The Gathering Storm over Media Ownership

Editor's Note: Bringing the story up to date: The Federal Communications Commission whacked a hornet's nest with a stick on September 23, 2002, when it announced that it would take a hard look at all of its controversial rules on media ownership. On that day, Michael Powell, the commission's chairman, invited comments from the public about who can own what and how much in the media business. Instantly, the hornets began to swarm.

By the deadline for submissions, February 3, oceans of legal briefs had poured in from unions, trade associations, consumer activists, think tanks, academicians; the Newspaper Association of America, National Association of Broadcasters, Newspaper Guild, National Organization for Women, Sony, American Federation of Television and Radio Artists, National PTA, American Psychological Association, National Association of Hispanic Journalists, United Church of Christ, and roughly 13,000 other groups and individuals.

All of them pointed out, in differing ways, that the FCC was embarking on nothing less than the most massive reexamination of media ownership rules in the agency's history, and that the outcome could have the most profound effects on how Americans get their news and information. Many of them argued that loosening the rules would cause a far greater concentration of media power in the hands of fewer and fewer huge companies -- even more concentration than already exists -- and the withering away of competition and diversity of viewpoints. Powell said that he and his fellow commissioners would review all the comments and evidence and hand down the new rules in late spring. And so the battle was joined, growing louder through the fall and winter.

While the FCC chief wanted to hold only two public hearings in New York City and Richmond, Va., on the rule change, Democratic commissioners, Jonathan Adelstein and Michael Kopps, organized additional meetings in Duke University, Seattle, Wash., San Francisco, and Los Angeles to ensure greater public involvement. Over the past few months, the opposition to the proposed rule changes has steadily gathered momentum, binding together a broad and diverse group of allies. The last round of public hearings in San Francisco and Los Angeles on Apr. 26 and 27, attracted a large number of both ordinary citizens and activists speaking out passionately against media consolidation.

Thus far, there is little indication that Powell has changed his mind. Over the same weekend, he told Newspaper Association of America convention that the FCC plans to remove the cross-ownership ban which prevents newspapers form owning radio and TV stations in the same area. But with the FCC decision a mere month away, the fight over the future of U.S. media is growing ever more urgent with each passing day.

And the lines have been drawn. It is a strange battle, in a way, pitting journalists against their bosses, breaking up old alliances, and gathering momentum as the day of reckoning approaches.

In mid-January, Senator John McCain, the new chairman of the Senate Commerce Committee, grilled all five FCC commissioners about the "monumental decisions" they were about to make that "will shape the future of communications forever." A Democratic senator, Byron Dorgan of North Dakota, called for more voices in the nation's media, but not from "one ventriloquist." A passionate, daylong seminar was held at Columbia's law school ("the most important meeting taking place anywhere in America today," Commissioner Michael Copps told the symposiasts). In late February, the FCC held a hearing of its own in Richmond, Virginia, followed by two others (at the University of Washington and Duke) organized by Copps personally. Copps, a Democratic appointee, complained that the policy review was moving too fast, and that the issues should be ventilated far more publicly before any decisions were made. Powell sternly disagreed, saying that "you don't need a nineteenth century whistle-stop tour to hear from America."

Powell has regularly pointed out that reviewing the rules is no pet project of his own, but was mandated by the Telecommunications Act of 1996 (signed by President Clinton), requiring him to reexamine FCC regulations every two years and get rid of the dead wood. Also, the U.S. Court of Appeals for the D.C. Circuit has ordered the FCC to justify several of the rules or junk them.

Still, Powell's own view ("validate or eliminate" has been his cry) is that much ownership regulation no longer makes sense because it dates from the era when channels of information were scarce. Now, cable, the Internet, and direct-broadcast satellites are commonplace. His legal adviser, Susan Eid, puts it this way: "The chairman has long since advocated that, if you're going to do an honest evaluation of the rules, you have to look at the marketplace as it exists today, not how it looked thirty or forty years ago when we had black-and-white TV, no remote control, and three choices of TV programs." The presumption is on repeal of the rules, she says, unless hard evidence proves they serve the public interest. Powell has been at pains to reassure his critics that he plans no scorched-earth policy that would lay waste all regulation. But defenders of the public interest -- Consumers Union, Consumer Federation of America, the Center for Digital Democracy, and many others -- fear that the FCC, with its GOP majority (three Republicans, two Democrats), will predictably facilitate Big Media's yen for the "efficiencies," the "synergies," and bottom-line values that come with gigantism. They fear those values will prevail at the expense of what's best for people who want to know what's going on in the world. Those advocates were not reassured in October when the FCC released twelve new elaborate studies of the media marketplace that, in total, suggested that media consolidation isn't such a bad idea. The consumerists countered that the studies were tainted and tilted, and that they telegraphed the commission's hidden intentions to favor Big Media at the expense of the public when the time comes to change the rules.

