Consumer Watchdog Urges DOJ to Reject Merger That Would "Fully Corporatize Radio in Top 100 Markets"

WASHINGTON, Oct. 9, 2013 /PRNewswire-USNewswire/ -- A proposed merger between major radio station owner Cumulus Media and radio content provider Dial Global/Westwood One would create a clear radio duopoly (with Clear Channel Communications) in the nation's largest radio markets, said Consumer Watchdog in a letter to the Department of Justice antitrust division.

"This merger would be a tipping point for listeners who already face fewer choices and homogenized content in talk, music and even sports," said Jamie Court, president of Consumer Watchdog. "A takeover of Dial Global by Cumulus will fully corporatize content in the top 100 markets and kill what remains of truly local radio."

The two vertically integrated companies would control outright 1,000 to 1,300 radio stations and indirectly control content for others, primarily in the top 100 markets, said Consumer Watchdog. The nonprofit, nonpartisan organization urged the DOJ in a letter signed by Court and Consumer Watchdog's emeritus director of research, Judy Dugan, to reject the merger.

The letter said, in part:

This proposed merger is unlike the merger of other private corporations because Cumulus does not and cannot own its most valuable asset, space on the airwaves.

The [federal] obligation to consumers in considering anti-trust issues generally concerns cost as well as control. For instance: Will an airline merger substantially raise consumer prices? U.S. radio spectrum, however, is a public asset to be used for the "public interest, convenience or necessity," per the Telecommunications Act of 1934. … The public interest to be protected is not the price of listening but the public usefulness of radio.

The chief beneficiaries of the proposed Dial/Cumulus merger would be the numerous hedge funds and investment banks that effectively control the companies. Cumulus owes interest of $200 million a year, more than twice its annual earnings, to the owners of its $2.6 billon in debt. Dial is controlled by Oaktree Capital and the Gore Group, its chief debt holders. These investors are eager for the merger: Cumulus' sale of stations will pay off the hedge funds. Cumulus debt holders also await "synergies" that will increase the funds flowing to sustain Cumulus' debt. …

Hedge funds and the CEOs who abet them too often strip a private company of its human assets and walk away rich. Their role in radio has weakened the public benefit of local radio with homogenized national programming. A Dial-Cumulus merger will intensify this flattening of the radio landscape.

See the entire letter with footnotes and sources here: http://www.consumerwatchdog.org/resources/cumulusmergerletter10-9-13.pdf

The letter noted that Cumulus CEO Lew Dickey, with annual compensation of over $2 million, has boasted of up to $65 million in annual savings from the merger. Those "savings," would come from shedding local jobs as stations are forced to run a diminishing number of syndicated, no-humans-required programming. The resulting windfall would go straight to the debt holders who effectively control the company, said Consumer Watchdog.

Cumulus already has a track record of dumping local programming regardless of local preferences.

"In 2011, Cumulus took over San Francisco talk/news station KGO. The company swiftly fired the majority of local talkers and dumped its CBS news feeds," said Dugan. "Listeners expressed their disappointment by turning the dial and KGO slumped from Number one it its market to Number 16. But Cumulus reaped a windfall of cost-cutting to pay its debt."

Dial Global currently distributes CBS News and NBC News while Cumulus owns the ABC Radio Network. Between them, they distribute three evening country music shows. The merged company will certainly cancel overlaps, leaving the shows and networks with no comparable on-air distribution sources in a duopoly market, said Consumer Watchdog.

As the letter said:

For instance, if the merged company dropped distribution of CBS news to the thousand or so non-CBS stations that currently use it, CBS Radio would lose income that supports its national news operation, regarded as the best in the radio business. Listeners would lose access to a credible, competitive news source.

The merger will also force diverse local voices and independent local music off the airwaves, said Consumer Watchdog. While various pay services such as Pandora and Sirius provide some alternatives, they are not free and do not have the diversity or reach of broadcast radio. They and other internet sources of audio information would also be subject to takeovers by the duopoly partners.

If radio is to remain a public service in any substantial fashion, federal regulators must reject this merger, said Consumer Watchdog.

Visit our website at: www.ConsumerWatchdog.org.

SOURCE Consumer Watchdog