Chancellor Media is also subject to competition from new media technologies such as, the delivery of audio programming by cable television systems, direct broadcast satellite (DBS) systems, the Internet, personal communications services and other digital audio broadcasting formats.
CONNECTIONS
Hicks, Muse, Tate & Furst is a leveraged buyout firm building a media empire. Hicks, Muse assembles limited partnership investment pools and targets companies in specific niches that can form a nucleus for other investments. Thomas O. Hicks is the chairman and CEO of Hicks, Muse, Tate & Furst as well as the chairman and CEO of Chancellor Media Corporation. Hicks, Muse, et. al. owns 17 percent of Chancellor Media, along with 69 percent of Capstar and 80 percent of LIN Television. In addition to its media holdings, Hicks, Muse, et. al. owns Berg Electronics, International Home Foods, Stratford Capital Partners, Olympus Real Estate, and Donaldson, Lufkin & Jenrette. International Home Foods nationally known products include Chef Boyardee pastas and Bumble Bee seafood, Libby s canned meat products, Polaner fruit spread, Gulden s mustard, and PAM cooking spray. The company also sells southwestern cuisine canned foods (Ro*Tel tomatoes, Dennison s chili, and Ranch Style beans) and snack foods (Crunch n Munch and Jiffy Pop). Tom Hicks also owns the Dallas Stars NHL Team and the Texas Rangers MLB Team. Mr. Hicks serves as a director of Capstar, LIN Holdings Corp., LIN Television Corporation, Sybron International Corporation, Inc., Cooperative Computing Inc., International Home Foods, Triton Energy, D.A.C. Vision Inc., and Olympus Real Estate Corporation.
R. Steven Hicks, the brother of Tom Hicks, is the Vice Chairman of Chancellor Media Corporation, and the President and CEO of Chancellor Media Services Group, as well as the President, CEO, and director of Capstar Broadcasting. Steven Hicks founded Capstar in 1996.
Between the Hicks brothers, they own everything from consumer food products to multiple steps in the media chain. They own the creation of content or message (the Dallas Stars and Texas Rangers), the production of the message (LIN Holdings Corp.), the delivery of the message (Katz), and the distribution and redistribution of delivery (LIN Television, Chancellor, and Capstar). Tom and Steven Hicks control the means of production and are a virtual monopoly.
CURRENT EVENTS
On July 7, 1998, Chancellor announced that it would buy LIN Television for $902 million in stock. The acquisition of LIN Television marks our entry into television broadcasting, a business complementary to our broad radio platform, said Jeffery Marcus, [former] president of Chancellor. However, in July of 1998, a stockholder derivative action was commenced in the Delaware Court of Chancery by a stockholder purporting to act on behalf of Chancellor. The defendants in the case were Hicks, Muse, Tate & Furst Incorporated, LIN Television, and a few of Chancellor s directors. The plaintiff alleged that Hicks, Muse, Tate & Furst inflated the price Chancellor was to pay for the merger because they, themselves, had overpaid when acquiring LIN. Thus, the merger allegedly constituted a breach of fiduciary duty and a waste of corporate assets by Hicks, Muse, Tate & Furst, which allegedly controls Chancellor, and the directors of Chancellor named as defendants. The plaintiff, defendants, and Chancellor reached a settlement; on March 15, 1999; the Boards of Directors of both Chancellor and LIN decided to terminate the merger. From the announcement of the merger to the settlement of the suit, many interesting transformations shaped the executive branch of Chancellor.
Beware the Ides of March. March 15 proved to be the fall for some executive members of Chancellor. Jeffrey A. Marcus, former President and CEO, Thomas P. McMillin, former CFO, Eric C. Neuman, former Senior Vice President-Strategic Development, and Richard A.B. Gleiner, former General Counsel, all resigned from their executive positions with Chancellor effective March 15, 1999. On that same fateful day, Thomas O. Hicks, the CEO of Hicks, Muse, Tate & Furst, was elected President and CEO of Chancellor Media Corporation; James E. de Castro was appointed as President and CEO of the newly created Chancellor Radio and Outdoor Group; and R. Steven Hicks, the current President and CEO of Capstar, was appointed as President and CEO of the newly created Chancellor Media Services Group.
On August 26, 1998, Chancellor Media and Capstar Broadcasting entered into an agreement to merge in a stock-for-stock transaction that will create the nation s largest radio broadcasting entity. Chancellor will acquire Capstar in a merger of Capstar into a wholly owned subsidiary of Chancellor Media. The combined company will have 463 radio stations in 105 markets as well as interests in television, billboards and ad sales.
This merger is subject to stockholder approval, and will be voted on July 13, 1999.
Due to the FCC s Telecommunications Act of 1996, which relaxed cross ownership and duopoly restrictions, radio groups across the United States have either merged with or been bought out by larger corporations. All of these mergers and acquisitions come with the hope of higher profits and larger returns. The thought being that larger station groups can not only cut costs by consolidating operations, but can increase revenues by creating a larger listener base that will attract higher shares of advertising dollars.
