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Cry havoc!

June 2, 2003, started a new era in media ownership in the United States with the relaxation of ownership rules by a 3:2 (Republican: Democrat) FCC. The two sides of this debate have been extremely polarized, but this column is not about to get into the political ramifications in this arena. Rather, we need to look at what it means and how it happened.

This has been a two-sided fight to change the ownership rules that were adopted between 1941 and 1975. On the pro-change side have been the Republican chairman and two Republican commissioners, together with the large networks — News Corp/FOX, GE/NBC, Viacom/CBS, Disney/ABC — and publishers such as Tribune and Gannett. On the anti-change side have been the two Democratic commissioners, together with consumer advocates, small broadcasters, academics, musicians and writers, with two strange bedfellows in the form of the NRA and NAB.

Just spending lobbying money has not been the manner of trying to change the commissioners' views. The largest contributor to travel for the FCC has been the NAB. It has spent $191,472 in the last eight years to bring FCC officials to its shows, while the total spent by the industry on FCC travel for 2500 trips over the past eight years has been $2.8 million. The destinations, in order of popularity have been Las Vegas; New Orleans; New York; London; Orlando, FL; San Francisco; Miami; Anchorage, AK; Palm Springs, CA; Buenos Aires, Argentina; and Beijing.

These numbers come from the Center for Public Integrity (www.publici.org) that has shown over the five years of its existence little or no favoritism for either political caucus.

The center also has detailed the amount of time senior executives from the industry have spent in ex parte meetings in relation to the ownership rules — meetings that are not recorded or minuted. It tells of the day in March 2003 when 18 FCC officials met with executives from ABC and Disney in six different sessions, and the days when Rupert Murdoch (News/FOX) and Mel Karmazin (Viacom/CBS) dashed from one meeting to another with commissioners and top FCC staff.

The swing vote on the present commission has been considered to be Republican Kevin Martin. He was the most visited commissioner during the run up to June's vote, with 16 visits — Viacom, three times; NBC, three times; ABC, two times; Hearst, two times; and one time each with Clear Channel, Cox, Cumulus, Gannett, News Corp, and Radio One.

Obviously the most pressure was from the TV broadcasters who were looking to consolidate the industry, as well as cross-own other media. The general argument they put forward is that if consolidation is not allowed then they will be short of money and will not be able to afford to make or purchase the programming that the cable networks are able to put together. The shouts from the other side have been mostly about Big Brother, the lack of local content, and the dumbing down — or even ownership control — of news content.

Everyone I have talked to says that consolidation of TV broadcast stations will be a slower process than what happened with radio. That may be so, but from the moment the commission ruled in favor of the “big guys” they were no longer on the same team. It would seem logical that one would expand their ownership in the TV media by going after affiliates with whom they have had soured relationships for many a year.

I have no doubt that the big players have already drawn up their first-, second- and maybe even third-tier lists of targets, together with identified station valuations, most valued players, most valued equipment and most valid market futures. We're certainly going to see the stations that have invested in DTV go first — that will help keep the FCC off the networks' back over DTV date quotas — and in the second and third rounds we will see the smaller markets fall. If we look to radio as an existing example, there could be four or five levels of consolidation with maybe only two networks left at the end of it all — and a few independents stubbornly hanging on.

The arguments are over. Things will never be reversed from this point and, the industry as a whole, particularly the equipment vendors, needs to realize that the rules just changed in the way one will sell their products as well. Don't let any feelings of how things should be get confused with the realities of June 2.

Paul McGoldrick is an industry consultant based on the West Coast.

Send questions and comments to:paul_mcgoldrick@primediabusiness.com

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