Radio Multiple Ownership: Market Manipulation Minus the Wait?

Depending on who’s doing the including, inclusion of a radio station in an Arbitron market may not be subject to a two-year waiting period for purposes of multiple ownership calculation.

While the heyday of radio consolidation is fading in the rearview, some opportunities still exist. As Cumulus Licensing LLC recently demonstrated, with a quick change in a station’s city of license, an otherwise impermissible ownership situation can become permissible – thanks to a helpful Audio Division interpretation of the contour overlap standard that has governed radio multiple ownership for nearly a decade.

Concentration of control in the radio world hasn’t been on many people’s radar for a while, so some background may be in order. 

Since back in the 1990s, radio ownership in any particular market has been subject to caps depending on the number of other stations present in the particular market. In the ‘90s, the relevant “market” for any proposed acquisition depended on the particular contours of the particular stations owned and proposed to be owned by the buyer. That gave rise to considerable flexibility for buyers, who were able to some degree to manipulate the scope of the relevant market to their advantage.

That signal contour approach to market definition was largely tossed out in 2003, when the Commission adopted an Arbitron/geography-based approach. Under the “new” approach, radio ownership caps are determined by the number of stations located in (or “home to”) Arbitron-defined markets. By relying on the independent determination of Arbitron as to which (and, thus, how many) stations were in each market, the FCC theoretically reduced the flexibility the signal contour approach had afforded to inventive applicants.

But, as the Commission acknowledged, even the Arbitron approach was subject to manipulation.

Station licensees could persuade Arbitron to modify its market definitions to increase some markets to include particular stations, or decrease them to exclude particular stations. The result of such modifications: some deals that might not otherwise have met the FCC’s ownership caps could suddenly be acceptable. To discourage rampant, licensee-induced changes in the Arbitron market definitions, the Commission imposed a two-year waiting period before any such changes could be relied on to demonstrate compliance with the ownership caps.

Of course, some stations aren’t located in (or “home to”) any Arbitron-defined markets. Such stations are still subject to the signal contour method of determining local ownership caps.

So what happened with Cumulus?

Cumulus was looking to improve its position in the adjacent Mobile, Alabama and Pensacola, Florida Arbitron markets. No problem there. It entered into agreements with a couple of other licensees to acquire a total of three stations, one in the Mobile market, the others in the Pensacola market. The proposed acquisitions would, once granted, still leave Cumulus safely within the permissible caps for those markets.

But wait. As a petitioner to deny the deal pointed out, of the stations that Cumulus already owned in the Mobile market, one had just been the subject of a recent change-of-community application that brought it from scenic Atmore, Alabama to slightly more scenic (from a 307(b) perspective, anyway) Saraland, Alabama. That change just happened to bring the station from outside the geographical boundaries of Arbitron’s Mobile market to within those boundaries. According to the petitioner, if that change had not been made, Cumulus’s proposed acquisitions would have had to be assessed under the signal contour approach and (again according to the petitioner) those acquisitions would have exceeded the relevant ownership caps and the assignment applications would have to be rejected.

As the petitioner saw it, the change-of-community application was essentially the same as an effort to modify the Arbitron market definition; since (as noted above), such market modifications are subject to a two-year waiting period, Cumulus could not take advantage of the change for two years. 

The Audio Division didn’t buy it.

According to the Division, the two-year waiting period applies only to market changes effected through Arbitron’s processes, i.e., changes in market boundaries (making a market bigger or smaller) or changing a particular station’s “home” designation for Arbitron purposes. Change-of-community applications, by contrast, are handled through the FCC’s own processes. The Commission can thus take into account the potential effect of such proposed changes on such regulatory considerations as multiple ownership and market size before deciding whether to grant the change. So the two-year holding period is irrelevant with respect to changes approved through the FCC’s processes.

In this case, the change-of-community application had already been granted before Cumulus filed its applications to acquire other stations in the market. Just before, as it turns out – the change-of-community application was granted on May 7, 2012, while the first of Cumulus’s assignment applications was filed two days later. That may, of course, have been purely coincidental; but – call us crazy – it seems to us that it’s a good bet that the filing of the assignment applications was timed to occur after Cumulus was successful in moving its existing station within the geographical boundaries of the Mobile market. 

In any event, since the petitioner’s beef was really with the grant of the change-of-community application rather than with the follow-up assignment applications, the Division concluded that it was too late for the petitioner to raise the issue now.

Another point weighing against the petitioner: even before the change-of-community, that particular Cumulus station had already been counted by Arbitron as “home to” the Mobile market for more than eight years, so the move into Saraland did not affect the practical Arbitron status of the station. It seems to us that the Division could have avoided any discussion of the two-year waiting period by mentioning this, since the station’s status as “home to” Mobile had clearly been in place for well more than two years before the change-in-community.  (It’s possible that the staff was concerned about the fact that formally moving the station from Atmore to Saraland meant that the Atmore market – not an Arbitron-defined market – would be losing a station, so Arbitron’s historical treatment of the station didn’t completely resolve all conceivable market-related questions. But that factor implicates Section 307(b) considerations more than multiple ownership concerns, at least as far as we can see.)

The Division opted instead to focus on the alternate rationale that FCC-granted changes potentially affecting a station’s market status are not subject to the waiting period. By doing so, the Division appears to have endorsed a way of circumventing the contour-overlap approach to the radio multiple ownership rules. 

But don’t look for a boatload of applications trying to take advantage of what might be classified as a loophole. The limitations on “move-in” applications that take stations from outside a market to inside the market have been considerably tightened in recent years. As a result, it seems unlikely that very many folks will be able to take advantage of the Division’s decision. Nevertheless, licensees looking to max out their local ownership interests may want to consider whether an otherwise impermissible acquisition might be made possible through the change in one or another station’s community of license.