27
May
2003
On June 2, the Federal Communications Commission (FCC) is expected to approve new rules dealing with the ownership of daily newspapers and broadcast-media outlets. These changes could dramatically alter the media landscape in the country, just as the Telecommunications Act of 1996 has resulted in the concentration of ownership of radio stations.
The new rules will likely result in a wave of television and newspaper cross-ownership. More plainly, companies will own both newspapers and television stations in the same market, which has not been allowed (with a few exceptions) since 1975. Critics of the change worry that the reduction of local-news voices in our communities would reduce competition among news organizations, damaging democracy and the free exchange of ideas.
The rule-making process has been remarkable for several reasons. For one thing, it's gotten virtually no attention from broadcast media outlets - including network news shows - and very little coverage from newspapers beyond national publications such as the Wall Street Journal and the New York Times. The parent companies of media outlets stand to be the big winners of further de-regulation.
Additionally, the process has been amazingly closed, with only one public hearing and - to date - no proposal publicly released. "The flow of information is the second most important part of democracy" behind voting, said Mark Cooper, director of research for the Consumer Federation of America, which was founded in 1968 as an advocacy and education organization and now has more than 285 member organizations. "The second most important set of rules is now a state secret."
And there's very little at this point - beyond inevitable court challenges by groups such as the Consumer Federation - that could stop the new rules.
The Changes
Details of the plan began emerging earlier this month from a draft circulated by Michael Powell, chairperson of the FCC. Powell is among three Republicans on the five-person commission, and the June 2 vote on the new rules is expected to be three-to-two along party lines.
The specifics of the plan probably won't be released until after the vote. "You won't find out until June 2," said Jeffrey Chester of the Center for Digital Democracy, whose mission includes "preserving the openness and diversity of the Internet in the broadband era." But "we know what's in there," he said.
According to the Wall Street Journal and other sources, three key elements will be part of the changes:
• Relaxation of the cross-ownership rule;
• A change in the ownership cap that would allow a single company to own television stations that reach 45 percent of the country's population, up from the current 35 percent; and
• A rule allowing companies in large markets to own three television stations (instead of the current two) and in medium-sized markets such as the Quad Cities to own two stations (instead of the current one).
The end result, Chester said, is that newspapers and "broadcast TV stations will be in the hands of fewer owners." And the concern is that this change will greatly reduce the number of voices in the "marketplace of ideas" that's so central to our democracy. "The media create the parameters of public consciousness," Chester said. The concentration of so many media outlets in a small number of hands "distorts a democratic society," he added. "It is an unhealthy environment."
The new rules that will be voted on next week stem from the Telecommunications Act of 1996, which requires the FCC to justify every two years the existence of old regulations on media ownership. The act essentially assumes these regulations are unnecessary and puts the burden of proof on the FCC.
But with Republicans controlling the FCC, the commission is clearly inclined to side with big media companies that have been pushing for the repeal of these rules. Fox, NBC, and Viacom, for example, filed a joint comment with the FCC urging an end to the ownership restrictions. And other giants such as AOL Time Warner, ABC/Disney, and Tribune Company have also been pushing for relaxed ownership standards.
The FCC has commissioned four studies in preparation for the review, and unsurprisingly, they all support de-regulation. The studies claim that:
• The number of media owners grew from 1960 to 2000, although not as quickly as the number of media outlets;
• Cross-ownership of media outlets does not have any predictable effect on the slant of coverage;
• The proliferation of other media such as the Internet and weekly papers provide adequate consumer substitutes; and
• Media concentration doesn't significantly affect the price of advertising.
These results mirror the arguments in favor of de-regulation - that ownership restrictions are unnecessary because consolidation isn't detrimental to news consumers or advertisers, and because consumers have plenty of alternatives to corporate media on the Web and in the marketplace overall.
Given the composition of the FCC, those findings have found a skeptical audience among media watchers. Chester noted that the Internet - a source of media substitutes, according to the FCC - still isn't universally accessible, and he added that the most popular news sites are owned by the big media companies.
Cooper added that while it might be true that bias overall might not be affected by cross-ownership, owners will exert themselves at key times. "When the big issues come up, they'll do the wrong thing," he said. "They'll leverage their power. Owners of media outlets are extremely political." As a result, the robust exchange of ideas could be at risk.
Furthermore, the Justice Department doesn't have any authority in the marketplace of ideas. Its anti-trust charge is related to price and commerce - hence, the focus on advertising - and not to the diversity of ideas available to the public. "They don't do democracy in anti-trust," Cooper said.
