United States. It is not simply a 
tool for corporations who are interested in maximizing profits.
    We do not question that broadcast conglomerates spend enormous 
resources in attempts to draw the largest possible audience in the 
specific demographics that their stations are targeting. But is that 
really how we define serving the public interest? Huge ratings?
    We need to return to the traditional priorities of localism, 
diversity and competition. Can local artists have a legitimate chance 
to get on commercial radio in their hometown? Is there not only 
diversity of format, but also diversity of ownership and, dare we say, 
diversity of programming targeting populations who may not fall into 
the most attractive marketing demographics? And is there a competitive 
environment that allows for the kinds of small, independent stations 
that tend to focus on local content and genres of music that are rarely 
seen from the conglomerates?
    We have been joined by our colleagues in the music community to 
raise these questions. In particular, we are greatly appreciative of 
the support and cooperation of AFTRA--the union that represents on-air 
talent--the AFM, the Recording Academy, Just Plain Folks, the Artists 
Empowerment Coalition and the Recording Artists Coalition. On many of 
these issues, we even agree with the RIAA. But the onus of proof should 
not fall simply on the complainers. The broadcast industry pushed for 
these changes, and now they should be able to step forward to fully 
explain their impact on localism, competition and diversity. To this 
date, their participation in public discourse regarding the present and 
future of the radio industry has been sadly lacking.
    In the end, it is clear that the broadcast conglomerates have one 
primary mission--maximizing shareholder value. They maximize value by 
utilizing the latest research techniques in an effort to build the 
largest possible audiences in their targeted demographics. Their mantra 
is that they give the people what they want. They play the hits.
    But do they give the people what they want? According to Duncan's 
Radio Report, radio listenership is at a 27 year low.\4\ And not one 
but two companies are now selling a satellite radio service based on 
the notion that consumers are so disenfranchised with radio today that 
they would pay $10 a month to subscribe to their service. And what if 
you don't fit into the demographics they pursue--what if you are old, 
or poor?
---------------------------------------------------------------------------
    \4\ ``12+ Radio Listening At 27-Year Low'' Radio and Records 
website, September 4, 2002.
---------------------------------------------------------------------------
    Has the restructuring of the radio industry been a success? This is 
the crux of the great disconnect. On one side, artists, record labels, 
consumer groups, religious organizations, community groups, unions, 
elected officials and music fans say ``no.'' On the other, broadcasters 
say ``yes.'' But you can't even say all broadcasters, since it seems 
that an increasing number of those left are expressing concern about 
their ability to compete in this consolidated marketplace.
    Radio is too precious to let this happen. It is universal, and it 
is cheap. It is part of our culture. And communities are begging for 
the opportunity to better utilize it for noncommercial means. Thanks in 
great deal to the efforts of Chairman McCain, roughly 1,000 rural 
community groups, schools and churches are launching Low Power Radio 
Stations in their neighborhoods or towns. The FCC was stripped of its 
ability to place these stations in urban areas pending further signal 
tests, and hundreds of urban groups are eagerly awaiting their shot.
    Mr. Chairman, the problem is not radio, it's what has happened to 
radio. We can--we must--do better. I hope that today's hearing serves 
as an inspiration for citizens around the country to contact you, 
Members of this Committee and other Members of Congress to inform them 
of how they would like to see radio better utilized in their community.
    Thank you again for inviting me to testify today.
                                 ______
                                 
Prepared Statement of Thomas F. Lee, President, American Federation of 
               Musicians of the United States and Canada
    On behalf of over 110,000 members of the American Federation of 
Musicians of the United States and Canada, I would like to thank 
Chairman McCain and the Committee for focusing on the issues that have 
arisen out of the increasing consolidation of radio ownership in this 
country. This hearing is an important milestone for musicians, artists, 
consumers and citizens who are adversely affected by consolidation in 
radio ownership. I also would like to thank Senator Russ Feingold (and 
his original co-sponsor, Senator Zell Miller) for introducing the 
Competition in Radio and Concert Industries Act in the 107th Congress, 
and reintroducing it in the 108th Congress. The AFM believes that 
enactment of Senator Feingold's legislation will help to ameliorate the 
problems our members have seen and experienced.
    The American Federation of Musicians is an international labor 
organization composed of over 250 affiliated local unions across the 
United States and Canada. It represents professional musicians across 
the full spectrum of industries and genres. AFM members perform live 
musical engagements in every size and type of venue and consisting of 
every kind of music, from classical to hip-hop, from major symphony 
orchestra concerts to Broadway and traveling theater to local lounges 
and bars--and everything in-between. Our members also record music for 
the recording, motion picture, television, radio and jingles 
industries. Our members include successful celebrities, struggling 
young artists, and performers at every economic level. And, of course, 
our members also are residents of their local communities--and music 
consumers who buy tickets, attend concerts and listen to the radio.
    Senator Feingold has said that when he introduced his legislation 
last summer, he saw a groundswell of interest among artists, consumers 
and local promoters. From my vantage point as the International 
President of the AFM, I can affirm the existence of tremendous 
grassroots concerns about radio, as well as support for radio reform. I 
hear these concerns when I talk to local union leaders and AFM members 
across the country. The unfortunate fact is that radio deregulation has 
not fostered innovation, competition or programming diversity. Instead, 
it has reduced the number of radio station owners across the Nation and 
in each geographical market. And, it has enabled those stations to 
flood the airwaves with the same few ``hit'' songs that are well-funded 
and heavily marketed. What gets left off the airwaves is everything 
else--music that is varied, innovative, independent, less well-funded 
or local. There is almost no place left on the radio dial for jazz 
musicians, symphony orchestra musicians, local acts, and the wide range 
of diverse music that falls outside the ``boxes'' established by 
centralized playlists. This hurts our members artistically and 
economically--and it also hurts the American public by depriving it of 
rich and varied musical offerings. The development of new forms of de 
facto payola systems raises the financial bar to radio airplay so high 
that even established artists suffer economically and many new artists 
have little hope of ever reaching a radio audience. Again, both 
creators and ``consumers'' of music suffer as a result.
    Our members also are harmed by the fact that large radio ownership 
groups have the ability to lock up huge portions of the live music 
business when they also own concert promoters and live performance 
venues. AFM members have experienced a variety of horror stories across 
the country--including bands that are pressured to play only in venues 
or to hire only promoters that are connected with the radio station 
group from which they hope to get, and desperately need, airplay, and 
local musicians who see higher theater ticket prices and diminished 
competition (and thus diminished live theater performance work) when 
the same entity has ownership stakes in the theaters in town, the shows 
that will come to town, and the radio stations whose promotion is 
necessary for a successful run.
    It is extremely difficult for individual musicians in need of radio 
audiences to speak out on these issues. But their organizations--
including their labor unions, the AFM and AFTRA, as well as other 
organizations including the Future of Music Coalition, the Recording 
Academy, the Music Managers Forum, the Recording Artists Coalition, 
Just Plain Folks, the Nashville Songwriters Association International 
and other music industry organizations joined together on May 24, 2002 
to issue an analysis of the problem in a ``Joint Statement on Current 
Issues in Radio.'' In addition, the Future of Music Coalition's 
important study of radio deregulation does a superb job of documenting 
what struggling musicians have seen over the last several years.
    Much about the contemporary radio industry is bad for recording 
musicians and live-engagement musicians. It also is bad for American 
society, and, moreover, consumers don't like it and want it to end. 
Musicians and consumers deserve a radio industry that serves the public 
better. The AFM looks forward to working with our fellow artist and 
other music industry groups, and with this Congress, to bring about 
positive change.

    The Chairman. Thank you, Ms. Toomey.
    Mr. Fritts, in your written testimony you state that NAB 
believes that the payola laws in 1960 remain effective today 
and that no Congressional intervention is needed. The system of 
independent promoters is largely the record companies' creation 
and the record companies should be responsible for ending the 
practice. That is your written testimony.
    Do your member companies take cash and/or gifts in exchange 
for airplay?
    Mr. Fritts. Not that I am aware of. All of them would be 
subject to severe FCC sanctions if they did.
    The Chairman. So they do not.
    Mr. Fritts. They do not as far as I am aware.
    The Chairman. In your written testimony, you state that 
deregulation has allowed radio stations to maintain financial 
stability while giving it the ability to ``prosper in the face 
of new competitors.'' Yet, the NAB opposes the relaxation of 
other media ownership regulations such as the 35 percent 
national television station ownership cap. Is that not some 
kind of a contradiction there?
    Mr. Fritts. Well, I appreciate your asking that question, 
Mr. Chairman. Indeed, we do oppose the increase of the 35 
percent cap. As you will recall, the 1996 Act increased the cap 
for network ownership of local stations from 25 percent to 35 
percent. There are currently 1,300 television stations. There 
are currently 13,000 radio stations. And while they are both 
regulated by the FCC, they clearly are two different mediums. 
And as a result, broadcasters have taken a look at the 
horizontal and vertical concentration by the networks and 
concluded that 35 percent is an appropriate level for network 
ownership.
    The Chairman. I am very interested in your statement that 
your Members do not take cash or gifts in exchange for airplay.
    Mr. Mays, does Clear Channel have any plans to obtain more 
radio stations?
    Mr. Mays. We do not have any stations pending at this time.
    The Chairman. Do you have any plans to obtain more radio 
stations?
    Mr. Mays. I would suggest to you that if we felt that there 
was----
    The Chairman. Do you have any plans to obtain more radio 
stations? I would like to ask the question for the third time.
    Mr. Mays. If we can serve the local community better and we 
see an opportunity, yes.
    The Chairman. Do you believe there is any limit to the 
number of radio stations that a company should be permitted to 
own?
    Mr. Mays. I think the 1996 Telecom Act established those 
limits by limiting the number of stations in each local market.
    The Chairman. I will repeat my question again, and I have 
not got a lot of time and I would like you to try to answer the 
question directly. Do you believe there is any limit to the 
number of radio stations that a company should be permitted to 
own?
    Mr. Mays. I do not think there should be a limit within the 
Telecom Act of 1996.
    The Chairman. Have you ever instructed Clear Channel 
employees to use the threat of withholding air time from 
artists to negotiate exclusive promotional concerts or any 
other concession from artists?
    Mr. Mays. No, sir. We never have. Let me explain why we do 
not do that. Radio is our principal business. The concert 
promotion business is less than 7 percent of our income. Our 
business is in serving what our audiences want to hear in all 
of our different markets. We see ourselves as an aggregation of 
a number of small businesses throughout this country that serve 
those local communities and play what our audience wants to 
hear and inform them with news and information. And as long as 
our audience wants to hear Mr. Henley's music, he has no threat 
of retribution from what he said, even though he said, Mr. 
Chairman, some things that were very untrue.
    And for the record, I would like to say that two companies 
do not control 52 percent. As I said, the top 10 control 44 
percent. We have nowhere near 82 percent of the pop market that 
he suggested. And I hope that he files our letter within this 
record which states that the San Francisco matter was 
absolutely false. Whether that was colored by his manager being 
a principal in one of our major competitors, I do not know, but 
what he said was false.
    The Chairman. Thank you.
    To your knowledge, has any other member of Clear Channel 
senior management given this instruction to Clear Channel 
employees?
    Mr. Mays. No, sir.
    The Chairman. Does Clear Channel have a policy to refuse to 
play songs from artists who are not on a Clear Channel tour or 
use non-Clear Channel venues?
    Mr. Mays. No, sir, we do not. I will give an example of one 
such incident. When the manager of Britney Spears alleged that 
we had less airplay during the tour that she did with a 
competitor, Concerts West, who I think Mr. Henley tours with, 
we did an exhaustive research study and found that her airplay 
went up 73 percent when she was touring with Concerts West than 
when she was touring with Clear Channel the year before.
    The Chairman. Does Clear Channel accept payments or gifts 
from independent promoters in exchange for radio airplay?
    Mr. Mays. Absolutely not, Mr. Chairman. We have a zero 
tolerance to pay-for-play.
    The Chairman. Does Clear Channel require its employees to 
sign affidavits or to otherwise certify that they will not 
accept cash and/or gifts in exchange for airplay?
    Mr. Mays. Every single air talent, every single program 
manager in our company, which numbers maybe 5,000 people, every 
year sign an affidavit that forbids them to accept any pay for 
play.
