Clear Channel’s Dominance Obscures Promotions Conduit

Clear Channel Communications, which last year became the nation’s largest radio broadcaster and concert promoter, is rewriting the economics of both industries, shaking up old alliances in regional markets across the country and leaving the competition feeling squeezed.

Midway through the key summer concert season, Clear Channel executives say synergy between its radio and live-event operations is resulting in millions of dollars in new revenue and higher attendance at some rock concerts and other events, such as dragster races. Rival radio programmers and concert promoters, in turn, say Clear Channel is eroding their ability to compete.

It was just one year ago that Clear Channel, the operator of 1,200 radio stations bought the dominant national concert promoter, SFX Entertainment.

“The landscape has changed completely,” said veteran Massachusetts promoter David Werlin, who has produced concerts for Phish and Bonnie Raitt. Because of the natural relationship between concerts and radio, “in a way, this was an inevitable marriage. Whether it’s a long-term marriage, a happy marriage or a profitable marriage remains to be seen.”

Traditionally, promoters hired by touring musical acts purchase advertising on radio stations playing the acts’ songs, often throwing in free blocks of tickets to be given away on the air. Such arrangements are designed to generate interest in the concert for the promoter and draw listeners--and other advertisers--to the radio station.

Promoters could shop among competing radio stations to find the cheapest ad rates, and radio programmers could choose among rival promoters to see who offered the most attractive ticket packages.

Now, some broadcasters say Clear Channel is keeping the tickets and ad dollars for its own radio stations.

Concert promoters who compete with Clear Channel for acts say its radio stations in some markets are slow or unwilling to advertise their shows.

Competitors also say they fear the conglomerate is using airplay on its 1,200 radio stations as leverage in dissuading acts from hiring other concert promoters.

Steve Smith, chief operating officer of Clear Channel Entertainment (formerly SFX), said there was no policy to freeze out competitors and added that the criticism from rivals was unfounded.

“I think that because we’re big and because we’re successful, we’re going to be a target,” said Smith, whose division generates about $1 billion in annual revenue and owns or operates 135 concert venues worldwide. “I don’t want the marketplace to overlook the fact that we’re good at what we do.”

Smith said that while the live-entertainment division expects to devote more money for advertising on Clear Channel radio stations than it did last year, the majority of its estimated $100-million advertising expenses still will go to competing radio stations and other outside media outlets.

He also denied that the company has a policy of withholding concert tickets or advertising dollars from competitors’ radio stations.

“There is no policy, in stone or suggested, that the radio stations have to do stuff for free for [the concert division], or that we ignore the best interests of the artist for the benefit of the radio stations. We’re just all trying to win,” Smith said.

Being part of Clear Channel, he said, has made it easier for the company’s concert promoters to negotiate free or discounted promotional packages on its stations. Moreover, lining up with the radio stations has added to its clout in bidding for artists’ tours, he said.

Paying the multimillion-dollar fees demanded by some major acts has become less risky for Clear Channel, Smith said, “because we’re able to anticipate the promotional needs and guarantee a certain level of incremental radio station promotion. It makes me digest that risk a lot more easily if I know our radio stations are committed before I put up the cash. But it’s got absolutely nothing to do with spins [the playing of a recording] on the radio stations.”

Promotions can include ticket giveaways, discounted advertising rates, and on-air “chatter,” he said.

The joint marketing of promotions and concerts is an outgrowth of a relentless consolidation in the radio and concert industries since 1996.

In its omnibus telecommunications act that year, Congress eliminated most restrictions on broadcast mergers. During the next 12 months, more than 4,000 of the country’s 11,000 radio stations changed hands. Since then, Clear Channel vaulted to the top of the heap with multibillion-dollar purchases of Jacor Communications and AMFM Inc.

The former SFX rocketed to the top of the concert industry on the heels of its own massive acquisition spree. In more than 18 separate transactions in four years--all of which were subject to Justice Department review--the company absorbed top promoters in markets from San Francisco to New England in creating a national powerhouse.

The government’s willingness to let Clear Channel grow further is an open question. Following reports that Clear Channel was in talks to acquire another promoter, Beverly Hills-based Concerts West, Justice Department officials in June notified Concerts West that they would scrutinize any takeover, sources close to the talks said. The two companies have since halted talks.

A Justice spokeswoman declined to comment this week.

But the combined company is making waves among competitors in both the industries in which it is No. 1.

In Denver, where Clear Channel owns the dominant rock station KBPI-FM, concert promoter Jesse Morreale said he recently called the station to purchase ads and offer 20 tickets to today’s concert by the rock band Tool, which is being put on by Morreale’s firm, Nobody in Particular Presents.

“We were informed the new policy is that if we, as a non-Clear Channel promoter, want ticket giveaways on the air, we have to buy” the additional promotion, Morreale said. “We should have access to the same promotional opportunities as any other client, and that includes a client that they own.”

Bob Richards, program director for KBPI-FM, said, “all we’re doing is bringing concert promoters to the same level as our other sponsors and clients. If you don’t spend a certain amount of money, we’re not going to give you promotional reciprocity.”

In Chicago, Clear Channel is using concert tickets to events such as pop star Janet Jackson’s tour--which it promotes--to draw listeners to its new pop radio station, WKSC-FM.

In Washington, Clear Channel earlier this year switched its oldies station to the pop format to compete with the dominant pop station, WWZZ-FM, owned by broadcaster Bonneville International Corp.

Since then, Clear Channel’s concert division has cut its advertising on WWZZ by 50%, said the station’s general manager, Mark O’Brien.

After O’Brien launched a promotion giving away tickets to the Clear Channel-sponsored “Wango Tango” concert in Los Angeles--using tickets he purchased from Ticketmaster--Clear Channel sued the station for trademark infringement.

O’Brien said he agreed to return the tickets and added that the Clear Channel station aired promotions for a giveaway for the same concert.

Clear Channel executives said they wanted to protect the brand name for concerts outside Los Angeles. The company added that it continues to make tickets to its other concerts available to outside stations. But O’Brien said Clear Channel is using its hold on tickets to freeze out rivals.

“They’re shutting out other radio companies from tickets and meet-and-greets with artists” whose tours it controls, O’Brien said. “They are building what looks to me like a monopoly. And, for some reason, it looks like they’re getting away with it.”