Media Curmudgeon

« Welcome Randy | Main | AOL is OK »

November 17, 2006

Bill Grimes on Clear Channel

Bill Grimes writes:

"The statement at the bottom of this piece is from 11/15's NY Times and it makes a number of key points--one which I argued strenuously in my 'Economics of the Media' class: That the media industry consolidation can be good or bad for our society depending upon the specific situation.

Radio station consolidation is not a case that I favored because it diminished the opporuntites for small buisnesses or private individual owners to participate as owners, i.e, the relative low expense of acquiring a radio station versus most other media proprties. The FCC misguided decision to permit a company to increase its radio station ownership from 14 stations in 1986 to at least 1200 twelve years later basically closed the door of ownership to many small buisnesses and individuals.

Worse was that, many owners in the past were citizens of the local community in which their station operated. Those days would be gone and the Clear Channel Commuincation (CCC) rapidly acquired more than 1200 radio stations.

The case I made in class was that eventually CCC, with its staggering dominance of the radio station industry (nearly 20% ownership of all US stations and its control of event venues in whch recording atrists played), would soon be unable to manage all these geographiclly disparate businesses.

Already the CCC share price had drifted continually down during last three years and was trading at 40% of its 2003 high. I figured that the company would likely begin selling many of its stations if only to accomodate Wall Street and investors.

Also, I knew that 25% of their stations made 90% of their profits, so keeping the unprofitable ones was simply a bad management decision. A bit of hubris, perhaps. Further, how could three or four people (including a father and two sons) manage successfully 1200 different operating businesses? Even Peter Drucker, Jack Welch and Bill Gates would be overwhelmed.

Also, I said that the prospect of having 5-6 huge media conglomerates was not a serious threat to reducing "the diversity of voices," certainly over any significant period of time and that certainly these conglomerates were not a threat to reduce total industry jobs. The "new media" has probably added nearly a million new jobs in the last ten years and it is difficult to spot any significant reduction in headcount when reviewing Annual Reports of Time Warner and News Corp. Happily, on this point there will likely be many new jobs in the radio industry after CCC sells 400+ radio stations (and their TV stations as well), especially since these stations are in "small" markets where more new jobs are usually sorely needed.

Students' concern about consolidation stifling dissenting voices on both information/news content and even on entertainment content was and is in my view unwarranted today given the explosion of "new" media, particulalry with the advent of blogging, which enables anyone to join the rainbow of political and social views continually spewed into the ethernet and available to 1 billion computers worldwide.

And, note the way these "new" media activities are increasing the number of new voices in old media. The New York Times, now includes daily reader response to many of its news and editorail pieces on its website (which had 30 million different viewers last month.) Imagine: readers having an expressed view in growing numbers at the NY Times! Perhaps some of this new User Generated Content is really Not Fit To Print and is seeping into the very veins of our venerated Lady, creating a plethora of new cacaphonous voices.

The FCC is not always wrong and the market nearly always is right.

NY Times: "Clear Channel (Communications) said in a separate statement Thursday that it would sell 448 of its 1,150 radio stations, as well as its 42-station television group. Overall, the properties up for sale generated less than 10 percent of Clear Channel’s revenue last year, and they are all in small to mid-sized markets, the company said."

Posted by Charles Warner at November 17, 2006 07:36 AM

Comments

Post a comment