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Media Monopoly
BEHIND THE
MERGERS: Q&A
NEIL
HICKEY INTERVIEWS NEIL
HICKEY
 Is
this court ruling as important as people say? Media consolidation
has been going on for decades.
•
Yes, because, among other things, it’s one more clear signal
that many judges, regulators, and politicians want to roll back
most of the remaining rules that traditionally have assured us
a robust marketplace of ideas. Too few companies controlling the
flow of news, information, and even entertainment is unhealthy.
Big isn’t necessarily bad, but big contains the seeds of
mischief that can hurt a republic like ours. Back in 1945, the
Supreme Court, in a case called Associated Press v. U.S., wrote
that “the widest possible dissemination of information from
diverse and antagonistic sources is essential to the welfare of
the public.” That’s still the guiding principle underlying
this whole discussion.
Specifically, what’s wrong with a company
— any of the major broadcast networks, for example —
owning a TV station and a cable system in the same market?
•
From their point of view, everything is right with it. They could
create all-news local cable channels and then combine those newsrooms
with the ones in the TV stations, increase revenue by selling
commercials on both channels, reduce the news staff, maybe eventually
shift the whole news operation to cable and use that valuable
local airtime for shows like Wheel of Fortune, Entertainment Tonight,
and Jeopardy. On a more cosmic level: AOL Time Warner, the world’s
biggest media company — which up until now has been prevented
from owning TV stations in cities where it also owns cable systems
— could go out and buy NBC, which owns a string of TV stations
in major cities. In the deal, it would also pick up MSNBC and
CNBC. That would make AOL Time Warner — already the world’s
largest media company — more gargantuan than it already is,
even though its stock market value has plunged.
Why NBC?
•
Because NBC is the only network that’s not already owned
by a big media conglomerate. Viacom owns CBS, and Disney owns
ABC. But GE, which owns NBC, is an industrial company, and there
have been hints for years that it would unload NBC if the time
and the price were right.
What about the other court ruling —
the one that sends the FCC back to the drawing board to justify
its 35 percent limit on the number of households any network or
station group can reach?
•
That’s big stuff. For one thing, it means that ABC, CBS,
NBC, and Fox will have a whole new lease on life. They could go
on shopping sprees, buying up many of the independently owned
stations that are now their affiliates, thus increasing profitability
and negotiating power with program suppliers. Don’t forget,
the broadcast networks used to control 95 percent of the TV audience,
and it’s now less than 50 percent because so many viewers
have drifted away to cable and the Internet. So those networks
want to find new revenue sources, and a potentially big one is
owning a lot of television stations — particularly now that
all TV stations are going digital and will be able to broadcast
on several channels simultaneously.
But suppose the FCC goes back to the drawing board and decides
that the best and fairest policy is to keep the 35 percent cap?
•
Forget it. Michael Powell, the Republican FCC chairman, is allergic
to regulations. His stated mantra is “validate or eliminate,”
by which he means: get rid of rules that block media companies
from achieving their full growth potential. [See cjr, July/August
2001] Even before he became chairman, he blistered his fellow
commissioners for their “stubborn refusal to fully consider
the competitive landscape” when they voted to retain the
rule a few years ago. Another time, he said that limits on ownership
of media properties are as outdated as the 1950s TV series The
Lone Ranger. He aims to reduce media regulations to the bare minimum.
The only question is, Will he favor raising that 35 percent figure
significantly or junking limits altogether?
Either way, the networks win big?
•
The more stations a network owns, the bigger its profits. Many
stations have profit margins over 50 percent. At Rupert Murdoch’s
News Corporation, for example, his thirty-three television stations
produce more cash flow than any of his other divisions, including
Fox News Channel and the Fox TV network. The top ten companies
that own stations increased their share of the industry’s
$20 billion annual revenues from 41 percent in 1995 to 54 percent
today. But besides that, networks want more stations so they can
reach more viewers with promotional announcements for their evening
newscasts, their newsmagazines, their morning shows, and their
entertainment schedule. That builds audiences, which translates
into higher ad rates. So you see the synergy. Some station owners
are eager to sell out to the networks and grab those high sale
prices. Others will be fighting to retain their independence.
If a network actually owns a station —
instead of just having it as an affiliate — it completely
controls what that station puts on the air?
•
Right. An affiliate, on the other hand, is free to perform public
service, if it wants to, by preempting the network’s prime-time
schedule of sitcoms and cop shows for news and documentaries on
matters of importance to the community. But don’t hold your
breath. TV stations have a vested, selfish interest in carrying
their networks’ regular schedule, no matter how banal the
programs are, because that’s what most people want to watch.
The number of hours of network preemption for coverage of local
issues could fit in the navel of a gnat.
What about ownership of a newspaper and
TV station in the same market? Where does that stand?
•
The FCC is still mulling it over. But the handwriting is on the
wall. That ban appears doomed. Newspaper owners and broadcasters
both are against it, and they wield a lot of influence. The Newspaper
Association of America, for example, says that forbidding such
cross-ownership is “outdated and unnecessary in today’s
diverse mass media marketplace.” A major coalition of consumer
advocates, however, claims that lifting the ban would trigger
an avalanche of mergers that would hurt journalism. “Hundreds
of newspapers would quickly merge with TV stations,” says
their filing to the FCC, “and by the time the dust settled,
the number of independent owners of major local news media would
be slashed by almost one-half.” And besides that, the activists
say, newspapers would become lapdogs instead of watchdogs because
they’d self-censor themselves to protect their bosses’
interests.
Whatever happened to that rule preventing
one company from owning two TV stations in the same city?
