Radio consolidation hits home

Cumulus Media’s acquisition of seven local stations follows national trend
Thursday, March 11, 2004 | 12:00 a.m. CST; updated 11:55 p.m. CDT, Friday, July 18, 2008

[Note: this story has been modified since its original posting to correct errors.]

Last July, at a Senate Commerce Committee hearing on media ownership, Arizona Sen. John McCain questioned Cumulus Media Inc.’s president Lewis Dickey about the company’s decision to ban the Dixie Chicks from its 50 country radio stations.

“This is remarkable,” McCain said to Dickey on July 9. “You restrained their trade because they exercised their free speech.”

Dickey defended the decision, saying local stations didn’t know how to handle the situation after singer Natalie Maines told an audience she was ashamed President Bush was from Texas.

Cumulus Media’s recent purchase of seven radio stations in Columbia and Jefferson City has, temporarily at least, brought home the national debate over radio consolidation.

Cumulus Media will own 301 stations in 61 markets when the $38.75 million deal with the Premier Radio Group is completed, making it the second-largest radio ownership company in the country, behind Clear Channel Communications.

Consolidation effects

Last summer’s hearings were held to review proposed changes to the Telecommunications Act of 1996, which removed the national cap on how many stations a company can own. Since then, according to the Federal Communications Commission, the number of radio providers decreased from 5,100 in 1996 to 3,800 by 2001.

Much of the testimony before the Senate committee addressed the effects of radio consolidation on artists and the public.

Simon Renshaw, a board member of the Recording Artists’ Coalition and the Dixie Chicks’ manager, told the committee that “the mad rush to consolidate has dramatically tipped the balance in favor of the radio industry. They now have unprecedented influence and control over the artists and the record labels.”

Also at issue were proposed revisions to the act by the FCC that would change the way radio markets are defined.

Right now, Columbia and Jefferson City are considered separate radio markets, although most stations can easily reach listeners in both places. But according to the Center for Public Integrity, individual market sizes are overstated to allow companies to own more stations than the FCC would normally permit.

The proposed revisions, which are on hold due to legal challenges, would have changed the market definition rules so that, for example, Columbia and Jefferson City might have been considered a single market.

Cumulus began in 1997, in the wake of the act’s passage. The company launched a business strategy of acquiring radio stations in small to mid-size markets, but it took time to pay off. Cumulus suffered a $92.8 million net loss in 2002, according to its filings with the Securities & Exchange Commission. The company finally saw a $5 million profit in 2003.

Cumulus in Columbia

Mike Dunn, general manager of KBIA, said that since the 1996 act, radio stations have become more profitable.

“Forty percent of radio stations were losing money before 1996,” he said. “It is rare to see that now.”

Marty Gausvik, Cumulus CFO, said the company’s strategy has focused on the markets ranked 50 to 100 by Arbitron. Columbia is currently ranked 251, although Gausvik expects the market to continue to grow.

He said the stations bought by Cumulus – KFRU/1400 AM, KBXR/102.3 FM, KOQL/106.1 FM, KPLA/101.5 FM, KLIK/1240 AM, KBBM/100.1 FM and KJMO/104.1 FM – are already successful and the company doesn’t plan any changes.

“We are excited to be in the area, and it seems Columbia is a rapidly growing market,” he said.

Michael Porter, an associate professor in MU’s communication department, said that while local ownership is lost with the Cumulus-Premier Marketing deal, the stations could benefit from new voices and the sales and programming knowledge of a larger organization.

Dunn said another downside to consolidation is that, in some cases, it has eliminated local news. However, he said, those changes, if they happen at all here, are in the future.

“It is too premature to start looking at the effect this will have in Columbia,” he said. “There will be practically zero change between now and when the FCC approves the deal.”

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