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Forbes attack has broadcasters riled

A cover story in the latest issue of Forbes magazine that paints terrestrial radio station owners as "Broadcast Bullies" holding back satellite radio via Capitol Hill muscle has some broadcasters fighting mad. Backyard Broadcasting President and CEO Barry Drake has written the magazine to assail it for "sloppy publishing and editing" and NAB President and CEO Eddie Fritts has accused the author of regurgitating "satellite radio industry propaganda."

"In a fair fight, XM Satellite Radio would capture a good share of the US audience. Unfortunately, competition in the broadcast industry is anything but fair," Forbes writer Scott Woolley says in the opening to the article appearing in the magazine's issue dated September 6th. He goes on to charge that "for decades the radio industry has crushed incipient competitors by wielding raw political muscle" and that the NAB is responsible for getting Congress to pass laws which have "banned, crippled or massively delayed" competitors to incumbent broadcasters. The article goes on to blame the NAB for the performance royalties which have put a damper on Internet streaming and forced satellite radio to pay higher royalties than terrestrial broadcasters. And it accuses the NAB of acting unfairly by getting the FCC to bar satellite broadcasters from using their terrestrial repeaters to insert local content. Meanwhile, Woolley paints AM and FM broadcasters as "geriatric competitors" who are holding back their satellite competitors and depicts HD Radio as an inferior digital system that terrestrial broadcasters are trying to foist onto consumers.

In a side bar article, Woolley takes as gospel the claims of low-power FM proponents that the NAB and its members are "crushing the little guys" with phony objections to spectrum interference. He quotes one of the harshest critics of broadcasters, Sen. John McCain (R-AZ), as accusing the NAB of using "raw political power" to squeeze out LPFM.

Long-time Forbes subscriber Barry Drake was so incensed by the article that he sent this letter to the magazine:

"Was it summer heat exhaustion or perhaps the end of season vacation schedule that caused the sloppy publishing and editing of Forbes September 6, 2004?

The story on XM by Scott Woolley not only bears little resemblance to the advertisement on the cover but fails on its own. (Editor's note: The cover shows XM CEO Hugh Panero with a sledge hammer and reads: Crushing radio: sick of stupid ads, stale playlists & schlock jocks? No wonder XM Satellite is making waves.")

The story fails to report that Clear Channel, the nation's most powerful radio company, owns part of XM and in the early days owned a very large position. It is fair to say without Clear Channel's support XM would not exist.

The story fails to report, although you discredit Radio for having 'schlock jocks,' that XM just hired the most famous duo; even Viacom fired these guys.

The story fails to put the business in perspective. That is, technology is moving so fast XM is old news before it ever got started. There have been more i-pods sold this year than there are subscribers to both satellite companies combined.

So after television, 8 tracks, cassettes, cable music channels, music video channels, cable news, cd's, cell phones, internet music channels, and now satellites, Radio continues to grow. Radio continues to grow not as Mr. Woolley suggests due to power inside the beltway. If you talk with anyone in Radio they could occupy you for hours detailing their frustrations with FCC, congress and the courts.

Radio continues to grow because it provides an indispensable service to the local community. I would not expect you to understand this. The relationship between Radio and its listeners is special and often inexplicable. I do, however expect your publication to offer unbiased coverage of businesses and industries. Something you and Mr. Woolley missed this time."

Meanwhile, NAB boss Eddie Fritts fired off his own letter to Forbes after a telephone conference call with the NAB Radio Executive Committee.

"I was disappointed to see Scott Woolley republish satellite radio industry propaganda and attempt to pass it off as responsible journalism. Hometown radio stations have little to fear in the form of competition from satellite. The 175 million listeners who choose free, local radio compared to the 2 million subscribers who elect the niche programming of satellite demonstrates which product has wider appeal.

The real issue is that XM Satellite Radio is unilaterally flaunting the terms of its FCC granted license. Mr. Woolley describes XM's scheme of putting faux-local content on nationally distributed channels as 'cleverness.' This ignores the fact that XM began the questionable practice just a few short weeks after agreeing in writing to abandon local content on its terrestrial repeater network.

Regardless of NAB's views of satellite, their disingenuous behavior has attracted the ire of legislators. Some in Congress are pursuing legislation to order an FCC investigation. Terrestrial radio broadcasters abide by the terms of their licenses by serving the needs of local listeners. The pending legislation and filings before the FCC would simply hold satellite to the same standard, requiring the companies to deliver on promises they made to regulators and, more importantly, to the public.

For over a decade, satellite radio pitched itself to regulators, the investment community, and customers as a supplement to local radio, describing a national, niche audio programming service. Its recent attempts to reinvent itself as a local alternative call into question the credibility of the company's leadership. But it also makes one wonder which service truly cannot compete," Fritts wrote.

RBR observation:

It's one thing to criticize radio with factual information. You've certainly seen some strong words from this publication, such as Publisher Jim Carnegie's "Naples is calling" treatise. And as we noted just yesterday (8/30/04 RBR Daily Epaper #169), this week's Barron's has a largely negative story on radio which, while painful to many in this business, was well researched. Not so the Forbes story and sidebar, which took at face value the claims of terrestrial radio's critics and seemed to devote no effort whatsoever to determining whether those claims were true.