The Department of Justice is mulling whether to meddle with billionaire John Malone’s plans to become the king of radio, The Post has learned.
Justice Dept. antitrust division officials have raised an eyebrow over plans by Malone’s Liberty Media to acquire iHeartRadio, the nation’s largest owner of radio airwaves with 858 broadcast stations, including Hot97 and Z100 in New York, sources told The Post.
Lawyers for Justice are scheduled to delve into the potential anticompetitive implications of a merger in greater detail in January and February, sources said. Until the agency makes a call, Liberty, which controls satellite radio giant SiriusXM and streaming music service Pandora, is unlikely to proceed with an offer, sources added.
Liberty sought the Department’s blessing to buy iHeart in recent weeks through a plan to grow its current 4.8 percent stake, according to sources and a Dec. 12 report in The Wall Street Journal.
But the agency’s antitrust officials declined to bless the plan immediately, saying they needed more time to review the fallout of any deal, sources with knowledge of the discussions said.
The Justice Dept.’s biggest concern is likely focused on the potential for reduced competition between SiriusXM and iHeart if they merge, said Holland & Knight lawyer David Kully, who oversaw radio mergers for the Department from 2013 through 2016.
iHeart’s current owners have an incentive to invest in the stations to compete with Sirius, Kully explained. 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 may simply jump to Sirius, which charges a subscription fee, he said.
“They could not rule out the potential of harm to listeners from this acquisition,” Kully said of the Department’s decision to take a closer look at a Sirius/iHeart marriage.
SiriusXM, which charges a fee for exclusive access to radio stars like Howard Stern, recently acknowledged that traditional radio is a threat. “The availability of traditional free AM/FM radio may reduce the likelihood that customers would be willing to pay for our subscription services and, by offering free broadcasts, it may impose limits on what we can charge for our services,” the company said in its 2019 annual report.
Liberty’s Sirius has not yet made an offer for iHeart, which emerged from bankruptcy six months ago, an iHeart source with direct knowledge of the situation said. iHeart’s three largest shareholders, who control about 50 percent of the stock, are expected to demand more than $20 a share, the source said.
iHeart shares closed Friday at $16.01, giving it a $1 billion market value. SiriusXM, which also offers podcasts, saw its shares close Friday at $7.14 a share, representing a value of $32 billion.
Even if Justice officials find issue with a Sirius/iHeart merger, the agency might OK it anyway given the growing threat of streaming music and podcasts to both companies, a source close to Liberty said.
Malone may move into iHeart’s space even if he does not get approval to buy the company.
“Sirius may want to expand its satellite radio platform into terrestrial radio because millennials don’t pay for anything — not even the $5 a month for a Sirius starter plan,” this source explained. “Also, the law of numbers suggest Sirius could soon hit a subscriber ceiling,” this person added.
“The question is how long is Liberty willing to wait?” this person said. “Liberty will want a ‘yes’ answer from the regulators before pursuing a deal. Otherwise, it won’t waste its time.”
The Justice Dept. already made Malone sweat this month when threatening to force events promoter Live Nation to divest Ticketmaster unless it agreed to extend certain anti-competitive concerns, including a promise to not retaliate against venues that refuse to use Ticketmaster.
Liberty, which owns a 33 percent stake in Live Nation, agreed to a deal with the Department on Dec. 19.
Neither the Department of Justice nor Liberty returned requests for comment.