UNSHACKLING
BIG MEDIA
BY
NEIL HICKEY
When
you mention the name Powell in Washington these days, you're usually
talking about global diplomatic issues. But there is another Powell,
not quite as visible, setting policy too, in another arena, and
his decisions are dramatically affecting the media landscape.
Michael
Powell, thirty-eight -- son of Secretary of State Colin Powell,
and, since January, chairman of the Federal Communications Commission
-- is looking hard at the commission's limitations on media ownership,
and hopes to abrogate the ones he believes have outlived their
usefulness. "Validate or eliminate," as he puts it. "Simple as
that."
At
Senate hearings in May, Senator Ron Wyden, Democrat of Oregon,
told Powell: "On your watch, we could have the most radical consolidation
of media ownership in our history." Many consumer activists fear
that Powell will reshape media policy permanently, killing off
once and for all the remnants of rules that have protected the
public interest for six decades.
To
that, Powell's supporters among legislators and think-tank analysts
respond: "It's about time." The day is long since past, they argue
-- in the age of satellites, cable, the Internet, and digital
broadcasting -- when Big Media should be restrained by government
meddling from achieving its full growth potential. In his first
press conference as chairman on February 6, Powell was clear about
his philosophy. He places "reliance on deregulation and markets,"
he said, and is "convinced from a review of historical facts that
the optimal environments for innovation and entrepreneurships
are capital markets and free markets." Media companies contend
that to compete in the global arena, and with the likes of AOL
Time Warner, they must be free to grow. It takes a giant, they
say, to compete with giants.
As
it is, a tangle of statutes, regulations, laws, guidelines, restrictions,
and court orders decree what those companies can and can't own.
Two such commandments are currently hot-potato issues. Both are
setting corporate chieftains, consumer advocates, legislators,
and regulators against each other in an emotional scrimmage that
will have profound effects on how journalism is conducted in the
U.S. They are:
*
Thou shalt not own a newspaper and a broadcast station in the
same market (unless both were yours before the rule went into
effect, or unless you persuaded the FCC that one or the other
was about to go bust).
*
Thou shalt not own television stations that, collectively, reach
more than 35 percent of the nation's households.
RULES
AND REASONS
Those
two commandments have been on the books since 1975 and 1996, respectively.
Plenty of other rules also help shape our media. For example:
major networks (ABC, CBS, NBC, Fox) can't buy each other; and
another: nobody can own more than one TV station in a market except
under strict conditions. The original rationale for all such ukases
was to guarantee a multiplicity of voices and prevent concentrations
of power. The argument now for junking them is that the marketplace
has spontaneously spawned plenty of information sources, and that
U.S. companies need economies of size to compete.
For
the two hot-potato "shalt nots" affecting journalism most immediately,
the stakes are far higher than they appear at first glance, making
it all the more regrettable that hardly a newspaper reader or
TV-news watcher alive has ever heard of them.
The
Tribune Company of Chicago offers an enlightening case study on
the tribulations of owning a newspaper and a television station
in the same city. By acquiring Times Mirror last year, Tribune
assumed ownership of television stations that serve Los Angeles,
Miami-Ft. Lauderdale, New York, and Hartford, Connecticut -- all
markets where it also owns newspapers. That means it might eventually
be ordered to divest itself of either a newspaper or a TV station
in each of those areas. Jack Fuller, president of Tribune Publishing,
is confident that the rule against such cross ownerships is so
clearly unconstitutional -- in an age when information sources
are no longer scarce -- that it inevitably will disappear. "To
tell newspapers that they can't do the kind of consolidation that's
going on everywhere else in the system," he says, "is to relegate
newspapers to an inferior position, which is really offensive.
This rule is a lead weight around our ankles."
The
newspaper industry -- and the National Association of Broadcasters
-- are firmly in Tribune's corner. The 1975 rule was designed
for a marketplace that no longer exists, they argue. A quarter-century
ago, cable was in its early adolescence. The World Wide Web was
years away, and satellite broadcast signals going directly into
American homes were a dream. Now there are more than 1,600 television
stations, 12,600 radio stations, 10,400 cable systems, 10 million
homes receiving direct satellite service, and more than 100 million
Americans with Internet access. Meanwhile, between 1988 and 1998,
the number of daily newspapers declined by about 150 to a low
of 1,489, making them the only players -- their owners argue --
denied full participation in the great and lucrative sport of
media convergence.
