Midwest Today, Spring 1999
Prior to 1996, the biggest radio station group in the country
owned 40 stations; now, some own ten times that number.
Over 4,000 of the nation's 10,455 commercial radio stations have been sold in just two years. The country has lost an average of three owners in each large market and one in each small market. The top ten owners have doubled their holdings, the number of independently-owned stations has been cut in half, and the percentage of stations owned by minorities has dropped from 3.1% to 2.8%.
Companies that have embarked on a buying binge have snapped up $35 billion worth of properties. The consolidation allows the biggest operators to reach the larger audiences that attract national advertisers, and also helps the companies boost profits by dividing costs across a larger number of stations.
The ultimate objective of the big radio owners was perhaps best articulated by Sam Zell, a Chicago real estate billionaire and chairman of Jacor Communications, the nation's second-largest owner of radio properties. Zell recalled the radio business as being "depressed" when he got involved in 1991. He said the industry was "over-leveraged and fragmented with mom-and-pop operations all over the country."
But then came deregulation -- what Zell describes as an "extraordinary, once-in-a-lifetime opportunity." Revealingly, he says "I was motivated by knowing that in 1920, there were 200 car companies in the United States. And I think since the mid-1950s, there have been only three."
Is this what Congress intended would happen to American radio, and where is the evidence of public support for this?
The trouble is, usually the only way the big boys can service their big debts is to cut operating costs. They often do so using Draconian methods. One of the saddest spectacles is how some prestigious, pioneering broadcasters -- stations which signed on in the early 1920s, for instance, and built proud histories of service to the public -- have been decimated by the big operators.
What typically happens is that the new guys come in and ruthlessly clean house. They fire longtime and popular air personalities so they can hire people at less cost, trim back news departments, abandon local autonomy in program decisions and eliminate budgets earmarked for community service. They often bring multiple stations under one roof and share air personnel. Aside from ruining staff morale, they shortchange the listener. To fill airtime, many of them rely on satellite-fed program content produced in some far-distant place - shows like Rush Limbaugh, Dr. Laura or Art Bell. And/or they rely on automated music run by computer.
Smaller suburban and outlying rural signals are often "moved in" toward larger and more lucrative urban markets as broadcast companies search for new properties. The result has been a loss of local service to the stations' "Community of License" and an excessive concentration of stations in the already congested larger urban areas.
Many rural communities across the Heartland have seen their hometown radio station abandon most or all of its local content. In many cases, entire rural regions are without any local radio, especially at night.
In the case of severe weather or other emergency, there is often no live radio to offer news and information. Local businesses lose when their hometown station shifts focus (and rates) to a larger metro area.
In the urban markets, ownership consolidation and its resulting increase in the street price of existing properties has forced broadcasters to abandon service to niche market segments, in favor of trying to appeal to the broadest common denominator.
Robert McChesney, an associate professor of journalism at the University of Wisconsin, bemoans this trend. "The electronic medium that should be the most de-centralized and the most open to local access and local ownership is becoming the most centralized and has the least access of any medium," he observed.
Enter the radio "pirates" or "micro broadcasters" as they prefer to be called - low-power and community-based, albeit illegal stations run by a ragtag group of latter-day First Amendment champions.
They are an eclectic mix of radical, conservative and, for the most part, selfless individuals who are filling a niche in countless communities throughout the United States. The programming they offer, often on a part-time basis and but a few hours a day or week, is diverse, edgy, educational or just plain fun.
What they lack in smooth professional voices, they make up for in enthusiasm for serving their local communities.
From farmers' fields to college dorm rooms, dance clubs to dining rooms, trailers, attics, basements, backpacks and even portable units hooked to car batteries, these guerrilla broadcasters beam their illicit fm signals with a power of anywhere from only ten to 100 watts. They are mere flyspecks compared with the 3,000- to 100,000-watt commercial FM goliaths that blanket entire regions.
These radio renegades, says Paul McMasters, First Amendment ombudsman for the Freedom Forum, "are the broadcast equivalent of the old anonymous pamphleteers or alternative newspapers."
McMasters says microbroadcasters are "more democratic right now, in the sense that they can reach the people that can't read and the people that don't have access to the Internet."