    The Chairman. The Los Angeles Times recently wrote--and I 
quote--``Clear Channel Communications has figured out a way 
around the rules that has left its smaller competitors fuming. 
By cutting deals to take over programming of five Mexican 
stations, Clear Channel has grabbed 50 percent of the San 
Diego's market radio advertising dollars. Since the FCC exempts 
foreign-owned stations from being counted toward the maximum 
number of eight, loopholes have allowed Clear Channel to take 
control of 13 stations in San Diego. While it may be within the 
letter of the law, many would probably argue that this was not 
the intent of the law.''
    Is this true? And if so, are there other markets that Clear 
Channel engages in misbehavior?
    Mr. Mays. Mr. Chairman, let me say that Clear Channel is in 
partnership with and is the largest broadcaster in Mexico, so 
we have great ties to the Mexican broadcasting market. It is 
true that we own eight stations in San Diego. We also program 
another five in Mexico. And I think those 13 stations represent 
13 of the 36 to 40 that are in that San Diego market.
    We think that encourages additional benefits to the 
community simply because whether it is the Mexican side of the 
border or the English-speaking side of the border, the 
diversity of formats that we have provided the San Diego market 
benefits that community.
    The Chairman. But it is clearly in violation of the intent 
of the law if you have 13 stations when 8 was the maximum.
    Does Clear Channel use voice tracking?
    Mr. Mays. Yes, we do in a small way. I think it is some 15 
percent or less of our programming. We export some of our 
larger market talent to some small markets basically because 
the smaller markets cannot afford it. Most of that is done 
overnight or on the weekends. It is not a significant part of 
our programming.
    The Chairman. Do you allow non-Clear Channel radio stations 
to advertise on the 770,000 billboards owned by Clear Channel?
    Mr. Mays. I am sorry, Mr. Chairman?
    The Chairman. Do you allow non-Clear Channel radio stations 
to advertise on the 770,000 billboards owned by Clear Channel?
    Mr. Mays. Yes, sir. They are very, very good customers of 
ours in all of our markets.
    The Chairman. Mr. Short, did you and your station ever 
encounter any anticompetitive behavior from larger stations in 
your market?
    Mr. Short. None that we could actually prove as hard 
evidence.
    The Chairman. Thank you.
    Senator Dorgan.
    Senator Dorgan. Thank you, Mr. Chairman.
    I do not have the foggiest idea where to start with these 
questions. This is the most interesting set of testimony we 
have received.
    Mr. Fritts, let me start with you, if I might. Was Mr. 
Short a member of the National Association of Broadcasters at 
one point?
    Mr. Fritts. I do not know. Were you?
    [Laughter.]
    Mr. Short. No.
    Senator Dorgan. Shoot. I was going to ask how you reconcile 
this if you have two members saying what Mr. Mays and Mr. Short 
said.
    Let me go to the point you made, Mr. Short. You talked 
about the methods by which national accounts would advertise, 
and I do not quite remember the terminology, but they bundled 
advertising packages and promotional packages?
    Mr. Short. Yes. For instance, if you own seven stations in 
the market and the competitor owns one, even if the competitor 
is doing well, you can offset all of that success by going to 
the advertisers and saying, so what if he has 5 or 10 percent 
of the market share. Add up the seven stations that we have and 
you get 35 percent. Therefore, you have over one-third of the 
market, and you do not need this guy at all. Just do business 
with us.
    Senator Dorgan. So they are saying with this package you 
can get the same reach with our stations----
    Mr. Short. Absolutely.
    And then going further, they take similarities in format. 
For instance, let us say I am an urban format, and they are a 
top 40. They will say, well, some of the same songs are being 
played on our station Bob is playing. So you are really not 
getting anything unique by doing business with Bob. Come do 
business with us on that station that plays a similar format as 
Bob, we will even give you a discount, if necessary, to get you 
to do business with us.
    Senator Dorgan. Mr. Mays, let me ask you about localism 
just a moment. I mentioned to you when we talked last in Minot, 
North Dakota, there was a train carrying anhydrous ammonia that 
derailed at 1:39 in the morning, sending a cloud of anhydrous 
ammonia over nearly the entire City of Minot. A pretty 
dangerous situation early in the morning in Minot, North 
Dakota. Much to everybody's surprise, the emergency alert 
system that the authorities were supposed to use to put 
emergency information on the air immediately malfunctioned. I 
do not quite know why that happened, but it did.
    So they attempted to call the radio stations and they could 
not get anybody there. Apparently they were playing piped-in 
music from somewhere else. There was one person there who would 
not answer the phone I guess because he was a maintenance 
person.
    But in any event, the point is this. When you have large 
broadcasting enterprises and you pump in homogenized 
programming from central locations--and I know that happens 
around the country--and you do not have people working the 
boards like you used to have, is that not troubling in terms of 
localism and service to community and so on?
    Mr. Mays. Senator, let me say that the stations were manned 
that evening and let me explain to you what happened. There was 
a switch from the emergency broadcasting system to the 
emergency alert system. Our air staff person there on that 
station said that apparently they called the wrong number, the 
hot line, and they did not understand the technology of how to 
interact with the EAS system. Every station across our whole 
company has that technology that allows the police department, 
the fire department to immediately go into those stations, 
including the one in Minot, to broadcast emergencies.
    And what I am told happened that night was that listeners 
started calling. The lines got jammed. The sales people and the 
administration that were not at the station at 2:00 a.m. in the 
morning, although there were people there, came to the station 
to help answer the questions.
    In addition to that, we had our Minneapolis engineers come 
and do individual seminars and instructions with the Minot 
police department, fire department on how to access the 
technology that they could not access for some reason that 
evening.
    So I think that was an anomaly and I am sorry that that 
happened, but the station was staffed.
    Senator Dorgan. Would you provide for the record for this 
hearing what you just described from your perspective?
    Let me just also say in the old days I suspect those 
engineers would have been Minot engineers rather than 
Minneapolis engineers coming in later. I am very concerned 
about this issue of localism.
    Mr. Mays. We have a very strong staff of engineers in 
Minot.
    Senator Dorgan. Let me put a chart up and ask several of 
you for your comments. This chart is actually a chart that 
shows concentration. It shows five very large companies and it 
shows their holdings in broadcasting and other areas. You 
cannot read it, but----
    [Laughter.]
    Senator Dorgan. Well, yes, that is the point.
    [Laughter.]
    Senator Dorgan. But it is pretty obvious. I do not have 
room. If I were going to put all these names on a chart that 
you could read, it would consume most of the room. But most of 
these are companies that have accumulated a substantial amount 
of broadcasting properties and we have very substantial 
concentration in the hands of just a few. The question I think 
this Committee asks is, what does that do to competition? What 
does it do to localism? What does it do to diversity?
    Mr. Mays, you have heard some very serious charges leveled 
today by other members of the panel with respect to your 
company, how large it is and its practices. I would hope that 
you will submit for the record--and I expect you will--specific 
responses to each and all of the charges.
    Let me ask the question that I was thinking about as these 
charges were made. Do you have specific procedures, written 
procedures, in your company that respond to the questions have 
been raised, the allegations that have been made about 
conflicts of interest and promotional deals that seem untoward 
to me? Are you confident that you have in place specific 
procedures to prevent that? Are you confident that what they 
are saying has never happened?
    Mr. Mays. Well, I am not going to say anything never 
happened, but yes, and we will provide that for the record, 
policies and procedures. But just the simple fact of how we run 
our business and how we localize our business, we would never 
tie airplay into performances or into concert tours. It just 
does not make sense that we would penalize the major part of 
our business and risk the ratings that would have a dramatic 
effect on our revenues to enhance some promotion or some tour.
    You speak of competition, and this chart which you cannot 
see now because----
    Senator Dorgan. I did see the chart earlier.
    Mr. Mays. I am sorry?
    Senator Dorgan. I saw that chart earlier. It was up.
    Mr. Mays. It is basically who we compete with right here in 
this Washington market. There are 56 radio stations here with 
some 30 to 35 different formats. We do own 8 of those 56. But 
those are not our only competitors for audience. There are six 
or seven cable companies that offer hundreds of channels of 
programming. There are 9 daily newspapers and 20 weekly 
newspapers in this market. There is satellite radio that offers 
200 channels of radio stations into this market. The cable 
companies that I talked about have 50 channels each of audio in 
their cable services.
    So the competition is robust. I heard that it should be, 
and we think it is robust and we compete as hard as we can. But 
certainly our eight radio stations within this large media pie 
here in Washington is not a concentration of power or a 
consolidation that affects competition.
    Senator Dorgan. If I might ask one more question, Mr. 
Chairman. I asked last week, when it was alleged that there 
were many voices, whether it was many voices from one 
ventriloquist or a few ventriloquists.
    I guess the question the Chairman asked at the start of 
this is very important. How much further? If we have another 
hearing 5 years from now, will we see the largest radio group 
owning 3,000 stations, 2,000 stations? What will we see with 
respect to television? Will we see similar galloping 
concentration that already existed? Where do you think this 
stops, and where do you think there ought to be legitimate 
concern about those of us who care about free markets and the 
market system and competition?
    Mr. Mays. Well, as I mentioned to the Chairman, I think 
that certainly there are limits that are within the 1996 bill, 
and I think that is certainly a restriction that prevents us 
from owning any more than 8 of those 56 radio stations here in 
Washington.
    But I would like to----
    Senator Dorgan. Except, Mr. Mays, if I might just interrupt 
just for a moment to say that in Minot, North Dakota, you own 
all six commercial radio stations. So what has happened, of 
course, in some circumstances, the FCC, through its own 
incompetence and definitional exercises has allowed you, at 
least in my state, to own all the commercial stations in one 
city, just to give you an example.
    Mr. Mays. Well, and that is because of the definition of 
market rule, which we are making comments with the FCC which is 
looking at that. And I believe Minot is considered part of the 
Bismarck as well as other surrounding cities around Minot, and 
it is a definition of market.
    But I think it is a perfect case for deregulation because 
when we bought those stations from the previous owner, there 
were three formats in Minot. There were two country stations. 
There were two adult contemporary stations. There was a news 
talk station and a station that simulcast one of the country 
stations. Today there is a classic rock station. There is a 
country station. There is a hit station. There is an adult 
contemporary station. There is an oldies station, and there is 
a news talk station. Much, much more diversity in Minot than 
prior to deregulation.
    Senator Dorgan. I have questions for other panel members, 
but I will wait until the second round.
    Mr. Mays. Could I also, Senator, touch on one other thing 
that you alluded to in consolidation? Mr. Short said that he 
could not compete as a ``stand-alone'' station, so he sold his 
station for millions of dollars to another party. Since that 
format in that community was denied the urban format, 
principally because the owner which he sold it to changed the 
format, we established a format that would appeal to that 
audience.
    In Philadelphia, where we have a number of stations as 
well, there is a broadcaster that owns one station in 
Philadelphia. That is all he owns. It is the number one station 
in Philadelphia. He is very, very profitable, much more 
profitable than we are. So I think throughout this country, all 
of those who own one station, if they do it right, can make 
money.
    The Chairman. Mr. Short, you deserve the opportunity to 
respond to that.
    Mr. Short. Absolutely. I look at it this way. I would call 
it you have a lot of audacity. You put someone out of business 
using tactics that are basically strong-arm tactics, and then 
after you put them out of business, you rebuild what they 
built, and then you say, look what a great thing we did and 
look what a great service we provide to the community. The 
great service was already being provided. There were no 
complaints. You can check the FCC's records. There is nobody 
saying we have got to get Mr. Short out of there other than 
maybe Mr. Clear Channel or maybe Mr. Citadel so that we can own 
everything that Mr. Short was getting.
    The Chairman. Senator Lott.

                 STATEMENT OF HON. TRENT LOTT, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Lott. Well, thank you very much, Mr. Chairman. 
Obviously, this has been an interesting hearing and I think an 
important one as we try to make sure we understand how the 1996 
Act is being carried out and the impact that it is having in 
all of our media and that does have to include radio.
    I am sorry I did not hear all of the witnesses' testimony. 
I have tried to glance over it quickly while I have been 
listening to some of the questions.
    Over the years I have been concerned about radio 
broadcasting because it is such an important part of America 
and our media outlets. It means a great deal in terms of 
entertainment, obviously, the way we get news, and we want to 
make sure that our policies encourage a strong and healthy 
radio ownership, as well as the other segments of the media.