The merger received approval by the Federal Trade Commission under the Hart-Scott-Rodino Anti-Trust Act on June 9, 1999. However, not unlike the LIN agreement, this merger is also under scrutiny from stockholders. In September 1998, a stockholder class action complaint was filed in the Delaware Court of Chancery by a stockholder purporting to act individually and on behalf of all other persons, other than defendants, who own securities of Chancellor and are similarly situated. The defendants named in this case are Chancellor Media, Hicks, Muse, Tate & Furst, Thomas O. Hicks, Jeffrey A. Marcus, James E. de Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J. Hodson, Perry Lewis, John H. Massey, and Vernon E. Jordan, Jr. The plaintiff alleges breach of fiduciary duties, gross mismanagement, gross negligence or recklessness, and other matters relating to the defendants actions in connection with the proposed Capstar merger. This lawsuit is ongoing, and Chancellor intends to contest these allegations. It will be interesting to see if this suit also ends with a settlement agreement to terminate the proposed merger.
In 1998 Chancellor Media entered the outdoor advertising business with the acquisition of Martin Media L.P. and Whiteco Industries, Inc. for $610 million and $930 million respectively. These acquisitions launched Chancellor into the number five spot in the outdoor market, owning over 42,500 billboards and outdoor displays in 38 states. However on June 1, 1999, due to management issues, Chancellor struck a deal to sell its outdoor business for $1.6 billion in stock and cash to Lamar Advertising. In return, Chancellor will receive a 30 percent stake in Lamar. The sale comes just months after Chancellor cancelled a consolidation with LIN Television. Hicks said that because Jim McLaughlin, president of the outdoor group, has elected not to stay with the company for very long, its been difficult to consolidate its billboard holdings. This sale will enable Chancellor to redirect its attention to its current and prospective radio holdings. CEO, Tom Hicks stated The agreement enables Chancellor s senior operating management team to focus on our industry-leading radio station portfolio.
FUTURE
On May 19, 1999, Chancellor Media announced that it will change its name to AMFM, Inc. subject to shareholder approval. Chancellor has formed three new business untis: AMFM Interactive, Inc. (AMFMi), AMFM.com and AMFM Equities, which are intended to position AMFM s E-commerce web sites as highly trafficked Internet destinations, stream online broadcasts of AMFM s on-air programming and other media, and promote emerging Internet and new media concerns. Chancellor intends on benefiting from the perceived loyalty of their 66 million listeners. Steven Hicks commented AMFM is redefining radio as a feedback-driven, user-controlled, value-sharing medium. The visual, interactive capabilities of the Internet will close the loop with radio audiences, transforming loyal but largely anonymous listeners into active members of communities and e-commerce buying clubs.
AMFM.com s revenue will mostly come from audio and video commercials and sponsorships, along with the sale of video conferencing and other Webcasting business services to a variety of media and corporate clients. Chancellor says it ll exchange radio advertising inventory and promotional sponsorships for stakes in promising companies whose value can be materially enhanced by its marketing efforts. In essence, Chancellor intends to trade advertising space for shares in promising Internet companies.
CONCLUSION
Radio as a source of advertising is alive and well, however, radio as a medium for news is rapidly dying. As defined by Charles Davis, mass media is a product containing news delivered to a zoned or regionalized audience. The key word in this definition is news. But what is news? Webster defines it as new information about anything; information previously unknown. So then can music or advertisements be news? Perhaps a more precise, societal definition would be more suitable. Certain factors, not mentioned in the above definition, are imperative characteristics of news. Factors such as conflict, closeness to home, prominence, numbers, information, and educational significance depict a more detailed description of news.
Radio news is virtually dead. It has been killed by the Telecommunication Act of 1996. For news to be profitable and to flourish as an independent entity, it must be competitive. The Telecommunications Act, striped radio news of its competition. The days of locally owned radio stations are long gone. Right before our very eyes radio stations are being bought up by mega media corporations, such as Chancellor Media, and with these mergers come virtual monopolies. No longer are the owners concerned with producing quality programming that entertains and informs consumers, but owners are now corporations concerned with the bottom line, the almighty dollar. With decreased competition and the desire to please shareholders, stations are being consolidated to save costs. News production is the number one expense of radio stations, and media moguls are cutting local news to cut expenses. News departments are being replaced with a top-of-the-hour generic broadcast with no local ties.
Media interest is shifting from Libertarian view points, that of news being the fourth state, to intense corporate interest of the bottom line. Radio stations are moving from self-interest to investor interest. It is no longer how many listeners you have, but how many ad dollars can you pull. These mega corporations are overwrought with debt. Chancellor alone is $6.4 billion in debt. To decrease this debt, media corporations must increase revenues and reduce expenses. This prompts these mega companies to acquire more to increase revenues and reduce expenses through consolidation. However, media acquisitions are grossly over priced. Stockholders took Chancellor to court because of inflated acquisition prices. These costly acquisitions to reduce debt create a viscous cycle of more debt. This mentality is fueling the consolidation of media companies.
So, I pose the question, is television the last true mass medium?
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