In re Applications of WBOK, INC.
(ASSIGNOR) AND STARR WBOK, INC. (ASSIGNEE) For Assignment of License of WBOK,
New Orleans, La.; WLOK, INC. (ASSIGNOR) AND STARR WLOK, INC. (ASSIGNEE) For
Assignment of License of WLOK, Memphis, Tenn.; KYOK, INC. (ASSIGNOR) AND STARR
KYOK, INC. (ASSIGNEE) For Assignment of License of KYOK, Houston, Tex.; and
LITTLE ROCK GREAT EMPIRE BROADCASTING, INC. (ASSIGNOR) AND KXLR, INC.
(ASSIGNEE) For Assignment of License of KXLR, Little Rock, Ark.
File Nos. BAL-6535, BAL-6536, BAL-6537,
BAL-6547
FEDERAL COMMUNICATIONS COMMISSION
17 F.C.C.2d 844 (1969)
RELEASE-NUMBER: FCC 69-508
May 13, 1969 Adopted
ACTION:
MEMORANDUM
OPINION AND ORDER
BY THE
COMMISSION: COMMISSIONERS BARTLEY AND JOHNSON DISSENTING AND
ISSUING STATEMENTS.
[*844] 1.
The Commission has before it for consideration the above captioned
applications.
2. Starr Broadcasting Group, Inc., is the
100-percent owner of the four assignees, and a grant of the applications will
give it its seventh AM station. Starr's
present broadcast interests, all 100 percent, are KOZN and KOWH(FM), Omaha,
Nebr.; KUDL, Fairway, Kans.; KCJC(FM), Kansas City, Kans.; and KISD, Sioux
Falls, S. Dak.
3. After sale of 73.3 percent of Starr's stock
to the public as part of the financing scheme for the acquisitions, de facto
control will rest with the following, who are presently the 100 percent owners
of Starr: William F. Buckley, Jr. (16.9 percent stock ownership after the
public issue), the commentator and owner of the National Review, and Peter H.
Starr (8.4 percent) and Michael Starr (1.4 percent), who are brothers
associated with Buckley in his broadcasting endeavors.
4. The purchase prices of the stations are as
follows: WBOK, $700,000 (cash); WLOK, $900,000 (cash); KYOK, $1,390,000 (cash);
KXLR, $450,000 (payable $50,000 in cash at closing and $29,000 more during the
first year). Starr Broadcasting Group
is financially qualified [*845] to purchase and operate the stations. The bulk of the financing will be provided
by the public offering of 73.3 percent of Starr's stock, which is guaranteed to
net $2,737,800, and a $1,500,000 bank loan from the Chemical Bank New York
Trust Co.
First-year needs
Purchase
price of WBOK $700,000
Purchase
price of WLOK 910,250
Purchase
price of KYOK 1,390,000
Payments
on KXLR purchase 79,000
Repayments
of principal on Chemical Bank loan 200,000
Interest
payments on Chemical Bank loan 125,500
Commitment
fee on Chemical Bank loan 3,750
Payments
to underwriter of stock issue for financial services other
than in
connection with the stock issue 34,500
Excess
of current liabilities over current assets of Starr Broadcasting
Group. Omitted from current liabilities is $60,000
due during next
year on
the purchase of KOZN and KOWH(FM) since they were
purchased
from Buckley himself 643,678
Total 4,086,678
Loan in
connection with KXLR purchase on which no payment is due
for the
first 15 months $50,000
Loan
from Chemical Bank New York Trust Co.
Interest rate is 8.25
percent. Principal is to be repaid in 10 quarterly
payments of $50,000
each,
followed by 40 quarterly payments of $62,500 each. The loan is
conditioned
on Starr Broadcasting Group's netting at least $2,392,-
000 from
the proceeds of the sale of its stock 1,500,000
Net
proceeds from sale of 73.3 percent of Starr Broadcasting Group's
stock 2,737,800
Projected
cash flow of stations to be acquired 333,871
Total 4,621,671
5. WBOK, WLOK, and KYOK presently have a
Negro-oriented format, and the applications propose to continue this
orientation. In all three cases the
applicant conducted elaborate surveys of community needs, starting by reading
up generally on problems facing Negroes today.
