The Media Consolidation Debate
With Steven Pearlstein
Washington Post Financial Staff Writer
Wednesday, May 21, 2003; 11 a.m. ET
The Federal Communications Commission is set to rewrite the federal rules governing how many properties a media company can own in a single market. While major media firms support the rule change, groups to the left and right of the political spectrum oppose it, arguing that more consolidation in the media industry will shut them out of the airwaves. See "Unlikely Alliances Forged in Fight Over Media Rules" from Tuesday's Washington Post.
A Transcript of the Discussion Follows:
Steven Pearlstein writes about business and the economy for The Washington Post. His columns on the economy appear every Wednesday and Friday.
Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
washingtonpost.com: Steven Pearlstein's column on the FCC media consolidation debate is online: "Could the FCC Play a Different Tune?".
Stanford, Calif.: I am interested in knowing where various senators fall on the spectrum in terms of further deregulation (consolidation?) of media sources. Who is a strong proponent and who is a vocal opponent of the proposal to weakening restrictions on media ownership?
Steven Pearlstein: The strongest proponent is in the House: Commerce Committee Chairman Billy Tauzin (R-La.). Ed Markey (D-Mass.) really leads the charge against on that committee. The strongest opponents are in the Senate, including John McCain (R-Ariz.) and Fritz Hollings (D-S.C.).
Burbank, Calif.: Isn't our media system a little too much like TASS as it is? Unfair and completely opinionated news? As the country moves further and further right, it becomes increasingly imperative that a diverse and balanced set of of voices are heard and that the "public airwaves" are allowed to represent the voices of all Americans.
Steven Pearlstein: I suspect the range of views that get through are pretty representative, actually.
Glendale, Calif.: Comment: Continuing consolidation in Telecommunications, Airlines and Investment banking have not improved these industries or the services that they offer. I don't see how putting the all of the public airwaves and most of the newspapers into the hands of a few gigantic corporations will help investors, consumers or diversity in communication.
Question: Won't a further consolidation of the public airwaves lead to an even more homogeneous advertising environment. As it is, I tune out of most TV and its advertising because despite the number of channels there is littler real differentiation in the views and content expressions to attract me. I personally believe that further consolidation will degrade the medium of TV and radio for advertisers and consumers alike. What do you think?
Steven Pearlstein: Yours is a complicated question. Consolidation can and has improved service and quality in many industries, even as it has reduced consumer choice. Importantly, it has also reduced price where markets don't get so consolidated that there is no price competition. Now the media is a difficult situation because the "price" is sometimes paid for by people other than the viewers/readers, but by advertisers, so the normal tradeoffs and incentives don't work so well there.
I think we can say this: Consolidation will mean fewer, big media giants controlling much of the programming and most of the "pipes" distributing that programming because there are, indeed, economies of scale. On the other hand, technology will insure that there will be many more niche markets as well, some of which will become so popular that they will either be incorporated into the programming of the mass market or prompt the mass media to copy them. I am not of the chicken little school who believe that everything now on television is terrible. There's lots of good things there, although there is so much it sometimes is hard to find it.
Dover, N.H.: There's no question that continued, extreme media consolidation would have a negative impact on democracy. But, on what basis will the FCC be able to continue regulation of broadcast media when the day comes that most content is not delivered on the public airwaves? Can there be a political will to continue regulating ownership and conceive of "licensing" in such an environment? How about squelching smut and ensuring community-oriented content continues? Is the latter possible without a constitutional amendment?
Steven Pearlstein: First, I want to say that my first job was at the Foster's Daily Democrat in your town, so hello.
On the democracy question, I disagree. Your town used to have one newspaper and one radio station and they pretty much controlled the flow of local information. I suspect that you all have many more sources these days. I know the quality of the paper has improved (thank heavens!). And I bet the satellite segment has a good foothold there to challenge the cable monopoly.
Southern Maryland: Radio listeners have been suffering through media consolidation for the last decade or so. Cookie-cutter formats designed using focus groups have robbed radio of most of its personality and local feel. Have you read Salon magazine's excellent reporting on radio conglomerates like Clear Channel? Small stations like Annapolis' WRNR seem to be the only broadcast outlets left for new and different music. (Well, there's XM satellite radio, but I don't think that counts as broadcasting since it's a subscription service.)
Steven Pearlstein: As you could see from today's column, I agree with you 100 percent on radio. If I ran the circus, I'd make Clear Channel and Infinity divest some stations so that they own no more than 10 percent of any given market. But the real stick would come if there were some programming requirements that went along with license renewals. That would get their attention.
