Shock Treatment

It doesn't really matter whether he overtakes KQ and Tom Barnard. Either way, Howard Stern wins. And local radio loses.

In February 1996, lawmakers in Washington said they wanted to encourage across-the-board competition in the broadcasting industry. For players such as Stern's Infinity Broadcasting, the resulting legislation--just like the FCC fines--turned out to be a blessing in disguise. The Telecommunications Act of 1996 lifted most media-ownership restrictions and led to a dizzying array of broadcast mergers, totaling somewhere in the neighborhood of $37 billion. The biggest deals involved ABC, which was gobbled up by Disney, and Westinghouse, which purchased Infinity for a whopping $4.9 billion just seven months after swallowing CBS. (In the fallout, Karmazin was named boss of CBS radio.) "If you think competition is about my engulf-and-devour company engulfing and devouring your engulf-and-devour company, then I guess we have more competition," says Steven Randall, senior analyst for the New York-based Fairness and Accuracy in Reporting (FAIR). "Because all we've had happen in the last year is an orgy of mergers. And there's probably no area of media that's been affected more than radio."

How does this help Stern? Radio execs in New York and L.A. are more likely to use national talent to build local ratings because they have confidence in proven commodities such as Stern, Don Imus, and Rush Limbaugh. They also have deep enough pockets to ride out a slow transition. In short, according to Jeffrey Yorke, Washington bureau chief at the trade mag Radio and Records, the Telecommunications Act is helping to accelerate an already pronounced trend. "Radio, which has always been local, local, local will now emerge as a conduit for more and more nationally syndicated programming," Yorke says. "Experience proves there's just more potential for profit."

There's no question that telecommunication reform helped pave the way for Stern in the Twin Cities. Previously, no one company could own more than five separate signals in any given market; now they're allowed at least seven, and Randall believes loopholes in the legislation allow for even more. Consequently, last August Chancellor--which already owned KFAN, KDWB, KTCZ, KEEY and KTCJ--made an agreement to purchase Minneapolis-based Colfax Communications. The acquisition gave Chancellor control of KQQL-FM (KOOL 108) and WBOB-FM (now WBLB-FM). It was WBOB--a redundancy as Chancellor's second local country station--that became Real Rock 100, the Howard Stern vehicle.

The entire competitive calculus was based on a battle of the titans. According to Kevin McCarthy, the general manager in charge of Real Rock 100, Chancellor's research showed that three years ago, after ABC bought out the hard-rocking 93X and turned it into 93.7 The Edge, KQ softened its musical format, pushing the median age of its listener from 28 to 32 with a playlist featuring the likes of Billy Joel, America, and CCR. Before this move, one in five of KQ's listeners was a 35-to-44-year-old male. That number has grown to one in three, which convinced the programmers at Chancellor that there were listeners out there pining for more Guns N' Roses and less Rolling Stones. "Our research showed these 25-to-35-year-old guys could be moved off KQ,'' McCarthy says. "But the nuclear weapon was Howard Stern. Musical format alone was not enough. With Howard we can become a magnet.''

In the words of Mick Anselmo, another local Chancellor GM, "If you were an independent operator and decided to take on a behemoth like KQ, you'd have a hard time because of cost and ability to sustain an attack. They would flank you musically. But when you're holding multiple brands, you can beat them at their own game. It's a win-win for us.'' It's also a win-win for Stern, who reportedly got an enviable commitment from Chancellor: Sources at Real Rock 100 say he has a guaranteed deal through the year 2000.

The situation obviously augurs against real homegrown competition on the airwaves. Along with ABC and Chancellor, there are really only three other players in local radio: Hubbard Broadcasting, CBS, and Nationwide Communications. Station managers all over town, echoing corporate publicists nationwide, argue that if fewer owners are moving more money around the dial, listeners will be able to choose the best of the best. Both allies and enemies of Stern point to his show as a boon to the industry in general--raising the beam for all morning hosts and talk-show personalities.

Just outside the incestuous, self-congratulatory world of corporate radio, however, those who watch the industry are concerned that programming will lose whatever edge it has left. Jim Pounds, vice president and media director at Periscope Communications, a Minneapolis ad agency, says companies who've just spent millions to consolidate will not only have to increase ad costs, but they'll have to adopt lowest-common-denominator, no-risk formats with mass appeal.

"These trends may make radio more financially viable, but a far less interesting medium from a cultural standpoint. There's a risk that stations will become so homogenized that they'll be virtually indistinguishable,'' Pounds says. "Hopefully, the big chains are savvy enough to understand they can't do stuff by formula. Unfortunately, these people abdicate to consultants. And consultants haven't had an original thought in several years. They're just duplicating what they did in the last market. If consumers accept that, I suppose they deserve what they get.''

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