As the industry continues to debate the pros and cons of potential deregulation of the FCC’s radio ownership rules, a group of 10 radio groups has written an open letter voicing its support for the National Association of Broadcasters’ June 15 proposal to dramatically roll back some of the current ownership limits. The missive – signed by top executives at Alpha Media, Connoisseur Media, Emmis Communications, Midwest Communications, Mid-West Family Stations, Neuhoff Communications, NRG Media, Perry Publishing and Broadcasting, Townsquare Media and Zimmer Radio – calls the ownership caps “an issue of paramount importance for the future of the radio industry.”
The group’s overriding rationale for supporting the proposal echoes points made by the NAB, namely that the emergence of digital platforms and devices has “fundamentally disrupted” today’s media landscape, giving radio powerful – and unregulated competitors – like Facebook, Google, Spotify, Pandora, YouTube and others that didn't exist when the current rules were enacted 22 years ago. “The rules are now a constraint that inhibits radio’s ability to compete, as well as attract capital and investment,” the groups state. From there, the letter makes three principal arguments. First, relaxing or eliminating ownership rules would “bolster the industry’s financial position at a time of unprecedented competition” by allowing companies to take advantage of the economies of scale. Continuing to serve the public interest with local news, sports, weather and emergency programming requires financially viable competitors “free to compete for assets, capital, and resources on a level playing field with their competitors,” the 10 group heads write. With an improved financial position, operators would be able to invest more in their business.
Second the groups claim that common ownership will drive more format diversity, as companies “use their additional stations to experiment and develop new and micro-targeted formats, rather than compete with their existing stations.” In their letter the execs contend that by developing new formats, radio will be in a position to better serve advertisers by offering broader audience reach, and become a stronger competitor to streaming audio services and satellite radio.
Third, the groups call “counter-intuitive” the FCC's elimination last November of the newspaper-broadcast and radio-television cross-ownership rules without also allowing radio groups to expand within their own industry.
Further deregulation has become a divisive issue in the radio industry. On June 15, the NAB proposed the FCC change its rules to allow a company to own up to eight FMs in the top 75 markets while also permitting the operator to own or control a limitless number of AM stations. Beyond the top 75 markets and in unrated markets, the NAB proposes all local radio ownership restrictions should be removed, allowing an operator to control as many stations as they’d like.
The NAB’s proposal has elicited strongly held reactions from both sides of the deregulation hot potato. While critics to further deregulation have yet to coalesce in a way that those advocating for change have, they’ve put forth a number of critiques in recent weeks. Counter arguments from both large and small operators contend it would make radio’s big players bigger and hurt smaller operators, resulting in fewer broadcasters serving local communities. And while cost reductions may help a company’s bottom line, detractors say they would also lead to fewer human resources, weaken public service and trigger more syndication and less live programming. Opponents also worry that allowing a company to buy more FMs would devalue AM radio as groups sell off AMs or show little interest in buying stations on the struggling band.
Opponents of the NAB proposal also dispute the notion that owning more FMs in a market would give a cluster more clout with advertisers and allow radio to better compete with digital giants. The trend of advertisers diverting dollars from radio to digital won’t be reversed by redistributing stations among a smaller group of owners, they counter. Some have suggested the radio industry would be better served by investing more in data and analytics so advertisers can more precisely target audiences and show attribution.
Just as having one newspaper in a community didn’t help newspaper advertising, fewer radio players won’t strengthen radio, they contend. What's more, opponents argue that revenue shares for five FMs in a market usually aren’t greater than for four, as the same amount of revenue is allocated across more stations. And detractors have suggested more consolidation will hinder opportunities for diversity in broadcast ownership.
Evidence Will Drive FCC Decision
When the FCC moves forward on its quadrennial review process later this year, one of its challenges will be to justify any changes it makes since those decisions are all but certain to face legal challenges. The repeal of cross-ownership rules last November are currently the subject of a pending case in federal appeals court. As both sides of the contentious issue make their arguments to the Commission as it again takes up media ownership restrictions, they’ll need to support their claims with data and research to show the public interest benefit and give the FCC the ammunition it’ll need when its attorneys again find themselves in federal court.
While the 10 groups say they have “further studied the issues involved so that we may come to a carefully considered decision,” the letter cites no studies or research to support its claims.
Asked by Inside Radio for the factual basis for the claim that deregulation would increase format diversity, a spokesperson for the groups cited FCC and NAB studies from 2007 and 2010. But many in the industry believe the rampant consolidation that followed passage of the Telecom Act of 1996 did little, if anything, to bring new formats to the dial with adult hits being the one notable exception during the past 22 years.
The open letter from the 10 radio groups notes that the NAB proposal was passed by a “substantial majority” after being debated and voted upon openly by both a special NAB Committee and by the full NAB Radio Board. To put the current ownership limits in context, it provides a history of the government’s regulation of the public airwaves. Throughout their history, broadcast ownership rules were intended to prevent one entity from having too much influence over the flow of information and ideas. “Given the vastly different competitive landscape in the information marketplace, it follows logically that the rules that were intended to limit advantage and undue influence must themselves adapt or be eliminated altogether,” the letter says.
No doubt there will be many divergent views expressed on the controversial subject – both in and outside the industry – as the FCC begins the 2018 quadrennial media ownership review later this year.