Congress so far has not jumped into the fray. There are bills that would maintain the broadcast-ownership cap at 35 percent, but no campaigns afoot among legislators to stop cross-ownership. "There is no short-term legislative fix," Chester said.
Local Impact
The consolidation of media certainly has an impact nationwide, but the biggest effect of these FCC rule changes will be felt at the local level, where consolidation of print and broadcast media is likely to occur.
Cooper led a study that looked at the effects of cross-ownership on 140 of the top 150 local media markets, sketching a worst-case scenario in which the top newspaper and top television station become corporate siblings through acquisitions and mergers spurred by the FCC rulings. The joint study by the Consumer Federation and Consumers Union (the not-for-profit publisher of Consumer Reports) found that simply joining the existing audiences of the top newspaper and the top television station in most markets would create a dominating media force.
"In one-paper cities, the local media giant would have a 90-percent share of the newspaper circulation, one-third of the TV audience, and one-third of the radio audience," the study's executive summary states. "No second entity could come close to matching this media power.
"In the typical two-paper town, the dominant firm would have four-fifth[s] of [the] newspaper market, and one-third of the TV and radio markets. The second firm would have a paper with only one-seventh of the circulation. In most of these markets, the TV market is also highly concentrated." (In the Quad Cities, the Quad-City Times has a higher circulation than the combined Moline Dispatch and Rock Island Argus, but it doesn't have nearly an 80-percent share.)
A likely scenario is that media companies would swap television stations so that their newspaper and TV holdings are in the same markets. News staffs of newspapers and television stations would likely be consolidated, so fewer reporters would be covering the news. There's the additional risk that newspapers that have traditionally been a watchdog when it comes to television stations could abdicate that role if they join corporately with a broadcast station. In the Quad Cities, of course, the two newspaper entities already have news-sharing and cross-promotional relationships with TV-news outlets - the Quad-City Times with KWQC and the Argus/Dispatch with WQAD.
The Quad-City Times has approximately 62 percent of the area's daily-newspaper circulation, but its parent company claims it has no interest in acquiring broadcast stations.
Dan Hayes, director of communications for Davenport-headquartered Lee Enterprises, was unequivocal about his company's intentions. "We decided three years ago to leave the broadcasting field," he said. "We have no interest in getting back into broadcasting."
But when Lee sold its network-television and radio affiliates in 2000, the media climate was different. There was, because of the cross-ownership rules, no potential for synergy; broadcasting outlets were in different communities than the company's daily papers. If the cross-ownership rules are relaxed or eliminated, broadcast stations might be more attractive to newspapers. When asked about this, though, Hayes didn't waver. "We're sticking with our strategy of focusing on newspapers," he said.
The Small Newspaper Group, headquartered in Kankakee, Illinois, is the parent company of the Rock Island Argus, Moline Dispatch, and weekly Leader. The privately owned publishing company has a dozen publications and also owns and operates Quad-Cities Online, a local Internet service provider. The Small family has a century of history in the publishing industry, and Len Robert Small has been president and CEO of the company since 1983.
The Small Group referred the Reader's inquiry to Treasurer Joseph Lacaeyse, whose assistant requested questions in writing. Lacaeyse did not reply to the Reader's questions, including those asking whether the Small Newspaper Group would "attempt to acquire broadcast-media outlets in the Quad Cities" and whether the company would "consider selling its Quad Cities properties to a company that owns broadcast-media outlets in the area."
There is one entity in the Quad Cities news market that seems particularly interested in growth in this upcoming environment of media consolidation. WQAD Channel 8 is owned by the New York Times Company, and "the Times definitely wants to buy," Chester said. The New York Times has reported that its parent company has supported repeal of the cross-ownership prohibition. In addition, the company's Web site notes that de-regulation could "make it possible for the Company to expand its own media interests in ways thus far prohibited by the FCC's rules."
Furthermore, a Merrill Lynch report, "The Media Industry: The Gold Rush Begins," conjectures that the New York Times Company will take advantage of existing relationships, such as the one between the Argus/Dispatch and WQAD: The company "has broadcast/newspaper alliances in several markets that could be precursors to swaps."
A merger between one of the newspapers and a television station in the Quad Cities "just blows the concentration through the roof," Chester said.
But WQAD President and General Manager Marion Meginnis was skeptical that cross-ownership in inevitable. "It's not a great climate to be selling things at a large price," she said. Meginnis wouldn't comment on the plans of her station's parent company.
Certainly, a local media merger isn't a foregone conclusion. But there is the potential for it, and if it does happen, consumers will have to dig deeper for both local and national news that is not funneled through an ever-growing corporate filter.
