Testimony from SENATE COMMERCE, SCIENCE,
AND TRANSPORTATION COMMITTEE
hearing on MEDIA OWNERSHIP: RADIO INDUSTRY
January 30, 2003
Senator Trent Lott -- Mr. Henley, I made an observation
at the beginning, and maybe you've addressed this, but is this
really about ownership caps and limits on competition or is this
about the problem with concerts and how that's handled?
Henley -- Well, I think it's about both, Senator.
I think they're 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 or break it"
format, only four radio companies -- Chancellor, Clear Channel,
Infinity and Capstar -- control access to 63 percent of that
format's 41 million listeners nationwide. And for the country
music format, the same four radio conglomerates control access
to 56 percent of that format's 28 million listeners.
Now, I remember when I first got in the business, professionally
that is, back in the late 60s and early 70s, there was a thing
called the 7-7 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 as of the 1996 Telecomm Act, this thing has just jumped
exponentially.
I don't see the wisdom in letting it go that far.
And from an artist 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...
I know there's payola because I get billed for it. My record
company bills me back for the independent promotion monies 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.
Mr. Mays alleged in his testimony that they're really in the
radio business; that the concert business is not really that
big of a deal for them, but I want him to understand that before,
another company called Concerts West was formed, in which I am
a minority, a small minority, shareholder. I'll 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 Pollstar's
reported concerts -- Pollstar is an entity that reports on all
the concerts and the revenues that happen in the industry --
according to Pollstar, Clear Channel Entertainment had a 95 percent
market share of all reported concerts.
So they are in the concert business. Big time.
Mays: Mr. Chairman, I, I, I, really have to respond
to what Mr. Henley said about payola at this point in time because
the five... The record industry is controlled by five record
companies. His beef is with the record companies. His beef is
not really with the broadcasters.
McCain: I guess he could speak for himself.
Mays: Fine, but I wanted to...
McCain: Thank you.
Additional comments by Henley when questioned further about
payola
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
or monthly sum of money to the radio station group or the individual
station. In fact, some stations rely solely on that as the majority
of their budget for the year. In exchange for this payment, the
radio station group agrees to give the independent promoter first
notice of new songs added to the playlist each week. And there's
some implication in there.
Stations in the groups also tend to play mostly records that
were suggested by the independent promoter, by the way. As a
result of the standardization of this practice, record companies
and artists generally must pay the radio stations' independent
promoters if they want to be considered for airplay on those
stations.
Record companies don't 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 they get an unfair advantage, However, none of the independent
promoters and none of the record companies are sending the checks
back. So I've got a beef with both the record companies and the
independent promoters and the radio stations.
I've got a beef with all of them.
The second payola practice occurs at the music labels. After
the music labels hire an independent promoter, to legitimately
promote their records to a specific stations for a fee. And reportedly
certain independent promoters use the label's money to pay the
stations for playing the label's songs on the air. I don't have
any proof of that, I've 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 with 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. You know, the radio stations ask the 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.
Henley's view on radio specifically
First of all, I think the FCC needs to take another look at
how it defines a particular market. As when stated before, when
Minot (ND) is included in the same market at Bismarck, and those
two in combination are considered to be one of the largest radio
markets in the nation, something's wrong -- with all due respect
to Minot and Bismarck. I think the FCC needs to re-evaluate and
take another look at how it defines a market, delineates a market.
I still have some things I want to say about localism but
in the interest of time, I'm just going to skip it. I just want
to say one thing.
There's been a lot of talk today about localism and how radio
stations are locally programmed to serve the interests of local
people. There's been intimations that local program directors
actually decide what is played on the local radio station. There's
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 talk
to are worried about two things primarily -- they're worried
about their severance; and they're worried about their non-compete
clauses. They get nothing whatsoever to say about what is played
on the radio.
Despite the examples that Mr. Mays has cited about the, uh,
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 playlist is virtually identical from station to station
to station with maybe a few aberrations here and there but the
playlist is virtually identical.
Everybody gets the same McDonalds hamburger. And if you like
hamburgers, it means you 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 be
abridged by either Congress or by the FCC."
And I think it is being abridged.
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