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Infinity Broadcasting Corporation, the largest company in the United States exclusively engaged in radio broadcasting, owns 26 radio stations serving 13 of the nation's largest radio markets. The company expanded during the 1980s and early 1990s by acquiring existing stations and successfully cultivating high-profile radio personalities.
Infinity was created by partners Michael Wiener and Gerald Carrus, who formed the company in order to purchase KOME, an FM radio station broadcasting in San Jose that also served the San Francisco area. KOME had just received its license to broadcast from the Federal Communications Commission (FCC) in 1971 before Wiener and Carrus assumed ownership in 1973. At the time, FM radio was a burgeoning medium, still struggling to catch up with the long-popular AM band. As FM gained in popularity during the 1970s, Wiener and Carrus achieved notable success with KOME, eventually expanding it into one of the most successful rock-and-roll stations in its geographic niche.
During the 1970s, Infinity embarked on an acquisition program informed by the strategy that had made KOME profitable; it purchased developing or underperforming radio stations in major markets and then turned them around with improved programming and management. Infinity eventually sold many of these concerns as a way of "trading up" to larger stations. In 1979, Wiener and Carrus brought another FM station under the Infinity umbrella that, like KOME, would stay with the company through the mid-1990s. They purchased WBCN, an underperforming station in Boston that the two believed had the potential to become a local ratings leader. Wiener and Carrus planned to shape WBCN in the image of KOME, making it an album-oriented rock station geared towards males between the ages of 18 and 30.
In 1981, Wiener and Carrus brought in Mel Karmazin to serve as company president and to oversee day-to-day operations. The 38-year-old Karmazin, a young, aggressive radio executive, agreed to accept the position with New York-based Infinity for a $125,000 annual salary and an opportunity to own part of the company should he prove responsible for significant growth. His only condition was that he was given total control of its operations. "You can't have three people run a company," Karmazin explained in the November 30, 1992 issue of Broadcasting.
Under Karmazin's direction, Infinity experienced steady, rapid growth during the 1980s. During his first year, in fact, he managed buyouts of two New York stations, WXRK-FM and WZRC-AM. He also picked up WYSP-FM in Philadelphia. In 1983, moreover, Infinity absorbed KXYZ-AM in Houston and WJMK-FM and WJJD-AM in Chicago. Those purchases substantially boosted the company's revenues and made it a contender in the upper ranks of the national radio broadcasting industry. Adhering to the company's original strategy of seeking undervalued companies, Karmazin nevertheless changed Infinity's direction by accruing a large portfolio of stations, the value of which he intended to increase over the long term.
Although Karmazin had significantly increased Infinity's assets and revenues with the string of early 1980s acquisitions, the company was strapped for cash by mid-decade. In a bid to raise investment capital for continued growth, Karmazin took Infinity public in 1986. Within a year, he had purchased five more stations: KROQ-FM in Los Angeles, WJFK-FM in Washington, D.C., WQYK-FM and WQYK-AM in Tampa, and KVIL-FM and KVIL-AM in Dallas. Then, in 1988, Karmazin and three other company executives borrowed more money in order to repurchase Infinity's stock and take the enterprise private again, reasoning that the stock market had undervalued the company and that they could profit in the future by selling off the repurchased stock. Despite the company's surging debt, management borrowed funds to procure three more stations during the late 1980s: WOMC-FM in Detroit and both WLIF-FM and WFJK-AM in Baltimore.
Infinity's critics during the late 1980s cited the company's high debt load and weak profit performance as evidence of its lackluster potential. However, many analysts believed that the company was a better investment than it appeared. Indeed, by the end of the 1980s, Infinity had positioned itself as a market-niche leader in several major broadcasting regions, a status achieved largely through a formula of developing unique and popular programs aimed at specific demographic groups, which boosted the stations' potential ad revenues. Infinity had been successful in purchasing key sports broadcasting rights, for example, and had cultivated several popular radio personalities, such as New York station WXRK's Howard Stern. Moreover, all of Infinity's stations provided nonentertainment programming, such as news or public affairs broadcasts.
