Cover Story

When he attended a National Association of Broadcasters convention earlier this year, Tony Yoken, general manager of WSSR-FM Star 98, brought back a souvenir pin that sums up the unprecedented flurry of activity in the national radio industry this year. The pin asks a seemingly simple question: "Quick: Who’s your owner?"

A recent wave of frantic buying and selling — Yoken refers to it as a "whirlwind" — makes the question tougher than it looks. Pending FCC approval, eight of the top-10 stations in Memphis will find themselves under new ownership within the last 10 months. This shuffling of the deck, both in Memphis and nationally, has led to more and more stations falling into fewer and fewer hands, renewing the debate over the pros and cons of market consolidation.

Proponents claim that centralization is good for the industry, arguing that the "economies of scale" commanded by larger companies will serve to streamline operations, increase the quality of broadcast content, and make radio a more efficient and viable vehicle for advertisers.

Opponents worry that too many stations in the hands of too few companies could lead to de facto monopolies controlling advertising rates and endangering the very existence of smaller operators. Three times this year, the U.S. Justice Department has intervened in instances where it felt that a single company’s ownership in a market threatened to reach levels exceeding anti-trust guidelines. Most notably, Justice proposed a settlement last week allowing Westinghouse Electric and Infinity Broadcasting to complete the largest merger in the history of radio. As part of the deal, the new company must divest itself of one station in Boston and another in Philadelphia.

Such a merger would have been impossible before the February passage of the Telecommunications Act of 1996. Prior to that legislation, a single company was limited to the so-called "rule of twelves," which limited nationwide ownership to 12 AM stations and 12 FMs. Prior to 1984, regulations were even stricter, limiting ownership to seven-of-a-kind nationally. While the act has drawn more attention for its deregulation of the telephone and cable industries, one of its less publicized effects was to completely eliminate national caps on how many radio stations a single company can own while dramatically raising the number of stations a company can own in a single market. For markets with between 30 and 44 stations, like Memphis, ownership is limited to seven, with no more than four in one band (i.e. AM or FM).

The loosening of these restrictions kicked off a feeding frenzy in the radio industry. No longer encumbered by previous regulations, single companies found themselves controlling much larger percentages of the local radio advertising revenue as well — upward of 50 percent in some cases. With that degree of market concentration, anti-trust concerns began to loom large.

In three cases to date — involving Jacor Communications in Cincinnati; American Radio Systems in Rochester, New York; and last week’s decision on Infinity/Westinghouse — the Justice Department has stepped in to force divestiture of stations to assuage anti-trust concerns. Although anti-trust decisions are based on a variety of factors, observers say that the ruling seems to be setting the local ownership limit at around 40 percent of a market’s radio revenue.

Memphis has not gone untouched by this "radio land rush," as Rolling Stone recently dubbed it. Earlier this year, Baltimore-based Sinclair Broadcast Group acquired WRVR-FM (104 FM), WJCE-AM (680 AM), and WOGY-FM Froggy 94, all previously owned by Keymarket Communications of Augusta, Georgia. Likewise, the WMC family of stations (TV Channel 5, WMC-AM, and FM-100) were sold to Raycom Communications, which is owned by Retirement Systems of Alabama.

One of the most active players nationally has been Texas-based Clear Channel Communications. According to recent surveys, Clear Channel has the second-largest total radio audience and is tied for first in number of stations. The company is poised, pending FCC approval, to become the biggest owner of Memphis stations, bagging their limit of seven.

This time last year, Clear Channel didn’t own a single Memphis radio station. It acquired television station Channel 24 (WPTY) in 1992 and began operating Channel 30 (WLMT) in 1993. In just two deals — acquisitions of U.S. Radio along with Radio Equity Partners — Clear Channel gained an unprecedented foothold in the Memphis market.

With the acquisition of U.S. Radio — the only deal finalized to date — came ownership of WHRK-FM K-97 and WDIA-AM, which were first and second respectively in the latest Arbitron ratings. In conjunction with that transfer, Clear Channel also agreed to buy KJMS-FM 101 Jams, the fourth-rated station in Memphis, and KWAM-AM, both of which are currently licensed to the Florida-based Rivers Group.

The acquisition of Radio Equity Partners will add fifth-ranked WEGR-FM Rock 103 and its sister stations, WRXQ-FM 96-X and WREC-AM. Despite these acquisitions putting Clear Channel near the 40 percent revenue-share threshold, most of the experts interviewed for this article think the applications will be approved, giving Clear Channel control of four of the top five radio stations in Memphis. Its seven stations will control 39.6 percent of the listening audience, according to Arbitron. The new Clear Channel lineup would also control 40.4 percent of Memphis radio ad revenue, according to 1995 estimates from Broadcast Investment Analysts. Last month, a Broadcasting & Cable cover story on Clear Channel included a chart with the legend "Memphis: A one-company town."

