Subject: Minot and CC
From: pcdicola
Date: Jan 10 2007 11:16PM
My name is Peter DiCola; I'm a Ph.D. student in economics at the University of Michigan. I've worked for Future of Music Coalition, a non-profit research and advocacy group, on two major studies of the effects of radio consolidation. (Full disclosure: Eric Klinenberg is a friend and colleague, and I made comments on a draft of his book.)
Jack Shafer's article on Minot radio contains a few claims that are inaccurate or contradicted by the data analysis I have done. In my research, I use the industry's own data to evaluate the radio industry, just as the FCC does. So my comments will be based on the data contained in BIA Financial Networks' Media Access Pro (Radio Version) database.
"Clear Channel Chairman May [sic] said the Minot stations represented only three radio formats before the company made its acquisitions—country, adult contemporary, and news talk. Clear Channel diversified the mix by adding a classic rock, a hits, and an oldies station."
For starters -- since Shafer's article is devoted to addressing the facts on Minot and Clear Channel -- the Clear Channel family name is "Mays," not "May," a typo that appears three times in the article.
More substantively, Chairman Mays's characterization of the formats on Clear Channel's six Minot stations before Clear Channel purchased them is false. The three stations previously owned by Reiten (until Fall 1999) had the following formats at the time of sale: Country, Country, and Adult Contemporary (AC). The three stations previously owned by Roberts (until Spring 2000) had the following formats at the time of sale: Classic Rock, Hot AC, and Country. According to the BIA database, there were no "news talk" stations among the six, and four distinct formats (not three) were represented among the six stations before Clear Channel arrived.
Chairman Mays's characterization of the formats on Clear Channel's six Minot stations after Clear Channel purchased them is also inaccurate. The only format switches came in the Fall of 2000. At that time, Clear Channel switched the previously Classic Rock KRRZ-AM to Oldies, and switched the previously Country KZPR-FM to Classic Rock. This added one new format on net, not three. Clear Channel may have "diversified the mix," but only slightly, and to a much lesser degree than Shafer reports.
To this day, Clear Channel programs both KCJB-AM and KYYX-FM with the same format -- Country -- in the same small market of Minot, according to the BIA database, which collects its format data directly from the radio stations themselves on a quarterly basis.
"The six stations weren't owned by six mom 'n' pop broadcasters but by two broadcasters."
This claim is accurate, but it's important to note that the ownership structure was quite different before the Telecommunications Act of 1996 (Telecom Act). In the fall of 1995, the six Minot stations in question actually had four different owners: Reiten Broadcasting (KCJB-AM and KYYX-FM), CD Broadcasting Corp. (KRRZ-AM and KZPR-FM), the Hoberg family (KMXA-FM), and Judith Ekberg (KIZZ-FM). So, including Faith Broadcasting's KHRT-FM and KHRT-AM, the Telecom Act pushed the number of independent commercial owners from 5 to 3, and eventually to 2 by the Spring of 2000.
The larger point about the dramatic change in radio's market structure is documented in Chapters 1 and 2 of a report I recently published called _False Premises, False Promises: A Quantitative History of Ownership Consolidation in the Radio Industry_. (The report and related materials are available at http://www.futureofmusic.org/research/radiostudy06.cfm.)
"Wherever a broadcaster consolidates ownership in a region, it will tend to diversify programming for economic reasons."
This chestnut from economic theory is a venerable one -- it dates back to an article by Michigan's own Peter Steiner in 1952 (he wasn't yet at Michigan when he published the piece). Unfortunately, Shafer reports this theoretical economic claim without supporting it with data beyond his flawed Minot data from Chairman Mays.
In _False Premises, False Promises_, I tally up the array of formats offered by the largest station groups -- those that meet or exceed the FCC's limits on local radio ownership -- and compare the formats offered to those offered by the smaller station groups (see Ch. 3, pp. 93-98 for the details). I find that the largest station groups actually focus on a narrow range of formats, and that the niche formats are actually offered by smaller station groups. In fact, many large station groups offer redundant formats in the very same markets, as we saw with Clear Channel operating two Country stations in Minot.
Clear Channel's radio stations are not an exception to this general trend. I looked at the formats offered in both Spring 1996 and Summer 2005 (the latest quarter for which I have data from BIA) by stations Clear Channel now owns but did not own in Spring 1996. Among these stations, the top twenty formats were offered on 81.8% of the stations in Spring 1996. By Summer 2005, once under Clear Channel's ownership, the top twenty formats were offered on . . . 81.8% of the stations. Clear Channel has not in fact used its size -- often much larger than its competitors' sizes locally -- to diversify its format offerings.
An earlier commenter criticized formats as a measure of programming. I agree that formats are not ideal. Researchers tend to look at formats because the format data are more plentiful. But my recent study also looks at overlapping playlists, and shows that the top 30 songs on Clear Channel stations can overlap by as much as 97%. Playlists in the same format with the same owner typically overlap by 50 to 60%. (See pp. 103-110 of the study for more details.) Clear Channel does not always tailor its offerings to local tastes; sometimes it does quite the opposite.
"The economic incentive to occupy as many strong programming niches as possible is so great that the scurvy bastards at Clear Channel even broadcast the liberal Air America network in about 17 markets."
While I can't speak to any deficiencies in Clear Channel executives' Vitamin C levels, I can point out an opposing economic incentive to the one Shafer describes. Offering homogenized programming is cheaper than offering something different on every station. It's really important to note that Peter Steiner's 1952 economic model did not have a cost side. Steiner's model relies on the assumption that offering two Country stations in the same market cost exactly the same as offering one Country station and one News station. Clear Channel's attempts to exploit economies of scale in programming -- through voice tracking, redundant programming formats, etc. -- shows what a crucial and ultimately misleading assumption that is.
Shafer's instinct to get more of the facts about Minot is to be applauded. I hope that I have corrected a few errors and contributed a few more facts to the conversation. I also hope I have clarified part of the main narrative of economic, social, and political concerns about media consolidation. While Steiner's economic model supports the idea that consolidation leads to diversity, that model misses a key feature of reality, the cost savings of homogenized programming. More importantly, the notion that larger radio companies provide more programming diversity is not supported by the facts.
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