Under Karmazin, stations acquired by Infinity were subjected to a rigorous regimen of financial reporting requirements and cost controls designed to improve their profit margins. In addition, Karmazin's team would adjust a new station's promotional strategy, usually by emphasizing local, rather than national, advertising sales. The overall programming and promotional initiatives usually resulted in high listener loyalty and healthy cash flow for most of Infinity's member stations.
Karmazin became known during the 1980s for his disciplined, hands-on management style. He met several times each week with his management team and continued to personally check up on local advertising accounts as he had since his days as a salesman. He also kept a heavy hand on all of Infinity's larger deals, such as the negotiation of rights to sports broadcasts. Karmazin's penchant for efficiency started at the top; Infinity's entire corporate staff in the early 1990s consisted of six people; Karmazin, a chief financial officer, an administrative assistant, and a three-person accounting office.
Infinity's spartan corporate staff was made possible by the autonomy that Karmazin afforded his local radio affiliates, as long as their ratings continued to rise. An important element of Karmazin's strategy was decentralized local management. Infinity relied on a system of performance-based financial incentives to motivate its workers and attract high-quality personnel, which were well-compensated by industry standards. General managers earned money for increasing cash flow, for example, and program directors were rewarded for higher ratings. Karmazin was particularly proud of Infinity's pay scale for advertising salespeople, which was a straight six percent commission with no limit on total earnings. Many salespeople earned more than $100,000 annually, with a few topping the $300,000 mark. "If a salesperson is going to get rich on a six percent commission," Karmazin stated in a Broadcasting article, "the company is going to get very rich on the other 94 percent."
Karmazin's management talents were perhaps most apparent in the example of Jim Hardy, whom Karmazin hired to serve as general manager of KOME, the first division acquired by Infinity in 1973. Raised in a Colorado goldmining town, before the onset of television, Hardy became interested in radio at a young age. He got his start in the business in the 1960s, working for his college radio station, one of the first FM stations in Colorado. In 1970, he went on to work for the first all-rock station in the United States, Denver's KLZ-FM. Hardy then served a long stint as a salesman at KWFM in Arizona until the infamous 1982 assassination of that station's disk jockey, Bob Cook, by a fanatic listener. Hardy then became manager of the station and soon thereafter was spotted by Karmazin as a capable candidate for the general management slot at KOME. After accepting the job, Hardy moved KOME to a new facility and began to reposition its programming and promotional operations. Citing consistent support from Infinity and the freedom afforded him in making critical decisions as contributing factors to his success, Hardy successfully increased the station's ratings and advertising revenue. By the late 1980s, KOME was the top-rated medium-market radio station by readers of Rolling Stone Magazine and was finishing tops in the important 25 to 54-year-old demographic ratings. "Gold mining is just like radio," Hardy noted in the April 2, 1990, issue of Business Journal-San Jose, in that "you dig a lot of dirt and hope you strike gold."
Despite the success of KOME and several other member stations, Infinity's performance lagged following the stock buyback of 1988. In addition to the company's huge debt load, which topped $450 million in 1989, poor advertising revenues during the U.S. recession damaged Infinity's bottom line. While sales increased slowly to $123 million in 1989 and then to $135 million in 1991, the company posted successive net losses totaling more than $100 million during that period. Nevertheless, Infinity retained its strength in core markets and managed to sustain a healthy cash flow, an important measure of health for radio stations.
In an effort to slash its debt and continue acquiring new stations, Infinity elected to go public again in 1992, earning $100 million in the offering, much of which was used to buy WFAN-AM in New York. Early in 1993, Infinity again borrowed money to purchase three additional stations--WUSN-FM in Chicago, WZLX-FM in Boston, and WZGC-FM in Atlanta--for a total of $100 million. Of all its acquisitions, the WFAN purchase garnered the most criticism from industry analysts, who regarded Infinity's payout of $70 million as excessive for an AM station, particularly a station that was not ranked in the top ten in its locale. Nevertheless, Karmazin viewed the addition as complementary to his strategy of focusing on radio sports; WFAN was an all-sports station.
