Scholars expound on media ownership


The FCC convened the first of three panels in advance of its review of media ownership rules, the scholar panel. Coming next are the views of the watchdog community, then the broadcast community. Here’s the scoop from the halls of academia – testimony summaries of the six panelists at the 11/2/09 scholar session.

* C. Edwin Baker, Nicholas F. Gallicchio Professor of Law and Professor of Communication, University of Pennsylvania School of Law: 1) Democratic disposition is a reason to disperse ownership of broadcast outlets. All people should be able to find media owned or controlled by people with whom they can identify, including women and minorities. The burden should be on those favoring further consolidation to prove it outweighs the value of diversity. 2) Concentration of ownership gives too much power to one person to influence opinion and is undemocratic – even if the ownership isn’t being used that way in practice right now, not even the potential should be risked. 3) Media quality: media firms aimed at profit maximization will rapidly fail to produce the content that people want. High quality reporting, for example, exposes corruption and helps consumers, but does nothing to help the owner. Big owners look at maximizing profits, and tend to diminish motivation to create quality journalism. Debt service also diminishes ability to invest in content. Local, long term owners have little or no debt and strong ties to their community and are preferable to nationally-based owners. 4) Large media forms can bias consideration of what ownership policy should be – default position should be against more concentration. Viewpoint diversity should not be a goal in itself; avoid the suppression of viewpoints, lessen the risk of suppression. Rules should favor local ownership, and this should be an independent aim. Internet makes broadcast localism more important; takes away ad revenue; even though internet is wide open, most bloggers reach less people than you could passing out leaflets. Cross-ownership, for study: Even though it makes the broadcast portion perhaps the best in the market, it also likely diminishes the journalistic efforts of all other broadcast competitors, and in the end does not improve local journalism.

* Harold Furchtgott-Roth, President, Furchtgott-Roth Economic Enterprises, former FCC Commissioner: Ownership proceeding is not about writing new rules, it’s about eliminating or modifying existing rules. If you have any doubt about the competitive situation for newspapers and broadcasters, visit them. Hurry, before they go out of business. This proceeding touches on the First Amendment. The rules under review present great challenges to it. The First Amendment is there because it is the recurrent tendency of nations throughout the world, including here, to write laws that restrict First Amendment rights. Blue laws – written to attack the rights of and persecute religious minorities. They were popular and widely viewed as appropriate but they were not American and violated the First Amendment. Rules that restrict the ownership of media that go beyond existing anti-trust law restrict the First Amendment. They place the government (FCC) of trying to decide who may speak and who may not speak; who may own and who may not own. Cross-ownership – created under the Nixon administration for evil purposes, to restrict who could own what. It is no less repugnant today than it was 30 years ago.

* Catherine Sandoval, Professor, Santa Clara University, School of Law: Study done with MMTC. Hopes to create baseline on methodology, FCC database improvement and status of minority ownership. Commends Genachowski for leadership. Reviewed more than 11K FCC records. Focused on ownership database, also looked at application database, had to do each one individually. Focused on commercial stations. Of 815 minority owned, there were 324 owners – 7.24% of all owners. Down somewhat from recent Free Press study. Databases must be easier to search and study to track emerging trends, for both public and internal study. FCC in the past has relied on private sources for studies of its own data, sources which then charge outside groups for access. 61% of minority owners control only one stations; 71% control solely. New biennial ownership reports are critically needed. Only 14 minority companies have 10 or more stations; very few have been able to take advantage of consolidation. Only three control 25 or more, and one is basically a restructuring to avoid bankruptcy. Another problem for FCC is entry – when did owners get their stations? 53% of current minority owners got the station before 1996 Act. 38.8% acquired first license between 1978-1980, when FCC first started looking at diversity of ownership. 300 have internet webcasts. 90% of Americans rely on radio and television, even higher among minorities. Internet is a supplement, not a substitute for broadcast. Minorities tend to lack internet access. 74.7% of minority owners air minority content. Spanish is #1 minority owner format. #2 is Religion (gospel, Spanish religion). #3 is Urban. Also many Asian stations. Some use mainstream formats (about 24%) for revenue reasons. 42 minority-owned stations 2007-09 went into some form of reorganization. 24 minority owned stations are silent – STAs must indicate this in a searchable way. FCC needs new filing category, other than general Form 316, for workout arrangements.

* Joel Waldfogel, Ehrenkranz Family Professor in the Department of Business and Public Policy, at the Wharton School of the University of Pennsylvania: Media informs us – it’s input into how we behave. Enormous fixed cost, zero marginal cost. Lots of people have to want it. Largely advertiser financed, so the value is what advertisers attach to the audience, not what the audience wants. There will be ensuing market failures from this model – some things that should be provided cannot be financed (that’s what PBS tries to remedy). Other things are over-represented as competitors go for the same big piece of the market. Internet outlets have far less fixed cost, but also makes it too easy to enter the market, so there’s too much dispersal of audience. What should we care about? Diversity has multiple meanings. Variety of content. Market enlargement, cable and internet style, opens the field. Reduced distribution costs should increase diversity of offerings. Competition: do internet-spurred changes spur competition? If demand is elastic, its harder to recoup high fixed costs. Data: products, audiences, knowledge, behavior.

* Steven Wildman, James H. Quello Endowed Chair of Telecommunication Studies and Director of the James H. and Mary B. Quello Center for Telecommunication Management and Law, Michigan State University: Visualize competition in economic sense? Short answer – No. The fixed cost is only fixed once your up and running – but you can decide to invest more or less in content, and that becomes fixed, so fixed cost is actually variable. (A lot of missing pieces to current study of media economics.) Diversity of ownership is important. Are viewpoints getting out there? Is the media economically efficient? Proceeding should take primary goals, see how they map out on diversity standards. Localism: Should be encouraged. Issue should be studied at the market level. Currently, better local coverage in larger DMAs – more outlets, more going on. Broadcast and print emphasize different types of news. Most stations don’t provide news at all, and some that do have nothing to do with local. TV, newspapers dominate coverage of local issues, radio comes in 3rd. Citizen journalism sites not catching on yet, cable in 120 markets is a no show.

* Simon Wilkie, Professor of Economics, University of Southern California, former Chief Economist, FCC: Six points: 1) We don’t really have many sophisticated economic models of media competition – not sophisticated, need more research on the marketplace of ideas. How do you link goals to market structure, and then measure that? Took a good stab at it in 2002, but it did not survive “tinkering on the 8th Floor.” HHI index is used now. Need something like that that better applies to media. Across markets? Across media platforms? How do we measure performance, specifically concerning diversity and localism? 2) This proceeding is linked to net neutrality proceeding. Keeping internet open without manager censorship. 3) Broadcast station is intermediary that gathers info and gives to consumer. Disintermediation – fundamentally a threat to providing quality journalism – expense of providing causing it to diminish. 4) Things not yet mentioned. When looking at either/or license issues, bright line rules over case-by-case rules minimize political element.