    That is one of the reasons why in the 1996 Act I thought we 
should pay particular attention to the radio broadcast industry 
and see if we could do some things that would help the industry 
which was struggling at the time. It was weak, I think, 
economically. I must say I was hearing a lot of complaints from 
the people at the local level and the people who were trying to 
make the radio stations a success.
    My chief concern in evaluating media ownership is always to 
make certain that local communities are being properly served 
and they are not being adversely affected. Certainly I take a 
look at what is happening in my own state.
    I think as a result of the Act, the industry is stronger 
than it was. It has actually been revived. Is it a perfect 
revolution or improvement? No, but I think it is healthier 
today than it was just a few years ago, and I want to make sure 
that we do not stop that strengthening and turn the tables 
back.
    It sounds to me like what I have heard the time I have been 
here and from the testimony I have read that part of the 
problem here is not really about levels of competition. It is 
this other issue of how the concerts are handled. I think that 
may be what prompted the legislation that has been offered 
today or by Senator Feingold and the Congressman that testified 
and what has contributed a lot to this hearing itself. So I 
think maybe these two should be treated separately. If there 
are concerns over here in the other area, then let us take a 
look at that.
    With regard to ownership rules, I should note--I presume 
others have noted--the FCC is reviewing this right now. I do 
not know when they would make any recommendations or if they 
would act, but they are looking at their ongoing, comprehensive 
media ownership proceedings, and I think we would be 
precipitous at this time if we moved out and started to advance 
some legislation that would preempt that.
    Let me just ask two or three questions of the witnesses 
then.
    Mr. Fritts, is there a distinction in your mind in your 
position at NAB between ownership consolidation in the radio 
industry and other media and entertainment industries? In my 
mind there is, but I would like to hear how you would describe 
that.
    Mr. Fritts. Certainly, Senator, I would agree with you that 
there is indeed, just by virtue of sheer numbers. There are 
13,000 radio stations, 1,300 television stations. There are 
almost 4,000 separate owners. I think what the overview, if you 
will, or the 35,000-foot review of what is taking place here 
today is really the question, has the 1996 Act worked? And we 
believe it has. It has provided more diversity. It has provided 
more diverse formats. It has continued to allow radio to be 
strong at the local level. I think that is the strength of 
broadcasting today.
    There are now 200 new competitors in the sky coming to 
every single market in the United States through direct 
satellite radio. So if local broadcasters are not local, we 
will soon be out of business. So the important thing for us to 
do is to be local, to serve the local community.
    And I think that is reflected by the surveys that show that 
95 percent of the American public listens to radio every single 
week. That is an extraordinarily high number, and 75 percent 
indicate that they believe that radio is doing a good job. So 
we are very pleased with those numbers. We would like for them 
to be slightly higher, obviously, but we believe the 1996 Act 
has worked and worked well.
    Senator Lott. Well, we specifically permitted unlimited 
national ownership of radio stations by a single company in 
that Act, but there was a sliding scale of limits for 
individual markets. I presume you all talked a little bit about 
that in my absence. I think that is a critical point to make, 
though, is it not?
    Mr. Fritts. And those limits remain today. What the FCC is 
doing--and I think all of us recognize that this hearing is 
certainly appropriate because the FCC every 2 years is required 
by the statute which you enacted, the Congress enacted, to 
review the bidding, if you will, to look at the landscape and 
to see what the ownership limits should be and is it working 
well. And they are in that process right now. Presuming that 
they make some modifications in this biennial report, there 
will be another biennial report 2 years from now where they 
will review the same thing. I am sure that if the system 
warrants it, that Members of Congress will hear about it and 
will ask the FCC or certainly provide comments to the FCC along 
these lines.
    Senator Lott. Mr. Mays, just again from glancing over the 
testimony, I kind of have the impression it has been inferred 
that since you do have these 1,200 radio stations that maybe 
you have not been meeting the need for public service 
activities or programs that would benefit the communities, that 
you do address the local needs. How do you respond to that?
    Mr. Mays. Well, as Mr. Fritts said, Senator, our local 
involvement with the community is the lifeblood of our radio 
stations. As I said earlier when you were out of the room, we 
consider ourselves an aggregation of a few hundred small 
businesses that serve their local community. And if we do not 
do extensive research in every market like we do and determine 
what the audience wants to hear, whether it is music genre or 
news and information and weather and public service work, we 
are absolutely not going to be able to sustain our business.
    You brought up an interesting point about the music tie to 
our company. Let me address that, if you will, just for a 
moment, as far as what we think the record companies are 
insufficient at and that is producing new music. So we have 
taken a number of our stations that concentrate on new artists 
only. In addition to this because of those five record 
companies not producing enough new artists, we provided a 
website where new artists could uplink their music and then we 
could draw it down and play on our radio stations, and we play 
new music on--I think 70 or so of our stations have new music 
only programs. Right here in D.C. on DC101. In Detroit every 
night at 9 o'clock they play only new music.
    We have 1,000 bands. This uplink has only been there for 4 
or 5 months. We have 1,000 bands up until 2 weeks ago of new 
artists sending their music up so we could download it, and 
every other radio station in the world could download it. 
Within the past 2 weeks, we have 1,000 more bands, and we are 
only promoting this because we are trying to roll it out slowly 
on our radio stations in 20 markets. Basically what they say is 
new artists, we are going to play you, upload your music to the 
website. And it has moved to 2,000 new artists in the past 6 
months.
    Senator Lott. Let me apologize. The red light is on here. 
But I would like just a couple of brief questions, if the 
Chairman would allow me a little latitude.
    The Chairman. Yes. Just let me add for the record. Mr. 
Fritts mentioned there are 4,000 owners. One owner gets 27 
percent of the revenue. I think that completes the picture a 
little bit more accurately.
    Senator Lott. Mr. Short, I take it that you feel like we 
have lost some of the local focus and the public service 
programming and that sort of thing, and maybe you have already 
touched on it. I apologize to ask you to repeat, but it 
directly relates to the question I just asked Mr. Mays. Do you 
feel like we are losing some focus there?
    Mr. Short. Yes, I do feel that. I am a Syracusean. I have 
been in Syracuse since 1968. I grew up in a town that hardly 
played any R&B on the radio. That is what got me into the radio 
business. I was so frustrated that there was no diversity. I 
kept asking why do we not have a--at that time it was called a 
soul station. It just dawned on me no one is going to do it, so 
I did it.
    All right. Now you got a guy who has been there for 30-plus 
years. I know people if I walk in the grocery store, the 
church, or the schools. They will hand you an announcement 
saying, can you get this on radio? I need to come by and see 
you, Mr. Short. Call Bob up. He will get this on the radio for 
you. And it is almost small town radio, even though a lot of 
Syracuseans do not like to think of themselves as small town, 
but it really is small town.
    And now you have a situation where everything is programmed 
and regimented. A program director from Texas says, no, we play 
18 songs per hour. Who is Willy? We do not have time for Joe. 
What is this? How much money does he have? What kind of a 
schedule is he willing to pay? Well, maybe it is the NAACP. 
Maybe it is the Urban League. Maybe it is the little Boy Scout 
troop or something.
    And it takes someone that is sensitive to that community 
that says, okay, I know this guy, I know the family. Sure I 
would like to sell him a $5,000 schedule or a $20,000 schedule. 
But he is not Coca-Cola. He is not McDonald's. He is Joe. Let 
him come on the air. We will make something work. We will bring 
him in, sit him in the studio, and we will talk about the 
issues for that particular situation. So that is an element 
that I think is completely gone, especially in Syracuse.
    And he talked about voice tracking. I would question that 
15 percent voice tracking. I think if you could just 
simultaneously listen to every station in the country that they 
program, you will hear that same voice all over. I mean, this 
guy is in Texas. He is in Syracuse. He is in Alabama. I do not 
know who the guy is, but it is the same voice. So I find it 
hard to believe that he is doing 15 percent of his time in 
Syracuse and he has got----
    Senator Lott. He must have a great voice is all I can say.
    Mr. Short. Yes. It is the voice, the voice of the station.
    Senator Lott. Well, I understand what you are saying. I do 
think times have changed, though. One of the first jobs I ever 
had was with the local radio station, WPMP-WPMO Pascagoula, 
Moss Point.
    The Chairman. Great place.
    [Laughter.]
    Senator Lott. Yes. You get a whole different voice. My 
mother did the logs. In fact, I think the first woman's voice I 
ever heard on radio was my mother's voice, and she was working 
before mothers worked quite that much.
    And it was different. Those days you had a local furniture 
store open. They went down and did a simulcast right there at 
the local radio station, and they would interview people as 
they walked by and tell what the price of the living room suit 
was.
    I think people now are looking for something a little 
different. That was nice, but I am not sure that that is what 
the market needs or what the people want now. I am looking now 
and I think most of my neighbors are--frankly I want heavy 
news. I want all news. I listen every morning to an all news 
station here in Washington, D.C., and when I listen to music, I 
listen to a station out of New Orleans. I listen to WWL, a 
powerful station out of New Orleans, even though I live 90 
miles away. Times have changed and I think we have to allow the 
radio industry to reflect the demands of the times and, by the 
way, be able to make a profit so they can stay in business.
    Let me ask Mr. Henley a question, if I could.
    The Chairman. I think Mr. Short wanted----
    Senator Lott. Oh, you want to add another comment?
    Mr. Short. Yes, I do.
    Your implication is that times have changed for the better. 
It is a presumption. First of all, they have never in Syracuse, 
since they have changed to urban, gotten the ratings that I had 
with my back woods' approach of just bringing Willy on. They 
have got all the research. They have got the voice. They have 
got all the connections. They subscribe to Arbitron. They have 
got billboards all over the place. They have got everything 
that supposedly makes you a new millennium professional radio 
station. But they do not know the format, not in Syracuse. They 
may understand what Billboard says on the top 40 and somebody 
says that DMX or Ja Rule or whoever is a good artist--play them 
72 times. Do not ask me any questions.
    Whereas I am answering the phone. Sometimes it is because I 
do not have a huge staff, so you get lucky and you get the 
general manager to answer the phone, and it is some guy who is 
saying, hey, you played a record. It goes something like this, 
and he starts singing it. And you say, I know that record. Hey, 
can you get that on for me? And you know what? When you do 
that, you are the greatest station. You know why? Because you 
cannot get that done over here. You have got to go through on 
levels of management, and it is considered unprofessional.
    But, hey, what is the difference in that and a regular 
call-in sophisticated talk show? You said the number is 1-800-
whatever. Call Rush Limbaugh. The listener is participating. So 
I really question that particularly since they cannot achieve 
the ratings that we have had.
    Senator Lott. I apologize to all of you and I thank you all 
for being here. This is extremely interesting. It is an 
important subject.
    Mr. Henley, I made an observation at the beginning and 
maybe you addressed this. But is this really about ownership 
caps and limits of competition, or is this about the problem 
with concerts and how that is handled?
    Mr. Henley. Well, I think it is about both, Senator. I 
think they are both very real problems. In 1996 there were 
5,133 owners of radio stations. And today, for the contemporary 
hit radio format, which is again the ``make it break it'' 
format, only four radio companies, Clear Channel, Viacom, Cox 
and Citadel, control access to 69 percent of that format's 51 
million listeners nationwide. And for the country music format, 
the same four firms control access to 53 percent of that 
format's 34 million listeners.
    Now, I remember back when I first got in the business, 
professionally that is, back in the late 1960s, early 1970s, 
there was a thing called the seven-and-seven rule. No one 
company could own more than seven radio stations and seven TV 
stations. Period. And then somewhere along in the 1980s--I 
believe it was during the Reagan administration--those rules 
were relaxed to allow each company to own two radio stations in 
a given market but no more than 40 radio stations total. But 
after the 1996 Telecom Act, this thing has just jumped 
exponentially. I do not see the wisdom in letting it go that 
far.
    And from an artist's point of view, I think it has really 
harmed music. I think it has really made it very difficult, 
again because of the millions of dollars it costs to get a 
record on the radio. And I know that there is payola because I 
get billed for it. My record company bills me back for the 
independent promotion monies that they have to give to the 
independent promoter. And they have worked out a very 
sophisticated system to skirt the current payola laws, a very 
sophisticated system where the money is paid to a middleman. 