Proposed programming for WBOK is news, 7 percent; public affairs, 2.5
percent; all other, 7.4 percent; and maximum commercial matter, 18 minutes;
with exceptions up to 20 minutes for elections, Christmas, Easter, back-to-school,
and emergencies. WBOK is one of two
Negro-oriented stations out of about 10
6. Proposed programming for WLOK is news, 8
percent; public affairs, 3 percent; all other, 7.5 percent; and maximum
commercial matter, 18 minutes; with exceptions up to 20 minutes for elections,
Christmas, Easter, back-to-school, and emergencies. Out of the nine AM stations in
7. Proposed programming for KYOK is news, 8.5
percent; public affairs, 3.2 percent; all other, 7.4 percent; and maximum
commercial matter, 18 minutes; with exceptions up to 20 minutes for elections,
Christmas, back-to-school, and emergencies.
Of the 10 AM stations
[*847] in Houston, Only KYOK and
a daytime-only station are aimed at the Negro population, which comprises about
25 percent of the total population there.
To determine community needs, the assignee interviewed 25 community
leaders, both white and Negro, including authorities on the local Negro
community, and representatives of government, service organizations, religion,
education, labor, and business. A
questionnaire was devised with an expert on sampling and on the Negro
population in general from Texas Southern University, a local Negro
institution, and 140 interviews with members of the local black community based
on its were undertaken. The assignee
found a need for information on employment, government services, public issues,
Negro history and culture, and business development utilizing funds now
available for black capitalism. To meet
these needs, the assignee proposes programs covering proposed legislation
before and during sessions of the State legislature and explaining the
potential effect of developments on the black community; a half hour weekly
program on which government and current problems will be discussed by guests
from local and State government; a 15-minute weekly program on which a city
official will answer questions frequently asked of Houston's minority group
office at city hall; a 1 hour weekly discussion program moderated by a member
of the State legislature; a 15-minute weekly consumer news program in conjunction
with the Better Business Bureau; a half hour weekly program on landmark events
in black history. In music broadcasts,
the emphasis will be on soul, rhythm and blues, rock, and jazz.
8. For KXLR proposed programming is news, 8.3
percent; public affairs, 2.8 percent; all other, 6.5 percent; and maximum
commercial matter, 18 minutes; with exceptions up to 20 minutes during periods
of heavy advertising, such as Christmas and Easter and during political
campaigns, which exceptions would not occur in more than 15 percent of the
broadcast hours of any given week and in no more than 5 weeks a year. To determine community needs, the assignee
interviewed 19 community leaders and 37 additional area residents. Based on the preferences of those interviewed
and analysis of the program offerings of other area stations, the assignee
proposes to continue the station's country and western format. The assignee found that there was a need for
discussion of issues and presentation of news pertaining to
9. The applications do not present a problem of
concentration of control of media of communications. A grant of them would give Starr seven AM stations, the maximum
allowed by the multiple-ownership rules.
The four stations are geographically separated from Starr's present
three AM and two FM stations in
10. The applicants are legally, technically, and
financially qualified. Based on the
information before us, we consider that a grant of the applications would serve
the public interest, convenience and necessity. Accordingly, the above-captioned applications are hereby Granted.
FEDERAL
COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
DISSENTING
STATEMENT OF COMMISSIONER ROBERT T. BARTLEY
The
Commission's actions in this matter grant consent to assignments of four
stations to assignees owned 100 percent by Starr Broadcasting Group, Inc.
Three of
the stations, WBOK, WLOK, and KYOK, have commonly owned assignors, and the
fourth, KXLR, has a separate assignor.
The
Starr Broadcasting Group also has stations KOZN and KOWH-FM,
The
applicant's showing on its proposed financing of these transactions and of the
operation of the nine resulting stations is not one from which I can make the
affirmative statutory finding that the applicant is financially qualified.
Also,
there is no showing as to how turning the Starr Broadcasting Group into a
publicly held corporation would serve the public interest. To the contrary, the public interest could
well be derogated. In a corporation the
stock of which is widely traded either over the counter or on the exchanges,
maintaining an attractive price of the stock and attractive dividends can
become paramount and, thus, relegate to lesser consideration the operation of
the stations in the public interest.
The stations could well become investment tools instead of servants to
the public interest.