The effect of this consolidation on the Memphis market is unclear, but most observers agree that such developments historically lead to consolidation in facilities and personnel. "In the long run, I think it will be good for the radio business," says Bob McDowell, associate professor of communication at the University of Memphis. Larger companies have the resources to produce what McDowell calls a "better overall product."

According to U of M journalism professor Jim Redmond, consolidation makes good business sense. "Strictly from a business standpoint, the smartest thing in the world to do," he says, "is to go into a market, buy up a bunch of stations, collapse them all into one, replace five program directors with one, replace five sales staffs with one, five general managers with one, and all the way down the line. ... Your profits are going to shoot through the roof. That’s good solid business."

The problem, Redmond contends, is that broadcasting is "not just a business. It’s a business conducted on the public airwaves." In his view, the FCC has abrogated its responsibility for regulating the broadcasting industry. The theory behind stricter ownership caps, he says, was "that when you create a multiplicity of owners, you create a multiplicity of everything, so you have a greater range of activity and you’ve got more voices out there."

Fewer owners, conversely, equal fewer voices. "Initially, the argument is: ‘We have the economic power to better serve the market,’" Redmond says. "But the reality of how economic power is used is that it is normally used to increase the economic power."

That power is enhanced by controlling a large portion of a market’s advertising revenue. In the case where the Justice Department intervened to keep Jacor from controlling more than 50 percent of the Cincinnati market, the feds concluded that such a high market concentration would result in some advertisers having to pay between 5 and 10 percent higher rates.

Among those in favor of the intervention was the American Association of Advertising Agencies, the so-called 4As. "Media-buyers were very concerned about a 50 percent concentration, because it’s almost impossible to buy around," explains John Kamp, senior vice president of the 4As in Washington.

Critics of the Justice Department’s decision don’t think the radio industry should be considered a market unto itself, since radio revenue represents only about 7 percent of all advertising revenue. Attempts to increase ad rates, they argue, would simply force buyers to other media, such as television.

Kamp disagrees: "For some advertisers, there isn’t an economic alternative to radio." In particular, Kamp cites teens as a segment of the population that is best reached through radio, especially for local advertisers.

Memphis media-buyers are taking a wait-and-see attitude. "The concern is that if they [Clear Channel] get a lock, they get the market," says Wil High, vice-president for media services at Archer/Malmo Advertising. "We haven’t seen anything at this point."

Ann Felty, media buyer for Walker & Associates, says she’s not too concerned. "It could cause a little bit of collusion on their part, but I don’t foresee that happening," she says. "The stations will stand on their own. It’s not going to make a huge difference except for management turnover and that sort of thing."

Another concern that comes with one company owning a bulk of a market is the viability of smaller operators. As Don Meyers, general manager of WMC’s two radio stations, says, "If Clear Channel has seven radio stations, that would make them a giant in this market."

According to Meyers, such a large group of stations could command more dollars because of its perceived efficiency, while potentially squeezing out smaller operators. Curt Peterson, general manager of the Sinclair stations agrees. "It has a chance of hurting the small single-station operators," he says, adding that stand-alone stations may find themselves targeted by buyers.

When all pending deals are finalized, there will be only two remaining locally owned, stand-alone stations among the top 13 in Memphis — sixth-ranked WLOK-AM and number 13 WMFS-FM — both of whom have rejected offers to sell.

"The concerns I have are those anyone would have when there’s potential monopoly control of a market segment," says Art Gilliam, general manager and majority stockholder of WLOK, a successful AM station with a gospel format. Gilliam expresses his concern not only about any single company monopolizing the radio market, but also monopolizing the African-American segment of that market. Clear Channel’s acquisition of K-97 and WDIA gave the company outlets reaching 59 percent of Memphis’ vast African-American audience. The pending acquisitions would push that number to 74 percent, according to numbers from International Demographics, Inc.

"I think there are potential problems," says Gilliam. "Whether those problems will materialize remains to be seen."

Sherry Chimenti, general manager of WMFS, is more optimistic. "I don’t feel we’re going to be affected by it," she says. In fact, she says stand-alone stations will have advantages, such as the freedom from worrying about stepping on the toes of other stations — a problem that comes with being a part of a group.

The changes brought about by Clear Channel’s big move into Memphis remain to be seen, particularly in terms of broadcast content. "Inherently, it has the potential for limiting the content by virtue of limiting the ownership," says Redmond. "The vision of the owner becomes the vision of the company. That happens everywhere."

McDowell, who sees the latest changes in the industry as beneficial on the whole, agrees. "When one company takes over others," he says. "That company has a basic philosophy that will affect the content."

