Rule Change Could Bring Cost Savings for Broadcasters

But there could be consequences, some warn October 27, 2017

The FCC’s decision this week to dump the main studio rule will likely have broadcasters across the country quickly reviewing their operations for potential cost savings if they haven’t done so already.

Banishment of the main studio rule could present significant savings opportunities for broadcasters. The FCC said so itself in its Report and Order: “Eliminating the main studio rule will produce substantial benefits. Broadcasters will be able to redirect the significant costs associated with complying with the main studio rule to programming, equipment upgrades, newsgathering, and other services to the benefit of consumers.”

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Broadcasters appear to believe it, too. Cumulus Media in comments submitted during the FCC proceeding detailed how the elimination of the main studio rule would enable the company to save “significant costs in at least six markets by no longer having to maintain a separate satellite main studio.” Meanwhile, Cox Media told the FCC its radio group “could reallocate $20,000–$50,000 per year in certain markets” if the main studio rule was eliminated. And Crawford Broadcasting, which owns 14 AM and 9 FM commercial broadcast stations, estimated base costs associated with a separate local main studio can “easily run $60,000 or more per year with a small space and minimal staffing, a significant amount by any measure,” according to comments it filed with the commission.

Several broadcast industry observers contacted for this story believe broadcasters will be eager to wring out as much savings as they can through various measures. But they also caution that those who turn away from servicing their local communities could suffer consequences.

Communications attorney Harry Cole at Fletcher, Heald & Hildreth says broadcasters have been keeping a close watch on the FCC proceedings since the latest studio requirement rulemaking was proposed back on May 18, 2017. The rule change takes effect once the decision is published in the Federal Register, which is expected to be by early November.

“Since the elimination of the rule has been in the works for some time now, with the ultimate result largely preordained, I would expect that most broadcasters who perceive the opportunity of cost savings have been planning out their moves in advance. It would not surprise me to see a number of moves in the near-term intended to take advantage of the change. The elimination of the studio requirement will allow consolidation of staff, equipment and operations, and relieve licensees of various costs like rent, insurance, duplicative staffing, equipment, etc. I assume that, at least for some if not many, the savings could be substantial,” Cole said.

Cole tells Radio World he believes there will be job losses as a result of broadcaster’s further consolidating operations. “I’m guessing that one of the anticipated sources of cost savings will be in reduction of staff. If I’m right, then the more stations that abandon their main studios, obviously the more jobs are likely to be eliminated. I don’t know how drastic the effect is likely to be.”

He adds, “However, it does occur to me that wholesale abandonment of any and all local presence in a station’s community could be a short-sighted move. A crucial aspect of broadcasting’s service that has long distinguished the industry from other media sources is its localism, a quality often touted by broadcast representatives. Moving station operations out of town will very possibly undermine broadcasting’s claimed identity as a local service, which could have eventual adverse repercussions in the overall regulatory approach.”

John Crigler, a partner with Garvey Schubert Barer in Washington, told Radio World in an email that the elimination of some of the supplemental requirements, such as staffing requirements, would have an immediate economic effect. “In fact, the elimination of the two-person staffing requirement may have a greater short term effect than elimination of physical location requirements. The purpose of the staffing requirement — artificially applied to the main studio rule by enforcement actions rather than rulemaking — was to insure licensee control and not serve local needs.

“From the beginning, the staffing requirement was designed not to make business sense. It required a licensee to keep two full-time employees on payroll even if they had only symbolic duties to carry out. That loud tapping noise you hear is the sound of LMAs being rewritten this very minute,” Crigler said.

Crigler also warns broadcasters that potential cost savings earned by shutting down main studios are likely to be offset by several countervailing economic forces.

“Even without a main studio requirement, commercial and noncommercial stations will have significant incentives to maintain roots in their local communities. FCC allocation rules, of course, require them to provide signal coverage of their communities of license, but a broadcast station that doesn’t attract an audience isn’t much of a station no matter where its studios are located, and audiences are generally loyal to local talent and their perspective on local concerns, including local weather and emergency information. Without that audience, local advertisers will abandon commercial stations. In addition to a strong philosophical commitment to public service, noncommercial stations are directly dependent on support from listeners for operating revenues. No local support, no station,” Crigler says.

This story first appeared on TVT's sister publication Radio World

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