The
assignees' showings in these applications on ascertainment of community needs
do not appear to meet the requirements of the Commission's public notice of
August 22, 1968.
The
assignor of the fourth station, KXLR, gives as its reason for the assignment a
desire to be free to pursue other business opportunities in the market, which,
in my opinion, raises a serious question as to whether the sale is to purchase
other broadcast interests and traffic in broadcast licenses.
In view
of the foregoing, I vote to set the applications for evidentiary hearing on
issues with respect to the above matters.
[*849] DISSENTING OPINION OF
COMMISSIONER NICHOLAS JOHNSON
I feel
compelled to register my strong dissent to the majority's action in this
proceeding. I fail to see how the
block-transfer of four successful and closely contiguous AM stations to any one
person or corporation can serve the public interest, convenience, and
necessity, as the majority finds, in light of this Commission's firm commitment
to diversity of ownership in the broadcast media. Yet today's decision involves much more than even this. Specifically, the majority makes five basic
and serious errors: First, the transferee, Starr Broadcasting Group, Inc., is
already the multiple owner of three AM and two FM stations in the tri-state
area of
Starr
Broadcasting Group, Inc., is owned by three persons: William F. Buckley, Jr.,
noted commentator and owner of the National Review, who owns 63.3 percent of
its stock; Peter H. Starr, who owns 31.7 percent of its stock; and Michael F.
Starr, who owns 5 percent of its stock.
The corporation is licensee of the following radio stations:
Station Location Date
of purchase
KOZN
KOWH-FM
KUDL
KCJC
(FM)
KISD Sioux Falls,
n1 KUDL is allocated to Fairway,
[*850] Starr Broadcasting was also a 38-percent
owner of Topeka Television, Inc., a recent applicant for a construction permit
for a new television station in
The
prior financial performance of Starr Broadcasting has not been impressive. According to the Form S-1 registration
statement filed by Starr Broadcasting Group, Inc., with the Securities and
Exchange Commission, Starr's statement of consolidated operations for its existing
five stations indicates a net loss of $145,102 for fiscal year 1967 (ending
June 30), a net loss of $168,633 for fiscal year 1968, and a net loss of $8,730
for the 3-month period from July 1 to September 30, 1968. ("Registration Statement," p. 6.)
In other words, for the 2-year and 3-month period for which figures are
available, extending from July 1, 1966, to September 30, 1968, the five
stations owned by Starr Broadcasting Group, Inc., accumulated a total deficit
of $322,465. ("Registration Statement,"
p. 6.)
The
first-year financial needs of Starr Broadcasting have been estimated at
$4,086,678. This figure does not
include any operational losses from the existing five stations. It does include, however, among other
things, the $643,678 which represents the corporation's 1967 excess of current
liabilities over current assets -- a figure which does not include $60,000
owned to Mr. Buckley since 1967.
This
means that one, several, or all of Starr's five existing stations are operating
at a substantial loss. I sympathize
perfectly with these negative revenues.
I know very well how difficult it is to operate a radio station with
financial success -- even 2 or 3 years after the initial purchase. It is my feeling, however, that a corporate
licensee with five stations on its hands, some or all of which are operating at
a loss, should at least not be given four more stations until things take a
turn for the better. There will
inevitably be the temptation, for example, to subsidize the losses of one station
with the profits of another -- particularly where, as here, the corporation is
publicly held, and its management wishes to present a rosy financial picture to
its stockholders. Whereas such
potential balance sheet manipulations may to some extent soothe the
dispositions of the corporation's stockholders, it inevitably means that funds
earned by the successful stations and once available for improved programming
may no longer be accessible. Further,
common sense would indicate that one money-losing station, to say nothing of up
to five, would require the full and undivided attention of all available
corporate managerial talent. By
virtually doubling the number of stations controlled by the licensee, the
Commission majority makes it more difficult for the directors of Starr
Broadcasting to focus their efforts on the corporation's currently unsuccessful
stations.
I do not
understand why Starr wishes to purchase four additional stations when its five
present stations are operating at a loss -- unless, of course, Starr wishes to
offset its current losses against the profits of the four stations to be
acquired, thereby creating a more attractive
[*851] (and marketable)
financial package. Whatever may or may
not be the corporate interest in this transaction, I certainly fail to
understand how the majority concludes that this proposal will promote the
public interest -- especially in light of the danger that the profits from the
successful stations will be drawn off to feed the unsuccessful ones. As Starr Broadcasting has made no
affirmative showing on this point, I must dissent to the transfer on this first
ground alone.