Sherry Sawyer, general manager of Rock 103, 96-X, and WREC-AM, and Bruce Demps, general manager of K-97 and WDIA-AM, declined to speculate on possible changes in the Clear Channel family after the licenses are transferred. "As I understand it, it would be business as usual," says Sawyer, "and that’s the way we’re approaching it."

Bill Moore, general manager of KJMS-FM and KWAM-AM, says he also expects "business as usual," but also said he expects KJMS’ format to "skew up" into the 25- to 54-year-old demographics, leaving younger listeners to K-97. That shift, he says, has been under way for some time.

The Memphis market is not yet as consolidated as some. In Orlando, for example, just three companies control 95 percent of the radio revenue. By contrast, the Memphis market will be dominated by four companies. Clear Channel will control 40.4 percent of ad revenue, with three other companies, Sinclair, Barnstable, and Raycom, combining for 50.9 percent, according to Broadcast Industry Analyst’s 1995 estimates.

Most agree, however, that changes in Memphis’ radio landscape are likely to continue. "The consolidation in the Memphis market is not over even after Clear Channel closes its pending stations," says Demps.

Although Clear Channel will have reached the ownership limit, other companies may seek to acquire more stations, putting them into even fewer hands.

Says WMFS’ Chimenti, "I don’t think the dust has totally settled."

"I love W-D-I-A," Bobby O’Jay says excitedly, savoring every one of the radio station’s call letters. "The secret is the sound of the station. It has always sounded like it had honey in it. It doesn’t sound like any other station. WDIA has a big, flavorful sound. When you listen to WDIA, you know you’re in the South."

After 14 years as the program director and morning drive-time deejay at WDIA, O’Jay still loves to talk about AM 1070. Like most black Mid-Southerners of his generation, O’Jay grew up listening to WDIA in awe of the station’s on-air personalities.

"I never thought I was good enough to be on WDIA," O’Jay says. "I’d been on the radio in Houston and in Chicago, but I never thought I was good enough for this station. But now I’ll be a part of its history."

WDIA has quite a storied history. It was the first station in the country to adopt an all-black format. It was the first black station to broadcast at 50,000 watts. It was also the first Memphis station to gross a million dollars. But most importantly, WDIA was the first station to present African Americans in a positive light. The WDIA personalities weren’t slobs or ugly caricatures. They were educated, articulate, and entertaining men and women who instilled a sense of pride in the black community.

"The people really own WDIA," says Bruce Demps, vice president and general manager of the station. "[Hearing] the sense of pride and emotional attachment that Memphians have for this radio station, you realize that it was more than an entertainment vehicle. It was part of their lives."

On October 25, 1948, the same year that Memphis first hired black postal clerks and policeman, Nat D. Williams debuted as the Mid-South’s first black deejay and inadvertently started a media revolution.

Williams, who stayed at the station until 1972, was soon joined at WDIA by Memphis radio legends such as A.C. "Moohah" Williams and Theo "Bless My Bones" Wade. He also helped launch the careers of Riley "Blues Boy" King and the venerable Rufus Thomas, who continues to spin blues records at the station on Saturdays.

But today this pioneer competes in a much different market. When WDIA first began broadcasting, Memphis had only five other radio stations. Now Memphis is home to more than five stations specifically targeted at a black audience. Nonetheless, in the most recent Arbitron ratings WDIA was the second-highest rated station in town, finishing behind only its sister station, K-97.

Inside the studios at 112 Union Avenue, O’Jay has tried to recreate the atmosphere of WDIA’s early days. In an era of "narrowcasting," WDIA’s philosophy hasn’t changed much in the nearly 50 years since its inception. Even after becoming part of the Clear Channel Communications empire in May, WDIA continues to offer an eclectic mix of programming, from R&B and talk to blues and gospel.

"The Goodwill Station" has also maintained its reputation as a community-oriented station. In its early years, WDIA raised thousands of dollars to provide a school bus service for disabled black children, grant college scholarships, sponsor a black Little League, and build low-rent housing. In the ’80s, the station raised $79,000 to save the Lorraine Motel (now the National Civil Rights Museum) from destruction.

"Dollars from this radio station were used to do things that social service agencies could not do," Demps says. "Name a non-profit organization here in Memphis, and we’re still involved in supporting them and working with them on things that are good for Memphis."

Still gushing, O’Jay says that WDIA is one-of-a-kind.

"WDIA is the last holdout," he says. "There are stations who could have done the same thing as WDIA, but they just gave up. They lost faith. When FM came into existence, WDIA kept fighting. Others gave up. But people don’t know us as an AM or an FM, it’s just a great radio station. We have the signal, the talent, and what it takes to compete. We just got into the ring and started fighting. And we’ve been knocking them out."