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Mickey Mouse replaces fox: foxy 99 sold to radio disney after 16-month contract dispute.

ON-AIR PERSONALITIES J.J. Spoon and Brandy Alexander still answer the phones with the words "Foxy 99."

Employees still come to work at the Plaza West Building in west Little Rock, and musk still wafts through the halls of KYFX-FM, 99.5.

All that's different is the offices are now on the third floor rather than the sixth ... and there is no radio broadcast.

KYFX stopped transmitting on July 10 when 16 months of ownership wrangling ended with Nameloc Inc. signing the station over to ABC Inc. of New York under a U.S. District Court order.

Along the way, what appeared to be a straightforward corporate acquisition of a minority-owned radio station for $2.56 million mined into a wild ride. It featured backlash from the black community, Nameloc owner Loretta Lever House's attempt to back out of--or possibly sweeten--the deal, lawsuits, counter-claims, uncooperative North Little Rock church officials and a federal contempt-of-court citation.

Still pending are Nameloc's appeals to the 8th U.S. Circuit Court of Appeals and the Federal Communications Commission. And there is also the matter of more than half-million dollars in attorney fees and other compensation claimed against House. (See sidebar.)

"I still feel very, very sad about this," House said last week in a telephone interview from Washington, D.C. She was there trying to drum up support among Arkansas' Congressional delegation to pressure the FCC to block the station's license transfer.

"A lot of things have been unjustly done. If I hadn't been under court under to do so, I probably wouldn't have signed the station over. But if I didn't, it would probably have resulted in huge fines or jail."

While House appears to be operating a phantom KYFX, ABC's parent company, Disney Inc., is three floors up, getting ready to launch Radio Disney in the old KYFX studio in early to mid September. Instead of the largely black listener demographic KYFX sought, the soon-to-be-dubbed KDIS will target children ages 6-13 and families with programming delivered by satellite.

House, 52, portrays herself as a little guy battling to maintain diversity and independent black media ownership who was run over by the tank treads of a multi-billion-dollar behemoth. She and others contend that black-owned radio and TV stations are disappearing across the country as fallout from media consolidation and that the free black voice in Little Rock is at risk.

She also accuses ABC of breaking a transaction confidentiality clause and costing KYFX substantial advertising revenue by inadvertently announcing the station's sale in job listings posted on the Internet.

For ABC and Disney officials and attorneys, the issue is much less complicated: House signed a sale agreement in March 2002. They even wrote a letter to Nameloc employees explaining their side of the dispute.

They contend House had second thoughts and tried several ways to back out of a deal, settling on the issue of minority media ownership only when other avenues were blocks. Meanwhile, her maneuvers kept Radio Disney from entering the Little Rock market for more than a year--although Disney officials declined to say whether the delay will hurt their entance to the market.

ABC filed suit in November to enforce the contract, and on Feb. 18 U.S. District Court Judge Thomas G. Thomas Eisele ordered House to complete the sale.

The Start

House and ABC even disagree on how they met.

House said they came to her through a broker, Bill Whitley of Media Services Group Inc.'s Dallas office, while ABC said she came to them through Whitley in October 2001. Judge Eisele found that ABC approached House in late November 2001.

Either way, ABC had put out the word in the fall of 2001 that it was looking to buy a radio station in the Little Rock market. House, who had acquired KYFX in 1992 through a FCC minority ownership program, negotiated with ABC officials for several months and finally signed a contract on March 25, 2002, to sell the station for $2.56 million.

The contract included stipulations that Nameloc had 15 days to negotiate a new lease with Joshua Ministries & Community Development Corp. of North Little Rock, which owned the station's transmission tower. Then, Nameloc would apply to the FCC for transferral of the broadcast license to ABC.

Those negotiations slowed and stalled for about two months, according to ABC officials and House, because church officials wouldn't include a lease assumption clause should the station be sold again. Church officials didn't return phone calls.

ABC eventually agreed to waive the assumption clause, according to its federal law suit.

Further negotiations ensued in mid-2002, with ABC ratcheting up tough talk to get House to finally submit a license transfer application. ABC claimed the application was ready by May 6, 2002, but House still hadn't submitted it by Nov. 8, when ABC filed its lawsuit. Nameloc argued that its failure to meet the deadline for the new tower lease voided the agreement, House said.

Between May and November, House and ABC exchanged several letters discussing complaints and hammering out details for the signing of closing documents. House called those letters amendments to the deal, but no official agreements were signed that changed the terms of the sale.

Nameloc complained in May 2002 that ABC had posted on Monster.com, a Web-based jobs listing service, openings at "Radio Disney KYFX, Little Rock," which hurt KYFX advertising revenues and violated a non-disclosure clause.

On June 6, 2002, Nameloc sent ABC a letter proposing a "license management agreement" allowing ABC to put its own programming in place until Nameloc could get the license transferred. Nameloc suggested a one-time $53,500 fee and monthly payments of $45,000, according to court filings, in addition to the $2.56 million sale price at the deal's closing. (The next day, Nameloc signed a lease agreement with Joshua Ministries but didn't provide ABC a copy until September.)

