AOL Eyes a Hot New Medium: Radio
Business Week Online
What's the next medium that America Online Inc. hopes to conquer? Try radio. The online giant, BUSINESS WEEK has learned, is negotiating to buy an equity stake in Dallas-based Chancellor Media Corp. and gain rights to broadcast Chancellor programming across the AOL system on the Internet. The talks come just weeks after AOL's main Internet portal rival, Yahoo! Inc., agreed to pay $5.6 billion for Broadcast.com Inc., the top provider of audio and video programming over the Internet.
Media industry insiders say that America Online is expected to invest a relatively modest amount--$250 million or so--in
Chancellor in exchange for exclusive rights to feature the company's radio stations on the Internet. Following Chancellor's
acquisition of San Antonio-based Capstar Broadcasting Corp. this summer, it will be the nation's largest radio chain, with 469
stations in 106 markets. The talks, which a source close to Chancellor says began in early April, could result in a deal by late May.
MULTIMEDIA HOOK. For AOL, which has long been searching for a broadcast strategy, linking up with Chancellor could be
an important step. Like Broadcast.com, a new AOL/Chancellor service could offer ''streaming'' programming, which allows PC
users to view and/or hear content as it is broadcast. Streaming also makes it possible to use the Net for services such as
teleconferencing. At a minimum, it would give AOL a stronger multimedia hook to keep its 17 million customers online. AOL
declined comment on any potential deal.
The investment could be a boon to Chancellor, which has suffered through management turmoil and sluggish stock performance
during the past year. Since Chancellor underwent a major restructuring in March that included ousting its chief executive and
scrapping lofty plans to turn it into a multimedia giant, investors have been warily awaiting the next big move.
While declining to comment on AOL or any other potential Internet deals, Chancellor Chairman and Chief Executive Thomas O.
Hicks says his company plans to become a major Internet player by getting Chancellor stations onto local Web portals and by
creating new Internet-based radio stations. Then, Chancellor's sales staff could sell Internet advertising along with radio air time.
''We have more than 65 million listeners around the country. That gives us a tremendous ability to help drive listeners to Internet
portals,'' says Hicks, who is also chairman and CEO of the Dallas-based investment firm Hicks, Muse, Tate & Furst Inc.,
Chancellor's founder and controlling shareholder. ''We see the Internet as a major growth opportunity.''
STERN STUFF? Chancellor is far from the only radio player looking for new growth on the Web. CBS Corp.'s Infinity
Broadcasting Corp., for one, is laying plans for an independently run Web site that will feature its 160 radio stations as well as
additional content from such syndicated stars as Howard Stern and Don Imus.
''No one knows what the commercial viability of this is really going to be,'' says J.T. Anderton of radio consultancy Duncan's
American Radio. ''But the Internet offers the prospect of doing some very specific, very targeted programming for a very specific,
very targeted advertising customer.'' That seems to be what AOL and Chancellor are banking on.
By Stephanie Anderson Forest in Dallas and Richard Siklos in New York, with Catherine Yang in Washington |