And what happens after that is very privileged information. But 
I know that these things exist.
    So Mr. Mays alleged in his testimony that they are really 
in the radio business, that the concert business is not really 
that big a deal for them. But I want you to understand that 
before another company called Concerts West was formed in which 
I am a minority--a small minority shareholder--and I will 
probably never see a dividend. We formed Concerts West in order 
to provide a viable alternative to the Clear Channel monopoly. 
We wanted to give artists a choice and have another place to go 
to promote their concerts. Before we formed Concerts West, 
Clear Channel Entertainment, according to Poll Star's reported 
concerts--Poll Star is an entity that reports on all the 
concerts and the revenues that happen in the industry. 
According to Poll Star, Clear Channel Entertainment had a 95 
percent market share of all reported concerts. So they are in 
the concert business big time.
    Mr. Fritts. Mr. Chairman, I really have to respond to what 
Mr. Henley said about payola at this point in time. The record 
industry is controlled by five record companies. His beef is 
with the record companies. His beef is not really with the 
broadcasters.
    The Chairman. I guess he could speak for himself.
    Mr. Fritts. Fine, but I wanted to----
    The Chairman. Thank you.
    [Laughter.]
    Mr. Henley. My beef is with both.
    The Chairman. Mr. Mays, this is an equal opportunity 
Committee. You have heard some comments by both Mr. Short and 
Mr. Henley, and before we move to Senator Wyden, we would be 
glad to have your response if you would like to.
    Mr. Mays. Well, I think I have covered most of the points.
    In all due respect, Mr. Chairman, we have about 20 percent 
of the radio revenues rather than 27 percent.
    The Chairman. Only how much?
    Mr. Mays. I am sorry?
    The Chairman. Only 20? Excuse me.
    Mr. Mays. I understand we are a big company, sir.
    Let me also say that we are here again only sustainable as 
it relates to the community service that we deliver. In 
Syracuse in our urban format, we have an African-American 
program director that picks every single thing that goes on the 
air. We make absolutely no Syracuse decisions in San Antonio. 
We make no Phoenix decision in San Antonio. We certainly make 
no New Orleans decisions in San Antonio. And that African-
American has a feel for the market, just like Mr. Short does, 
and he is intertwined with that African-American community, 
just like Mr. Short was. And we feel that he is doing a great 
job.
    As it relates to the tour business, as I said, it is less 
than 7 percent of our income.
    The Chairman. Which is how much?
    Mr. Mays. I am sorry?
    The Chairman. Seven percent of your income is how much? $5 
million, $10 million, $50 million?
    Mr. Mays. Maybe $100 million or so.
    The Chairman. Go ahead, please.
    Mr. Mays. Our radio income is substantially higher than 
that. I am not arguing that we are not a big company, and I am 
happy that Senator Dorgan said he did not feel that big was 
necessarily bad.
    But I think that if you put things in perspective, that we 
would never, never jeopardize our radio local roots to play or 
not play an artist because he is or is not touring with us. As 
I mentioned, the Britney Spears situation is absolutely to that 
point, where when she toured with Mr. Henley's company, she got 
73 percent more airplay on Clear Channel radio stations than 
she did when she toured with Clear Channel Entertainment. And 
that is true with every artist because we are not going to 
jeopardize our principal business and ignore what our audience 
wants to hear for the benefit of a concert artist. We are just 
not going to do that, Mr. Chairman.
    The Chairman. Thank you, Mr. Mays, and as a father of 
teenage children, I will not comment on whether you should be 
airing Britney Spears or not.
    [Laughter.]
    The Chairman. And I apologize to my colleagues, but I think 
it is important, when serious comments are made, that other 
witnesses be allowed to respond to those comments so that we 
can get a full story.
    Senator Wyden.
    Senator Hutchison. Mr. Chairman, could I just say I am 
going to have to leave.
    The Chairman. I am sorry, Senator Hutchison. I apologize.
    Senator Hutchison. No, no. I agree that it is good to have 
the ebb and flow. I have certainly learned a lot from the 
hearings. I will have to go before I can ask any questions.
    The Chairman. Could we indulge Senator Hutchison to make at 
least a brief comment, Senator Wyden?
    Senator Wyden. Sure.

            STATEMENT OF HON. KAY BAILEY HUTCHISON, 
                    U.S. SENATOR FROM TEXAS

    Senator Hutchison. I did not intend to do that.
    But let me just say that I do have two constituents here 
who are saying exactly the opposite things. And I would like to 
know more about the payola. Mr. Mays says there just isn't any. 
Mr. Fritts agrees with that. Mr. Henley and other artists say 
it is absolutely there. It appears to me that there is some 
sophisticated way that an artist is required to pay money to be 
on a major station.
    My question is, how does this occur, and should we be 
looking at the laws on payola maybe separate from any issue of 
ownership?
    And my second question would be, how does a new artist get 
into the market? Now, Mr. Mays says that there are a lot of 
just new market programs which appears to make sense. So I 
would ask Mr. Henley why doesn't a new market program that is 
pretty widely dispersed make a difference.
    And then I would ask Mr. Mays how can you say there is no 
payola when artists have to pay.
    Those would be my two questions, and if you would prefer 
those to be for the record----
    The Chairman. If Senator Wyden does not mind, I would like 
to have a response to those questions.
    Senator Hutchison. Thank you.
    The Chairman. Please. Who do you want to answer first? Mr. 
Henley or----
    Senator Hutchison. Let me just ask first Mr. Mays. It just 
seems to me that there is some form of payola. Maybe it is not 
called payola. Maybe it does not violate present laws. But if 
an artist has to pay to be on the air in a major station, I 
think that there is a problem. I would ask that question of Mr. 
Mays first.
    Mr. Mays. And I would be happy to address that, Senator 
Hutchison. I understand the record companies have come to 
Senator Feingold and to possibly people on this panel with a 
plea to save them from themselves. In other words, they write 
the checks to these independent promoters, and they do not like 
to do that, but they are not willing to stop doing that because 
they are afraid I guess some other record company will continue 
to do it.
    We have, as I said, a zero tolerance to pay for play. 
Absolutely a zero tolerance for pay-for-play. We have our 5,000 
disc jockeys sign affidavits every single year. We have our 
program directors in every single market sign affidavits every 
year that they will not accept any pay for play or they will be 
fired.
    Independent promoters do interact with the corporate office 
in terms of actually buying our research and information, and 
they pay us for that. We do research every night in every 
single market, and that is valuable information to them because 
of what it means the audience wants to hear.
    As far as the new artists are concerned--and I think you 
were here when I talked about our uplink, but something you 
might be interested in--I was at a meeting in New Orleans night 
before last, and I asked our manager of our Austin radio 
station KVET why he has been so wildly successful. And he said, 
well, gee, we have two country stations in that market. One is 
an up-tempo country station and his is one that plays new 
artists, the Texas, kind of the Willy Nelson, Waylon Jennings 
genre of music.
    The Chairman. What you are saying, Mr. Mays, is that there 
is no payola. In response to her question, there is no payola.
    Mr. Mays. Absolutely none.
    The Chairman. Thank you.
    Mr. Henley.
    Senator Hutchison. Mr. Henley.
    Mr. Henley. Thank you.
    The new payola practices take two primary forms. Radio 
consolidation has created the first type. Radio station group 
owners establish an exclusive arrangement with an independent 
promoter who then guarantees a fixed annual monthly sum of 
money to the radio station group or the individual station. In 
fact, some stations rely solely on that as a majority of their 
budget for the year in some cases. In exchange for this 
payment, the radio station group agrees to give the independent 
promoter first notice of new songs added to the playlists each 
week. And there is some implication in there. Stations in the 
group also tend to play mostly records that have been 
``suggested'' by the independent promoter, by the way. And as a 
result of the standardization of this practice, record 
companies and artists generally must pay the radio station 
through independent promoters if they want to be considered for 
airplay on those stations.
    I mean, the record companies do not like this either, and I 
wish they would stop doing it, but until all of them stop doing 
it, none of them are going to stop doing it because if one guy 
breaks ranks, then he gets an unfair advantage. However, none 
of the independent promoters and none of the radio stations are 
sending the checks back. So I have got a beef with both the 
record companies and the independent promoters and the radio 
stations. I have got a beef with all of them.
    The second payola practice occurs after the music labels 
hire an independent promoter to legitimately promote their 
records to a specific station for a fee. And reportedly, 
certain independent promoters use the label's money to pay the 
stations for playing the songs on the air. I do not have any 
proof of that. I have never been involved in it, but I know 
that I get billed back by my record company for a certain 
amount of independent promotion.
    Furthermore, this new form of independent promotion which 
are these concerts that the artists are asked to do for radio 
stations is simply another form of payola. Now, Mr. Mays has 
characterized these concerts as charity concerts and 
interaction with the local community. The radio stations ask an 
artist to come and play a concert, and they give a relatively 
meager sum to a local charity, but somebody should ask Mr. Mays 
and other radio conglomerate owners how much they make a year 
on these concerts where artists are forced to play for free.
    The Chairman. Go ahead.
    Mr. Mays. I would be happy to address that, Senator. And 
thank you for bringing that up, Mr. Henley.
    Yes, we do ask and we have hundreds of people coming to 
events like Wango Tango in Dodgers Stadium. 76,000 people are 
into the Meadowlands at what we call Zootopia where we ask a 
whole range of artists to come for all day long, most of which 
are new artists, but those that complain about going are those 
who do not get to go because there are only so many that we can 
have within that venue during those many hours. So the ones 
that go love it because they get exposure to thousands of 
people in the Meadowlands Stadium or Dodgers Stadium, and the 
new artists love it because they are on what we call the side 
bands and they love to do it for the exposure and what money we 
pay them. But we have never had a complaint from those that 
gain the exposure and the promotion on the radio. We are sorry 
we cannot put all of the artists there that would like to, but 
we just cannot.
    Mr. Henley. I am sorry. My point was that some of the money 
from those concerts goes to the radio station and not all of it 
goes to charity. That was the point I was trying to make.
    If I might just comment on the new music program. Mr. Mays 
said they have a program that comes on at 9 o'clock at night. I 
would bet that that program only lasts for an hour, and I would 
bet that it goes one night a week.
    Mr. Mays. In Detroit, it goes every night a week.
    Mr. Henley. Okay, in Detroit.
    Senator Hutchison. Thank you very much, Mr. Chairman. I 
really appreciate the indulgence. Thank you, Mr. Wyden.
    The Chairman. Thank you.
    Senator Wyden. Thank you, Mr. Chairman.
    Mr. Mays, the Wall Street Journal ran a front page article 
not too long ago, and in the headline it said, perfecting the 
art of seeming local. And it essentially is about your company. 
You have described in discussions with several of my colleagues 
that your view is that it does not go on very often. You do not 
have these virtual radio stations where the deejays are located 
out of town, but the program looks, of course, like it is 
appearing locally. And that is certainly not what the Wall 
Street Journal is talking about in its front page article.
    In fact, Mr. Chairman, I would like to ask unanimous 
consent that this article be made a part of the record.
    The Chairman. Yes.
    [The information referred to follows:]

               The Wall Street Journal, February 25, 2002

 From a Distance: A Giant Radio Chain is Perfecting the Art of Seeming 
                                 Local

                         By Anna Wilde Mathews

    On Feb. 15, disc jockey ``Cabana Boy Geoff'' Alan offered up a 
special treat for listeners of KISS FM in Boise, Idaho: an interview 
with pop duo Evan and Jaron Lowenstein. ``In the studio with Evan and 
Jaron,'' Mr. Alan began. ``How're you guys doing?''
    The artists reported that they had just come from skiing at nearby 
Sun Valley, then praised the local scene. ``Boise's always a nice place 
to stop by on the way out,'' Evan Lowenstein said, adding that the city 
``is actually far more beautiful than I expected it to be. It's 
actually really nice, so happy to be here.'' Mr. Alan chimed in: 
``Yeah, we've got some good people here.'' Later, he asked Boise fans 
to e-mail or call the station with questions for the performers.
    But even the most ardent fan never got through to the brothers that 
day. The singers had actually done the interview in San Diego a few 
weeks earlier. Mr. Alan himself has never been to Boise, though he 
offers a flurry of local touches on the show he hosts each weekday from 
10 a.m. to 3 p.m. on the city's leading pop station.