ABC countered with a proposal for about $10,000 in monthly payments and, in a later letter to Nameloc, claimed it was losing $15,000 a month due to the delays.

On June 19, 2002, Nameloc wrote ABC a letter claiming it lost $53,500 in ad revenue for May, June and July because of the job posting and offering to submit the filings to the FCC as soon as ABC Inc. paid that much in restitution.

On Aug. 2, 2002, Nameloc asked the escrow agent for the deal for payment of the escrow funds and claimed ABC breached its agreement.

Two days before ABC sued on Nov. 8, it notified Nameloc that it wouldn't renew a broadcast agreement for the Tom Joyner Morning Show and the Tom Joyner Weekend Show that was to expire on Feb. 28, 2003. House claimed that was retaliation by ABC for the wrangling over the sale.

What's It Worth?

House denied she was trying to get more money out of ABC, although the company felt it was being gouged.

Little Rock media expert Pat Walsh said, although House was about to reap a small fortune, she may have felt a twinge of seller's remorse. She may have believed, Walsh said, she sold Foxy too cheaply after Archway Broadcasting Group LLC of New York, paid about $8 million last year for Little Rock radio stations KHTE-FM, 96.5, and KLEC-FM, 106.3.

But those stations combined for about $2.5 million in annual ad revenue, while KYFX would've been lucky to even break $1 million, he said. And both Archway stations either owned their own transmission towers or had exceptionally favorable lease terms.

KYFX, meanwhile, has a short tower along the Arkansas River and "doesn't have the same signal to cover the same number of ears" as other stations that sold for more, Walsh said. ABC-Disney will probably have to reengineer the station to increase range.

Disney was buying up radio stations around the country at the time--it's up to 57 markets now. Bigger price tags for stations in San Antonio and Kansas City, significantly larger markets than Little Rock, may have influenced House as well.

House's complaint that ABC broke a non-disclosure agreement flies in the face of FCC rules which require some public disclosure of pending transactions through on-air and newspaper ads, Walsh said.

"Loretta didn't want anybody to know what was going on," Walsh said.

House initially refused to comply with Judge Eisele's summary judgment in ABC's favor and petitioned the FCC on March 5 to reject any license transferral application. ABC took her back to federal court March 14, where Eisele found her in contempt for making the complaint, which interfered with his order for her to complete the sale.

House claimed the contempt citation violated her rights because the FCC can take complaints from anyone.

The National Association for the Advancement of Colored People, the National Association of Black Owned Broadcasters and the Arkansas Regional Minority Purchasing Council formally objected to the license transfer in early May. However, an FCC bureau approved the transfer on the afternoon of Friday, May 30, the last business day before the FCC froze all license transfers in connection with the controversial deregulation of media ownership rules, said Kofi Ofori, an attorney with the NAACP.

The decision has been appealed to the full FCC, although such decisions are rarely reversed, Ofori said.

"The reason people should care is that our country, our society, is based on principles that a wide range of ideas, news and opinions should be available," Ofori said, citing a three-year-old FCC study that linked minority media ownership to broadcasting of a better range of viewpoints. "It seemed like (Disney and the FCC) wanted to ramrod this through."

Dale Charles, president of the Arkansas chapter of the NAACP, said House was steamrolled by a big corporation and that Little Rock's black community would be hurt.

"(KYFX) was crucial," Charles said. "(This) eliminates one of the few black voices to be on the air that gives black perspectives from a black point of view."

Philander Smith College's student government leaders and officials from the Christian Ministry Alliance have filed petitions for the FCC to reverse itself, as well, Charles said.

Charles King, executive director of the minority purchasing group, said while there is black-oriented programming in Little Rock, "There is a big difference between 'minority-owned' and urban formats ... KYFX was the voice of the community."

King was unhappy that the FCC allowed ABC to reply to accusations by opponents of the sale but didn't give opponents a last chance to respond.

Disney, in its letter to Nameloc employees, said it carries African-American programming and has a close relationship with Radio One, a minority-owned communications company. Disney also pointed out that Archway is run by African-Americans.

Why Sell?

If the station is so important to the community, why did House agree to sell in the first place?

House said she was under stress at the time of negotiations; she had just married and her father had recently died after a year-long illness.

"I signed the asset purchase agreement during a time when I was a little vulnerable," House said. "In those vulnerable times, I went ahead and made a bad decision."

But there were other pressures.

The church that owned the transmission was "very concerned," House said.

"(Black) community leaders came to me with much concern about taking the station out of the black community," House said. "After going over the issue with them, I realized it was a big mistake that I made."

It took almost five months after the federal court order for House finally to sign deal-closing documents. Within hours, Nameloc employees were dragging a decade's worth of accumulated furniture, business records, office equipment, CDs, and other items down from Foxy's old sixth-floor offices to the new offices of a company whose business plan seems tenuous at best.
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Title Annotation:minority-owned radio station sold
Comment:Mickey Mouse replaces fox: foxy 99 sold to radio disney after 16-month contract dispute.(minority-owned radio station sold)
Author:Holcombe, Carl D.
Publication:Arkansas Business
Geographic Code:1USA
Date:Jul 28, 2003
Words:1970
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