Statement of the Honorable Howard L. Berman
Senate Commerce Committee Hearing on Consolidation in the Radio
Industry
January 30, 2003
Chairman McCain, 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 (DOJ) and Federal
Communications Commission (FCC).
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, emails, 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 Lowrey 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'm glad they're here today because they should
have the 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 first-hand
accounts, you have to use your own judgement as to whether they
warrant an investigation.
But here are the most serious:
- Clear Channel (CC) denies, or threatens to deny, radio airplay
to recording artists if they use companies other than Clear Channel
Entertainment (CCE) to promote their concerts, if they refuse
to give local CC stations free concert tickets, or if they refuse
to do interviews and free drop-by performances for CC stations;
- CCE refuses to let artists play venues it owns unless the
artists agree to let CCE be the nationwide tour promoter, or
agree to use CCE venues in other markets;
- CCE uses predatory pricing to offer recording artists or
events deals that independent concert and event promoters cannot
offer;
- CC "parks" or "warehouses" radio and
television stations in certain markets in what seems like a violation
of legal ownership caps;
- By threatening to boycott them, CCE signs exclusive deals
with venues to ensure that competing concert promoters cannot
access these venues;
- CC has removed CC-owned programming, such as Rush Limbaugh,
from independent stations, and then given competing CC-owned
stations exclusive rights to carry this programming, in a clear
attempt to drive competing broadcasters out of business;
- Radio stations generally demand payment from record companies,
and Senator Feilngold 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 policymakers, 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 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 sources of revenue. Similarly, songwriters depend
on airplay of their musical compositions 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 can't afford them. The proof
is that the major record labels, independents, and several artists'
groups recently put aside their intramural squabbling and jointly
called on the FCC and Congress to address payola.
If, through its control of the air waves 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 believe that consolidation within an industry is not
necessarily an evil, independent concert promoters must at least
be given a level playing field on which to compete.
While I believe the allegations and negative effects outlines
above and additional ones that I detail in my written statement
merit a full investigation, it doesn't appears as if the agencies
with jurisdiction will conduct one.
The reaction of the DOJ has been most disappointing. In a
meeting with my staff, and a written response to me three 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 first hand evidence to, in
turn, contact the DOJ. To those who expressed skepticism, I asserted
the 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 never responded
to their overtures, or 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 Bush Administration would not
allow the DOJ to actively pursue antitrust investigations. But
I don't think this is a sufficient explanation. The ongoing investigation
of the Pressplay and MusicNet ventures, indicates the Bush DOJ
is interested in publicly 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 isn't it willing to
pursue allegations of actual anticompetitive behavior in the
radio and concert promotion industries?
I don't know the answer to this question, and judging by the
responsiveness of the DOJ on this issue to date, I do not expect
to get a response even if I ask it.
Anyway, that's why I am here today. I think that this is an
issue that Congress itself must deal with. I'm very grateful
that you're beginning that process with this hearing.
Thank you, Mr. Chairman.
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