Battle For The Airwaves - Page 4 of 7

Battle For The Airwaves

Citadel-owned WWWZ-FM, with a 10.0 rating. Combined with Clear Channel stations, these mega-broadcasters receive 60 cents of every advertising dollar in this market, according to Aidoo. WPAL-FM’s rating was 0.7, as measured in the same period.

To protect minority ownership and program diversity, the National Association of Black Owned Broadcasters (NABOB) filed comments against further deregulation with the FCC in January. Asserts NABOB Executive Director James Winston: “If the large companies have their way and all the [ownership] rules are eliminated, then it would definitely sweep out all small broadcasters.”

Moreover, NABOB is working with Sen. John McCain (R-Ariz.), sponsor of the Telecommunications Ownership Diversification Act of 2002, which would bring back the tax certificate program that offers large broadcasters a break on capital gains taxes if they sell their stations to minorities. (Powell and Clear Channel’s Mays are in favor of the bill.) NABOB also collaborated with Sen. Russ Feingold (D-Wis.) on the recently introduced Competition in Radio and Concert Industries Act, which is designed to regulate the radio and concert promotion industries. In reaction to the new bill, Mays says Sen. Feingold is “dead wrong. The legislation is built on the faulty premise that the concert business and radio business need to be fixed. They don’t.”

Explaining NABOB’s alliances with McCain and Feingold, Winston says, “We are trying to help them shape legislation so that it helps to create additional minority ownership opportunities [and to] come up with the exact language for the legislation so that it achieves the desired result.”

With huge broadcasters controlling local markets, independent operators must expand to stay competitive. “These days you need to own a cluster of stations just to survive, let alone compete,” says Archway Broadcasting Group’s Al Vicente, who is in the process of buying 13 stations in the Southeast. “You have to have a cluster of stations so you have economies of scale … have [multiple] stations run from one location so that you are not duplicating expenses and have employees that can work on more than just one station.” Multiple-station operations, he says, also offer advertisers the ability to reach many different audiences with one buy.

But getting bigger requires capital to purchase stations–loads of it. According to MMTC, an AM radio station in a top 10 market, depending on the strength of the signal, could cost between $30 million and $80 million, and as much as $500 million for a similarly situated FM station–or 11 times cash flow. The asking price for an AM/FM station in a mid-sized market is between $1 million and $5 million.

Gaining access to capital has traditionally been a problem for black broadcasters. Aidoo, who must raise money for her low-rated station, says banks don’t like to finance radio stations because they can’t place a lien against the asset if the borrower defaults. Since the federal government regulates radio broadcast licenses, the FCC must approve any potential buyers of the station, which creates more problems for a lending institution. “Most banks won’t finance a