A second
reason for my inability to join the majority involves the fact that Starr
Broadcasting will be three-fourths publicly held. The bulk of the financing for the block-purchase of the four AM
stations in question is to come from a bank loan and the proceeds of a public
stock offering. As the following
purchase prices are involved, this financing must perforce be substantial:
Station: Purchase
price
WBOK
(cash) $700,000
WLOK
(cash) 910,250
KYOK
(cash) 1,390,000
KXLR
(cash plus payments) 450,000
Total 3,450,250
To
obtain these sums, Starr Broadcasting first intended to sell to the public 56.4
percent of its stock. This estimate has
recently been revised, however.
Apparently due to current market conditions, Starr now proposes to sell
73.3 percent (338,000 shares at $9 per share) to the public. This will mean that, should all the stock be
sold, Mr. Buckley will retain only 16.9 percent of the corporation's ownership;
Mr. P. Starr will hold 8.4 percent of its stock; and Mr. M. Starr will hold 1.4
percent. The majority speculates that
Mr. Buckley will still retain de facto control under this proposal. Reassuring as this belief is, I do not see
how it can be supported. With 73.3
percent of the corporation's stock up for sale, it does not seem impossible
that someone may purchase more than 16.9 percent of the total stock -- thereby
giving him de facto control of the corporation. There is the substantial possibility, therefore, that shortly
after today the nine stations owned by Starr Broadcasting may be under the
control of persons or corporations not presently before this Commission.
In
addition, the management of a publicly held corporation is naturally concerned
with its public image as reflected in its financial statements and stock
dividends. Thus, for example, it may be
financially desirable to distribute the corporation's earnings out to the
shareholders in dividends rather than devoting them to improved
programming. I do not say this
inevitably will be the case. But I do
feel it is a possible danger, and do not feel I can, consistent with my
obligation to serve the public interest, vote for the four transfers in
question without some assurance from the transferees, or the majority, that
programming and not stock market considerations will govern the operations of
the transferee's stations. I would have
thought the public was deserving of much more caution than the majority shows
today.
My third
objection to the four transfers in question involves the potential dominance by
the transferee of the Negro-oriented audiences
[*852] in major communities in a
four-state area. Stations WBOK, WLOK,
and KYOK have what is described as a "Negro-oriented" format of soul
music, rhythm and blues, rock music and jazz.
In response to public surveys, the applications propose, in addition to
their basic music format, a number of public service programs which will
provide the black communities in
More
importantly, however, the transfers of the
The
majority deals with this objection in one sentence: "The fact that WBOK,
WLOD, and KYOK serve a specialized market which the others do not, further
dispels any suggestion of concentration of control." (Majority opinion, at
p. 6.) Precisely the opposite is the case.
The preliminary effort in excessive concentration of control matters is
always to delimit the particular line of commerce involved. For some purposes, it is sufficient merely
to define the line of commerce relevant to broadcast station transfers as
broadcasting, particularly when the transfers involve television and so few
stations are allocated per market. In
the instant case, however, we cannot ignore the fact that WBOK, WLOK, and KYOK
have successfully specialized their programming to serve the specific needs and
desires of their communities' black radio audiences in three major cities. If the line of commerce, therefore, is in
part defined as Negro-oriented audiences in three large communities in a
three-state area, it seems clear that the transfers will substantially
concentrate market power and control
[*853] over sources of programming diversity in the hands of one
corporate interest. Contrary to the
majority's assertion, therefore, the concentration of control issue is a real
one.
I find
this quasi-monopolistic concentration of control over a programming format to
be particularly unfortunate in light of the lessons drawn by the Kerner
Commission report on civil disorders.
The report attributed the sense of alienation and helplessness felt by
many black residents of this country's large cities in part to a failure by the
mass media to offer them some access to the broadcast forums they control. I feel that one way to counteract this trend
toward alienation and helplessness, at least with respect to the media, is to
strive toward the goal of diverse and local ownership and control of community
broadcast stations. In an area of
discussion where little is demonstrably clear, I have operated on the
assumption that a station which is locally owned and controlled will tend to be
more responsive to the needs of its audience than one that is owned by an
absentee, multiple-station corporation.