John
F. Sturm, president of the Newspaper Association of America, points
out that in roughly forty markets around the U.S., newspaper/TV
combinations remain in effect (e.g., the Chicago Tribune
and WGN-TV) because they pre-existed the 1975 directive. "Tell
me what complaints have been filed with the FCC resulting from
any of these 'grandfathered' situations?" Sturm demands. "The
fact is there is no harm in them. The principle is that the harm
must be real, not conjectural. We've lived for more than twenty-five
years with a rule that would prevent a harm that has never happened."
Susan
Eid, legal adviser to chairman Powell, suggests that owning a
broadcast property and a newspaper could, in fact, increase not
only the amount but the quality of journalism in a market by letting
the owner spread costs across a greater base.
DUMBING
DOWN
Opposition
to ownership deregulation runs strong and deep among many consumer
advocates, academics, and politicians. Abolishing the rules, they
say, would instantly cause the prices of TV station groups and
newspaper chains to zoom as they maneuvered to absorb each other,
and/or became tantalizing targets for media giants such as News
Corporation, Disney, AOL Time Warner, GE, and Viacom. The resulting
heavy debt incurred by buyers -- so goes the scenario -- would
bring excruciating pressure to increase profit margins and stock
prices, thereby causing cutbacks, layoffs, and an urge to pander
to mass tastes at the expense of traditional, substantial journalism.
"The pressure would be like an oven at 650 degrees and journalism
would be an ice cube," says Robert McChesney, professor of communications
at the University of Illinois. As journalism becomes a smaller
part of larger empires, it will be subject to ever more commercial
exploitation, he reasons. "In this debate, the range of possible
outcomes runs from bad to terrible. There's no possible argument
that this could be good for the quality of journalism. There's
no upside. The only question is how bad the downside will be."
Gene
Kimmelman, co-director of Consumers Union's Washington office,
agrees that in order to achieve the largest return and amortize
debt, the media owner is tempted to seek ever-larger audiences.
That usually means more news-you-can-use, life-style stories,
and celebrity coverage at the expense of investigative reporting,
foreign news, and serious political journalism. "The elimination
of ownership rules potentially leads to the dumbing down of journalism,"
he says.
A
different view comes from Adam Thierer, director of telecommunications
studies at the libertarian Cato Institute in Washington. The economics
of media companies "absolutely dictate" that broad deregulation
must occur, he argues. "Whether people like it or not, the industry
is getting bigger and needs more significant resources to compete
in a global media marketplace." Let's relax these restrictions,
he suggests, and see what happens. "It might be there's no problem
at all, and I suspect that's probably the case."
But
a rush to the bottom line and the lowest common denominator is
the inevitable result of deregulation, says Mark Cooper, research
director of the Consumer Federation of America. "News departments
get reduced, and culturally diverse and public interest programming
comes under pressure. Less popular programming disappears and
journalists are evaluated by the corporate-profit-center logic
of these huge organizations." He adds: "The new chairman of the
FCC doesn't care a whit about any of this stuff."
DIVERSITY,
COMPETITION
Another
major tussle facing Michael Powell is the ongoing power struggle
between networks and their affiliates over how many television
stations one company should be allowed to own. Ever since the
1940s, the FCC has been stitching a patchwork of rules aimed at
protecting diversity by preventing America's TV stations from
falling into a few hands. Initially, the limit was a meager three
stations nationwide, then five, then seven, then twelve. In 1996
-- in the pre-Michael Powell years -- the commission junked numerical
limits altogether and decreed that reaching 35 percent of American
households was enough for any entity. The goal: to ensure diversity,
competition, and a multiplicity of information sources.
Those
four major broadcast networks -- ABC, CBS, NBC, and Fox -- earnestly
disagree. Repeal of the rule, they argue, would have no bad effects
on the stations or their audiences, and besides, the Big 4 need
to own more stations to achieve economic efficiencies.
Virtually
all public interest advocates, plus trade unions such as the American
Federation of Television and Radio Artists, are at pains to refute
that logic. The argument: local stations by law are responsible
for what goes out over their air, but the networks are muscling
affiliates to carry virtually every minute of network programming
and threatening draconian penalties if they don't. That prevents
stations from preempting the network feed for programs -- including
public affairs programs.
For
example: in the 2000 presidential election year, NBC's planned
broadcast of an American League divisional playoff game conflicted
with the first Bush-Gore debate. NBC decreed that every station
in the network should carry baseball instead of politics. The
affiliates protested clamorously. Thanks to the 35 percent cap,
enough of those stations were independently (non-network) owned,
giving them the collective wattage (barely) to force an NBC retreat
and let them air the debates if they chose.
CBS,
for its part, has pressured its affiliates to stick with Bryant
Gumbel's two-hour, low-rated Early Show, in the face of
continuing requests from those stations that they be allowed to
use the second hour for local news. For the 1994 Lillehammer winter
Olympics, CBS required its stations to air the coverage in its
entirety, or lose the right to broadcast the games altogether.
