What is minority-owned?
By BroadCasting & Cable Staff -- Broadcasting & Cable, 1/21/2001 7:00:00 PM
Catherine Hughes' radio empire began with humble beginnings: a single Washington station bought at a bargain price in 1979.
Since then, her company has become a huge success, a rare story among minorities who get into the broadcast business. Today Radio One, now headed by son Alfred Liggins III, is the country's ninth-largest radio group and sits on a mound of investors' cash.
But a funny thing happened on the way to Wall Street.
After raising $172 million in its 1999 initial public offering, Radio One no longer is considered a minority company under the government's definition: The dilution of Hughes' holdings pushed the company out of any one of several definitions the government uses to classify a company as "minority-owned."
The disqualification also resulted in Radio One's falling out of the government's tally of minority-owned companies. In fact five minority companies that have tapped equity markets in the past two years-including Entravision and Radio Unica-were excluded from a National Telecommunications and Information Administration report last week detailing minority broadcast ownership. If those companies had been included, the number of minority owners would have jumped by 112 full-power stations, including 12 TV outlets.
For the companies, losing minority status may do practical damage by disqualifying them for federal minority initiatives. One such program some policymakers want to resurrect would give tax breaks to broadcasters that sell to minorities and, in the process, give the buyers a bargain price.
Given Radio One's success-it now owns 51 stations-handing the company a break may seem as ludicrous as giving a helping hand to white-run industry giants like Clear Channel or Infinity. But some advocates of minority media programs say aiming government efforts toward single stations and small-group owners is out of date.
Robert Johnson, chairman of Black Entertainment Television, last week was sounding the call for a liberalized definition of minority control. Appearing with Commerce Secretary Norman Mineta during a press conference on minority broadcast ownership, he was an even less likely candidate than Hughes for government largess. After all, he had just sold his cable network to Viacom for $3 billion.
Johnson himself admitted that he is a "strange duck" for public sympathy. But "you will never see a change in the flow of wealth-generation in this country," he insisted, unless government programs encourage minority-controlled companies to tap public markets.
These days, he said, big station groups have tremendous advantages over small owners, and if minorities are to have any media voice, the government must help them reach the scale needed to compete nationwide with several stations in each market. Otherwise, the 61% of minority owners operating as single-station operators will be forced to sell out to big, white-controlled conglomerates.
Johnson suggested several ways companies might retain minority status after tapping equity markets. For instance, a public company with a minority chief executive holding at least 5% of the stock might qualify, he said. Other suggestions: companies in which minorities hold a majority of board seats or a minority individual holds a super majority of the voting stock but a smaller portion of the equity.
Mineta wouldn't endorse any of the proposals, and any change would be controversial, in no small part with civil-rights groups which have attacked some local marketing agreements between minorities and big broadcasters as "shams" that leave key programming decisions and profits in the hands of white-controlled corporations.
Also, the tax certificate was often abused. Companies looking to cash in could strike a deal with minority buyers, who would hold on to a station for a year or two before selling. Congress finally killed the program in 1995 after Viacom tried to create a $600 million tax break by selling its cable systems to two large companies and an African-American who contributed only $1 million of the $2.3 billion price.
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