Arbitrary rules

The day in 1980 when CNN went on the air on cable systems should have been the day that the ownership rules for television were rethought. From that quiet
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The day in 1980 when CNN went on the air on cable systems should have been the day that the ownership rules for television were rethought. From that quiet start when most people thought a 24-hour news operation was neither feasible nor wanted, the world of broadcast television in the United States was changed. There was even more change in 1985 when — at the personal suggestion of Fidel Castro to Ted Turner — CNN International was created. These changes resulted in a single entity being capable of broadcasting information directly into the nation's homes.

The ownership rules were created by government out of fear: Fear that a medium could dominate nationally, as happened for the moguls of the print industry. But as soon as there were more than three sources of news — beyond ABC, CBS and NBC — an arbitrary percentage of viewers that an owner could address became unnecessary. Three judges in a federal appeals court described the 35 percent rule recently as “arbitrary and capricious and contrary to law.” They were ruling in the case of News Corp. and Viacom, who both ended up addressing about 37 percent of the nation's population through acquisitions.

The appeals court did not, unfortunately, throw out the rule, even though it had found it unlawful — it remanded it back to the FCC to justify its existence. Given that the new chairman of the FCC, Michael Powell, has already been heard to wonder aloud about the rule we can only hope that the consumer groups that are already whining about the court's decisions will not get the taxpayers' money tied up in the Supreme Court.

The negative thing (I think it's negative, at least) about this court decision is in the long term it will assist in facilitating a trend that I have already forecast. The amalgamation of the television industry is following what has already happened in several cycles in the radio industry. The networks are already in strained relationships with their affiliates. The affiliates, in many cases, are financially strained, and the conversion to DTV is not a happy prospect for many of them. If this appeals court decision holds, you can be sure that many of them are going to be gobbled up for a small fraction of their street worth today because they can be literally squeezed out of business by the networks or groups.

This is akin to the travel industry: Travel agents were created by the industry to facilitate growth and offer convenience for the traveler. Travel agents are being crushed by the industry that created them because there are now easier and more profitable distribution methods — i.e. the Web. So with the affiliates, who were created by the industry to distribute product to people the government wouldn't allow networks to cover. When that need disappears — as it seems to have done — the affiliates will disappear. Instead of the local studio in small cities, we will begin to see the modern radio station's look, but to save money the equipment location will probably be right at the terrestrial broadcasting site. If there is any local programming — and there won't be at the lower DMA cities — it will be minor and upconverted.

One particular example involves Emmis, a corporation centered in Indiana with viewers in Portland, OR, and Orlando, FL. In addition to radio, it has TV properties, print publications and international radio properties, but it's in the Portland and Orlando markets where the company is showing its ignorance of its own existence.

TV broadcasting makes its money from advertising. Maybe somebody will come up with a way of making money from datacasting in this digital age — maybe — but until then broadcasters need to be able to tell advertisers how many people are watching and charge accordingly. You don't, therefore, prevent people from watching your station, do you?

Well, Emmis believes it needs to. In fact, the man who runs the show has failed to come to terms with DirecTV for re-broadcasting the KOIN signal in Portland and the WKCF signal in Orlando for those cities' DirecTV subscribers. Emmis believes it needs a better deal than any of the other stations have agreed to. That is arbitrary, indeed, and unfair to everyone involved.

The moral must be that any person or body that tries to control the delivery of information in this era — or even a percentage of information — is doomed to failure.

Paul McGoldrick is a freelance industry consultant based on the West Coast.

Send questions and comments to:paul_mcgoldrick@primediabusiness.com