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
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.
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
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
Projected cash flow of stations to be acquired 333,871
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.
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.
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
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
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
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.
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
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.
it should be made perfectly clear that the grant of 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
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.
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