The Rush to Gulp US Radio Stations

Concepts like public service, once cherished, are out the window under deregulation

The surface glamour faded long ago from radio. But Americans keep as many as five or six sets in the house and use them regularly. Don Imus, Rush Limbaugh, and Garrison Keillor remind us that television hasn't stripped all the glory from the medium or its revenues - totaling $11.5 billion in 1995.

The radio stations that CBS owns - 39 of them - grossed a half-billion dollars last year. Like the printing presses in the Federal Mint, commercial radio stations in America churn out cash in prodigious amounts. Returns of 40 to 50 percent yearly are not uncommon.

Multibillion-dollar mergers and acquisitions in the telephone and television-based industries spawned by the new telecommunications law have stolen our eye from the land rush now under way in Radioland. A vast consolidation of ownership has begun among America's 10,000 commercial stations. Just two months after passage of the law erased the limits on the number of radio stations a single owner may acquire, a station-buying blowout is justifying critics' fears that the law is not spurring competition, but monopoly. An industry that once had to base its license renewals on service to a station's community has been let off the hook by Congress and the president.

Rita Zanella, a media analyst at Gruntal & Co. in New York, predicts that eight or 10 big station groups will eventually control the entire broadcasting industry. "You control pricing," she told the Chicago Tribune. "You eliminate your competition and have greater control over what you can charge."

To cite just a few examples of the radio land rush, Jacor Communications Inc. of Cincinnati spent nearly a billion dollars in February to acquire 26 radio stations and two television stations. Jacor now controls 62 per-cent of the radio revenues in the Cincinnati market, nearly half the Denver market, 30 percent of the Tampa market, and a quarter of the radio business in Portland, Ore. In a single deal worth $1.2 billion, announced earlier this month, the Sinclair Broadcasting Group of Baltimore acquired 34 radio stations in 27 markets, along with a group of television stations, becoming a miniconglomerate in a single bound.

With the purchase of three stations in March, Citadel Communications Corporation now owns seven of the most powerful AM and FM stations in Albuquerque's 36-station radio market. That includes KKOB, which blankets much of the southwest, and the city's only classical music station, KHFM. Arthur Schreiber, a former manager of KKOB and a veteran of the radio wars, predicts that Albuquerque's classical-music listeners will soon find themselves without choice on the air. "It's hard for me to believe that Citadel can meet its debt service by continuing to play classical music on a station that cost it $5.6 million," says Mr. Schreiber.

The federal government is essentially licensing the drive to bigness. Station brokers predict that 1996 will be the most lucrative year ever for station trades. In a deregulatory environment, small, aggressive companies such as Jacor and Citadel can become mass-comm players in a single bound, with lenders anxious to supply cheap money.

BUT radio isn't just any business. Radio is an essential part of our civic capital. It speaks over publicly licensed frequencies to millions of listeners, at home, at work, and on the road. In the past stations were more than juke boxes. They provided breaking news and weather bulletins, specialized information for farmers, investors, community organizations, local governments, and emergency services. Before the start of deregulation in the 1980s, owners were limited to seven AM and seven FM stations, to ensure diverse voices and dispersed power.

The new barons of radio are absentee owners who convert their stations from local presences into cash cows for instant milking, their values ballooned for trading to the next buyer. The name of the game is to avoid being the "last sucker" stuck with debt if recession hits.

Radio, once the most trusted news source in America, has increasingly abandoned the role of local service-provider. Newsrooms in many stations have been cut to the bone - one or two readers, Schreiber says, "ripping and reading" news and weather supplied to all clients by a single news source, the Associated Press.

There is teeth-gritting sameness in the music they play, as dial-twisters who have traveled long distances in a car can testify - various shades of rock and country music.

Before deregulation, the Federal Communications Commission required buyers to hold their stations for at least three years before resale, to ensure local commitment. In the new environment, a wheeler-dealer can theoretically turn his station over as soon as the FCC approves the purchase. Media writer Ken Auletta was told by the head of a station ownership group: "It's commodity trading to us. We don't know [our] community. We're short-term players."

The fundamental question is unavoidable: Is mass communications solely a growth game for entrepreneurs, banks, and Wall Street, or is it also a social partner that justifies its existence by living up to its civic obligations? The late Donald H. McGannon, a respected industry leader in the 1950s and '60s as chairman of the Group W (Westinghouse) Stations, was a businessman with a vision who told his staff: "If we do the right thing in our cities and towns, the money comes." They did - and it did.

The times have changed. But not the relevance of McGannon's vision. Undoing the damage of the Telecommunications Act of 1996 will be difficult, but it will have to happen.