Online Resources
Ownership studies by the FCC
FCC rule-making notice
Consumer Federation and Consumers Union study
Center for Digital Democracy media-ownership overview with links
The new rules will likely result in a wave of television and newspaper cross-ownership. More plainly, companies will own both newspapers and television stations in the same market, which has not been allowed (with a few exceptions) since 1975. Critics of the change worry that the reduction of local-news voices in our communities would reduce competition among news organizations, damaging democracy and the free exchange of ideas.
The rule-making process has been remarkable for several reasons. For one thing, it's gotten virtually no attention from broadcast media outlets - including network news shows - and very little coverage from newspapers beyond national publications such as the Wall Street Journal and the New York Times. The parent companies of media outlets stand to be the big winners of further de-regulation.
Additionally, the process has been amazingly closed, with only one public hearing and - to date - no proposal publicly released. "The flow of information is the second most important part of democracy" behind voting, said Mark Cooper, director of research for the Consumer Federation of America, which was founded in 1968 as an advocacy and education organization and now has more than 285 member organizations. "The second most important set of rules is now a state secret."
And there's very little at this point - beyond inevitable court challenges by groups such as the Consumer Federation - that could stop the new rules.
The Changes
Details of the plan began emerging earlier this month from a draft circulated by Michael Powell, chairperson of the FCC. Powell is among three Republicans on the five-person commission, and the June 2 vote on the new rules is expected to be three-to-two along party lines.
The specifics of the plan probably won't be released until after the vote. "You won't find out until June 2," said Jeffrey Chester of the Center for Digital Democracy, whose mission includes "preserving the openness and diversity of the Internet in the broadband era." But "we know what's in there," he said.
According to the Wall Street Journal and other sources, three key elements will be part of the changes:
• Relaxation of the cross-ownership rule;
• A change in the ownership cap that would allow a single company to own television stations that reach 45 percent of the country's population, up from the current 35 percent; and
• A rule allowing companies in large markets to own three television stations (instead of the current two) and in medium-sized markets such as the Quad Cities to own two stations (instead of the current one).
The end result, Chester said, is that newspapers and "broadcast TV stations will be in the hands of fewer owners." And the concern is that this change will greatly reduce the number of voices in the "marketplace of ideas" that's so central to our democracy. "The media create the parameters of public consciousness," Chester said. The concentration of so many media outlets in a small number of hands "distorts a democratic society," he added. "It is an unhealthy environment."
The new rules that will be voted on next week stem from the Telecommunications Act of 1996, which requires the FCC to justify every two years the existence of old regulations on media ownership. The act essentially assumes these regulations are unnecessary and puts the burden of proof on the FCC.
But with Republicans controlling the FCC, the commission is clearly inclined to side with big media companies that have been pushing for the repeal of these rules. Fox, NBC, and Viacom, for example, filed a joint comment with the FCC urging an end to the ownership restrictions. And other giants such as AOL Time Warner, ABC/Disney, and Tribune Company have also been pushing for relaxed ownership standards.
The FCC has commissioned four studies in preparation for the review, and unsurprisingly, they all support de-regulation. The studies claim that:
• The number of media owners grew from 1960 to 2000, although not as quickly as the number of media outlets;
• Cross-ownership of media outlets does not have any predictable effect on the slant of coverage;
• The proliferation of other media such as the Internet and weekly papers provide adequate consumer substitutes; and
• Media concentration doesn't significantly affect the price of advertising.
These results mirror the arguments in favor of de-regulation - that ownership restrictions are unnecessary because consolidation isn't detrimental to news consumers or advertisers, and because consumers have plenty of alternatives to corporate media on the Web and in the marketplace overall.
Given the composition of the FCC, those findings have found a skeptical audience among media watchers. Chester noted that the Internet - a source of media substitutes, according to the FCC - still isn't universally accessible, and he added that the most popular news sites are owned by the big media companies.
Cooper added that while it might be true that bias overall might not be affected by cross-ownership, owners will exert themselves at key times. "When the big issues come up, they'll do the wrong thing," he said. "They'll leverage their power. Owners of media outlets are extremely political." As a result, the robust exchange of ideas could be at risk.
Furthermore, the Justice Department doesn't have any authority in the marketplace of ideas. Its anti-trust charge is related to price and commerce - hence, the focus on advertising - and not to the diversity of ideas available to the public. "They don't do democracy in anti-trust," Cooper said.
Congress so far has not jumped into the fray. There are bills that would maintain the broadcast-ownership cap at 35 percent, but no campaigns afoot among legislators to stop cross-ownership. "There is no short-term legislative fix," Chester said.
