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Premature Obituary

June 2003

Premature Obituary

Reports that the FCC's new TV-ownership rules will kill free speech are greatly exaggerated.

The U.S. will still have an abundance of media outlets.

by Ken Marlin

June 16, 2003

I understand the concern, at least in theory, of the politicians and pundits at both ends of the spectrum who prophesy the end of democracy as we know it if the Federal Communications Commission's new rules opening the door a bit wider to media concentration are allowed to stand. 

But when you look at the facts, the hysteria doesn't seem warranted. 

In the early 1960s -- when newspapers were a force, television mainly comprised three broadcast networks and each market had only a few TV stations -- Congress mandated that the FCC protect the public interest with regard to broadcast television stations. In 1964, the agency adopted rules that allowed an entity to own two TV stations in a market if one was not among the top four in ratings and the market had at least eight independently owned and operated commercial or noncommercial stations. In 1975, it imposed a rule banning a newspaper from owning a broadcast TV station in the same market, and vice versa. Last year, a federal appeals court ordered the FCC to reconsider the rules, saying it had not shown the limits were still in the public interest. Under the new regulations adopted this month, in markets with 18 or more TV stations a company now may own three, but only one can be among the top four in ratings. In markets with nine or more TV stations, the cross-ownership ban was lifted. There were also a few other changes, but the FCC retained a ban on mergers of broadcast networks. 

Does this add up to revolutionary change? Is it the beginning of the end of free speech in the U.S.? I don't think so. 

The debate has centered on a few issues. One argument says the rule change lets big media moguls get even bigger, and that's bad. News Corp.'s Rupert Murdoch seems to have become (again) the favorite whipping boy. 

Well, OK. There probably will be some more mergers and some swapping of a newspaper or TV station in one market for one in another. But for a number of reasons, it is far from clear that the FCC's loosening of the cross-ownership restrictions will immediately cause large media firms to go on a buying spree. 

First of all, there are still limits. Second, if media moguls binge they will drive up prices and drive down investment returns. Third, proposed mergers still must meet the FCC's public-interest standard and pass the Justice Department's antitrust test. And fourth, changes to ownership restrictions are but one of several factors affecting the value and desirability of media properties. Americans are changing lifestyle habits, reading fewer newspapers and watching less broadcast TV; advertising trends are shifting. 

Another argument says relaxing the cross-ownership restrictions will result in fewer outlets for minority viewpoints and that would be an abridgement of free speech. But it's absurd to believe that, as a result of these rule changes, there won't be outlets for minority viewpoints. 

For openers, the changes affect markets where there are large numbers of TV stations! And we live in an era in which 85% of Americans have or soon will have access to more than 100 satellite/cable TV outlets, plus innumerable radio stations (broadcast and Internet) plus Web sites that give audio, video and text access to content providers as diverse as BBC, Fox and Al-Jazeera. 

I understand the longing for the old days when morning-drive radio was all about local news, not dominated by New York-based, syndicated talk shows. I recall when local families controlled most of the nation's radio and TV stations and newspapers and were focused on their local communities. 

But there are a couple of problems. First, the FCC strengthened rules about radio ownership. Second, by and large the local radio and TV programs are still there -- it's just that fewer people tune in. That's what happens when you get more media outlets. 

And in many cases, even proprietors with familiar names aren't that local any more. The Chandlers of Los Angeles sold the L.A. Times to the Tribune Co., which also controls the Chicago Tribune and 10 other dailies around the country and owns more than 20 TV stations. The Hearst Corp. is still privately held, but it owns a dozen dailies, a dozen or so TV stations, interest in a half-dozen cable channels, a couple of radio stations, and more. The New York Times Co. is still family dominated, but has nearly two dozen newspapers, a half-dozen TV stations and a couple of radio outlets. 

I believe the FCC came to a fair and reasoned conclusion. The rule change could trigger some merger activity, but the public interest clearly remains intact. Under virtually every scenario, the U.S. still will have far more media outlets than it had when the rules were conceived -- and many more than most other countries have. 

Free speech is alive and well. 

Ken Marlin is managing partner of Marlin & Associates LLC, a New York-based M&A advisory firm that focuses on middle-market firms in digital information and technology. 

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