Turning Off the Radio

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By: Glenn Rifkin

When L. Lowry Mays and B.J. “Red” McCombs purchased their first radio station—KEEZ-FM—in San Antonio, Texas, for $125,000 in 1972, they had no inkling of the empire that lay ahead. Mays, an investment banker, and McCombs, a used-car salesman, hadn’t even planned to buy the station at all, but wound up with it when the original buyers, for whom Mays had cosigned a loan, bailed out. Mays would later be called “the accidental broadcaster.”

Embracing the opportunity, the pair began acquiring radio stations and named their nascent company Clear Channel Communications. Congress then passed the Telecommunications Act of 1996, allowing broadcast companies to own an unlimited number of stations, and Clear Channel went on a buying spree. By 2001, it had grown into the largest broadcaster in the business, with more than 1,200 radio stations, or roughly one in 10 of all US stations.

With Mays as the CEO, Clear Channel moved deeper into the music business, including as a promoter, but radio and music fans decried the behemoth’s homogenization of the industry. All of its stations used market-research-generated playlists, which critics said ignored local tastes and stifled musical diversity. “Everybody gets the same McDonald’s hamburger,” said rockstar Don Henley, in testimony in front of Congress. The company was called “radio’s big bully.”

Clear Channel ignored the criticism. The founders were more concerned with cash flow and the future. By 2006, Mays began to worry about disruptions coming to the radio industry, mainly through the internet and the emergence of alternative streaming sources of programming. Advertising markets were fragmenting, as advertisers could suddenly target specific audiences more easily. The value of Clear Channel’s shares had dropped by more than half. Mays believed it was a good time to make an exit.

He couldn’t have been more right. The pair agreed to a leveraged buyout of the company to two Boston-based private equity firms, Bain & Company and Thomas H. Lee Partners, for nearly $27 billion (including $8 billion in debt). The deal, one of the largest buyouts in history, was consummated in 2008. It “sent shockwaves through the industry because of that valuation and their gargantuan heft,”says  Buzz Knight, a media consultant based in Boston.

It also made Mays look like a genius. Almost instantly, Clear Channel got hammered by the Great Recession, changing consumer tastes, and a wave of consumer disinterest in its programming strategy. The company rebranded itself as iHeartRadio in 2014 but ended up declaring bankruptcy in 2018, swamped by $20 billion in debt. iHeart, however, would become a potent force in the industry,

So why did Mays sell? His answer, in a Texas Monthly story in 2018, couldn’t have been simpler: “It was best for the family to sell and take the chips off the table."