In 1992, Infinity began to rebound, as sales increased about 29 percent and net losses were cut to about $9.4 million, largely the result of a general economic recovery. In mid-1993, the company initiated another stock offering in order to help pare its debt. Perhaps most importantly, many of Infinity's marketing strategies were beginning to pay off during this time. Having cultivated what was possibly the most impressive assemblage of high-profile talk and sport show talent in the business, Infinity was prepared when the popularity of talk and sports radio experienced a re-birth. Among its most notable local celebrities were: Don Imus (WFAN); Doug "The Greaseman" Tracht, whom Infinity had hired away from another station and planned to syndicate nationally; G. Gordon Liddy, attorney and talk show host on WJFK; and Mike Francesa (WFAN), who had become well-known on CBS-TV.
Foremost among Infinity's talk show staff was Howard Stern, an outspoken, controversial morning radio personality. After Stern had achieved a huge following on New York's station WXRG, Infinity began syndicating Stern's show to other stations for $300,000 per year during the early 1990s. Stern soon became one of Infinity's most coveted assets, generating an estimated $15 million annually in sales and capturing as much as $2,000 per 30 second advertising slot. Stern's key attribute was his appeal to white-collar men aged 18 to 34, the most difficult-to-reach and lucrative demographic group sought by advertisers. Of that group, in fact, Stern attained higher ratings in the massive New York market than the highest-rated prime-time television shows.
However, Infinity's success in the rapidly growing talk show market came at a price. Several of its stations' most popular hosts had drawn the attention of regulatory agencies, who cited them for crude and deviant behavior on the air. As a result, some premier advertisers had been scared away from those stations. Although the FCC had loosened restrictions on material it viewed as repulsive, Stern and several other hosts continued to push the boundaries. In 1992, "The Greaseman" was under investigation for indecencies allegedly committed before his move to Infinity, and Infinity's KROQ-FM in Los Angeles came under fire for broadcasting a controversial murder hoax. Howard Stern generated the most controversy, drawing criticism not only from the FCC but also from a wide range of special interest groups. Karmazin's emphatic defense of these talk show hosts earned him a reputation among some observers as a staunch advocate of what he viewed as First Amendment rights, while other analysts were not so favorably impressed.
As the economy improved and Infinity's programming and management strategies began to pay off, the company's financial performance improved. Of import to Infinity's bottom line was its move in 1992 to begin syndicating more of its talk shows nationally. Syndication allowed the company an entirely new means of profiting from its most popular programs. In addition, in 1992, the FCC amended its restrictions, increasing the total number of U.S. stations allowed per operator from 24 to 36 and boosting the number that an operator could own on each band (AM and FM) in one city from one to four. Late in 1993, Infinity added WIP-AM, an all-sports station in Philadelphia, bringing its total number of holdings to 22.
In 1993, with revenues up more than 35 percent to $234 million, Infinity posted its first positive net income--$14 million--since the mid-1980s. The company was also experiencing strong gains in the value of its stock and reported operating profit margins of 45 percent, a full ten percentage points higher than the industry average. Acquisitions that year cemented Infinity's position as the largest company solely engaged in radio broadcasting. From just a few rock-and-roll stations in the early 1980s, Infinity had grown into a diversified industry leader with stations providing sports, oldies, country music, talk show, and even Spanish-language programming. Karmazin picked up the company's 23rd station early in 1994, acquiring KRTH-FM, an oldies station in Los Angeles, for $110 million, the largest sum ever paid for a U.S. radio station. Taking advantage of the FCC's new, more permissive ownership regulations, the company expected to make several more acquisitions during the 1990s.
Principal Subsidiaries: WXRK-FM, WZRC-AM, WFAN-AM, KROQ-FM, KRTH-FM, WJMK-FM/WJJD-AM, WUSN-FM, KOME-FM, WIP-AM, WYSP-FM, WOMC-FM, KVIL-FM/AM, WJFK-FM, WBCN-FM, WZLX-FM, KXYZ-AM, WZGC-FM, WLIF-FM, WJFK-AM, WQYK-FM/AM.
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