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S. HRG. 108–903 MEDIA OWNERSHIP HEARING BEFORETHE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION UNITED STATES SENATE ONE HUNDRED EIGHTH CONGRESS FIRST SESSION JANUARY 30, 2003 Printed for the use of the Committee on Commerce, Science, and Transportation ( U.S. GOVERNMENT PRINTING OFFICE 95–894 PDF WASHINGTON : 2007 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION ONE HUNDRED EIGHTH CONGRESS FIRST SESSION JOHN MCCAIN, Arizona, Chairman TED STEVENS, Alaska ERNEST F. HOLLINGS, South Carolina CONRAD BURNS, Montana DANIEL K. INOUYE, Hawaii TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West Virginia KAY BAILEY HUTCHISON, Texas JOHN F. KERRY, Massachusetts OLYMPIA J. SNOWE, Maine JOHN B. BREAUX, Louisiana SAM BROWNBACK, Kansas BYRON L. DORGAN, North Dakota GORDON SMITH, Oregon RON WYDEN, Oregon PETER G. FITZGERALD, Illinois BARBARA BOXER, California JOHN ENSIGN, Nevada BILL NELSON, Florida GEORGE ALLEN, Virginia MARIA CANTWELL, Washington JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey JEANNE BUMPUS, Republican Staff Director and General Counsel ROBERT W. CHAMBERLIN, Republican Chief Counsel KEVIN D. KAYES, Democratic Staff Director and Chief Counsel GREGG ELIAS, Democratic General Counsel (II) VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF C O N T E N T S Page Hearing held on January 30, 2003 ......................................................................... 1 Statement of Senator Brownback ........................................................................... 17 Statement of Senator Burns ................................................................................... 12 Prepared statement .......................................................................................... 13 Statement of Senator Dorgan ................................................................................. 14 Statement of Senator Ensign .................................................................................. 15 Statement of Senator Hollings ............................................................................... 11 Prepared statement .......................................................................................... 11 Statement of Senator Hutchison ............................................................................ 70 Statement of Senator Lott ...................................................................................... 64 Statement of Senator McCain................................................................................. 1 Prepared statement .......................................................................................... 1 Statement of Senator Smith ................................................................................... 82 Statement of Senator Wyden .................................................................................. 16 Article from The Wall Street Journal, dated February 25, 2002, entitled, From a Distance: A Giant Radio Chain is Perfecting the Art of Seeming Local ............................................................................................................... 73 WITNESSES Berman, Hon. Howard L., U.S. Representative from California ......................... 7 Feingold, Hon. Russell D., U.S. Senator from Wisconsin ..................................... 2 Prepared statement .......................................................................................... 5 Fritts, Edward O., President and CEO, National Association of Broadcasters .. 24 Prepared statement .......................................................................................... 26 Henley, Don, Recording Artists’ Coalition ............................................................. 33 Prepared statement .......................................................................................... 36 Mays, Lowry L., Chairman and CEO, Clear Channel Communications, Inc. .... 18 Prepared statement .......................................................................................... 20 Short, Jr., Robert, President, Short Broadcasting Co., Inc. ................................. 38 Prepared statement .......................................................................................... 40 Toomey, Jenny, Executive Director, Future of Music Coalition .......................... 47 Prepared statement .......................................................................................... 49 Prepared statement of Thomas F. Lee, President, American Federation of Musicians................................................................................................... 