'Awful Things Will Happen'

One of the most contentious of the FCC regulations forbids a single company to own a newspaper and a television station in the same community. The Newspaper Association of America, whose member papers account for almost 90 percent of U.S. daily circulation, is ferociously campaigning to exterminate that rule. The twenty-seven-year-old ban is so archaic that it should end "without further comment or analysis," says the NAA's brief, because a mountain of evidence proves that cross-ownerships improve the quality and quantity of news and public affairs reporting without posing any real threat to competition and viewpoint diversity. John Sturm, president of the NAA, recalls that the cross-ownership rule was born in a different world a quarter century ago, and that "whatever it was designed to prevent or remedy is irrelevant now." He points to forty communities in the United States that have cross-ownerships (which existed before the rule, or got special waivers). No harm, he insists, has come to the public in those markets. "Our opponents' arguments are all theoretical -- no data, just words. 'Awful things will happen,' they warned. Well guess what? Nothing awful has happened. What more evidence do we need? Case closed."

That doesn't satisfy Linda Foley, president of the 35,000-member Newspaper Guild, who fires from the opposite battlement: More cross-ownerships means jobs will be lost, and news consumers will receive a more homogenized diet of news and opinion. "The biggest impact is that we would have fewer and fewer people on the local level deciding what the news agenda is." The NAA-Guild difference of opinion dramatizes an unbridgeable chasm: The owners of newspapers generally want the ban lifted and the journalists who work for those papers generally don't. Reporters, columnists, and editorial writers -- predictably -- tend to think it's an unwise career move to publicly oppose their bosses' position on the matter, which may be why journalists have mostly failed to inform Americans about what's at stake here.

A few do speak out. At Knight Ridder's Philadelphia Inquirer, Henry Holcomb, a business writer, told CJR he worries about a corporate mentality that may try to "squeeze as many dollars as possible" out of a newspaper/TV combination and "blur all of the distinctive ways we try to stimulate and inform the public." Would TV people who acquired a newspaper be respectful of what they don't know about newspapering, he wonders? Will they understand the subtleties of print culture?

One voice in the wilderness among newspaper proprietors is Frank Blethen, publisher of The Seattle Times, whose family has controlled the paper for generations. "Our opposition to cross-ownership runs against our own business interests," he says. Repeal of the rule would substantially increase the value of the Times. "It would eliminate a competitor and give us more control over the marketplace. If that's all we cared about, we'd be for it."

But he's sure that these clusters don't produce good journalism. "The Blethen family could benefit financially from repeal of cross-ownership," he says, "but I guarantee you that the citizens of Seattle would not benefit from it." Large newspaper chains and TV station groups covet these combinations out of self-interest, not the public interest, he says, because owning lots of media in one market lets you control advertising rates. "It's the public company mentality, that you have to keep getting bigger as the only way to drive earnings, stock prices, and the ceo's stock options." Editors of chain-owned newspapers are mostly silent about cross-ownership, Blethen says. "We're creating a whole generation of publishers and editors who don't have the independence to speak out on these issues on behalf of the public."

New Sources Of News?

As long ago as 1978, the Supreme Court in FCC v National Citizens Committee for Broadcasting, wrote: "It is unrealistic to expect true diversity from a commonly owned station-newspaper combination. The divergence of their viewpoints cannot be expected to be the same as if they were antagonistically run." Defenders of the rule offer evidence that newspapers and television stations are by far the most popular sources of news and thus ought not be melded into one voice. But backers of deregulation are fond of pointing out that the Internet, cable, and direct broadcast satellites offer an array of choices that didn't exist a few decades ago, so no great damage is done by losing a journalistic voice or two in a community. Hold on, says the opposition: Virtually all of the major Internet sites that people use for news are owned by Big Media; the editorial content is indistinguishable from what those broadcasters and newspapers put out. Moreover, they point out, most Internet users go to the Web for national and international news, not local. And besides that, the Internet is not a mass medium, no matter what you may have heard: Little more than half of U.S. households have Internet connections, and among minorities and poor people, the figure is a lot lower.

