July/August 2000 | Contents

BLACKING OUT ABC NEWS:
From Robber Barons To Media Barons

BY LAWRENCE K. GROSSMAN

"A war between the rich and the very wealthy -- with the American consumer caught in the middle." That's how FCC Chairman William E. Kennard depicted the shameful fracas between Time Warner and Disney-ABC that for thirty-nine hours in May blacked out World News Tonight, Nightline, and the local news from 3.5 million cable homes. The chairman was right on target.

Time Warner, in its arrogance, thought it could get away with depriving cable subscribers of the celebrity version of Who Wants to Be a Millionaire. Even worse, Time Warner deprived millions of people of a major source of the news, a disservice to the public and a demonstration of raw corporate power that is a danger to democracy. The dissemination of news became the victim of mammoth battling telecommunications empires seeking to crush competition and dominate the information age. As invariably happens when the rich and the wealthy fight, they resolved their dispute and the customers will pay.

Still at issue is a far more important question than who gets how much money. When America Online and Time Warner merge, will the new Internet-cable-movie-TV-music-news-book-and-magazine-publishing behemoth wield so much control over access to both the Internet and cable distribution that it will stifle competition? I'm no fan of government regulation, but the mistake the government made a long time ago in cable was to allow the major cable operators, the monopoly gatekeepers who decide which program services people can see, to own many of the program services they distribute on cable. The cable titans say, "Trust us, we treat everyone equally." But in real life they favor the content they own and do whatever they can to squelch the competition.

I learned this firsthand some fifteen years ago when I ran NBC News. Encouraged initially by several major cable operators, NBC News tried to launch a twenty-four-hour cable news service to compete against Ted Turner's CNN, then a monopoly. As the cable moguls told me privately, Ted had the industry over a barrel. Not only was CNN the only cable news service there was, it was also the only cable programming that subscribers cared about. Confident that no cable operator would dare pull the plug on CNN, Turner demanded that the cable operators pay a huge rate hike for carrying his news service. To arm themselves for battle, the cable operators assured us they'd welcome our new cable news network as leverage against CNN.

Realizing he had a major fight on his hands, Turner figured out how to solve his money needs, freeze out NBC News, and preserve his news monopoly -- a triple play. He quickly sold a financial stake in CNN to a handful of the nation's biggest cable operators and in return they closed the door to any news competition that might reduce the value of CNN. NBC's proposed twenty-four-hour news channel, barred from the major cable systems, couldn't get the distribution it needed. Later, the cable operators did agree to carry CNBC, NBC's new financial channel, but only after exacting a pledge that it "would not become a general news service in direct competition with CNN," NBC president Robert C. Wright testified to the FCC.

In 1993, CBS ran into the same stone wall when it tried to get cable operators to accept a competing news channel. A year later, News Corporation chairman Rupert Murdoch, frustrated at not being able to start a cable news channel of his own, complained to Broadcasting & Cable magazine that the major cable operators, including cable titan John Malone and Time Warner chairman Gerald Levin, "would not give me the time of day," so eager were they to protect CNN's twenty-four-hour news monopoly. No wonder former FCC general counsel Henry Geller called the cable model "a First Amendment horror story," one that violated the amendment's underlying premise that the American people should receive information from sources as diverse as possible. When Time Warner bought Turner's entire broadcasting and sports empire in 1996, the government refused to approve the deal unless Time Warner's cable systems agreed to carry competing cable news services so that subscribers could finally watch the news of their choice.

Still, as we head beyond cable to the age of the World Wide Web, we face a different kind of "First Amendment horror story." While we now have plenty of channels to choose from, the news, information, and entertainment we see are increasingly being created, produced, and delivered by a shrinking number of interlocking global telephone, television, cable, and Internet conglomerates. Thus, AT&T, the leading long distance phone company, owns cable operator TCI, which has held an interest in CNN. AT&T is also acquiring MediaOne, the giant cable company, that holds a stake in Time Warner Entertainment, part of the huge multimedia corporation that is about to be bought by AOL, the nation's dominant Internet service provider.

In their zealous effort to dominate the new information age, today's media barons are following in the legendary footsteps of last century's robber barons. At the start of the industrial age, a handful of business titans led by J.P. Morgan, John D. Rockefeller, Andrew Carnegie, and Edward Harriman merged each other's railroad lines, iron and coal mines, steel plants, and oil companies into several giant interlocking industrial trusts. According to historians Mary R. and Charles A. Beard, "by the end of the [nineteenth] century the major portion of manufacturing . . . was concentrated in the hands of . . . a few corporations. Although not many of these gigantic concerns had complete monopolies, . . . they had a power so great that they could often exercise a decisive influence over the cost of raw materials, the prices of finished products, and the fortunes of independent competitors . . . ." They built up such "a wide dominion over the economy in general, over politics, and over public opinion . . . ." that the government finally had to step in with antitrust laws to break them up.

Yesterday the industrial revolution! Today the information revolution! Yesterday's Standard Oil, US Steel, and great railroad empires have been replaced by today's AOL-Time Warner, Viacom-CBS, GE-NBC, Microsoft, MCI-Worldcom-Sprint, and Disney-ABC. When Time Warner blacked out Disney's ABC last spring during sweeps week, Disney, itself a quintessential competition squasher, ran to the FCC to seek protection from what it called "a remarkable display of monopoly power" (ironic coming from the company that is fighting for restrictive copyright legislation, a law some call "the Mickey Mouse Protection Act," that would extend Disney's domain over its intellectual properties, hinder innovation, and limit public discourse).

We hooted at the Orwellian message Time Warner left on our blank TV screens, "Disney has taken ABC away from you." But it's not funny. We need new rules to stop the growing concentration of media. Here's a message for the computer screens of the FCC, FTC, and Justice Department: "Better to limit the mega-media mergers now than have to break them up later."

Lawrence K. Grossman, a former president of NBC News and PBS is a regular columnist for cjr.

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