56 (III) VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF MEDIA OWNERSHIP THURSDAY, JANUARY 30, 2003 U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. The Committee met, pursuant to notice, at 9:36 a.m. in room SR– 253, Russell Senate Office Building, Hon. John McCain, Chairman of the Committee, presiding. OPENING STATEMENT OF HON. JOHN MCCAIN, U.S. SENATOR FROM ARIZONA The CHAIRMAN. I tell the Members of the Committee we are waiting for three more Members to show up. In the meantime, perhaps in the interest of time, we could have Senator Feingold and Congressman Berman begin their opening statements. I may have to interrupt you. In fact, I hope I have to interrupt you, but please begin with your opening statement. Welcome Senator Feingold, Congressman Berman. Please proceed. [The prepared statement of Senator McCain follows:] PREPAREDSTATEMENTOFHON. JOHNMCCAIN, U.S. SENATORFROMARIZONA Today, the Committee begins a series of hearings examining media ownership. Later this year, the Federal Communications Commission will act on a proceeding that addresses a number of different media ownership issues. These decisions will have a significant impact on the American media landscape. I have always been a firm believer in free market principles. I continue to believe that anachronistic government regulations that do not reflect today’s multimedia marketplace should be thoroughly reviewed by the FCC and repealed or modified wherever appropriate. Given the tremendous impact media can have in the every- day lives and thinking of Americans, however, we must approach these issues thoughtfully and it is important that the Committee hold hearings to better under- stand them. Today we will examine media ownership in the radio industry. After enactment of the Telecommunications Act of 1996, the radio industry saw unprecedented consolidation. Several station owners began to purchase stations across the United States and the largest owner, Clear Channel Communications, has grown from 60 stations in 1996 to over 1,200 stations today. Many critics have voiced their concerns about radio consolidation and have alleged that some companies have been en- gaging in anticompetitive behavior. For instance, some have claimed that Clear Channel’s vertical integration with its entertainment division has hurt independent concert promoters and artists. Some artists suggest that their refusal to use Clear Channel’s promotion services has led to their music not being played on Clear Channel stations. I am concerned about these allegations and I look forward to hearing from the witnesses on these specific issues. Finally, I believe that, wherever possible, we should look to market-based ap- proaches to ensure there is diversity in media ownership. Later today, I will re-in- troduce the ‘‘The Telecommunications Ownership Diversification Act.’’ The bill pro- vides a tax deferral and other market-based incentives designed to ensure that our (1) VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00005 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF 2 tax laws do not disadvantage small businesses that may be owned by women and minorities who can help to further viewpoint diversity in media. I hope that other Members of the Committee will join me on this important legislation. STATEMENT OF HON. RUSSELL D. FEINGOLD, U.S. SENATOR FROM WISCONSIN Senator FEINGOLD. Thank you very much, Mr. Chairman, for holding this hearing and my thanks also to the ranking Member, Senator Hollings, for holding this hearing to examine the effects of radio station ownership consolidation. I appreciated the conversa- tions I have had with both of you about this, and this is a very early time in the session to be able to bring up this issue, so I am grateful. I also want to thank Senator Dorgan for his leadership on this issue. If Congress had heeded Senator Dorgan’s warnings about the effects of consolidation on many of our communities, perhaps we would not have to be here today. Before I begin, I would ask, Mr. Chairman, that my full statement be allowed to be printed in the record. The CHAIRMAN. Without objection. Senator FEINGOLD. Let me start by saying that like I am sure all of you, I love radio. It brought baseball play by play and Bob Dylan songs into my life, along with many other enriching influences. And I am sure everyone in this room has his or her own version of that sentence because radio has always been and continues to be, despite competition from assorted new technologies, nothing less than the soundtrack of American life. Whatever our different experiences, we are all beneficiaries of radio’s basic, uncomplicated and utterly vital principle: radio is a public medium that must serve the public good. Over the last year, Mr. Chairman, I have learned that the rapid consolidation in ownership of the radio and concert industry has made it difficult for individuals, artists, and organizations to find outlets to express their creativity and promote diversity. To be hon- est with you, Mr. Chairman, I find that a groundswell of anger is building in Wisconsin and across the country about these changes. People are actually angry about this. I know this, of course, because when people are angry, they tend to call up their Senators. I received the first contact about this more than a year ago. Owners of a local concert promotion company said that they were being pushed out of business by the anticompetitive practices of a large radio station and promotion company. Then I heard independently from a local radio station owner. He said that his station had, without warning and without compensation, lost syndicated programming, after investing lots of years and a big chunk of money into building an audience for that program, to a station across town, a station recently bought by a large radio station ownership group. Both of these small local businesses that I just mentioned cited the same company, the Clear Channel Corporation. Now, I first asked the Administration to look into anticompetitive activities and allegations that Clear Channel and other companies were trying to evade the already minimal local ownership limits, and I did not hear back for quite a while. VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00006 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF 3 I did, however, get an earful from many others, especially after I spoke to a reporter from the Chicago Tribune. In the interview, I simply expressed my concerns about these issues. I also mentioned that I was looking at possible legislation. And the response to this was overwhelming and fervent. Songwriters, artists, promoters, managers, consumer groups, religious organizations, unions, and radio station owners all called or wrote right away asking, what can I do to support your efforts? Mr. Chairman, this legislation is not just about entertainment. More broadly, neither is this issue. I am here not just because I want to preserve radio as an entertainment. I am also here because we must preserve radio as a medium for democracy. There will likely be a number of conflicting views expressed about the levels and effects of radio ownership consolidation during the hearing today. After all, market power can be measured in a number of different ways. Some may argue that owning 1,000 stations is only a fraction of the total number of stations in the United States. While this statement is true, I think it is important to view any ownership numbers in recent historical perspective. When the 1996 Telecom Act became law, there were approximately 5,100 owners of radio stations. Today, Mr. Chairman, there are only about 3,800 owners, a reduction of 25 percent. Minority ownership has also decreased. The number of African- American owners of radio stations has fallen by 14 percent. Prior to 1996, one company could not own more than 20 AM stations and 20 FM stations. Now two companies—two companies, Mr. Chairman—control 42 percent of the content that reaches listeners and 45 percent of industry revenue. The concentration of ownership is perhaps most startling when we look at radio station ownership in local markets. Four radio station companies control nearly 80 percent of the New York market. Three of the same four companies own nearly 60 percent of the market share in Chicago. In my home State of Wisconsin, four companies own 86 percent of the market share in our largest Milwaukee radio market. At the same time that national and local markets have been consolidated, I have heard really countless stories of how some of the large radio station ownership groups also wield increasing power through their ownership of a growing number of businesses related to the music industry. Take Clear Channel as an example. This corporation owns more than 1,200 radio companies, Mr. Chairman, more than 700,000 billboards and control venues across the United States, and it also owns the largest concert promotion company in the United States. During the last year and a half, I have also heard countless allegations about actually leveraging this cross-ownership in an anticompetitive manner. I have heard from small businesses in Wis- consin, local promoters and local radio stations who talk about large radio and promotion companies tying in radio and promotion services to push them out of business. These local businesses are happy to compete in a free marketplace, but when a company uses their cross-ownership, especially using a public medium like radio, in an anticompetitive manner, it is simply unacceptable. Some will argue that there are consumer benefits. For example, they will often say that since 1996, there have been more formats VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00007 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF 4 or types of radio stations in almost every market, but what they will not tell you is that since many of these formats are owned by the same out-of-state companies, that they play the same songs and they share the same news, which actually reduces consumer choices. There are other disturbing ways in which the concentration of ownership is changing what we hear on the radio. Singers, musicians, and managers have talked with my staff and with me about some of the new and very daunting challenges they face when trying to get their songs played on the airwaves. These people are very concerned that playlists are no longer based on quality, subjective as that is, but are sold to the highest bidder instead. They told me how in the past if you could not get a deejay to play your song in Cleveland, perhaps you could try in Pittsburgh, and if the song was a hit in Pittsburgh, the Cleveland deejay would probably hear about it. Now I am told, Mr. Chairman, that does not happen anymore. It really cannot. The same companies own the stations in both markets. If they do not want to play a song, they do not, anywhere. Opportunities for artists to try their music somewhere else just do not exist. I have also been hearing about a new shakedown system. The large radio stations allegedly require huge payments through independent promoters before they will put a song on the air. If you do not have the money to play in this system, you are shut out. Is this pay-for-play? If it is not, I would like to know what is. Consider also how the rise in ticket prices coincided with the passage of the 1996 Telecom Act. More precisely, consider that ticket prices went through the roof. Before the act was passed, ticket prices were increasing at a rate that was slightly higher than the Consumer Price Index. Since the Act became law, ticket prices have increased at a rate that is