The
assumption may not be verifiable in every case. Yet the majority has failed to disprove it to me in the instant
case. Absent any evidence (much less
reasonably compelling proof) that the public will benefit from absentee
ownership of its communications media by large multiple-station owners, I must
continue to vote in favor of local ownership.
This assumption leads me to dissent to the majority's action.
Fourth,
it should be made perfectly clear that the grant of the
The
majority's decision today adds this four-station concentration to Starr
Broadcasting's existing five-station chain.
This five-station chain extends in an almost straight line along
Interstate Highway 29, from
The
majority deals with this issue in an offhanded and contradictory manner. First, they state that the transfers
"do not present a problem of concentration of control" -- even though
the transfers will give Starr
[*854] "the maximum (of
seven full-time AM stations) allowed by the multiple ownership rules."
(Majority opinion, at p. 5.) The majority then states that the transfers of
WBOK, WLOK, and KYOK would disperse the concentration of control which their
present owners hold. The reason given
is that the present owners of WBOK, WLOK, and KYOK also own WGOK in
The
Commission's multiple ownership rules with respect to standard broadcast
stations are contained in section 73.35(b) of its rules, which provide, in
part, that "(no) license * * * shall be granted to any party * * * if the
grant of such license would result in a concentration of control of standard
broadcasting in a manner inconsistent with public interest, convenience, or
necessity." This indicates to me that before we affirm transfers of more
than one standard broadcast station to any party, we should require some
affirmative showing that the transfer will not harm, and indeed will further,
the public interest. No such showing
has been made by this applicant. The
majority, therefore, appears to read section 73.35(b) of our rules as providing
that any transfer of up to seven full-time AM stations does not raise
concentration of control questions, and will automatically be approved. I must emphatically dissent to such an
interpretation.
The
fifth reason I am unable to join the majority is that it today acts to approve
the transfer of four stations to Starr Broadcasting while, at the same time,
the Securities and Exchange Commission is delaying its approval of the proposed
stock offering until Starr can submit to it further information concerning the
risks Starr's stock offering presents to the buying public. The SEC requires that all corporations
wishing to sell stock to the public must first file with it a registration
statement and prospectus setting forth all the risks involved in the
offering. Starr's original prospectus,
which it filed with the SEC some time ago, has not yet been given SEC
approval. On April 29, 1969, the SEC
sent Starr a deficiency letter asking it, among other things, to amend its
prospectus to update its financial information as of March 31, 1969, and to
state the reasons why its present five stations have operated at losses during
prior years.
Clearly
this information, if supplied, would greatly influence this Commission's
determination whether the proposed transfers will be in the public
interest. If, for example, it should
appear from Starr's recent financial information that its five present stations
are currently operating at substantial losses, or that the stations' prior
losses were due to management inexperience or other reasons affecting
Starr's [*855] ability to operate four additional stations,
then that information might well affect our decision to approve the transfers
in question.
Yet, to
my knowledge, Starr has not filed the requested amendments with the SEC or the
FCC. And to my knowledge, the majority
has not even attempted to discover precisely why the SEC believes that Starr
has failed adequately to apprise the stock purchasing public of the risks
involved in the proposed offering. I do
not believe this Commission should rule that a transfer of four AM stations to
Starr, to be financed by a substantial stock offering, serves the public
interest when, at the same time, the SEC believes it does not yet have enough
information to warn the public of the risks involved in the stock
offering. I believe this Commission has
at least as high an obligation of care toward the public with respect to the
protection of its property as does the SEC with respect to potentially risky
financial transactions. I would at
least postpone our decision until the SEC or the FCC has been apprised of all
relevant information.
In sum,
I am not convinced that the accumulation of broadcasting power presented by the
applications dealt with today is justified by our guiding standard of the
public interest. I do not believe that
either the financial past or future of Starr Broadcasting warrants the apparent
confidence which the majority feels it has earned. I believe the majority's decision will place in the hands of one
absentee corporate owner an undue concentration of control over one of the few
sources of information and entertainment available to the black communities in
I
dissent.
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