Radio's Hot, and So Is Thomas Hicks
The little- known mogul and his partners own five or more stations in seven big markets.
By Douglas Gomery
Douglas Gomery is the author of nine books on the economics and history of the media
A decade ago, in the hit movie "Working Girl," aspiring Wall Street tycoon Melanie Griffith hatched a plan to help a company gain a foothold in TV broadcasting – through radio. Seasoned Wall Streeters mocked her: "Radio is small potatoes."
But the plot proved prophetic. From January through November 1997, 839 radio deals worth $9.8 billion were struck.
ûince President Clinton signed the 1996 telecommunications reform act, fully one in four commercial radio stations have changed hands. Two years after Congress shredded nearly every rule governing radio station ownership, there is no hotter industry.
And no more important figure than Thomas O. Hicks.
While everyone has heard of one – the new radio colossus, CBS – the other of radio's Big Two, Hicks, Muse, Tate & Furst, with more than 400 stations, owns twice as many.
Rupert Murdoch and Michael Eisner may be household names; Hicks ought to join them in media mogul status.
âicks Muse is a private Dallas-based investment firm that in 1997 gobbled up former radio giants Evergreen Broadcasting, Gulfstar, Viacom, Capstar, SFX (pending) and Gannett's radio arm in deals worth an estimated $7 billion.
Today Hicks and his investment banking partners own five or more radio stations in New York City, Los Angeles, Chicago, San Francisco, Philadelphia, Detroit and Washington, D.C.
Yet only astute baseball fans had any idea who Hicks was when early in 1998 he announced he would spend a quarter of a billion dollars to purchase the Texas Rangers.
Hicks knew radio's prime times – the morning and afternoon weekday commute – seem immune to competition from other media. He figured that if he collected hundreds of stations, centralized programming and cut sales costs, he could improve the bottom line.
He also knew he could begin to compete with television and newspapers for advertising. In any market, Hicks Muse's stations could reach what TV and newspapers promised, and better target certain audiences. Indeed there were no more interested followers of Hicks' performance than executives in newspapers and TV stations, who formerly had the local advertising market to themselves.
¬icks did not come to radio as some wunderkind. He had cut his teeth buying and selling hotels, and he still controls Ghiradelli Chocolate, Chef Boyardee and Stetson hats.
Hicks began dabbling in radio only a few years ago. Now he controls more stations than David Sarnoff and William Paley, founders of NBC and CBS radio respectively, did together in their peak years in the 1940s.
Hicks also began to buy station support services to gain further leverage. When Hicks Muse acquired the Katz media group for $373 million, it took over the leading seller of radio (and television) national spot advertising. Katz sells on behalf of 2,000 local radio stations and 340 television stations, garnering more than half of this $1.5 billion market. When Coca-Cola wants to spot test a product and plug it on radio, the odds are good it will go through Katz and air its spots on Hicks Muse stations.
Logic dictated the next move: form a network. In September 1997 Hicks Muse hired David Kantor, former head of the ABC Radio Networks, to start up and run the AMFM Radio Networks. Hicks Muse is now negotiating to acquire SFX Broadcasting Inc. for about $1.2 billion.
While Hicks is abiding by the newly loosened telecommunications laws, the Justice Department fielded antitrust complaints from local merchants who wanted to be able to buy advertising from more than one radio owner. If the Justice Department sides with Hicks, the company will control roughly half of all radio advertising billings in the Long Island radio market.
Furthermore, during the final three months of 1997 Hicks Muse spent nearly $1.45 billion for an important collection of TV stations, Lin Television Corp., and is offering $850 million for the second largest chain of movie theaters in the United States – the United Artists Theatre Group. And Hicks Muse spent $100 million to form a company,
OmniAmerica, to build radio and television transmission towers.
But the investment company's biggest profits will come when it takes its business methods global. Hicks Muse is in the process of setting up a $750 million fund to acquire TV and radio properties throughout Latin America and other Spanish-speaking countries.
In particular, Hicks sensed that Latin American radio was a fragmented industry, and he would try to do in Latin America what he had just done in the United States.
Maybe then someone will pay him more respect. l ###