On the cable side, concentration is already apparent: Two owners, Comcast and AOL Time Warner, serve 40 percent of cable households. All of the cable news networks -- CNN, CNN Headline News, Fox, MSNBC, CNBC, CNNfn -- are owned by three conglomerates: AOL Time Warner, GE, and News Corporation. Direct broadcast satellites? Two companies control virtually the entire industry, and recently, one of them (EchoStar) tried unsuccessfully to buy the other (DirecTV). Thus, most sources of news are tapped from the same old barrels.

'More Voices, Not Fewer'

Are TV networks too big for their boots? TV stations think so. The 1996 Telecom Act lets media companies like Viacom, GE, Disney, and News Corp. -- which own, respectively, CBS, NBC, ABC, and Fox -- accumulate stations to their hearts' content, as long they reach no more than 35 percent of U.S. households. The networks have lobbied furiously to own more stations because many of those local outlets have huge profit margins of 40 percent or more (networks make far less), and because owning them would give the networks more power than they already have over what gets on the air nationally. To bolster their push to lift the ownership caps, networks claim that their owned-and-operated stations produce better local newscasts than independent stations do. No they don't, insist the indies. At the moment, CBS owns twenty-one stations; ABC, ten; NBC, thirteen; and Fox, thirty-three. Most other commercial stations have affiliate contracts with a network, but are owned by companies like A.H. Belo, Hearst-Argyle, Cox, and Post-Newsweek. Station groups like those think the TV networks already have too much influence, and believe that letting them gobble up more TV stations will give them a stranglehold on programming -- news, public affairs, and entertainment.

The dispute has driven a wedge between the National Association of Broadcasters (whose board of directors is dominated by independent station owners) and the big TV networks, causing CBS, NBC, and Fox to quit the NAB in a huff. Dennis Wharton, an NAB vice-president, says: "We think the thirty-five-percent cap has been good for localism." An influential group called the Network Affiliated Stations Alliance, which represents 600 stations, agrees. Its chairman, Alan Frank, the president of Post-Newsweek's station group, tells CJR: "We feel it's important for democracy that we have more voices, not fewer. Further consolidation is not good for the country. Our system of broadcasting is set up very clearly as being locally based. That's its strength."

The affiliated stations argue that independent stations are far more able than network-owned stations to preempt the network's prime-time programs when a major news story of local importance breaks. Still, networks often use sanctions built into affiliate contracts to muscle stations into running the network's menu of entertainment shows instead of local news coverage.

In September 2002, CBS strong-armed a Florida affiliate into airing the season premiere of 48 Hours instead of an important gubernatorial debate. NBC, during the 2000 political campaign, pressured its affiliates to run a baseball playoff game instead of a presidential debate. (Some refused.) ABC's affiliate in Dallas, home of American Airlines, had to fight the network for a few minutes of airtime during Monday Night Football halftime to present local news updates on the November 12, 2001, crash of an American Airlines jet. But the simple truth is that stations rarely preempt the network for local coverage lest they enrage viewers devoted to Survivor, The Bachelorette, and Joe Millionaire.

As with most of the ownership rules, the underlying debate is less about principle than about whose financial ox would be gored if the 35 percent cap were eliminated or eased. Affiliates (but not network-owned stations), collectively, haul in tens of millions of dollars every year for renting their airtime to the networks. That so-called "compensation" is found money for the affiliates and goes straight to the bottom line. They don't want to lose it. Networks, on the other hand, say they can't afford to pay it any longer and have made it no secret that they want to stop. Thus, the more stations a network can own outright, the more it can improve its revenue stream, eliminate compensation, and obviate those pesky preemptions that undermine audience ratings and advertising income. Hostile guns from many quarters are bearing on the 35 percent rule; however, the smart money is betting that the FCC will hedge its bet and raise the limit to 40 percent or 50 percent rather than discard it altogether.

'How Dare You?'

