The New York Post is reporting that the Department of Justice is considering whether it should look into John Malone’s plans to take a larger stake in iHeartMedia. However, you may find the reasoning The Post gives quite baffling.
The paper is reporting that D.O.J. lawyers will look into potential anticompetitive implications of Liberty owning a large chunk of iHeart due to the fact that Liberty also owns a controlling stake in SiriusXM and Pandora. Liberty currently owns a 4.8 stake in iHeart.
The Post quotes attorney David Kully of the firm Holland & Knight. Here’s what he had to say. “iHeart’s current owners have an incentive to invest in the stations to compete with Sirius. But if Sirius and iHeart were to be owned by the same company, the new owner could have less incentive to throw funds at the broadcast business, which makes its money from advertising, as unhappy broadcast customers (advertisers) may simply jump to Sirius, which charges a subscription fee.”
Kully offered up that baffling explanation. When was the last time a radio station or company worried about SiriusXM as competition or as a reason they would or would not invest in their own stations?
Read the entire New York Post column HERE.
Here’s another theory why Malone might want to buy iHeart. He wants to use ownership of the biggest radio company to get the NAB to change its position on music royalties. Sirius CEO Jim Meyer has long complained about FM stations not paying artist & label royalties that he has to pay. If the owner of the biggest radio company also took that position, it might make a new royalty a reality. As it is, iHeart gets a discount on its streaming royalty that Malone’s Pandora doesn’t get. So he’d also like to get the iHeart rate apply to Pandora. The DOJ has every reason to investigate Malone’s plans.