    This may be the future of radio. The Boise station's owner, 
industry giant Clear Channel Communications Inc., is using technology 
and its enormous reach to transform one of the most local forms of 
media into a national business. In fact, Boise's KISS 103.3--its actual 
call letters are KSAS-FM--is one of 47 Clear Channel stations using the 
``KISS'' name around the country. It's part of an effort to create a 
national KISS brand in which stations share not just logos and 
promotional bits but also draw from the same pool of on-air talent. Via 
a practice called ``voice-tracking,'' Clear Channel pipes popular out-
of-town personalities from bigger markets to smaller ones, customizing 
their programs to make it sound as if the DJs are actually local 
residents.
    ``We can produce higher-quality programming at a lower cost in 
markets where we could never afford the talent,'' says Randy Michaels, 
the chief executive of the company's radio unit. ``That's a huge 
benefit to the audience.''
    It's also a huge benefit to Clear Channel, which can boast of a 
national reach and economies of scale to advertisers and shareholders. 
The voice-tracking system allows a smaller station in Boise to 
typically pay around $4,000 to $6,000 a year for a weekday on-air 
personality, while a local DJ in a market of Boise's size would have to 
be paid salary and benefits that might run five times as much. That's 
why Clear Channel is developing multiple identities for a battalion of 
DJs like the 29-year-old Mr. Alan, who is based at KHTS-FM in San 
Diego, but also does ``local'' shows in Boise, Medford, Ore., and Santa 
Barbara, Calif. Mr. Alan does research to offer up news items and other 
details unique to each city.
    The new sound of radio is tied to big changes in the industry 
brought on by a 1996 law that got rid of the nationwide ownership cap 
of 40 stations. The law also allowed companies to own as many as eight 
stations in the largest markets, double the previous limit. The shift 
sent broadcasters into a frenzy of deal-making, as stations rapidly 
changed hands. A fragmented business once made up mainly of mom-and-pop 
operators evolved quickly into one dominated by large publicly traded 
companies that controlled stations around the country.
    No one took advantage of the new law more aggressively, or 
successfully, than Clear Channel. The company started out with one FM 
station in San Antonio. A relatively little-known firm before 1996, it 
rapidly grew into by far the biggest player on the airwaves. Today, it 
operates more than 1,200 U.S. stations, compared with 186 stations 
owned by its biggest publicly traded rival, Viacom Inc. Privately held 
Citadel Communications Corp. has 205 stations, mostly in midsize 
markets. Clear Channel has combined its radio clout with a growing 
array of other media assets, including the nation's leading concert-
promotion company and a major outdoor-advertising operation.
    Now Clear Channel is moving to exploit its size by linking up its 
different businesses and wooing major advertisers with the promise that 
it can deliver nearly any combination of geography, demographics and 
radio format. Part of that effort is the move to create national brands 
such as KISS, which can become familiar touchstones for big national 
advertisers and, eventually, listeners. While voice-tracking is not a 
new practice in radio, Clear Channel is pushing the concept on a far 
grander scale than ever before, extending well beyond the 47 KISS 
stations to encompass most of its empire.
    Mr. Michaels compares his model to McDonald's Corp.'s franchise 
system. ``A McDonald's manager may get his arms around the local 
community, but there are certain elements of the product that are 
constant,'' he says. ``You may in some parts of the country get pizza 
and in some parts of the country get chicken, but the Big Mac is the 
Big Mac. How we apply those principles to radio we're still figuring 
out.''
    Indeed, as Clear Channel has moved to take advantage of its reach, 
it has run up against traditional ways of doing things in radio. To 
create a national brand based on a Federal trademark, for instance, it 
has had to mount legal challenges in several markets, chasing off 
stations that had been using versions of the KISS name locally. (The 
U.S. station that actually has the call letters KISS-FM is an album-
rock station based in Clear Channel's corporate hometown of San 
Antonio, owned by rival Cox Radio Inc.) Clear Channel is facing 
objections from union locals representing on-air talent, which likely 
stand to lose jobs as the company phases in more virtual programming.
    The company also drew an investigation by the Florida Attorney 
General's office into whether it was portraying national call-in 
contests to listeners as local. Clear Channel admitted no wrongdoing, 
but in 2000 it paid the state an $80,000 contribution to the Consumer 
Frauds Trust Fund and agreed not to ``make any representation or 
omission that would cause a reasonable person to believe'' that 
contests involving numerous stations around the country were actually 
limited to local listeners.
    Mr. Michaels argues that much of the static his company hears, 
particularly from competitors, is simply a battle against progress. He 
compares it with another point in radio's history: when the industry 
began phasing out live orchestras and in-studio sound-effects experts 
in favor of recorded music. ``The guy making buggy whips and installing 
horse shoes should have gotten into making tires,'' he says. Change, he 
says, is ``inevitable. All we can do is exploit it.''
    Nothing better illustrates Clear Channel's efforts to do that than 
its drive to develop the KISS brand. It's derived from Clear Channel 
pop powerhouse KIIS-FM in Los Angeles. The wider rollout was begun by 
Mr. Michaels' Jacor Communications Inc. before Clear Channel bought it 
in 1999. It kicked off by introducing the KISS format in Cincinnati, 
among other cities. Each had its own frequency and call letters, 
usually something as close as possible to KISS.
    At the same time, radio technology was changing rapidly. In the 
mid-1990s, stations began buying software and hardware that allowed 
them to run their on-air programming with computers that contained 
entire catalogues of digital songs. Using such systems, DJs could also 
digitally record voice bits and drop them into a preformulated schedule 
of songs and commercials. Stations had long been able to prerecord some 
materials, using tape setups. But now a disc jockey could put together 
a perfect five-hour shift in less than an hour, using a computerized 
system that lets the DJ hear just the end of one song and the beginning 
of the next.
    Clear Channel and its predecessor companies began installing the 
technology in all its stations in the late 1990s, and linking them 
together into a giant high-speed digital network to move digital 
recordings around seamlessly. Gradually, the company started piping 
major-market DJs into smaller cities. It even did the same with some 
news stations, which used local reporters feeding information to 
announcers in different cities, who would then send back their 
newscasts digitally to be put on the air.
    An early indication of the impact came in Dayton, Ohio, in 1999. 
Dozens of teenagers showed up at a Clear Channel pop station early one 
morning looking for the Backstreet Boys, after hearing an interview 
with the band that morning. The teenagers were politely told that the 
band wasn't available and given promotional items. The interview was 
actually done earlier in Los Angeles.
    ``That's when we knew this could be huge,'' says Sean Compton, 
Clear Channel vice president and national program coordinator.
    Boise's 103.3 was one of the early KISS converts. KARO, as it was 
called, had been playing classic rock. But it was competing in a 
crowded niche and ratings were lagging. So, in early March 2000, Clear 
Channel decided to switch it to a pop format and use the KISS brand.
    It took only about two weeks to create an entirely new station. The 
logo came from a KISS station in Las Vegas, with a Boise artist simply 
replacing the Las Vegas station's frequency with the local one. Clear 
Channel pop stations in other cities digitally imported their own song 
catalogues to Boise's hard drive. A programmer in Dallas helped prepare 
the first song list.
    Before the format change, the station was using one voice-tracked 
show from Salt Lake City on weekdays, as well as some national 
programming. After the station went KISS on March 13, 2000, it began 
importing all of its DJs. Weekday mornings came from Los Angeles, 
middays from Cincinnati, afternoons from San Diego and evenings from 
Tampa, Fla. Two of the old rock station's DJs were laid off. Later, one 
out-of-town KISS DJ moved to Boise to do a live afternoon show. As 
costs went down, ratings went up.
    ``You can deliver a better product than a live station,'' says Hoss 
Grigg, who was an on-air personality under the old format before 
becoming the program director for Boise's KISS. ``If they get it, they 
get it, no matter where it comes from.''
    Indeed, Mr. Grigg, who comes from the area and has worked in Boise 
radio on and off for a decade, quickly learned how to operate a virtual 
station. The station hired a Boise State University student, who it 
dubbed ``Smooch,'' sending him to local KISS events because the real 
DJs weren't available. To handle phone calls that came in for the out-
of-towners, the station first tried to maintain separate voice-mail 
boxes for each. But Mr. Grigg eventually gave up and just set the 
studio line to ring busy unless he or another station employee was 
actually in the studio.
    Mr. Grigg also devised ways to keep his air talent up to date on 
events in Boise. He created a guide with helpful pronunciation tips 
(``BOY-see . . . no Z'') and descriptions of ``Boise Hot Spots,'' like 
the Fort Boise skateboard park featuring a ``sweet bowl.'' Major 
thoroughfares, local sports teams and the names of area high schools 
were also included. Mr. Grigg created a special Web site, which he 
updated constantly, to inform his outlying DJs about coming concerts 
and station promotions.
    But even as he works to keep the station sounding local, Mr. Grigg 
draws much of his station's identity from around Clear Channel. Many of 
the contests he runs are national. The remixes of big songs to promote 
KISS come from Chicago, as does the voice used on most promotional 
messages.
    The music selections for Boise's KISS are made in San Diego by 
brand manager Diana Laird, who also programs other stations as well, 
including ones in San Diego and Santa Barbara. Mr. Grigg advises her on 
what's popular with call-in listeners, but Ms. Laird says she always 
takes such requests with ``a grain of salt, considering maybe 1 
percent'' of listeners call in. She instead relies on instinct, 
national tastes and research in markets with demographics similar to 
Boise. She says the Santa Barbara station gets far more hip hop and 
dance music than the mainstream pop that is heard in Boise. But KISS 
listeners in Boise and Medford hear identical playlists, because their 
demographics are similar, Ms. Laird says.
    It was Ms. Laird who helped connect ``Cabana Boy Geoff'' to Boise. 
Mr. Alan, who works long hours as promotions coordinator at KHTS in San 
Diego as well as being an on-air personality, wanted to raise his 
profile and earn the extra money that voice-tracking a few stations can 
provide. To squeeze it all in, he typically arrives at Clear Channel's 
meticulously landscaped San Diego office before 7 a.m., not long after 
his 2 a.m. sign-off from a live air shift. A recent day began even 
earlier with a cellphone call from Mr. Grigg, who told him of a Boise-
area Olympic hopeful and recapped a station-sponsored party the night 
before at a Boise restaurant.
    Sipping a large cup of coffee, Mr. Alan tried to convince himself 
it was 10 a.m., the time his show would air. With Mr. Grigg's briefing 
in mind, he told the Boise audience that last night's event was ``a 
wild and crazy party,'' though of course he hadn't attended. ``I 
personally saw a number of you hook up with people you had never hooked 
up with before.'' Then came the Evan and Jaron interview. (A 
spokeswoman for the singers said they couldn't be reached for comment.)
    Mr. Alan wrapped up his five-hour shift in just an hour, but he 
returned later that afternoon to do a Boise show for the next Monday, 
when he would be out of the office for the President's Day holiday. 
This one was harder, since it took place three days in advance. Mr. 
Alan also had to make a convincing on-air handoff to a live person--
Smooch, the station's street promoter, who would be doing a live 
appearance during Mr. Alan's show.
    Again, a phone call helped. Smooch, whose real name is Troy 
DeVries, reported that he would likely be hanging out at a nightclub 
called The Big Easy sometime that weekend. So, Mr. Alan, who has never 
met Mr. DeVries in person, riffed a bit: ``On Saturday night, me and 
Smooch, we were hanging out at The Big Easy,'' he said, launching into 
a bit that made fun of Mr. DeVries's dancing. ``Just thinking about it, 
I'm cracking up.'' (As it turned out, Mr. DeVries went to the nightclub 
on Friday instead).
    Mr. Alan also used phone calls he had recorded during his live show 
in San Diego, editing out local references to make them usable in 
Boise. He typically greets Boise listeners by using names taken from e-
mails he gets from Boise, or sometimes from San Diego callers. Then, he 
puts them in a situation using a real local place drawn from his 
research. Sometimes he does a bit less, though. After greeting 
``Dawn,'' who ``is stuck at work today,'' he admitted off the air that 
she was ``somebody I just made up right now.''
    Mr. Alan says his voice-tracked shows sound just as good as his 
live ones, and listeners ``don't get cheated out.'' Still, he admits 
that he was concerned when his fiancee told him that if she had a crush 
on a DJ and found out that he wasn't really in her city, ``she'd be so 
disappointed, she'd be heartbroken and stuff.''