Alexandria, Va.: Doesn't the coming era of digital broadcasting sort of eliminate the 'limited spectrum' argument? As I understand it, TV stations will soon be able to broadcast three channels in the bandwidth they currently use to broadcast one.
Steven Pearlstein: Not really, because the existing broadcasters will still be the only ones who can use the spectrum, as I understand it. No room for new entrants.
Arlington, Va.: Your column makes a very good point about the current media landscape -- it's not WHO owns a media outlet that makes it good or bad. I used to live in Alabama. The New York Times Co. owns the Tuscaloosa News, but you'd never know it by reading it. Never any bad news reported about anything, esp. local business interests and the holy Univ. of Alabama football program. Then there's the independent Birmingham News, which failed to catch the HealthSouth accounting scandal AND the Anniston, Ala., chemical poisoning stories. The best thing that could happen is for a media company that values journalism to buy both properties...
Steven Pearlstein: I'm gonna let your comment stand by itself. Well said.
Falls Church, Va.: You write: "For television, it might mean requiring more comprehensive, in-depth or innovative news, quality children's programming, and regular live broadcasts of local cultural events and amateur sporting events."
Can't TV stations make the case that there's no audience for these things (other than, maybe, for good children's TV)?
Steven Pearlstein: They can make the case that there is no advertising revenue for these things, but that is different than saying there is no audience. That's point one. Second, you'd never know whether there is an audience for stuff like regular local cultural programming until you do it for a while, perfect it and get the word out. Nobody knows, in other words. Third point: there are just some things that are good for the community where the "market" may not provide it, but since these broadcast licenses are really licenses to print money, they should be required to reinvest it in their community in ways that only broadcasters can, providing programming that nobody else can or would. They have totally abandoned their public interest responsibilities, in my opinion.
Washington, DC: Are we seeing the last days of the FCC's regulation of the public airwaves, what with the proliferation of the Internet, broadband, satellite radio, etc.?
Steven Pearlstein: My guess is not in our lifetime.
Baltimore: Where do we draw the line next on deregulation? Seems that if the free-marketers carry their logic to its highest level, then there'd be no rules on how many TV stations a company could own in a single market.
Steven Pearlstein: What you fear in terms of total deregulation is just what the networks and the media conglomerates would secretly like to happen, even though they dare not say it in public. But as with radio, these guys always overplay their hand and get too piggy and ignore their customers to the point that they either get zapped by the marketplace or invite re-regulation. So don't despair. The political and market systems work pretty well over the long run.
Bethesda, Md.: Why is the media consolidation debate happening now? This is really the first I've heard of it, and I'm wondering why it's at the top of the agenda in 2003 instead of 1993 or 1983.
Steven Pearlstein: It is happening because the federal law requires the FCC to review its media ownership rules every two years and the new Republican majority on the FCC is now proposing to loosen those rules. Vote is on June 2 on their proposal.
Washington, DC: I read that one of the Democrats on the FCC is arguing that some loosening of the ownership rules is needed, but not as much as favored by the Republican majority. Seems like that's a weak argument, as I do not believe that a Democratic-run FCC would be voting to loosen these rules at all.
Steven Pearlstein: I'm not sure you're right about a Democratic FCC not voting to loosen at all. There have been lots of exceptions to the rules granted by the FCC in the past and even the Clinton era FCC engaged in a combination of deregulation and heavy-handed regulation. These aren't simply questions. They require analysis of what markets work on their own and which ones don't, and if they don't, what policies might make them work better. Getting all that right on the first try isn't easy.
Washington, DC: I think your column today astutely points out that the rulemaking fight is a proxy for a larger issue over broadcaster's public interest responsibilities. But don't you think that forcing the broadcasters to uphold those responsibilities is a much tougher political fight than the one at hand?
Steven Pearlstein: I'm sure the broadcasters would fight tooth and nail against any system that would require them to spend more on good programming and lower their profits as a condition of keeping licenses that they now consider to be their property. Now, however, we have some other, equally piggy and equally powerful business interests that would take the other side: the cable operators!
DCDC: Dear Mr. Pearlstein,
Why do television networks seem to schedule their commercial breaks for the same times during an hour, and why is this practice not the subject of antitrust action?
Steven Pearlstein: Because it is collusion that is done in plain view, without communication among them. The same thing happens in airline ticket pricing, where one raises a price and waits to see if the others follow. If they do, the higher price sticks. If they don't, the fare increase is withdrawn. So they are able to collude on prices without ever exchanging a word. In the example you cite, one broadcaster might decide to defect from the arrangement in order to attract more viewers and thus more advertising revenue. But any network that would do that would know that it would only mean the others would follow suit, leaving all the competitors worse off. So they don't do that. This is called oligolopolistic competition, which is only one step away from the behavior of a monopolist.