almost 50 percentage points higher than the Consumer Price Index. Mr. Chairman, because of these concerns, I have reintroduced legislation, the Competition in the Radio and Concert Industries Act, which would address the levels of concentration, curb some of the anticompetitive practices, and end the alleged new payola system. The legislation prohibits those who own radio stations and concert promotion services or venues from leveraging their cross- ownership to hinder competition in the industry. For example, if an owner of a radio station and a promotion service hinders access to the airwaves of a rival promoter or artist, then the owner would be subject to penalties. My legislation will also help to curb further concentration that leads to these anticompetitive practices. It would strengthen the FCC merger review process by requiring the FCC to scrutinize the mergers of any radio station ownership group that reaches more than 60 percent of the Nation’s listeners. The legislation would also curb consolidation on the local level by preventing any upward revision of the limitation on multiple ownership of radio stations in local markets. And finally, the bill would also prohibit the alleged new payola system where the big radio corporations are said to leverage their market power to require payments from artists in exchange for playing their songs. VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00008 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF 5 Mr. Chairman, these are not radical notions. All my legislation says is let us first get a handle on consolidation and crack down on alleged anticompetitive practices. Second, let us modernize our payola laws to make sure all forms of payola are banned. I hope that a lot of you will join me in cosponsoring this legislation, but I also hope that this hearing will flesh out other issues that are leading to many of the concerns that I have been hearing. Americans should be able to hear new and different voices, and those voices deserve a place on the publicly owned airwaves. Radio is one of the most vibrant mediums we have for the exchange of ideas and for artistic expression. This public medium has long served the public good, and we must ensure that it continues to do so. If we do not act now, Mr. Chairman, further concentration of the industry will guarantee that the range of voices we listen for when we turn on the radio, the voices of democracy that make radio unique will continue to fade away. So thank you so much, Mr. Chairman, for holding this hearing, and I look forward to working with you, the ranking Member, and all the other Members of the Committee. [The prepared statement of Senator Feingold follows:] PREPAREDSTATEMENTOFHON. RUSSELLD. FEINGOLD, U.S. SENATORFROMWISCONSIN Thank you Mr. Chairman and ranking Member Hollings for holding this hearing to examine the effects of radio station ownership consolidation. I also want to thank Senator Dorgan for his leadership on this issue. If Congress had heeded Senator Dorgan’s warnings about the effects of consolidation on many of our communities, perhaps we wouldn’t be here today. I’ll start by saying that I love radio. It brought baseball play-by-play and Bob Dylan songs into my life, along with countless other enriching influences. I’m sure everyone in this room has his or her own version of that sentence, because radio always has been—and continues to be, despite competition from assorted new technologies—nothing less than the soundtrack of American life. Whatever our different experiences, we are all the beneficiaries of radio’s basic, uncomplicated and utterly vital principle: Radio is a public medium that must serve the public good. But, over the last year, I have learned that the rapid consolidation in ownership of the radio and concert industry has made it difficult for individuals, artists, and organizations to find outlets to express their creativity and promote diversity. A groundswell of anger is building in Wisconsin and across the country about these changes. People are actually angry about this. I know, of course, because when people are angry they call their senators. I received my first contact about this more than a year ago. Owners of a local concert promotion company said they were being pushed out of business by the anticompetitive practices of a large radio station and promotion company. Then I heard from a local radio station owner. He said his station had, without warning and without compensation, lost syndicated programming—after investing a lot of years and a big chunk of money into building an audience for that programming—to a station across town, a station recently bought by a large radio station ownership group. Both of these small, local businesses cited the same company—the Clear Channel Corporation. I first asked the Administration to look into anti-competitive activities and allegations that Clear Channel and other companies were trying to evade the already minimal local ownership limits. I didn’t hear back for quite a while. I did, however, get an earful from many others, especially after I spoke to a reporter from the Chicago Tribune. In the interview I expressed my concerns about these issues. I also mentioned that I was looking at possible legislation. The response to this was overwhelming and fervent. Songwriters, artists, promoters, managers, consumer groups, religious organizations, unions and radio station owners all called or wrote, asking ‘‘What can I do to support your efforts?’’ This legislation is not just about entertainment. More broadly, neither is this issue. I am here not just because I want to preserve radio as entertainment. I am here because we must preserve radio as a medium for democracy. VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00009 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF 6 There will likely be a number of conflicting views expressed about both the levels and effects of radio ownership consolidation during this hearing today. After all the market power can be measured in a number of different ways. Some may argue that owning a thousand stations is only a fraction of the total number of stations in the United States. While this statement is true, I think it is important to view any ownership numbers in recent historical perspective. When the 1996 Telecommunications Act became law there were approximately 5,100 owners of radio stations. Today, there are only about 3,800 owners, a reduction of about 25 percent. Minority ownership has also decreased—the number of Af- rican-American owners of radio stations has fallen by 14 percent. Prior to 1996, one company couldn’t own more than 20 AM stations and 20 FM stations. Now two companies control 42 percent of the content that reaches listeners and 45 percent of industry revenues. The concentration of ownership is perhaps most startling when we look at radio station ownership in local markets. Four radio station companies control nearly 80 percent of the New York market. Three of these same four companies own nearly 60 percent of the market share in Chicago. In my home state of Wisconsin, four companies own 86 percent of the market share in the Milwaukee radio market. At the same time that national and local markets have been consolidated, I have heard countless stories of how some of the large radio station ownership groups also wield increasing power through their ownership of a growing number of businesses related to the music industry. Take Clear Channel as an example. This corporation owns more than 1,200 radio companies, more than 700,000 billboards, and controls numerous venues across the United States. It also owns the largest concert promotion company in the United States. During the last year and a half, I have heard countless allegations about leveraging its cross ownership in an anti-competitive manner. I have heard from small businesses in Wisconsin—local promoters and local radio stations—who talk about large radio and promotion companies tying in radio and promotion services to push them out of business. These local businesses are happy to compete in a free marketplace, but when a company uses their cross ownership—especially using a public medium like radio— in an anti-competitive manner, it is simply unacceptable. Some will likely argue that consolidation benefits consumers. For example, they will often say that since 1996, there have been more formats, or type of radio stations, in almost every market. But what they won’t tell you is that since many of these same ‘‘formats’’ are owned by the same out-of-state companies that play the same songs and share the same news—which actually reduces consumer choices. There are other disturbing ways in which the concentration of ownership is changing what we hear on the radio. Singers, musicians and managers have talked with my staff and with me about some new and very daunting challenges they face when trying to get their songs onto the airwaves. These people are very concerned that playlists are no longer based on quality—subjective as that is—but are sold to the highest bidder instead. They told me how, in the past, if you couldn’t get a DJ in Cleveland to play your song, you could try to find one in Pittsburgh who would. And if the song was a hit in Pittsburgh, the Cleveland DJ would hear about it. I am told that doesn’t happen any more. It can’t. The same companies own stations in both markets. If they don’t want to play a song, they don’t—anywhere. Op- portunities for artists to try their music ‘‘somewhere else’’ just don’t exist. I have been hearing about a shakedown system, where large radio stations allegedly require huge payments through independent promoters before they’ll put a song on the air. If you don’t have the money to play in this system, you are shut out. Is this ‘‘pay-for-play’’? If it isn’t, I’d like to know what is. Consider also how the rise in ticket prices coincided with the passage of the 1996 Telecom Act. More precisely, consider that ticket prices went through the roof. Before the Act was passed, ticket prices were increasing at a rate that was slightly higher than the Consumer Price Index. Since the Act became law, ticket prices have increased at a rate that’s almost 50 percentage points higher than the Con- sumer Price Index. From 1996–2001, concert ticket prices rose by more than 61 percent, while the Consumer Price Index increased by just 13 percent. There are a number of factors behind this rise in ticket prices. But the fact is that the largest radio station ownership group also is involved in over 60 percent of the concert industry, in terms of revenue, certainly begs the question—has consolidation within the radio and concert industry led to increased ticket prices? VerDate 0ct 09 2002 07:25 Feb 01, 2007 Jkt 095894 PO 00000 Frm 00010 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\95894.TXT JACKF PsN: JACKF