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Wednesday, Nov 25, 2009
Critics accuse Clear Channel of shady radio deals and nasty concert business. Now the government is starting to pay attention.
Mar 27, 2002 | Clear Channel Communications, the country's largest radio broadcaster and the dominant player in the live entertainment concert business, is drawing fire from some Washington regulators.
With holdings that include approximately 1,225 radio stations and 130 concert venues, the company in recent years has amassed unparalleled power in the music and entertainment industries. That power -- and what it means for the music business, as well as for Clear Channel competitors -- has been the topic of heated debate within the music industry for the last year.
Critics insist Clear Channel's size and hardball business policies have effectively shut down competition. Yet company officials deny any wrongdoing and suggest that the charges are being made by competitors hoping to distract the multi-billion dollar media giant.
Still, the allegation of unfair practices seems to be gaining some currency inside the Beltway. Last week, Rep. Anthony Weiner, D-N.Y., became the second congressman this year to write to the Department of Justice and ask for an investigation of Clear Channel's practices.
Also last week, the Federal Communications Commission took the rare step of denying a Clear Channel station purchase. Citing concerns about media concentration, the FCC designated one of its administrative law judges to hear the issue -- the first time that's been done in more than 30 years.
At the same time, the FCC is weighing evidence submitted last year that Clear Channel illegally "parks" or "warehouses" radio stations it's not allowed to own, by selling them to front, or shell, companies. Clear Channel executives adamantly deny the charge, but a former Clear Channel employee now tells Salon the practice goes on in the open.
The accusations indicate a new wave of scrutiny for the billion-dollar media giant.
"The question is, when does being an aggressive company trying to do a good job controlling market share for stockholders, when does that become anti-competitive?" asks Weiner, a member of the Judiciary Committee. In writing to the Department of Justice, Weiner suggested Clear Channel's dominance of the concert business is "harmful to consumers, venue owners and artists."
In January, Rep. Howard Berman, D-Calif., wrote to both the Justice Department and the FCC, urging them to examine several of Clear Channel's business practices. Both agencies responded, telling Berman they were willing to move forward with investigations if they receive evidence of wrongdoing, and would be willing to review any evidence his office receives.
As for Weiner, he says if the Justice Department tells him it has examined the company and is satisfied there is no wrongdoing, he and Berman will likely push for a congressional hearing. Although the House of Representatives and its committees are controlled by Republicans -- who traditionally see no problem with media consolidation -- Weiner says it's "not beyond reason" to suggest a Clear Channel hearing could be scheduled this year.
Weiner's letter centered around a specific allegation involving Clear Channel and how it was able to take a venue contract away from a competitor. The specifics are somewhat complicated, but the allegation is straightforward: When a rival beat out Clear Channel in its attempt to buy a New York-based concert promoter, Clear Channel tried to thwart the deal by turning around and poaching one of the promoter's most important assets, a county-run outdoor amphitheater, with an overly generous contract bid that will cost Clear Channel money in the end.
"We all understand we're competitors and competition is rough, but to us this was completely unparalleled," says Tom Etter, senior vice president of Covanta Energy, which at the time was the majority owner of the Metropolitan Entertainment Group, the New York concert promoter Clear Channel bid on. Clear Channel lost out to Mitch Slater, a well-known New York promoter, who bought Metropolitan.
Then, within weeks of losing out to Slater in February, Clear Channel signed a contract with Lackawanna County in Pennsylvania to operate and book its Montage Mountain Performing Arts Center near Scranton, Pa. The 18,000-seat amphitheater, which Metropolitan helped build and operated exclusively for the last two years, was one of Metropolitan's biggest moneymakers and a key component in Slater's offer to buy the company. "When we called to tell Clear Channel we had decided to go with Mitch Slater they were pretty upset. I heard from many people inside Clear Channel that Mitch would be a formidable competitor and would cost them money. Because if Clear Channel's got to bid for concerts against somebody with a good reputation, like Mitch, it's going to cost them money," says Etter.
Etter accuses Clear Channel, which had just reviewed Metropolitan's financial records for its unsuccessful bid on the company, of taking a loss at Montage Mountain in order to sabotage the Slater/Metropolitan deal and to lock out a competitor. "That was their motivation," says Etter. "Clear Channel hoped the Metropolitan deal would fall apart and it could pick up the pieces. They can't make money off the Montage contract, which will probably lose money every year. So why would they do that? There has to be another motive other than profits."
That allegation is what caught Weiner's attention: "When you start to make deals not in your self-interest and take losses in order to box out the competition, that starts to rise to the level of anti-trust behavior," he says.
A Clear Channel spokesman points out it was the county, unhappy with its Metropolitan relationship, that contacted Clear Channel about taking over Montage Mountain.
He calls the allegation that Clear Channel is willing to lose money on the deal "unfounded," adding, "We're a public company, we're not going to lose money on a facility for the sake of a small competitor. To suggest we've done something wrong here is absurd."
Metropolitan has sued Clear Channel, as well as the county, and is trying to retain exclusive rights to promote Montage Mountain through a court injunction.