    Indeed, several Boise KISS listeners said they couldn't tell that 
many of the station's on-air personalities weren't in town. ``If you 
can't tell, it's not that big a deal,'' says Jennifer Hardy, 24, who 
has gone to KISS events with her five-year-old son. ``They are involved 
with the public.'' But Hope Brophy, a manager at a local hair salon, 
said that, even though she couldn't tell the difference, the idea 
``irritates me. . . . I think if you don't live here, you don't 
understand it.''
    In Boise, KISS's pop rival, KZMG-M, ``Magic 93.1,'' is gambling 
that there is an advantage in having more live presence. The station, 
which is owned by another big company, Forstmann Little & Co.'s 
Citadel, has live DJs on nearly all the time on weekdays, except for 
midnight to 5:30 a.m. KZMG promotes itself as the ``live and local'' 
station that always takes calls from listeners, but KISS is still ahead 
in the ratings.
    Mr. Michaels, the Clear Channel radio chief, says he's not aware of 
the details of Mr. Alan's situation, but that it sounds like ``this 
would be an example of a personality being a little too creative.''
    Mr. Michaels says that he himself usually can't tell when a show is 
voice-tracked from another city and when it's live. ``I don't think 
it's at all wrong or deceptive to put together terrific programs that 
reflect local communities and sometimes use talent who may physically 
be somewhere else,'' he says. He compares the radio shows to films, 
which wouldn't be ``nearly as much fun if the camera kept turning 
around to show you it was just a set. I don't know that the radio 
experience would be as good if we said every five minutes, `By the way, 
I'm not really here and I taped this 20 minutes ago.' But that's all 
part of the magic of creating entertainment.''

    Senator Wyden. This article goes into considerable detail, 
Mr. Mays, in effect on how you deceive the listeners. I will 
talk briefly about a station in Boise. It says they handle the 
phone calls by setting up separate voice mail boxes so that 
people cannot tell the deejays are out-of-towners. Then at one 
point they set up a studio line to ring busy, and finally if 
somebody came in, they would free up the line.
    I guess my question to you is--whether you think it is 15 
or 20 percent or whatever is not the important question. To me 
it is going up, number one. And number two, I would just be 
curious about whether your stations disclose this to people 
locally. I mean, do people locally know that the deejays are 
not from there?
    Mr. Mays. Let me say, Senator, that I agree with I think 
what you are getting at. Even though that article in the Wall 
Street Journal had many inaccuracies and it was not all 
correct, the fact is that it appears that we were in that one 
case deceiving our listeners by leading them to believe that 
that talent was in Boise instead of San Diego. No, we do not 
attempt nor would we allow by company policy, since we heard of 
that particular incident, to deceive any listener.
    If a voice track is done and if it is done overnight, say, 
and the talent is in Denver and it goes to Fort Collins or 
whatever, we ensure that every piece of information, the news, 
weather, sports, is done correctly in order that we can have 
all of the local information there for the public.
    Senator Wyden. That is not what I am asking.
    Mr. Mays. Now, whether or not they know that that talent is 
in Denver rather than Fort Collins, possibly not. But it is 
company policy not to try to deceive the person by suggesting 
that the Denver talent that is doing the news in Fort Collins 
at 2:00 a.m. in the morning is actually in Fort Collins. That 
is against company policy.
    Senator Wyden. But you are not telling me that you have a 
policy to disclose to the local listener that the deejays are 
not there locally. Do you have a company policy on that point?
    Mr. Mays. No, we do not.
    Senator Wyden. Thank you.
    Question 2 is you said in response to the Chairman with 
respect to ownership limits and cited the 1996 law that you 
would respect those limits. And of course, that is the law and 
acquisitions continue. I am just curious whether you think as a 
policy, if three or four companies end up owning the majority 
of radio stations in this country, is there any down side in 
that?
    Mr. Mays. I would say that as long as those companies--
certainly I do not think the other concentrated companies in 
the entertainment business like the record companies are 
serving their customers and their audiences. But I would say 
that if those individual radio stations throughout this Nation 
are aggregations of small businesses dedicated to their 
community and as long as there is robust competition with other 
media, which there is in every market, then it really does not 
matter who the ownership of those individual stations are if 
they are run locally for the benefit of the community. So if 
you had the top 10 owning 80 percent instead of 44 percent, I 
do not think that would be bad public policy.
    I think deregulation has been a huge benefit to the 
diversity and to the audiences in all of our markets. If you go 
to the audiences in Medford, Oregon and do a survey--and we 
would be happy to do it for you--of how they enjoy radio and 
the diversity in that market, it is going to be very positive. 
And that is market after market because, as I said, we do that 
because it is our lifeblood to keep our customers, your 
constituents, happy whether those be the audience or whether 
they be the advertisers.
    Senator Wyden. I have a question for the panel. The reason 
I asked Mr. Mays that question is I think that that is a 
relevant question for radio, but it is a relevant question for 
the communications business generally. And Mr. Mays just said 
in his opinion there were not any down sides if you had three 
or four companies owning the vast majority of radio stations.
    Well, we are on the eve of the Federal Communications 
Commission looking at changing the concentration rules 
generally for a whole host of media, and I am very troubled 
about the prospect that in a lot of communities in this 
country, you are going to have one or two people owning 
virtually everything in sight. They are going to own the radio 
station. They are going to own the newspapers. They are going 
to own the TV. They are going to own the Internet networks. And 
I find this very troubling, contrary to what Mr. Mays has 
talked about.
    I would just like to go down the row for this panel and say 
what are the lessons radio that the Federal Communications 
Commission ought to pick up as it deals with media 
concentration generally because I for one think that this 
country ought to be pretty reluctant to repeat the radio 
experiment in other areas of communications policy. Why do we 
not just go down the row and begin with you, Ms. Toomey.
    Ms. Toomey. Thank you very much, Senator.
    First of all, I want to emphasize that I think we are 
closer to that three and four company ownership than you think. 
When you count the number of stations nationally, it looks like 
a really big number. But when you cut it down to local markets, 
as I did in my testimony, we are looking at four companies 
owning over 70 percent of listeners nationally in all markets. 
And then when we get to smaller markets, it is more and more. 
And then we get to the case of something like Minot where all 
of them are owned by one company. So I think this is the 
direction we are moving in, and we should begin to look at 
concentration instead of numbers of owners because that is when 
we can see where the damage is taking place.
    Next, I need to say that radio is different than other 
forms of media, and we need to always keep that in mind because 
it is the easiest and cheapest to produce. It is licensed at a 
local level, which means that it is one of the final media 
forms that is specifically programmed locally. So if we lose 
this one, as there are large concentrations in all the other 
media forms, we are just concentrating the problems. And if you 
looked at that really beautiful chart behind there, we already 
see that happening incredibly.
    And these recent trends also have made it harder and harder 
for grassroots folks to compete, as we have seen from the 
table, and mom and pops sell out. We have less minority 
ownership. We have fewer women running stations. We have less 
local news and, as our study illustrates, fewer musical 
choices.
    I think the most frightening thing for the Senators would 
be a quote that Congressman Foley said at Future of Music's 
summit conference just a couple of weeks ago where he said in 
his own market there used to be five stations he could go to to 
get some policy news on the air, and now that has been reduced 
to one. So within 6 years, he has lost 80 percent of access to 
his own local radio stations. And that makes a really damning 
picture for people who want to know what our public 
representatives stand for.
    Senator Wyden. Mr. Fritts.
    Mr. Fritts. Thank you, Senator. I had not planned to do 
this but I think because of Ms. Toomey's comments, I need to, 
for the record, state that there are numerous studies that 
contravene the FMC's conclusions, including a November 2002 
report by Bear Stearns, a September 2002 Federal Communications 
Commission white paper, and a July 2002 Arbitron-Edison Media 
survey. In addition, there was a poll in December conducted by 
the Mellman Group that found very wide listener satisfaction 
with what was taking place in radio.
    Having said that, what I would focus on to your question 
quite frankly is that the NAB has never asked for wholesale 
deregulation. We have never asked for deregulations like the 
truckers or the airlines or the banks. What we have said is 
that the FCC has appropriate jurisdiction and oversight and 
that they should and do review these limits on a regular basis. 
Obviously, recently they have reported to you and to this 
panel.
    We believe that the safeguard for you as a Senator and for 
you as Members of Congress is that the FCC, the oversight of 
jurisdiction for radio and television, has appropriate 
abilities and safeguards in all of these areas to regulate and 
to oversee the expansion or the contraction of radio or other 
markets in this process.
    So we are comfortable that the FCC, with its now five 
commissioners led by Chairman Powell--and we are comfortable 
that this oversight Committee, as well as one in the House, 
will continue to monitor these progressions and to make sure 
that the American public is well served.
    Senator Wyden. Mr. Henley.
    Mr. Henley. First of all, I think the FCC needs to take 
another look at how it defines a particular market. As was 
stated before, when Minot is included in the same market as 
Bismarck and those two in combination are considered to be one 
of the largest radio markets in the Nation, something is wrong 
with all due respect to Minot and Bismarck. I think the FCC 
needs to reevaluate and take another look at how it defines a 
market and delineates a market.
    I still have some things I want to say about localism, but 
in the interest of time I am just going to skip it. I want to 
say one thing. There has been a lot of talk today about 
localism and how radio stations are locally programmed to serve 
the interest of local people. There have been intimations that 
local program directors actually decide what is played on a 
local radio station. There has even been the implication that 
deejays have a say in what is played on a local radio station.
    I can tell you from experience that all the deejays I have 
talked to are worried about two things primarily. They are 
worried about their severance and they are worried about their 
noncompete clauses. They get nothing whatsoever to say about 
what is played on the radio.
    And despite the examples that Mr. Mays has cited about 
individual programming, if you could compare a cross section of 
the Clear Channel playlists from a cross section of their 
stations across the country in the same format, you would find 
that that playlist is virtually identical from station to 
station to station, with maybe a few aberrations here and 
there. But the playlists are virtually identical. Everybody 
gets the same McDonald's hamburger. And if you like hamburgers, 
then you should just eat hamburgers, I guess.
    I just want to read one thing in conclusion. The FCC is 
charged with protecting what the Supreme Court referred to as 
an uninhibited marketplace of ideas. And I want to read from 
the seminal First Amendment decision which says, ``it is the 
right of the public to receive suitable access to social, 
political, aesthetic, moral, and other ideas and experiences 
which is crucial here. That right may not constitutionally be 
abridged by either Congress or by the FCC.'' And I think it is 
being abridged.
    Senator Wyden. Mr. Short.
    Mr. Short. Thank you.
    In response to your question, Senator, I genuinely believe 
that if Clear Channel could press a button and program all 
radio stations at the press of that button, they would just for 
the sake of getting rid of the labor costs, driving up profit 
margin and making more money than they are already making.
    Enough is enough. I mean, there is no limit here. We are 
seeing stations become eliminated and replaced with jukeboxes, 
sophisticated computers. For some reason, they feel they have 
to go to every city and serve that city as though the city was 
advertising nationally saying, come, serve us, we need your 
help. So what is happening now is you have this audacity that 
says, we can own as many as we want and we can lay off as many 
people as we so desire because we can control these stations 
from anywhere.
    Syracuse is a market that Clear Channel is currently 
basically over the limit in terms of ownership. I think they 
have gotten a waiver to allow them time to spin off one of 
these stations. But I question whether or not they really are 
looking for the time to spin one off versus looking for time 
for that cap to be lifted so that there is no need to spin one 
off and you just keep owning.
    And then what you do is you put all stations in one 
building. You call it economies to scale, if you will. And you 
have one secretary, one telephone expense, one market manager, 
and you run 9 or 10 or whatever they let you run--7 legally--
and then you run 2 by redefining what is in your market, as Mr. 
Henley said, and what is really outside of the market. For 
instance, you can put a station 20, 30 miles out of your city 
of license and through sophisticated technology with repeaters 
and things like that, you could actually hear it where it 
initially was not intended to reach and then that makes it 
usable in that market.
    So what you are seeing is economies to scale for the 
benefit of profitability more so than the benefit or serving 
the public needs. And I am not saying you should never use 
automation, but I think what the intent is, go buy this 
station, lay off seven or eight of the people, or more, and 
just replace it with the one program manager.
