CBS and Clear Channel Eye Minority Fund

Executives at CBS Corp. and Clear Channel Communications Inc. have confirmed that the media companies are in the process of raising a private equity fund that will invest exclusively in minority-owned media enterprises, including broadcast, print and new media.

The fund, which will be in the multi-hundred million dollar range according to CBS Vice President Martin Franks, is attracting commitments from several media and financial entities. Trade magazine Daily Variety reported Aug. 16 that Chase Manhattan Bank had agreed to help finance the fund, providing institutional banking services and acting as a lender. Neither Frank nor a spokesperson for Chase would confirm the bank’s involvement with the fund.

Clear Channel Vice President Major Thomas said the fund could begin investing this year.

Although most media concerns have been actively investing in new media assets to complement their core assets – CBS owns considerable stakes in Sportsline.com and Marketwatch.com among others, and Clear Channel invested $15 million in Tunes.com earlier this month – Frank said the fund will have a more altruistic motivation.

“CBS and Clear Channel have taken the lead in helping to create this fund to deal with the problem of not enough minority media ownership in this country,” he said. “The fund will be managed by an independent manager and be at strictly arms length from its investors.”

According to a study by the National Association of Black Owned Broadcasters, less than 2% of radio and television stations are owned by minorities. Further, the NAACP criticized network television programmers earlier this year for the lack of minority representation in prime time series.

The FCC ruled earlier this month that, for the first time since 1960, television broadcasters can own two stations in a market. The ruling is expected to create a financial windfall for broadcasters. Franks said the launch of the fund is completely unrelated to the FCC’s decision.

“We have deliberately gone out of our way not to involve the FCC so we could refute suggestions that there could be a quid pro,” he said. “The idea for the fund comes out of a conversation between [CBS CEO] Mel Karmazin and [Clear Channel CEO] Lowry Mays where they agreed that the industry could do a better job in dealing with the minority issue than could the government.”

Neither executive would disclose the identity of the other partners in the fund.