Chancellor Creates 3 Units to Capitalize on the Internet

Chancellor Media Corp., which is set to become the largest U.S. radio company, on Wednesday announced the creation of three business units designed to capitalize on the growth of the Internet and said it plans to change its name to AMFM Inc.

Dallas-based Chancellor said shareholders will vote on the name change, as well as its planned acquisition of Capstar Broadcasting Corp., on July 13.

The purchase, originally valued at $4.1 billion, will make Chancellor the biggest U.S. company in its industry, with 465 stations in 105 markets.

The Internet strategy will attempt to capitalize on the loyalty of radio listeners to their local stations and on Chancellor’s ability to exchange advertising and marketing for stakes in promising Web companies, Chancellor said.

The strategy of swapping advertising and promotion for equity in Internet companies has been successfully employed by CBS Inc.

The new units will be named AMFM Interactive, or AMFMi, AMFM.com and AMFM Equities.

AMFMi will develop and manage a network of local Web sites paired with the company’s radio stations. The sites will reflect the content of their sister stations, with links to merchandise such as concert tickets and to information referred to in radio broadcasts.

A trial launch of AMFMi is underway in Philadelphia and selected other markets, Chancellor said.

AMFM.com will be an online broadcasting company, working to provide Internet audio and video to AMFMi sites, other media companies and corporate clients.

The unit will also create and manage Internet-only radio stations using Chancellor’s proprietary radio content.

The unit appears to be similar to Broadcast.com Inc., the Internet media company being bought by Yahoo Inc. for $5.7 billion.

The third unit, AMFM Equities, will exchange advertising on Chancellor radio stations for equity in Internet and new-media companies “whose value can be materially enhanced by [Chancellor’s] marketing assistance,” the company said.

Television network CBS has employed the strategy in acquiring stakes in companies like SportsLine USA Inc. and MarketWatch.com Inc. in return for a combination of marketing, branding and promotion.

Chancellor shares rose 63 cents to close at $56.69 on Nasdaq.