•
That so-called “duopoly” rule got shot down in 1999.
It’s now okay to own two stations as long as the market still
has a reasonable number of competing voices. One month after the
FCC changed the rule, Viacom bought CBS in a major media merger.
Their overlapping ownership of stations no longer prevented the
deal. On April 2, that “competing voices” restriction
was declared “arbitrary and capricious” by the same
federal court that overturned the 35 percent cap, and the judges
ordered the FCC to either justify the rule or abolish it.
Any other deregulatory actions we should
know about?
•
A year ago, the court abolished a 30 percent cap on the number
of U.S. households a cable company could reach. That was big.
And watch for this one: it may yet be possible for a major broadcast
network to buy one of the other major networks. ABC buys CBS,
for example, or NBC buys ABC.
Are there any strong voices out there fighting
this deregulatory trend?
•
Yes, and ironically they cross party lines. Democrats usually
favor retaining regulations and Republicans don’t. But Senator
Trent Lott, the Republican Senate minority leader, agrees with
Senator Ernest F. Hollings, Democratic chairman of the Senate
Commerce Committee, that the 35 percent cap should remain. So
does William Safire, the conservative columnist on The New York
Times, who calls Michael Powell a “roundheeled” pushover
for the big media companies, and claims the chairman is steering
the FCC toward “terminal fecklessness.” The National
Association of Broadcasters — not known for liberal policies
— also is campaigning to retain the cap, and has expressed
disappointment that the cable/broadcast cross-ownership rule was
vacated. Three networks — CBS, NBC, and Fox — have quit
the NAB in protest over the association’s support of the
35 percent cap.
Isn’t there any upside to abolishing
a lot of old regulations?
•
Sure, there can be. A newspaper buying a TV station, for example,
might impose more rigorous, higher journalistic standards on the
TV newsroom and help create better newscasts. A rich media company
buying up small stations in the boondocks might easily invest
a lot of money in those stations to improve their news programs.
Also, major media companies are better able to fight nuisance
lawsuits against their properties, where local independents might
just fold and settle to save legal fees. “You can’t
be journalistically vigorous if you aren’t economically strong,”
Michael Gartner, a former president of NBC News, wrote recently
in USA Today. That sometimes means accepting the embrace of a
distant media giant.
If this subject is so important, how come
the general public knows so little about it?
•
Because broadcast and cable news people practically never cover
it. Many of them say it’s too complicated, too boring, too
hard a story to tell in TV terms. A skeptic might say they lay
off it because TV news organizations are owned by the very companies
that stand to reap the rewards of deregulation if nobody wakes
citizens up to the realization that these issues affect them personally
in important ways.
How do newspapers handle the story?
•
The great majority bury it in the business pages, if they treat
it at all. Don’t forget, many big newspaper companies own
television stations and stand to benefit from deregulation. News
Corporation owns thirty-three stations, for example; Tribune Company
has twenty-three; Gannett owns twenty-two; The New York Times
Company, eight; Post-Newsweek, six. Some newspaper companies may
decide to buy up many more television stations. Or they might
be seen as attractive takeover targets themselves by AOL Time
Warner, GE, Disney, whomever.
Is the correct position in all this that,
ideally, we should try to restore all the rules that the courts
and the FCC have struck down?
•
No, because that’s not realistic. The deregulatory trend
has proceeded so far in the last half-dozen years — since
passage of the 1996 Telecommunications Act — that it’s
irreversible. The goal, however, is: don’t throw out the
baby with the bathwater. Reasonable people on both sides can agree
on minimum, necessary rules to preserve a diversity of news and
opinion. Many ownership regulations are decades old, when sources
of news were a lot scarcer. Now, there’s a superfluity of
news outlets rather than a scarcity, but they are owned by fewer
and fewer companies.
What should we think of Chairman Powell?
•
He’s very intelligent, very quick, like his father, the secretary
of state, and an eloquent spokesman for deregulation. In March,
on CNBC’s Capital Report, he put it succinctly: “My
concern has been, rather than slavishly defending the rules because
they’re associated with worthy goals, that someone has got
to be courageous enough to [find] a more reasonable way to regulate
in the context of the modern media marketplace.” He wants
to “recalibrate” media rules, he says, in light of the
“extraordinary changes” in the media landscape. On other
occasions, he has said we don’t need a lot of regulations
because antitrust laws are sufficient to prevent dangerous media
monopolies.
But hasn’t the Bush administration
reorganized antitrust procedures to give the Justice Department
sole oversight of mass-media mergers, ending the system whereby
the Federal Trade Commission also has jurisdiction in these deals?
•
Yes, and some insiders see that change as a subtle tactic to expedite
mergers. The FTC is an independent, bipartisan agency, but the
Justice Department is part of the executive branch and run by
presidential appointees who obviously get their marching orders
from the White House. Senator Hollings was very unhappy with the
new arrangement, saying it raises conflict-of-interest issues,
and he demanded to know which outside consultants and lobbyists
were in on the decision.
What’s the worst-case scenario in all
this?
•
That some transnational company that knows little and cares less
about your community, and whose main allegiance is to its stockholders
and advertisers, will own your local daily and weekly newspapers,
all your television and radio stations, the cable system, the
Internet service provider, several of the national networks that
serve you, your local video stores and movie houses, many of the
magazines and books you read, and all of the sports teams in your
area. That would allow endless cross-promotions of the owner’s
interests, and probably very little hard news about anything having
negative impact on advertisers or on the company itself. Everything
you read or see, every opinion, every image, and every jot of
information would arrive through one corporate filter.
Neil Hickey
is CJR's editor at large.
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