Yet Richard Lee, chief of the Fed-eral Communications Commission's compliance bureau, bragged to a group of commercial broadcasters that "in the 13 months I have been on the job, we have shut down 325 pirate stations."
Claiming it's worried about dial clutter and interference, the FCC has dispatched federal agents in a latter-day version of the old g-men raids on moonshine stills.
McMasters says "I think that is scary in light of the fact that the government is slapping these people around with great frequency and force."
He may be right about the overkill. Clandestine broadcasters have been hunted down and subjected to law enforcement muscle, including the use of choppers, submachine guns, flak jackets and other equipment and tactics usually seen in the takedown of killers or major drug lords.
Tampa, Fla. radio pirate Doug Brewer says his neighborhood was cordoned off and he was handcuffed in a chair for two hours as agents took thousands of dollars' worth of electronic equipment, only some of which was used to broadcast music on a low-power station beamed out of his house.
"I'm not a militia guy, and we never broadcast anything political on this station -- just music," said Brewer, 43. "Why in the hell would you consider me such a threat? They were treating me like a drug cartel guy or a hit man."
Since 1991, Black Liberation Radio, a small unlicensed pirate radio station in Decatur, Illinois transmitting with 15 watts, has defied authorities and found ways to continue its broadcasts. Napoleon Williams and Mildred Jones, the owners, have been fined, imprisoned, and had their equipment seized.
The Illinois Attorney General's office took the unusual step of launching the Decatur Police on a three-hour raid of the Williams home. Police cordoned off a two block radius around the house, cut BLR's power, batter-rammed the front door, and entered in full riot gear with gas masks and automatic weapons.
Williams was subsequently convicted of an obscure charge called "felony eavesdropping" because he tape recorded conversations he had on the phone with state officials and then played them on his station without their permission.
It's not just urban-based micro-radio operators who are getting into trouble. Roy Neset is a 51-year-old wheat farmer in North Dakota who got tired of the programming from his town's commercial station and started sending a satellite feed of right-wing talk shows into his field when he plows.
"I don't have time to run a radio station -- I'm a farmer," Nesit explains. "I just want to have something worthwhile to listen to as I work." But the fcc shut him down too, prompting Nesit to remark, "I didn't know what I was getting into when I started this, but now Big Brother is really flexing his muscle."
Pirates say the fcc is just kowtowing to the National Association of Broadcasters, a powerful lobbying group that represents licensed stations. Pirates suspect commercial stations fear their already diminishing audiences will be claimed by their low-power rivals.
Has the FCC lost sight of its charter?
The FCC was established by the Communications Act of 1934, and was given the responsibility of making a "fair, efficient and equitable distribution of ra-dio service" to the various communities of the United States.
But, says Louis Hiken, a lawyer for radio pirates, "When the law says you have to regulate radio stations in the public interest and you create a regulatory scheme that says nobody but the very rich has access to the airwaves, that's unlawful."
Until 1980, students and nonprofit or-ganizations could get a "Class d" license that allowed them to operate a station of ten watts or less. But that changed when commercial interests and the Corpora-tion for Public Broadcasting were successful in getting Congress to repeal those licenses, claiming too many "un-professional" radio stations were cluttering the airwaves.
Takes Deep Pockets
Launching a full-size, commercial radio station can cost as much as $100,000 to $250,000 in fcc licensing fees and engineering studies, plus capital costs that can easily exceed $1 million.
Rick Sellers, who bought an existing AM station -- KMRY in Cedar Rapids, Iowa -- says that even with an uncomplicated license transfer, his costs including law-yer's fees, were in excess of $13,000 for the paperwork alone.
Buying a new am frequency is next to impossible in most markets, because so few are available. Even if you've spent money on an engineering study and find a new frequency, guess what? The FCC then opens that frequency up for others to apply for and gives the license to the "most worthy" applicant, or holds an "auction" where the highest bidder wins.
FCC red-tape runs the bill up for anyone trying to acquire either an am or fm station, obviously stacking the deck in favor of the rich guys.
Since stations cost so much to start, broadcasters rely on shortcut methods to operate. Fortunately for them, advances in technology enable station owners to get by on skeleton staffs.
In the old days, when transmitters had vacuum tubes and unstable crystals, an engineering department was required to monitor operations and thus assure license compliance. These days, transmitters are solid state and even the small stations can be run by remote control.