Local Impact
The consolidation of media certainly has an impact nationwide, but the biggest effect of these FCC rule changes will be felt at the local level, where consolidation of print and broadcast media is likely to occur.
Cooper led a study that looked at the effects of cross-ownership on 140 of the top 150 local media markets, sketching a worst-case scenario in which the top newspaper and top television station become corporate siblings through acquisitions and mergers spurred by the FCC rulings. The joint study by the Consumer Federation and Consumers Union (the not-for-profit publisher of Consumer Reports) found that simply joining the existing audiences of the top newspaper and the top television station in most markets would create a dominating media force.
"In one-paper cities, the local media giant would have a 90-percent share of the newspaper circulation, one-third of the TV audience, and one-third of the radio audience," the study's executive summary states. "No second entity could come close to matching this media power.
"In the typical two-paper town, the dominant firm would have four-fifth[s] of [the] newspaper market, and one-third of the TV and radio markets. The second firm would have a paper with only one-seventh of the circulation. In most of these markets, the TV market is also highly concentrated." (In the Quad Cities, the Quad-City Times has a higher circulation than the combined Moline Dispatch and Rock Island Argus, but it doesn't have nearly an 80-percent share.)
A likely scenario is that media companies would swap television stations so that their newspaper and TV holdings are in the same markets. News staffs of newspapers and television stations would likely be consolidated, so fewer reporters would be covering the news. There's the additional risk that newspapers that have traditionally been a watchdog when it comes to television stations could abdicate that role if they join corporately with a broadcast station. In the Quad Cities, of course, the two newspaper entities already have news-sharing and cross-promotional relationships with TV-news outlets - the Quad-City Times with KWQC and the Argus/Dispatch with WQAD.
The Quad-City Times has approximately 62 percent of the area's daily-newspaper circulation, but its parent company claims it has no interest in acquiring broadcast stations.
Dan Hayes, director of communications for Davenport-headquartered Lee Enterprises, was unequivocal about his company's intentions. "We decided three years ago to leave the broadcasting field," he said. "We have no interest in getting back into broadcasting."
But when Lee sold its network-television and radio affiliates in 2000, the media climate was different. There was, because of the cross-ownership rules, no potential for synergy; broadcasting outlets were in different communities than the company's daily papers. If the cross-ownership rules are relaxed or eliminated, broadcast stations might be more attractive to newspapers. When asked about this, though, Hayes didn't waver. "We're sticking with our strategy of focusing on newspapers," he said.
The Small Newspaper Group, headquartered in Kankakee, Illinois, is the parent company of the Rock Island Argus, Moline Dispatch, and weekly Leader. The privately owned publishing company has a dozen publications and also owns and operates Quad-Cities Online, a local Internet service provider. The Small family has a century of history in the publishing industry, and Len Robert Small has been president and CEO of the company since 1983.
The Small Group referred the Reader's inquiry to Treasurer Joseph Lacaeyse, whose assistant requested questions in writing. Lacaeyse did not reply to the Reader's questions, including those asking whether the Small Newspaper Group would "attempt to acquire broadcast-media outlets in the Quad Cities" and whether the company would "consider selling its Quad Cities properties to a company that owns broadcast-media outlets in the area."
There is one entity in the Quad Cities news market that seems particularly interested in growth in this upcoming environment of media consolidation. WQAD Channel 8 is owned by the New York Times Company, and "the Times definitely wants to buy," Chester said. The New York Times has reported that its parent company has supported repeal of the cross-ownership prohibition. In addition, the company's Web site notes that de-regulation could "make it possible for the Company to expand its own media interests in ways thus far prohibited by the FCC's rules."
Furthermore, a Merrill Lynch report, "The Media Industry: The Gold Rush Begins," conjectures that the New York Times Company will take advantage of existing relationships, such as the one between the Argus/Dispatch and WQAD: The company "has broadcast/newspaper alliances in several markets that could be precursors to swaps."
A merger between one of the newspapers and a television station in the Quad Cities "just blows the concentration through the roof," Chester said.
But WQAD President and General Manager Marion Meginnis was skeptical that cross-ownership in inevitable. "It's not a great climate to be selling things at a large price," she said. Meginnis wouldn't comment on the plans of her station's parent company.
Certainly, a local media merger isn't a foregone conclusion. But there is the potential for it, and if it does happen, consumers will have to dig deeper for both local and national news that is not funneled through an ever-growing corporate filter.
Online Resources
Ownership studies by the FCC
FCC rule-making notice
Consumer Federation and Consumers Union study
Center for Digital Democracy media-ownership overview with links