    Mr. Mays mentioned the gentleman that is doing a good job 
of programming in Syracuse. What about the sales staff that 
they brought in? What happened is the sales manager for the 
urban station is no longer there because there is no need for 
him. They can use their other station sales managers to sell 
that urban station. So they are taking out and not necessarily 
putting back, but making it appear that whatever they replace 
it with was needed and is of the public interest, which I do 
not think it is.
    And then on top of that, I think you really risk the danger 
of not really having diversity. You have Mr. Lowry Mays' 
viewpoint of the world, and I am not sure that everybody is 
ready for that.
    I do not want to go from the plantation to the ranch just 
to say, well, I have a place to live. I would like to own. And 
that is the issue here. You have Americans who actually believe 
in the American dream, that if you do certain things, own your 
business, serve the public, stay out of trouble, educate 
yourself, that there will be a reward, not a penalty, not some 
guy coming in and saying, eliminate all little guys. Or he may 
not say it exactly that way, but implementing tactics that 
result in the elimination of independent operators.
    So now you have no diversity. You have answering machines 
sitting there running busy instead of an individual providing 
customer service. How many of you have dialed a 1-800 number 
and it is frustrating. You say, where are the people that work 
at this place? We do not want to leave a message and have them 
get back to us. They are not going to get back to us unless you 
leave a number saying I am willing to buy some commercials, 
please call me. Then someone will get back to you.
    So I think it is a tragedy to have diversity of ownership 
suffer by eliminating these owners, putting Mr. Mays' opinion 
of what that community should have in that market for the 
benefit of basically Mr. Mays and his shareholders. It is all 
bottom line, and if you, the lawmakers, allow Clear Channel to 
own 3,000, you will be sitting here 5 years from now, again 
with Mr. Mays, and he will have 3,000 stations probably.
    Senator Wyden. Mr. Mays, I am sure you want to respond.
    Mr. Mays. Well, I think I have covered the point that Mr. 
Short has accused us of running some automated jukeboxes around 
the country which could not be further from the truth. 
Certainly we have a sales manager in that station in Syracuse.
    I would just say that it is just common sense that each one 
of our radio stations has to be independently serving their 
local communities or there would be no reason why we would have 
your constituents listen to our radio station and like the 
information and the entertainment that they are receiving and 
our advertisers who use that audience to sell products to. It 
is just inconceivable to me why anyone would think that we 
would tear down that commitment to the local community for 
every single one of our radio stations and not do the research 
in every single market to support the information, news, and 
entertainment that we put on each individual radio station. 
Whether it is in Illinois, Oregon, or Arizona, it is all the 
same. It is a commitment to the local community and we are not 
in business unless we adhere to that.
    We do not run automated answering machines. We have huge 
staffs in every one of our markets. Smaller markets are 
somewhat smaller than here in Washington.
    But let me just say that when you are at the maximum limit 
in Washington, D.C. with 8 out of the 56 radio stations and you 
have 200 satellite radio stations, 9 daily newspapers, 20 
weekly newspapers, 13 television stations, and you are trying 
to compete to sell your customers' products, which is our 
business--we are in the business of selling our customers' 
products and through our audiences, the advertising that we 
sell, we hope that we do accomplish that. It is our absolute 
commitment to be a public service conduit to every single 
market that we are in, which we do achieve in every single 
market that we are in.
    But to be accused of playing some homogenized McDonald's 
format on every one of our stations would be a way to the road 
to disaster. We just cannot do that, and I do not understand 
why people at this table assume that we can.
    Senator Wyden. My time is up. I would just say, Mr. Mays, 
we know that you do your homework, that you do research on 
various communities. What concerns me is whether or not the 
industry is going to be straight with the listeners, and that 
is why I asked whether your station had a policy of disclosing 
when the deejays were not there locally. You were candid, which 
is to your credit, that you do not have the policy. That is the 
kind of thing that I want to see in the future because I think 
the public has got a right to know.
    Thank you, Mr. Chairman.
    The Chairman. Senator Smith, thank you for your patience.

                STATEMENT OF HON. GORDON SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Mr. Chairman. I have been in and 
out this morning trying to cover commitments in three different 
committees, but I particularly appreciate your holding this 
hearing because I think it is so interesting and it is an area 
I am trying to get up to speed on.
    But it frankly strikes me that if it was not this industry, 
we could bring the airlines in here and have the same 
discussion. We could bring the banks and the credit unions in 
here and have the same discussion. We could bring the farmers 
in who complain about packer concentration. Then we could bring 
the packers in to complain about retail store competition. This 
is called the marketplace and it seems to be working.
    This area is new to me and it is fascinating to me. I 
earned my living growing and processing peas. I remember when I 
first got into my business, there was Green Giant and there was 
Bird's Eye, and they dominated everything. Now they are just 
labels. They do not even produce anymore because some of us 
figured out how to pick up the crumbs falling from their table, 
and little businesses want to become big businesses.
    It does seem to me what I want to focus on, is there 
anything in this system that prevents little guys from becoming 
big guys like Clear? That I think is the real central question 
we have to ask because right now United is bankrupt and JetBlue 
and Southwest are prospering. They figured out how to undercut 
those guys to provide customers quality service and price.
    I just think it is impossible for us as U.S. Senators to 
figure out the intricacies of every industry. What we have to 
make sure of is that the door is open to newcomers, that 
monopolies do not exist, or at least there are the abilities to 
stop illegal activities which prevent newcomers and new capital 
from coming in. I guess that is really my central question.
    I think the proposal here is that we have ownership caps. 
My question is, how do ownership caps actually translate into 
getting more local people on local stations? I am not sure I 
understand that nexus.
    I also think, Mr. Chairman, one of the benefits of your 
having this hearing is that Mr. Henley, whose music I have 
loved since I was a little boy----
    [Laughter.]
    Senator Smith. Actually we are probably the same age. But 
he has the ability to come here and complain and express the 
fear that he might have retribution. I bet you will not because 
we are going to be watching to make sure you do not. So I thank 
you for your courage to come here.
    I frankly plead with the industry generally to make sure 
that if there are features in how you do your business that 
look like payola, look like a bribe, that you purge yourself of 
those things.
    But I guess my question is, is there a proposal here like 
ownership caps that actually makes sense to help local artists? 
And what is the nexus there? I ask that just for information.
    Ms. Toomey. Mr. Chairman, in the interest of fairness, I 
want to address first Mr. Fritts' attempt to discredit our 
study. We are not a rogue organization. We represent over a 
dozen artists' organizations, and we have 40 letters of support 
for the study with everyone from all the unions, Don Henley's 
group, the Arts Empowerment Coalition, Just Plain Folks, 
everything from very big and small organizations, consumer 
groups, Consumer Union, Consumer Federation, Media Access 
Project, et cetera. All of them have looked at our study and 
said the numbers ring true.
    Now, Mr. Fritts does raise an interesting issue. We cite 
most of the studies that he offered up in comparison to our 
studies within our study because we say these studies tell us 
half the picture. They just do not tell us the next. It is 
almost as if the detective has chased the thief into the 
drawing room, but then does not look in the closet, and what 
our study does is it goes into the closet and says this is 
where the problems are.
    The problem is, as soon as we put our study out, the NAB 
said, well, you have got the wrong numbers. Now, the reason it 
has taken so long for us to do a study like this is because it 
is expensive to buy industry data, and it was very important to 
get a grant to do that kind of work. But the fact of the matter 
is this should be public data, and if anything really good can 
come, if we can understand how these dramatic changes are 
affecting the landscape, what we need to know is publicly what 
is happening at all of these radio stations.
    So one thing that I would suggest maybe come from a hearing 
like this is the idea that we make, as a requirement of a 
station's license, that they file certain pertinent bits of 
information that tell publicly so citizens groups and musicians 
and artists can all see the statistics that it took so long to 
bring forward. I think if we could see them and anticipate what 
trends are coming down the line, we might be able to adjust for 
them and make sure that the full diversity of citizens are 
being served by the public airwaves.
    Senator Smith. What you are asking in law is some 
regulation that requires so much local content in what is 
presented by these stations.
    Ms. Toomey. Even more basically, just information about the 
stations themselves so that we can know what percentage of 
marketplace they are controlling, what other connections they 
have, whether they are actually programming stations whose 
licenses they do not own but who they have a relationship with 
which extends the number of stations they have in a market.
    Senator Smith. Mr. Fritts, is there anything about 
ownership caps that in your view assures the local producers of 
music get on the air?
    Mr. Fritts. Well, I am not a very good singer, but if I 
wanted on the air, I would have to get on on the merits, quite 
frankly. Put it this way. If there is a worthy artist, they 
will make their way onto the air.
    I used to own and operate a chain of small town radio 
stations, and I know the system pretty well. Our stations were 
so small that no independent record promoter wanted to come to 
us. We programmed for the local community just as radio is 
doing now.
    I think the overview here is that the FCC has in the public 
record documents that Ms. Toomey was talking about, and we 
would be happy to provide a response to the myths that are 
sometimes alluded to in these studies.
    The problem, I would submit, that Mr. Henley has, is not 
with the radio stations but, indeed, is with the record 
companies. There are only five record companies and they 
operate as monopolies, and they dictate to the artist what the 
terms and agreements will be. And if it is different than that, 
then I would like to hear it.
    Senator Smith. So after the food industry and then the 
banks and credit unions, we ought to bring the recording folks 
in here too.
    Mr. Fritts. Just one final point. Mr. Mays has not always 
been a large company. He started with one radio station many 
years ago and built his company in the American system.
    Senator Smith. Is there anything in the system that would 
prevent a start-up operation--like Mr. Henley may want to start 
a radio station--is there anything that Mr. Mays can do to him 
to prevent him from going into this business if he so chooses?
    Mr. Fritts. Not that I am aware of.
    Senator Smith. Mr. Henley.
    Mr. Henley. Well, if I was going to get in the radio 
business, I should have done it in the 1970s.
    [Laughter.]
    Mr. Henley. But you and I have more in common than just my 
music. I know something about farming and I know something 
about peas because I grew up on a farm in East Texas picking 
peas for my father. And what has happened to the radio industry 
is exactly what has happened to the agriculture industry. I am 
a member of the American Farmland Trust, and I know about the 
decimation of the small family farms in this country. They have 
virtually disappeared. Why? Because big agribusiness has taken 
over the industry, and that is exactly what has happened in the 
music business.
    You can do all these research models and you can 
concentrate on the business factor, but what is left out of the 
equation is the impact on the culture. In my humble opinion, 
research has ruined the radio business because of the way they 
do it. They do call-out research. They do focus groups. They 
will bring people into a room or they will call them up and 
play 10 seconds of a song to them, and they will say, do you 
like this? They will do even galvanic skin response, for 
Christ's sake, and see if the heart rate increases. That is not 
the way people listen to music. People have to become 
acquainted with a song. It has to grow on them, and music does 
not get a chance to do that anymore.
    So in my estimation, research has ruined radio. It is not 
realistic. It does not have a human element or a human factor 
in it. Everything is built on a business model, and that does 
not take into account our culture and our feelings as human 
beings and our emotions and our need for creativity and 
expression.
    Senator Smith. Thank you.
    Mr. Short. To answer your question, I think it is similar 
to me saying could someone, one individual, start the next 
Microsoft or start the next General Motors or next whatever 
giant corporation that exists? Technically the answer is yes, 
but realistically how can you do it, particularly given that 
you have a monopoly in place. Many of these companies I just 
mentioned were kind of like the first and that was their in. 
Now that everybody knows how to do it, it is unlikely, since 
everybody knows the secrets, that there is going to be the next 
one anytime soon.
    Clear Channel was basically first. You know, they were in 
position. When the law changed, they were out of the gate. They 
did whatever they had to do quickly and, maybe to their credit, 
they saw a loophole and they took advantage of it. Now that 
other people see this loophole, they say, well, let us try to 
jump through it. Well, the knot is a little smaller now and you 
might get hung trying to go through there.
    There are other reasons. Access to capital is extremely 
difficult. Who is going to lend a small entrepreneur first time 
out of the gate many, many millions of dollars to go up against 
a giant? I would not risk my money with that scenario and most 
other prudent businessmen or women would not either.