Herndon, Va.: Seems like you're proposing a very complicated formula for deregulation -- some deregulation for some markets, none for others, etc. Is our political process capable of undertaking such a complicated reform?
Steven Pearlstein: Everything at the FCC is complex and legalistic (too much so). What I propose is simple compared to the way they already tie themselves up in their own underwear.
Washington D.C.: What effect, would greater consolidation of media outlets have on minority ownership?
In addition, will larger consolidations of media command higher profits from advertisers in these local markets while at the same time cutting operating costs by cutting staff? (For instance, maybe resulting in less news coverage?)
Steven Pearlstein: Minority ownership is out the window with consolidation, no question about that. As for the effect on advertising rates, if the "savings" from consolidation are not passed along to the advertisers, or if the media giants try to use their near-monopoly power to squelch price competition and raise prices, there are antitrust laws that can be used to punish them. Not clear, however, that the current Justice Department wants to do that except in the most extreme price fixing schemes.
Alexandria, Va.: It seems like the media ownership rules have done little to prevent -- or at the very least examine thoroughly -- mergers like AOL Time Warner and the various operations of Messrs. Murdoch and Turner. Is this because they somehow operate under different designations to which different rules apply?
Steven Pearlstein: They've stretched the rules, got around them on technicalities, won waivers. And in some cases, there are no rules -- for example, no rules preventing the Time magazine group from being owned by company that is also a cable operator and Hollywood studio. These are all different "markets" so there is really no antitrust problem in the aglomeration.
Annandale, Va: FCC Chairman Powell has declined to postpone a vote on the matter, despite the fact that nearly all of the 10,000 comments the agency has received on this subject have urged the FCC to back down. Do we know anything about which way this vote would go if held today?
Steven Pearlstein: I think this is a false issue, really. The issues are well known, they have the votes and they don't want to leave things hanging out there for a month so that opponents have a chance to stir up the public and the Congress. If the Democrats had the votes to do something moving in the other direction, I can assure you they would use the same tactics. My experience is that arguments over process are usually smokescreeens for disagreements about policy.
Rockville, Md.: Today's column illustrates the vice of concentration, not only in the media business: "While deregulated markets have produced a more efficient industry, they have also driven variety -and] local flavor" out of those markets. Concentration can, and often does, lead to efficiency for those that compete in the market. But the benefits of that efficiency rarely benefits those who consume the products or services. We see this phenomenon today in many industries that have not been "regulated." Groceries is a good example. As the retail market grows more concentrated, consumers have fewer choices of retailers and products. With half the groceries sold in this country in the hands of a half-dozen chains, we find the shelves filled with products offered by producers who are forced to pay big dollars for the privilege of being in the store. Smaller producers are squeezed out of the market, and consumers have less variety.
And let's not forget the argument quoted early in the column -- that "unregulated competition . . . will ensure lower prices". "Unregulated" is a buzzword that means lack of merger enforcement under federal antitrust law. What the FCC seeks to permit by its new rules is a new round of media merger mania, which will have the same effect as we have seen in other industries -- high concentration. That NEVER leads to lower prices and higher quality in consumer goods or services markets. It leads to higher prices and higher profits for the competitors left after the innovative independents are driven from the market, or have been acquired by the industry's giants. In the radio and television markets we think of as "free," imagine what advertisers will pay if a few giant media companies control the leading radio and television stations, and perhaps the leading, or, in many markets, the only, newspaper in town.
These are the basic lessons that we learned in this country almost a century ago. They resulted in a fabric of antitrust laws that, when vigorously and sensibly enforced, provide consumers with the highest quality at the lowest price. To do that, we need a variety of competitors competing on a level playing field. Those that can compete efficiently and profitably, survive and grow; the inefficient fall by the wayside. But, anyone has a chance to enter the market, to innovate, and grow.
Steven Pearlstein: Well, that's a pretty standard big-is-always-bad argument that has generally been discarded even by aggressive antitrust enforcers like Robert Pitofsky, ex FTC head, who is now back at Georgetown University. I think you're painting with too broad a brush.
Leesburg, Va.: On the piggy cable operators - no dispute there on your characterization... But do they take the other side out of a sense of moral righteousness or out of a sense of "anything to hobble the broadcasters is ok with us?"
Steven Pearlstein: Your political sense is correct: anything that hobbles my competitor is good for me. That motive accounts for quite a bit of quiet and not-so-quiet lobbying in Washington on a wide range of subjects, let me assure you.