A computer monitors transmitter function, and dials a predetermined call list to alert personnel after hours if there is a problem. Then it supplies a menu of op-tions and recommendations, enabling a solution to be implemented by the mere press of a key on the touch-tone phone.
Stations no longer have to employ people with fcc technical licenses to oversee operations. A secretary will do as the officially listed person of accountability.
Almost overnight, for good or bad, radio has been transformed.
The big operators "don't think long-term," observes Sellers, who has been in radio for 33 years but last year decided it was time to go into business for himself. He's bucking the trend with his independent-owned station, that's for sure.
The problem is especially acute in the nation's Top 50 markets, where half the stations now are part of a broadcasting chain, according to numbers compiled by Radio Business Report, an authoritative Alexandria, Va. trade publication.
Critics say that in the midst of all this acquisition fever, listeners are being left out of the equation. As homogenized programming takes over, listeners are tuning out. "America's Most Trusted Name in music research for radio," The Gavin Report, recently said that overall radio listenership has "hit its lowest point since 1981." It noted that "Since  the declines have been fairly steady, representing roughly a 9% loss over the last nine years." Gavin quoted several possible reasons for that slippage, including "...homogenized format offerings" and "...a trend away from 'localness.'"
Sacrificing local content will also make it difficult for over-the-air stations to compete with the satellite-delivered cd-quality audio programming that some companies will soon offer nationwide.
With all the big money on the line, there are some who are worried about the financial future of radio. Rick Sellers thinks the same fate that befell some stations in the 1980s could happen again if cash flow falters. "The multiples are sky high now," Sellers ob-serves, referring to the over-valuation of station properties. "The debt service becomes so steep that it breaks your back. And that happened in the late '80s, when banks started owning radio stations they really didn't want to own because the owners were in technical default. If enough of these are in default, the value drops out, the bottom drops out, and that's what happened..."
Nervous investors are taking a look at Chancellor, for instance, and wondering if it will be able to follow through on its plans to own the largest group of u.s. radio stations. Last month the company said that it will try to sell all or part of itself to boost its stock. Currently it's trading at 18 times cash flow, whereas rival Clear Channel Communications Inc. trades at 30 times cash flow and Infinity Broadcasting Corp. at 35 times.
A "multiple" is based on projected aft-er-tax cash flow, a key measure of the performance of broadcasters, which typically carry heavy debt loads. After-tax cash flow is defined by the company and analysts as earnings before depreciation, amortization and other non-cash charges, and before deferred taxes, capital expenditures and corporate overhead.
The Pirates versus the Big League
While Disney/ABC radio buys up eight stations in a market, making it virtually impossible for others to compete, the micro stations with their volunteer staffs are able to get on the air cheaply. There are an estimated 1,000 micro stations nationwide -- nearly double in the last year. They spice the airwaves of ur-ban cauldrons, Midwestern cornfields and college hubs.
Stephen Dunifer, 46, a self-taught electronics engineer and activist, launched Radio Free Berkeley in April 1993.
After the FCC forced Dunifer off the air, he began broadcasting his community news, political commentary and eclectic music from a backpack, hiking to different locations in the northern California hills each Sunday night to avoid detection. The FCC fined him $20,000 and sought an injunction to shut him down.
But for three years, federal Judge Claudia Wilken refused to grant the injunction. While she reviewed Dunifer's claim that the fcc might be violating his Constitutional right to free speech, Dunifer and other radio pirates were emboldened to operate more openly.
Here in the Midwest there was Beat Radio in Minneapolis; Iowa City Free Radio; Free Radio Prison City in Jackson, Michigan; Radio Free Indianapolis; kaw in Lawrence, Kansas and others.
Unfortunately for the radio pirates, Judge Wilken finally sidestepped Dunifer's Constitutional challenge by recently ruling that since pirates fail to apply for an fcc license, they lack the legal standing to make these arguments. But there is hope.
FCC Opens Door To Low Power Radio
To the consternation of many commercial stations, the FCC's new Chairman, William Kennard, says he would be open to officially sanctioning microstations.
"There are fewer (radio) opportunities for small businesses, minorities and church groups," Kennard says. "I'm very sympathetic to the view of some of these microbroadcasters... I believe we have an obligation to explore new ways to open the doors of opportunity to use the airwaves, particularly as consolidation closes those doors for new entrants."
