Combined SFX–Clear Channel Could Wield Monopolistic Power, Observers Say

Some fear the combined company may threaten to withhold airplay from acts who shun its tour promotion.

The just-announced merger of the nation's largest concert promoter, SFX Entertainment, and radio behemoth Clear Channel will create a formidable combined company that could wield monopolistic power in the music industry, experts said on Tuesday (Feb. 29).

Clear Channel owns or operates nearly 900 radio stations and 19 television stations across the United States, while SFX controls 120 concert venues throughout the country. Combined, they could threaten to withhold radio airplay from artists who do not agree to have their tours handled by SFX, according to observers.

"That's a whole lot of power in one place, whether they use it that way or not," said Gary Bongiovanni, editor of the concert-industry magazine Pollstar. "That's a big hammer they have in their pocket."

Matt Case, a promoter with an SFX competitor, House of Blues Concerts, said it was inevitable that the combined company would use its power.

"If you're up against the wall and want something badly, you're gonna use whatever you have," he said.

Citing these concerns, one East Coast promoter who asked not to be named said he doesn't believe the Justice Department will allow the merger.

Representatives from the Justice Department, who enforce antitrust laws meant to protect the marketplace from monopolies, could not be reached for comment at press time. Representatives from SFX and Clear Channel also could not be reached.

Even if the new company doesn't wield its power as a weapon, its vast holdings will allow for expanded promotional opportunities.

"The only thing I think that's really clear straight away is that there's potential there for cross-marketing, cross-promotion stuff," said Steve Jones, a communications professor at the University of Illinois at Chicago. "This is going to be an interesting one to watch."

Clear Channel CEO Lowry Mays said in a statement that the deal will allow the company "to gain immediate leadership in the highly attractive live entertainment segment, while taking advantage of the natural relationship between radio and live music events."

The deal also gives SFX a way to escape the $1.1 billion debt they acquired during a buying spree over the past several years, which saw them acquiring such other concert promoters as Bill Graham Presents and Delsener-Slater, observers said.

"They paid more than market worth for the tours, the promoters, everything," Washington, D.C., promoter Seth Hurwitz said. "The economics didn't make sense [as] a concert business on its own."

SFX is currently promoting tours by such major artists as Bruce Springsteen, the Red Hot Chili Peppers and Britney Spears, whose hit "... Baby One More Time" (RealAudio excerpt) helped make her one of last year's biggest pop stars.

The SFX–Clear Channel deal is the latest in a series of corporate mergers in the entertainment world. America Online announced earlier this year that it planned to buy Time Warner. Warner Music (Madonna, Kid Rock) later announced its plans to consolidate with EMI (Beastie Boys, Spice Girls).

Clear Channel and SFX also plan to work together on unspecified Internet music ventures, according to Clear Channel's Mays. In August, Clear Channel said they planned to invest $15 million in the Web company, which operates was then purchased by the downloadable-music company in December.

The Clear Channel–SFX deal is expected to be completed in late summer.