Earlier
this year, the networks' high-handedness finally became too much
for their affiliates. On March 8, the 600-member Network Affiliated
Stations Alliance (NASA) fired off to the FCC a "Petition For
Inquiry Into Network Practices," a bulky document detailing their
catalogue of complaints. During the last five years, NASA claims,
"the balance of power between networks and affiliates has shifted
overwhelmingly in the direction of the networks." When that happens,
the stations' "ability to select community-appropriate programming
. . . is significantly undermined," and TV service "is determined
more by Hollywood-based network studios" that know nothing and
care less about the informational needs of any particular village,
town, or city.
Allied
with NASA is the Muscular Dystrophy Association and its national
chairman, Jerry Lewis, who for almost a half-century has been
playing host for the biggest televised fund-raiser in America.
"Jacking up the cap would be catastrophic to our Telethon," Lewis
declared in a January 29, 2001, letter to chairman Powell. He
went on to say that virtually no network-owned station is permitted
to preempt regularly scheduled sitcoms and dramas to carry the
event. "Keeping the cap at 35 percent could mean the difference
between our Telethon continuing to do its lifesaving job or fading
into history as network-owned and other top stations drop the
show at the direction of network executives."
In
response to the NASA petition, the Big 4 wrote to the FCC in May
calling the document a "confusing mixture of unsubstantial factual
allegations." Andrew Lack, until recently president of NBC News
and now president and chief operating officer of NBC, told Broadcasting
& Cable magazine in May: "The station guys have big [profit]
margins and want to protect their interests and don't want to
recognize that we have interests, too."
Chairman
Powell waded into the controversy at his February 6 press conference.
Depending on whether you're a network or an affiliate, he said,
"this cap is either vital to your continual survival or its removal
is vital to your continual survival." He declared himself skeptical
as to whether such ownership restrictions actually benefit consumers.
"I think that's almost a romantic notion . . . an emotional one."
CHESS
GRANDMASTERS
In
this jostling-and-shoving between contending forces in the emerging
telecom world, both sides are being disingenuous. TV stations
are not famous for providing gobs of local-interest public service
programs, especially in prime time, when self-interest dictates
that they stick with crowd-pleasing, mass appeal, network-created,
episodic entertainment. Beyond that, the stations are playing
both sides of the street: battling to restrict the networks' power
by defending the ownership cap; and campaigning to expand their
own turf by advocating tossing out the TV/newspaper crossownership
rule.
And
the four colossal corporations that own the broadcast networks
(Viacom, GE, Disney, and News Corporation) are spinning when they
argue that their future is in jeopardy if they can't gobble up
more and more TV stations. Their profit margins and their prospects
are enviable by any business standards.
Each
party to the struggle is like a chess grandmaster looking a dozen
moves ahead to ensure a sound position in the endgame. At stake
is the pot of gold expected to accrue to the most farsighted players
as the broadband age dawns, and as interactive television -- with
its potential for immensely wider revenue streams -- becomes a
reality. Soon, every television station in America will be broadcasting
digitally, giving them a half-dozen channels to exploit instead
of just one, with the dizzying prospect of cashing in on local
all-news services, pay-TV movies, home shopping, data transmission,
and whatever else they can sell. No mystery why TV stations are
hot properties.
Rupert
Murdoch's Fox is leading the charge on the station ownership issue;
it's currently in court (along with Viacom, AOL Time Warner, and
NBC) to quash the 35 percent cap. Beyond that, according to NASA's
petition, Fox, in its contracts with stations, is unabashedly
demanding "near total control of its affiliates' digital spectrum
. . . [which] precludes the development and delivery to the public
of digital services selected by the local station." That's seen
by affiliated stations as an attempted land grab of unprecedented
chutzpah. Murdoch, who won a waiver in 1993 to own both the New
York Post (which was failing) and WNYW, is buying from Chris-Craft
Industries for $5.4 billion a ten-station chain including New
York's WWOR. Murdoch is threatening to fold the Post if
the FCC doesn't bend the rules to allow him (over media activists'
objections) to own those two TV stations and a newspaper in the
same city. With more than 40 percent of U.S. households, Fox already
is the number one station group in the country. Murdoch also is
in negotiation to buy the domestic satellite service DirecTV,
a deal that Republican Senator John McCain of Arizona claims would
result in "a consolidation of power the likes of which this country
hasn't seen since William Randolph Hearst." "Ridiculous," Murdoch
shot back. News Corporation would still be a "minnow," he declared,
compared to AOL Time Warner.