    I think Senator McCain had mentioned earlier, when he 
started, about the legislation for a tax certificate or 
something of that nature. I think that we do need to look at a 
tax certificate with some provisions for small businesses and 
particularly for minorities.
    One of the things that happened, if you look at the history 
of the telecommunications acts in the past, from 1934 through 
1978, hardly any stations were owned by African-Americans. It 
was not because no African-American thought of the idea. Who 
was going to lend you the money? And then who was going to 
advertise after you got it? But they made provisions with the 
tax certificate that allowed a significant growth in minority 
ownership from 1978 through 1996. That is probably the greatest 
growth in terms of African-American and other minority 
participation in the broadcast industry.
    And then came the bolo punch, the knockout punch in 1996. 
While they had all these supposedly great intentions, it for 
practical purposes was no better than the guys who invented the 
leisure suit. I mean, it was supposed to be a nice style, but 
who needs it now? Get rid of it. If it is no longer 
appropriate, if it is no longer relevant, make adjustments.
    The 1996 Telecommunications Act was supposed to be an 
amendment to the 1934 Act, not a replacement so that the new, 
smart lawyers can figure out a way to make one or two or three 
companies control not only the media but control--look at the 
elections--control the public viewpoint. If you own the 
airwaves, you can basically push whatever agenda that you have 
personally, and it may not necessarily be the agenda that is 
best for the country.
    So I would say institute a tax certificate, make banks and 
lending institutions lend money. And if you take away some of 
these stations--Clear Channel has what? I have information that 
says--well, correct me. He has got his information. But Clear 
Channel has an estimated revenue of over $3 billion annually.
    Senator Smith. But if you want to go into Mr. Clear 
Station's business, can you do that?
    Mr. Short. Can I do what?
    Senator Smith. You may have to have a business model. You 
may have to go get a loan. Can you get into the business? Can 
you get a license?
    Mr. Short. Yes, you can. If you are a U.S. citizen, no 
felony, and you have a few bucks in your pocket, yes. Will you 
survive?
    Senator Smith. Can you be a JetBlue? I do not know. That is 
just a question I am asking. I want to make sure that we have 
the kinds of regulations that give people ins to it, but in the 
end we cannot guarantee that anybody succeeds.
    The Chairman. Can you be a family farmer?
    Senator Smith. That is a great question. I know some family 
farmers that are doing very, very well, and there are some that 
just do not. And I know a lot of food processors very 
frustrated with Wal-Mart because they absolutely dominate the 
market. But eventually somebody is going to figure out how to 
do better what Wal-Mart does.
    Mr. Short. But it is frustrating. I did that. I was the guy 
who was an accountant. I was the guy who believed the American 
dream that, yes, you could own a radio station. When I had my 
station--and Jim Winston is behind me sitting here--there 
probably were not 100 African-Americans who owned a station at 
that time. And Mr. Mays talks about more African-Americans 
owned stations. Well, I think there are more African-American-
owned stations, but the number of African-American owners is 
down. You have maybe Radio One, Inner City, and a few companies 
like that that have a lot.
    So now the chances--if you are an African-American growing 
up in this country, and you say, you know what, this guy over 
here made $3 billion in radio advertisement, I think that is 
what I want to do, I do not want to be a teacher, I do not want 
to be a scientist, I want to be a broadcaster if they have got 
that kind of money in broadcasting, how can that person do it 
with monopolies in place, limited access to capital? There 
seems to be no end in sight.
    Senator Smith. Monopoly is a legal term of art.
    Mr. Short. Oligopoly, monopoly. If it walks like a duck, 
quacks like a duck, it is a duck.
    Senator Smith. But that is why we have the Sherman 
antitrust law, and I assume that they are going to enforce it. 
I guess what I want to find out, are they enforcing it?
    Mr. Short. That is a great question.
    Senator Smith. Are there things that are going on in this 
industry that make it impossible for others to compete against 
monopolies? Maybe there are, maybe there are not. But if they 
are big businesses, they tend to be called monopolies, and I 
want to make sure that little businesses are not impeded from 
becoming big businesses by some structural impediment.
    Mr. Short. Right. The DOJ had said that, I believe, if you 
exceeded the 40 percent ruling, if you owned more than 40 
percent of the market, many of these companies that were trying 
to buy more in that market were denied because you were 
considered to have enough market dominance.
    Syracuse is a good example that either the DOJ has kind of 
looked the other way or there are new rules or something, 
because they have greater than 40 percent. And then you go out 
and you combine your strength in radio by purchasing television 
stations in the same market. So it just goes on and on.
    Senator Smith. Just an editorial comment.
    The Chairman. I think Mr. Mays is eager.
    Senator Smith. I think he wants to talk.
    I just want to say big is not always better. Bigness does 
not always equal most profitable. So sometimes when you get too 
big, you are going to find all kinds of inefficiencies that 
come from scale and they are going to break you down and you 
are going to get some competitors coming in that have figured 
out how to take you down.
    Mr. Mays, is anybody working at taking you down?
    Mr. Mays. I do not know, but certainly United Airlines 
might have a different view of that.
    Let me say that 20 percent of the industry revenues is not 
a monopoly.
    The Chairman. Mr. Mays, on that subject, according to Media 
Access Productions, BIA Financial Networks data, May 16, 2002, 
Clear Channel's revenue was $3.25 billion, 27.5 percent of the 
revenue share. Now, if you have different information, I would 
be glad to have it. But BIA Financial Networks is a reliable 
gauge. That was for 2001. But $3.25 billion is a pretty good 
amount of money. And big may be better or worse, but where it 
is 27.5, I will be glad to get whatever information you have.
    Mr. Mays. I think those industry revenues are wrong, and I 
think----
    The Chairman. So the BIA Financial Networks are wrong.
    Mr. Mays. Yes. And I think since that was published, they 
have come out and said that those industry revenues are wrong 
and the industry revenues are $16 billion. I am looking at an 
independent report here that says Clear Channel does, in fact, 
have $3.2 billion in revenue, and that is 18.7 percent of the 
industry revenue.
    The Chairman. What independent organization is that?
    Mr. Mays. This is a Bear Stearns source, BIA Financial 
Networks.
    The Chairman. I do not want to waste the time of the 
Committee but we would be glad to hear your information. I am 
proceeding on the information you got 27.5 percent of the 
revenues by a reliable source. And if you have a reliable 
source, we would be glad to correct the record.
    Go ahead, please.
    Mr. Mays. Okay, excuse me.
    I would say it depends, Senator, on what that individual 
radio owner would like to do. I think obviously with almost 
4,000 owners, that you have a lot of one-owner radio stations. 
I mentioned earlier that Jerry Lee in Philadelphia is the 
number one station, the most profitable station in 
Philadelphia. He operates one station. It is very successful. 
He does not want to own 2 or 10 or 1,200.
    But there are other companies that have recently entered 
the market. Certainly Radio One, which is basically an African-
American-owned company, has grown considerably on a percentage 
basis much faster than we. Spanish Broadcasting, Hispanic 
Broadcasting, Telemundo. Salem, which is a religious 
broadcaster has been growing their business. I think the answer 
to your question is, yes, the barriers of entry are not 
overwhelming for a person to build a large company within this 
industry, and I think we are seeing that every day.
    There are 10 percent more minority-owned stations since 
1997 to 2002.
    The Chairman. Is that an increase in minority owners or 
minority ownership stations?
    Mr. Mays. I am not sure, Senator. My data shows----
    The Chairman. I am sure.
    [Laughter.]
    Mr. Mays. But minority owned companies. The difference is--
--
    The Chairman. Please proceed.
    Mr. Mays. Okay. And I am sorry I do not have that data, but 
the data is they are 10 percent owned by minority-owned 
companies since 1997.
    I would like to also respond to what Mr. Henley----
    The Chairman. Again, could I put that in a different 
perspective since we are dealing with statistics? I think that 
is from 2.75 percent of the market to about 3. some percent of 
the market, that 10 percent increase you are talking about.
    Mr. Mays. But let me say, Senator, we concentrated our 
efforts in the divestiture required by the Justice Department 
in our last large acquisition, and we sold $1.5 billion worth 
of radio stations to the minority community. And there were a 
number of different owners that we could have sold that $1.5 
billion worth of properties to.
    And then as I said, we also co-established a fund called 
the Quetzal/Chase Fund and funded it ourselves with $15 million 
to provide funds for minorities to buy broadcast properties. 
And we strongly support your bill and we will be happy to do 
anything that we can to help that get through these halls.
    I would like to also say that Mr. Henley accuses us of 
doing too much research and broadcasting to the mass audiences 
in our individual markets based on research, and then says that 
we do not play anything except what the record companies tell 
us to play. I mean, it is inconsistent.
    But I would say, again, that our whole focus is serving our 
local communities and nothing can take us away from that, Mr. 
Chairman.
    And I really do appreciate you having us here today.
    The Chairman. Well, thank you.
    I just want to point out again it is interesting how we 
talk about statistics. I think it is pretty impressive when you 
say there has been an increase of 10 percent in minority 
broadcasters. In a little different perspective, it was 2.7 
percent of all broadcasters in 1991. It is now up to 3.8 
percent. I understand that minority includes Hispanic as well 
as African-American and other minorities. I do not think that 
that is quite what we had in mind, is it, Mr. Short?
    Mr. Short. I would certainly hope that such pathetic 
numbers are what we had in mind.
    The Chairman. That is why I am introducing the legislation 
today.
    Mr. Fritts, please, go ahead.
    Mr. Fritts. Mr. Chairman, let me give you a success story. 
One, we agree with you that the numbers for African-American, 
for Hispanics and other minorities of ownership of stations is 
under what it should be and could be, and we have a number of 
programs in effect that we are helping to alleviate that 
problem in terms of training, in terms of helping secure 
capital access to the capital markets, but more especially, the 
biggest boost will come when your legislation passes. We think 
that is a very important part of that.
    There is a gentleman named Al Vicente. He is a former NAB 
board member. He is an African-American. He is currently buying 
radio stations and has built up a group from about a year-and-
a-half ago until now, somewhere in the neighborhood of 20 radio 
stations that he is buying and operating himself as local 
stations in various markets. And while that is not enough to 
move the number substantially by itself, it is a start, and it 
indeed answers Senator Smith's question of is there an 
opportunity and can it be done.
    I would point out one final point. On a personal basis, my 
son sells advertising for a radio group in competition to Mr. 
Mays' group in Jackson, Mississippi. While it is tough 
competition, as a salesperson he is doing quite well, thank 
you, in a tough marketplace and does not have any complaints 
about what is going on in the marketplace.
    So it can be done. He would like to be an owner himself, 
but unfortunately he does not have access to the capital 
markets to buy where he would like to, but maybe some day.
    The Chairman. Well, this has been long, and I apologize to 
the witnesses for the length of this hearing. Obviously there 
is a great deal of interest.
    We intend, most likely, to have additional hearings, 
including television, newspaper, other ownership issues. It is 
topical because the FCC may be making some decisions and we 
hope that we can add to their base of knowledge. We had a 
hearing not long ago where we had five FCC commissioners, and 
there were varying levels of concern amongst those five 
commissioners about this issue of media concentration. So I 
think we need to continue to look at it.
    I think Senator Smith's point is well made, that things 
have a tendency to balance out, but I also think in some cases, 
such as minority ownership--I apologize that I do not know the 
total percentage of the American population that are 
minorities, Hispanic, African-American, Asian, et cetera, but I 
would imagine it is significantly more than 3.8 percent which 
is the percent of ownership of radio stations--of broadcasting. 
And I think that that is an important factor because that is 
where people get their news and information and everybody 
should have the right to get different messages of different 
kinds. This is really what this is all about.
    We also do not want to stifle artists, especially new and 
emerging artists, and I am sure, Mr. Mays, that you are 
sensitive to that issue as well. I also understand some have 
raised questions about fewer and fewer numbers of songs that 
are being played on some stations, and that is an area that we 
did not discuss. But I hope that this will spur more of a 
national debate, more information being exchanged, better 
information both for the Federal Communications Commission, as 
well as Members of Congress in general, in this Committee in 
particular.
    I thank you for your contribution today. I thank you for 
being here. And speaking as one Member of the Committee, this 
has been a very important and very helpful hearing, and I hope 
we have been fair to all.
    This hearing is adjourned.
    [Whereupon, at 12:41 p.m., the Committee was adjourned.]

                                  
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