Mergers and acquisitions are among the oldest tactics for commercial ventures that want to increase their power and presence. They are also increasingly popular in the non-commercial sector, according to a March 14 Associated Press report.Public radio stations are engaged in an unprecedented expansion program, the report notes, with broadcasters buying new stations faster than ever. From 1998 through 2000, only one public radio station changed hands per year, but in 2002 six did so. This year promises even more activity, with four deals already pending. On a small scale, the M&A mania in public radio reflects the larger one that swept the broadcasting industry in the wake of the Telecommunications Act of 1996—a sweep that launched Clear Channel Communications to the top of the radio heap, with more than 1200 stations.Public broadcasters have discovered that, to fulfill their mission, they have to focus on business—which means reaching an ever-increasing number of listeners, according to Marc Hand, managing director of Public Radio Capital. Hand's Colorado-based financial firm helps raise money for public broadcasters to acquire new stations. Multiple stations allow a greater diversity of programming—such as jazz and classical music broadcast simultaneously—and result in a larger paid subscribership, industry analysts say.
San Francisco's KQED, claimed to be the most listened-to public station in the US, plans to buy a station in Sacramento, and taking a cue from Clear Channel, to deliver the same news programming it offers in San Francisco Bay, customized with local traffic and weather. That would put it in direct competition with Sacramento's existing public radio, but the move could benefit both.The AP report quotes analysts who say that "when multiple public stations compete in a market, the audience and pledges for all the public stations increase." That sounds counterintuitive, but it's exactly what happened in Los Angeles when Pasadena's KPCC got a $1 million upgrade fund from Minnesota Public Radio. Instead of eroding the listenership of Santa Monica's KCRW, both stations grew larger audiences. The same scenario played out in Washington, DC with WAMU and WETA. Last year, for the first time, public radio funding firms obtained investment ratings from Wall Street, which they used to issue multi-million–dollar bonds for station acquisitions.The ailing music industry may be next for the M&A mania. A March 13 report from Reuters indicates that the industry's "Big Five"—Universal Music, EMI, BMG, Sony Music, and Warner Music Group—may soon become the "Big Four" or even the "Big Three." Most of them are seeking merger or acquisition deals, the report notes, with Warner Music Group perhaps most likely to go first. WMG's parent company AOL Time Warner has already made public its intention to sell off its Warner disc manufacturing division. Debt-riddled Vivendi Universal SA is seeking buyers for its American entertainment units, and German media conglomerate Bertelsmann is looking for partners for its Bertelsmann Music Group.
The M&A rumors came just a week after former BMG CEO Strauss Zelnick told a music industry gathering that he expected to see consolidation in the industry this year. "In any mature industry, consolidation is a little like gravity and a little hard to overcome," said Robert Broadwater, managing director at the investment firm Veronis Suhler Stevenson.