Jeffrey
Chester, executive director of the Center for Digital Democracy
in Washington, says that deregulatory fervor is "part of a continuum
that's reshaping the American communications system." The transition
into the next generation of digital media is all about melding
editorial content, advertising, and marketing as the distinctions
between television and the Internet become fewer and fewer. The
long-term strategists at Disney/GE/ News Corporation/Viacom/AOL
Time Warner have a pretty clear vision of how they want their
companies to expand and to exploit their synergies, but the public
is clueless about this revolution that's going on largely outside
its view, and so are most journalists, even as their profession
suffers layoffs by the thousands, and the trivialization of news.
THE
PUBLIC INTEREST?
At
ground zero of this paradigm shift stands chairman Powell, who,
his critics claim, has a blinkered, messianic approach to public
policy that lets free market principles and the interests of mega-media
corporations trump the public interest at every turn. Says Robert
McChesney: "He is a nice, sincere guy. He is also a figure resolutely
opposed to the very notion of the public interest. I think he
believes that government is evil and that business will automatically
regulate itself. It's a free-market faith, and since it is a faith,
it requires no empirical verification."
Jeffrey
Chester puts it another way: "His biological father may be Colin
Powell but his spiritual father is Mark Fowler." (Fowler, the
FCC chairman under President Reagan, was an outspoken apostle
of wholesale media deregulation who once famously said that a
television set is nothing but a toaster with pictures.) Powell,
Chester claims, likes to suggest he has given these issues deep
intellectual consideration, but is basically another sword-wielder
in the Bush administration's broad-based crusade to end government
curbs on business.
The
Powell legal adviser Susan Eid is at pains to point out that her
boss was an FCC commissioner for more than three years before
becoming the chairman, and she challenges his critics to point
to any action of his during that period that imperiled the public
interest. He grows "a little frustrated," she says, "when people
have an automatic, knee-jerk reaction to what he may or may not
do." In fact, she claims, he has been "consistent and judicious"
in his desire to examine ownership rules in the light of the current
media environment -- namely, a plenitude of information sources
-- "and make a decision based on that, not on the way the world
existed thirty or fifty years ago." Indeed, she adds, the Telecommunications
Act of 1996 mandates that the commission do just that every two
years.
In
any event, Powell maintains, any truly egregious levels of media
concentration would violate antitrust laws and be prosecuted accordingly.
Asked at his maiden news conference for his definition of "the
public interest," Powell joked, "I have no idea." The term can
mean whatever people want it to mean, he said. "It's an empty
vessel in which people pour in whatever their preconceived views
or biases are." His job, he claimed, is making sure that the public
benefits, "and not necessarily the industries or the barons" who
have a stake in FCC decisions. Beyond that, he said, "I don't
know. I am still trying to figure it out."
Until
June, Powell was the first FCC chairman since the Eisenhower years
to have a Republican president, Senate and House. That gave him
a unique, rock-hard platform from which to reshape media policy.
That's different now. With Democrats in control of the Senate,
the formidable Commerce Committee, which oversees the FCC, has
the South Carolina Democrat Ernest Hollings in the chair, replacing
Senator McCain. McCain generally favors deregulation; Hollings
is a long-time opponent. So Powell's deregulatory express might
become a local.
Nonetheless,
a few recent court decisions have emboldened the administration
and the FCC. In March, for example, the U.S. Court of Appeals
for the District of Columbia Circuit threw out a cap that limited
cable companies from having an interest in more than 30 percent
of U.S. cable systems, a decision called by Consumers Union "an
enormous loss and a devastating blow" to the public. And in April,
the FCC amended the so-called Dual Network Rule, allowing one
or other of the Big 4 networks to own an "emerging" network such
as UPN or WB. That allowed Viacom and its subsidiary, CBS, to
continue ownership of UPN, the failure of which (as Powell put
it) "would result in a loss of diversity." Viacom's president,
Mel Karmazin, says he'd try to buy both NBC and CNN if the FCC
would let him.
And
so the debate goes on and the media geography shifts. Will ownership
rules disappear altogether? Will AOL Time Warner buy NBC? Will
Viacom buy Yahoo? Will CBS News or ABC News downsize drastically
by merging some (most, many?) of their resources with CNN? In
cities across America, will one company own the only newspaper
in town, several television stations, many of the leading radio
stations, and the local cable system? If so, what will be the
effect on the quality of the news reporting we all receive?
In
the future, for better or worse -- take your pick -- there will
be a lot fewer "Thou shalt nots" than there used to be. And one
final question: Will the media explain to readers and viewers
why that matters? *
Neil
Hickey is CJR's editor-at-large.