FCC commissioners Gloria Tristani and Susan Ness say they think consolidation is happening too fast. Tristani fears a loss of localism and called station owners a vanishing breed.
Kennard made it clear that the FCC would not ignore the low-power issue simply because "it's inconvenient" for existing broadcasters. Recently the commission announced it wanted input on the idea of licensing low-power fm stations (LPFM). It said that new LPFM stations could provide a low-cost means of serving urban communities and neighborhoods, as well as populations living in smaller towns and communities. It said it had received over 13,000 inquires in the last year from persons interested in starting a low power radio station.
It proposed one level with a power and antenna height of 1,000 watts and 60 meters, which would produce a service area with a radius of about 8.8 miles. It proposed another service with secondary use status to operate at maximums of 100 watts and 30 meters with a service radius out to 3.5 miles. It also asked for comments on a one- to ten-watt microradio class of stations with an antenna height of 30 meters and a service radius of one to two miles.
Already there are even attempts to commercialize pirate radio.
Community Radio Coalition wants the FCC to control programming and is lobbying for restrictions that would assure LPFM stations are "professional" and full-time only, with out-of-towners barred but local companies allowed to be as big as they want to be.
But Don Schellhardt of the Amhearst Alliance opposes this and asks "Which kind of radio station is more in the public interest: A ten-watt part-time, time-shared in South Side Chicago that may someday lead some teenagers out of the ghetto or a 100-watt full-time station by The Loop that blasts out 'hard rock' to enrich a group of North Shore investment bankers?
"If newcomers, and even oddballs, can't get a foothold in low-power radio and new stations can't deal with time and/or income limitations by 'entering the fray' part-time, then where is the payoff from low-power radio for society?" He says "I want them to be small enough so that everyday Americans - and even more so members of marginalized, excluded groups -- can afford to get on the air."
Not unexpectedly, any hint that the FCC may allow low-power stations has inflamed the National Association of Broadcasters (NAB), who are mounting an aggressive campaign to fight such a move.
Sen. John McCain (R-Arizona), for instance, has been actively opposing opening up the airwaves for more diversity.
And Rep. Billy Tauzin, a Republican from Louisiana, who chairs the House telecommunications subcommittee which oversees the FCC, is widely viewed as the water boy for big broadcasters. Of late he has subjected William Kennard, the first black chairman of the five-person commission, to some heavy-handed threats.
Tauzin wrote a letter challenging the FCC's authority to even explore the idea of licensing low-power stations, and his spokesman, Ken Johnson, heightened the attempts at intimidation by warning that "Kennard runs the risk of adding fuel to our efforts to radically reform the FCC from top to bottom."
Chairman William Kennard fired back that "I'm sure that...Rep. Tauzin does not want to limit Americans' choices to who or what they can hear on the radio. The radio airwaves are big enough for all of us."
Michael Bracy, executive director of the Low Power Radio Coalition, a nonprofit group in favor of the FCC plan, says "It would truly be a shame if politics and the companies interested in maintaining the status quo got in the way."
The Federal Communications Commission is also considering proposals to tighten current restrictions on station ownership. Stricter rules could slow the rapid pace of consolidation that has shaped the radio industry since the 1996 Telecommunications Act. The FCC is likewise considering whether to eliminate so-called local marketing arrangements that allow a single person or group to own one station in a market while managing another -- a way of skirting current re-strictions on common ownership.
Jeffrey Marcus, CEO of Chancellor Media Corp., told federal regulators that current broadcast ownership rules are outdated and thwart competition.
But entertainer Stevie Wonder, who owns a station in California which targets a black audience, says that's the opposite of the truth. He notes that independent and minority-owned stations "are now an endangered species pursued by large corporate predators" -- and that certainly doesn't promote competition or diversity.
Rick Sellers is one commercial broadcaster who loves the idea of micro radio -- if it's under 100 watts and if the technical issues such as interference can be worked out. The problem right now, he says, is that many pirates are not technically well-backgrounded, so their make-shift equipment produces harmonics or additive signals that have been known to interfere with aircraft or emergency communication. But he thinks the fcc could cut red tape, assign frequencies, and help low power stations with equipment that is properly filtered, and still keep the cost to under $1,500.