FCC Approves Cross Ownership Waivers, But A Dissenting Opinion Is A Zinger!
Along party lines the Federal Communications Commission has approved, as Chairman Kevin J. Martin proposed new rules for cross ownership of broadcast stations and newspapers in the same city, citing the need to strengthen the newspaper industry. It was something the Republicans and big business wanted, and something the Democrats oppose so vehemently that there is talk of trying now to get Congress to overrule the FCC.
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The message we continually get from newspaper trade organizations is that newspapers are in fine shape, sure they need different business models to counter losing advertising to the Internet, but margins are still very healthy even if employment numbers are savaged. But now a leading member of the Bush Administration says, “In many towns and cities, the newspaper is an endangered species.”
Democrat Commissioner Michael Copps was so angry with the vote that he issued a long blistering dissenting opinion declaring the need to protect newspapers is basically nonsense; they are doing very well without needing protection.
Here is some of what he had to say:
“We claim to be giving the news industry a shot in the arm—but the real effect is to reduce total newsgathering. We shed crocodile tears for the financial plight of newspapers—yet the truth is that newspaper profits are about double the S&P 500 average …
“Local news, local music and local groups so often get shunted aside when big media comes to town. (Fellow Democrat) Commissioner Adelstein and I have heard the plaintive voices of thousands of citizens all across this land in dozens of town meetings and public forums. From newscasters fired by chain owners with corporate headquarters thousands of miles away to local musicians and artists denied airtime because of big media’s homogenization of our music and our culture. From minorities reeling from the way big media ignores their issues and caricatures them as people to women saying the only way to redress their grievances is to give them a shot to compete for use of the people’s airwaves. From public interest advocates fighting valiantly for a return of localism and diversity to small, independent broadcasters who fight an uphill battle to preserve their independence. It will require tough rules of the road to redress our localism and diversity gaps…
“It’s worth stepping back for a moment from all the detail here to look at the fundamental rationale behind today’s terrible decision. Newspapers need all the help they can get, we are told. A merger with a broadcast station in the same city will give them access to a revenue stream that will let them better fulfill their newsgathering mission. At the same time, we are also assured, our rules will require “independent news judgment” (at least among consolidators outside the top 20 markets). In other words, we can have our cake and eat it too—the economic benefits of consolidation without the reduction of voices that one would ordinarily expect when two news entities combine.
"But how on earth can this be? To begin with, to the extent that the two merged entities remain truly “independent,” then there won’t be the cost savings that were supposed to justify the merger in the first place. On the other hand, if independence merely means maintaining two organizational charts for the same newsroom, then we won’t have any more reporters on the ground keeping an eye on government. Either way, we can’t have our cake and eat it, too.
"Also, since when do unprofitable businesses support themselves by merging with profitable ones—and then sink more resources into the money-losing division simply as a public service? Think about it this way. If any of us were employed by a struggling company, and we suddenly learned that a Wall Street financier had obtained control, would we (1) clap our hands with joy because we expect the new owner is going to throw a bunch of cash our way and tell us to keep on doing what we’d been doing, except more lavishly or (2) start to fear for our jobs and brace for a steady diet of cost cutting?
"Here’s my prediction on how it will really work. Mergers will be approved in both the top 20 and non-top-20 markets—towns big and small—because the set of exceptions we announce today have all the firmness of a bowl of Jell-O. Regardless of our supposed commitment to “independent news judgment” the two entities’ newsrooms will be almost completely combined, with round after round of job cuts in order to cut costs. It’s interesting to hear the few proponents of this rule bemoan the lost jobs that they say result from failing newspapers. Ask them this: in this era of consolidation in so many industries, isn’t cutting jobs about the first thing a merged entity almost always does so it can show Wall Street it is really serious about cutting costs and polishing up the next quarterly report? These job losses are the result of consolidation. And more consolidation will mean more lost jobs. Newly-merged entities will attempt to increase their profit margins by raising advertising rates and relentless cost-cutting. Herein is the real economic justification for media consolidation within a single market.
“Let’s also be careful not get too carried away with the supposed premise for all this contortionism, namely the poor state of local newspapers. The death of the traditional news business is often greatly exaggerated. The truth remains that the profit margins for the newspaper industry last year averaged around 17.8%; the figure is even higher for broadcast stations. As the head of the Newspaper Association of America put it in a Letter to the Editor of the Washington Post on July 2 of this year: “The reality is that newspaper companies remain solidly profitable and significant generators of free cash flow.” And as Member after Member Congress has reminded us, our job is not to ensure that newspapers are profitable—which they mostly are. Our job is to protect the principles of localism, diversity and competition in our media.
“Were newspapers momentarily discombobulated by the rise of the Internet? Probably so. Are they moving now to turn threat into opportunity? Yes, and with signs of success. Far from newspapers being gobbled up by the Internet, we ought to be far more concerned with the threat of big media joining forces with big broadband providers to take the wonderful Internet we know down the same road of consolidation and control by the few that has already inflicted such heavy damage on our traditional media.
“In the final analysis, the real winners today are businesses that are in many cases quite healthy, and the real losers are going to be all of us who depend on the news media to learn what’s happening in our communities and to keep an eye on local government. Despite all the talk you may hear today about the threat to newspapers from the Internet and new technologies, today’s Order actually deals with something quite old-fashioned. Powerful companies are using political muscle to sneak through rule changes that let them profit at the expense of the public interest. They are seeking to improve their economic prospects by capturing a larger percentage of the news business in communities all across the United States.” - Philip Stone December 20, 2007
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