Wednesday, July 11, 2007

Clear Channel's Greatest Hits: The media giant's long reach into the concert business

This week the Future of Music Coalition is taking on Clear Channel because the company is forcing local and indie artists to waive performance royalties to have their music considered for airplay on the chain’s stations.

What’s really angered us is that the move comes as part of a settlement of an FCC investigation into payola at Clear Channel stations. According to the terms of the deal, Clear Channel and other broadcasters must play 4,200 hours of local and independent music. So let’s recap: Clear Channel is investigated for payola and then they turn around and ask local and indie artists to give up something of value to get on the air. Kind of sounds like payola all over again, doesn’t it?

In its response to FMC, Clear Channel claims it has the artists’ best interest at heart, but that’s simply not the case. As we wrote yesterday, Clear Channel’s dominant position in the radio market ensures most local and indie artists won’t get significant airplay. Today, we’ll look at how Clear Channel tried to unite two different streams in the music industry – radio and concert promotion – under the banner of corporate synergy to generate not only revenue, but also significant leverage in the music industry.

In addition to acquiring more than 1,100 radio stations, throughout the late 1990’s the media giant also spread its tentacles into other areas of the media and entertainment business: outdoor advertising, radio research, regional news networks, radio trade magazines, syndicated programming, music venues, and, perhaps most important for artists, concert promotion.

In 2000, Clear Channel bought the nation’s largest concert promoter, SFX Entertainment, for $4.4 billion (the new unit was dubbed Clear Channel Entertainment at the time). The sale put Clear Channel in a position no company had ever occupied: the primary arbiter of radio airplay and the 800-pound gorilla in the concert industry. Clear Channel took two of the crucial positions required for an artists to make a living and combined them into one. In 2005, Clear Channel decided to spin off the live entertainment division from its radio holdings for reasons discussed below. But before we get to that, we need to discuss a little history of the Clear Channel SFX-merger.

Clear Channel argued its position would create synergy that would enrich artists and the company itself. For artists to be successful, they need airplay. Once they have airplay and have gained a mass following, they can sell a lot of concert tickets, or vice versa. Clear Channel said it could make both happen.

What happened instead was more Sopranos than synergy. In some cases, the company was accused of using access to radio play on its stations to force artists into bad concert deals. A 2001 Salon article details:

"One manager for a platinum-selling rock band says too often bands today have to choose between radio airplay or a big concert payday. He says not long ago his act was arranging a deal for a concert in Denver.

Clear Channel Entertainment offered the act significantly less money to promote the show than (Nobody in Particular Presents or NPP) did. Since the manager is supposed to act in the best interest of the band, the logical move would have been to accept the NPP offer to guarantee the band a bigger paycheck.

But the band's label was told that if the act didn't accept Clear Channel Entertainment's lower offer, local Clear Channel stations would not play the band's new single, let alone promote the show on-air. Without that radio support, NPP's more generous offer suddenly didn't look so appealing.

That incident was not isolated. When Everlast played Denver last year the same thing happened, someone close to the artist claims; his label was told if Clear Channel didn't handle the concert promotions, its stations would not promote the show on the air. (Salon citation)

NPP sued Clear Channel accusing it of “monopolistic and predatory practices” in concert promotions in the Denver area. NPP alleged: “Clear Channel repeatedly has used its size and clout to coerce artists to use Clear Channel to promote their concerts or else risk losing air play and other on-air promotional support.”

In 2004, a judge threw out the charges of monopolistic behavior against Clear Channel, but allowed the rest of the case to continue. It was settled later that year, but not before some damning e-mails came to light. In the e-mails, Clear Channel executives said they wanted to “crush” rival concert promoters and they discussed threats to artists and record labels if they did not agree to the terms of Clear Channel concert deals.

Despite the heavy-handed tactics, Clear Channel executives had nothing but praise for the Denver operation:

“The synergy between Clear Channel and SFX, especially in Denver, has been nothing but spectacular. Denver is becoming a model for how successful it can be,” said then SFX executive Chuck Morris.

Other artists said they felt pressure from Clear Channel to play free promotional concerts as Rolling Stone reported in 2004:

“Some artists and managers also complain that Clear Channel stations use their control of the airwaves to pressure acts into playing radio-promo concerts. A manager of a Top Forty group says that his client's songs were pulled from a large-market station after the band refused to play a free promotional concert in 2000.”

For the artists that Clear Channel claims to have at heart, the Clear Channel-SFX merger was a mixed story. In 2002, rocker Steve Miller had this to say in Billboard:

"As the 1990s went on, Clear Channel came in, and things started getting real crazy, real quickly. I looked up one day and said, 'Who are these guys doing 11 of my shows?' Then it was 19, then one year it was 38 of 42 gigs. But the money wasn't good. I'm not talking about profits; I'm talking about where it was coming from. I don't like the way they run their facilities, and I don't like the way they treated me as an artist. Their lack of a sense of humanity is shocking."

After announcing a 59 percent drop in profits in the first quarter of 2005, Clear Channel decided to sell off Clear Channel Entertainment to boost revenues. Analysts said the entertainment division was the least profitable and most volatile of Clear Channel’s holdings. Clear Channel’s much-anticipated synergy between concert promotion and radio airplay never materialized. Its experiment was clearly a failure, but it hardly changed Clear Channel’s greedy tactics.

In 2007, the Patent Office threw out a patent by Instant Live, formerly a Clear Channel company, after a challenge by the Electronic Frontier Foundation. Instant Live claimed its patent gave it a monopoly on all-in-one post-concert digital recording. It would have forced anyone making such a recording to use Clear Channel technology and stifled innovation – not unlike Clear Channel has tried to lock artists into bogus performance royalty deals and promotional concerts. The tune remains the same at Clear Channel.

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