Among the other ownership rules, public advocates are especially averse to the notion of one company owning two television stations in the same community (so-called duopolies) and to letting any of the Big Four TV networks -- CBS, ABC, NBC, Fox -- buy out one of the others.

In 1999, the FCC relaxed its rules to allow common ownership of two TV stations in the same market as long as one of them isn't among the community's four leading stations, and eight others remain. About seventy-five such duopolies exist. For journalists, that often means combining news staffs and resources, reducing the richness of a community's news diet. In Los Angeles, for example, CBS's two stations share a news director, and so do Fox's. In New York, Fox's two stations will soon be under one roof. (Since 1995, the number of entities owning commercial TV stations has dropped 40 percent.)

The NAB argues that the FCC ought to okay these media marriages because some small TV stations are losing money, and if they go out of business, the community will lose one newsroom covering the local scene. In a new tack, the NAB recently upped the ante and began campaigning for triopolies in areas where stations are on shaky financial ground. (Viacom's president, Mel Karmazin, told a media conference in December: "How dare they say you can have only two stations in a market?")

At the national level, far more conspicuous consequences for news would result if, let us say, CBS took over NBC. (Viacom, CBS's parent, once expressed such an interest.) That can't happen now, but if the rule is altered, two news divisions inevitably would become one, giving viewers less choice in hearing about wars, elections, national policy, and the Washington ballyhoo. (Meanwhile, Dan Rather and Tom Brokaw would suffer the indignity of sharing the anchor chores.)

In April 2002, NBC acquired Telemundo, the Spanish-language network, and promptly merged the two networks' newsrooms in Miami. The assumption, says Herta Suarez, AFTRA's national director of special projects, is that NBC will do the same in cities such as Los Angeles and Chicago, where both networks have news operations. "This will reduce opportunities for journalists to work," she says, "and also what the public will learn." (Suarez also laments that NBC pays Latino staffers less than Anglos for the same work.) Juan Gonzalez, president of the National Association of Hispanic Journalists, says that the goal of giving Americans a diversity of opinions and analyses "has been virtually forgotten."

A 'Tragic Mistake?'

At the Columbia law school forum in January, chairman Powell confessed he is no fan of Congress's mandate that he review media ownership rules every two years. It's "regrettable and destabilizing" he said, to go through this torturous process so often. He added: "There will be rules when this is done [but] there won't be a rule that lets one person own everything."

That reductio ad absurdum was marginally reassuring to his opponents, but they hoped he would remain tightly focused on the crucial underlying principle, that the whole point of devising public policy is to do what's best for the people, not to guarantee corporations their desired "efficiencies" and "synergies," which is none of the FCC's business.

As USC's filing to the commission put it, the agency's mandate to regulate is driven by the First Amendment rights of the public, not the media owners. Safeguarding those rights has "been understood to permit restricting the media industry's natural desire to concentrate ownership in order to achieve economies of scale." Sandra Ortiz, author of the USC brief and executive director of the university's communications law center, says that the once-revered concept of local media ownership has become "so rare as to be almost quaint."

The Newspaper Guild's comments to the commission are equally unambiguous: "Media owners claim that relaxation of ownership rules will allow them to realize 'synergies.' [But] the commission's charge is to protect and enhance media diversity, competition, and local identity -- not efficiency." AFTRA points out that media conglomerates, in hot pursuit of higher profits, customarily put heavy pressure on their newspapers and broadcast stations to cut costs, with negative consequences on the journalism. Once upon a time, says the union, broadcast stations competed for audience by doing the best possible local news. But media companies that dominate a market have little incentive to spend money on enterprisers and investigations. Depriving people of that "is to enter onto a slippery slope that will leave the public wondering whose 'truth' is being told."

Allowing further media concentration would be a "tragic mistake," says the veteran editor Gene Roberts, now a journalism professor at the University of Maryland. "Communities deserve to be looked at with different eyes. Even with the best integrity and most solid news principles in the world, what looks like a story to one person may not to another." Easing the rules, says Roberts, is "just going to make an already bad situation even worse. There's very little news competition in most parts of the country, and we're about to have even less."

That's how it looks now, anyway. Five unelected appointees, whom most Americans have never heard of, will make those decisions in the next few months. If they get it right this time, the hornets won't swarm quite so furiously two years from now when the rules come up for review all over again.

Neil Hickey is CJR's editor at large.

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