Long Beach: If history provides us with any clarity on the issue of media consolidation, it is that CONTROL over information is more insidious than we know. For instance, the Mellons controlled 5 of the 7 dailies in Pittsburgh in the early 20th century. It later came out that the two "independent" papers had their bonds and loans controlled by Mellon. NO FREE PRESS. NONE. And nobody knew. Who knows who is in control behind the curtain?
Steven Pearlstein: That's too conspiratorial for me.
Oakton, VA: I've got 500 channels on my cable system. Of course these 500 channels are owned by the same five or six media companies. On the plus side, almost every major newspaper is on the Internet, so I can read Molly Ivins even if the Post only prints her column once in a blue moon.
Steven Pearlstein: I'm with you on Molly Ivins. But let me ask you: Even if 500 channels is controlled by the same five or six media companies, has that really deprived you of very much commercially-viable programming or political points of view that are out of the mainstream. I doubt it.
Washington, D.C.: If the FCC does what everyone knows it's going to do next week, what should we -- the TV consumers -- be watching for?
Steven Pearlstein: It will unleash a flood of station purchases and swaps that will result in greater concentration of licenses into fewer hands.
Outside the Beltway: "The issues are well known, they have the votes and they don't want to leave things hanging out there for a month so that opponents have a chance to stir up the public and the Congress."
Yeah, but: you're right that it's an issue over policy, but if there's fear that delay will cause a groundswell of opposition isn't it likely that fear stems from the fact that the administration and the FCC isn't serving the public interest -- that it's further selling out the assets of the American public to a small number of corporate entities. If that's the case, then it seems to me that promulgation of policy is very closely tied to a closely managed process that limits transparency.
Steven Pearlstein: It would be hard to argue that those who care about this have had no idea its coming along or where the chairman and the other members stand on it. This has been on the official agenda for more than a year, with lots of articles in the newspapers and trade press and even on television. What I usually say about things like this is that they illustrate why elections matter. If you don't like the new rules, organize your friends to vote against the Bush-Cheney ticket. That's how representative democracies sort these things out.
Long Beach: The fact about Pittsburgh's papers was in George Seldes' biography. It is not a theory or a conspiracy routine. Did you know that Andrew Mellon's divorce was blacked out in Pittsburgh? Had to go to New York to read the juicy details. Andrew Mellon was known as the de facto President for three administrations, no less.
Steven Pearlstein: I'm not doubting that the Mellons might have controlled the Pittsburgh media back then. I don't think the Mellons or anyone else can control and manipulate opinions quite so easily today.
Bowie: Are we deprived of out-of-the-mainstream views? Certainly.
Where can you see Jim Hightower? No advertiser will sponsor him because his viewers aren't people swayed by advertising.
You also never hear overt racialists because no one would advertise on their shows.
Steven Pearlstein: I'm not sure the reason Jim Hightower no longer has a radio show is that his people aren't swayed by advertising. I suspect it is because advertisers didn't like his views and his audience wasn't sufficiently large to force them to advertise anyway, out of commercial necessity. But you raise a good case: shouldn't there be a place for Jim Hightower in syndicated radio just as there is for Rush Limbaugh. Yes. And radio consolidation is probably one reason that hasn't happened.
Washington, D.C.: I'm not entirely sure I understand your argument about regulation. Yes, in theory we could force radio and television programming, but the reality is that people will not watch and will demand something else. Look at newspapers, your own business. Washington DC doesn't have a good newspaper because people won't support anything other than middlebrow and upper-middlebrow fare. Yes, it's junk food for the mind, but that's what people want and that's what media companies will give them.
Steven Pearlstein: I'll let your comment stand without reply. Mass media need mass audiences.
Rockville, Md.: Reply to Mr. Pearlstein's comment:
Big is not bad, per se. It depends on many things: how you got big, for example. But the key to my argument, which you perhaps overlooked, is the need for a diverse market place -- more rather than fewer firms competing. In that environment, one expects a few big firms. But there are enough smaller, efficient firms around to discipline the behavior of the biggies.
Steven Pearlstein: Precisely. And we have to make sure that those little guys are still allowed to get access to the public.
Washington, D.C.: Could you explain the Washington Post's position on this? Your column touches on it briefly, but not explicitly.
Steven Pearlstein: The Washington Post Co, as far as I understand, has no official position on the proposed changes in the media ownership rules. The head of our television division, however, has put that division on record as opposing allowing natinoal networks to own stations reaching 45 percent of the national market rather than the current 35 percent cap.The reason is that he and other "unaffiliated" local stations believe that giving the networks more stations will give them more power over them.
Steven Pearlstein: Thanks, folks. That was good. See you next week.
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