Media ownership: lessons from the US

Media ownership: lessons from the US A recurrent question needs new answers
Media ownership is a policy issue with a long and increasingly contentious history in the United States. The issue has become more contentious since Congress required, in the Telecommunica- tions Act of 1996, that the Federal Communica- tions Commission revisit its media ownership regulations every two years (later modified to every four years), and repeal or modify any rules determined to no longer be in the public interest. This has meant that the issue of media ownership is almost always near the top of the U.S. communi- cations policy agenda, given that once one review of the ownership regulations finally ends, the next one is scheduled to soon begin, particularly when the inevitable court challenges are taken into consideration. Over the past 40 years, the general trend in this policy area has been one of a gradual and steady relaxation of ownership rules in some industry sectors and the complete elimination of ownership rules in others. Thus, for instance, we have seen
the number of television stations that a single entity could own expand from seven to twelve. The numerical limit on the number of stations was then eliminated in favor of the current audience size-based limit, which prevents any single entity from reaching TV stations that reach more than 39 percent of the national television audience (see Coldfarb, 2008). Restrictions on the extent to which broadcast networks could own their prime-time programming have been eliminated, a rule change that facilitated extensive vertical inte- gration between production studios, broadcast networks, and local stations. In cable television, rules limiting the national subscriber reach of multiple system operators, as well as rules limiting the extent to which cable systems could own the channels they carry, have been struck down by the courts and have yet to officially re-emerge from the FCC in any modified form.
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In addition, a number of rules that were put in place in the 1970s to encourage ownership of media outlets by women and minorities have subse- quently been rejected by the courts as unconsti- tutional (Bachen, Hammond, & Sandoval, 2007). Very recently, however, the FCC has made efforts to introduce new policies designed to encourage investment in female and minority-owned media outlets, to encourage the sale of broadcast stations to female or minority owners, and to discourage discrimination in broadcast transactions (Federal Communications Commission, 2008b). Today, the media ownership regulations in place put no limit on the number of radio stations that a single entity can own nationally, but limit radio station ownership within local markets to as many as eight stations, depending upon the size of the market. Similarly, there is no national television station ownership limit (only the audience reach limit noted above). Locally, a single entity can own up to two television stations in a market, depending upon the size of the market. Cross-ownership of radio and television stations in the same market is limited as well, with individual entities able to own up to two television stations and up to six radio stations in an individual market, depending upon the size of the market. A ban on cross-ownership of a daily newspaper and a broadcast station in the same market has been in place since 1975, but was recently relaxed in the top 20 markets at the conclusion of the most recent iteration of the FCC’s media ownership review (Federal Communications Commission, 2008a). The current rules also prohibit mergers among the “top four” broadcast networks (for a more detailed summary of current ownership regulations, see Goldfarb, 2008)
Underlying rationales As important as the history of the rules them- selves, and their evolution over time, is the under- lying rationales that have historically motivated them. Specifically, media ownership regula- tions traditionally have been put into place to achieve both economic and non-economic policy objectives. The FCC’s overarching policy goals are compe- tition, diversity, and localism (Federal Communi- cations Commission, 2008a). What makes the case of media ownership regulation such a difficult one
is that it involves all three of these policy goals; one of which (competition) is primarily economic in nature; two of which (diversity and localism) are not. These economic and non-economic policy goals can sometimes conflict. From an economic standpoint, the key goal has been to maintain a sufficiently competitive media environment, particularly in the broadcast sector, where constraints on spectrum availability have limited the number of entities that can broadcast in any individual market. In the simpler media envi- ronment of years past, in which cable television, satellite radio/television, the Internet, and portable electronic devices did not exist as mechanisms for the delivery of content, the need for such regula- tions was perceived as much greater than it is in today’s more competitive media environment (for a detailed discussion of competition as a commu- nications policy principle, see Napoli, 2001). Moreover, policymakers have responded to an increasingly “converged” media environment by considering competition not only within, but also across, media sectors. Consequently, policymakers often have considered ownership regulations in terms of their potential impact on some industry sectors’ ability to effectively compete against other industry sectors (hence the frequency of the seemingly paradoxical tendency to allow greater concentration of ownership on behalf of competition). Diversity and localism deal with different issues. Diversity, as conceptualized in the realm of commu- nications policy, has focused on the diversity of information sources and content options available to the citizenry. In many instances, diversity of sources has been presumed to lead to diversity of content (hence the traditional concerns about increasing female and minority ownership of media outlets), but this assumption has come under increased scrutiny (see Bachen, Hammond, 8c Sandoval, 2007; Candeub, 2006). Localism traditionally has referred to the extent to which media outlets address the distinctive needs and interests of their local community, as well as the extent to which media content origi- nates from within a local community. Local origi- nation often has been presumed to be related to the extent to which the content addresses the needs and interests of the local community; and, as a result localism concerns often have been raised in the face of policy decisions facilitating greater ownership of media outlets by out-of-market
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entities (for detailed discussions of diversity and localism as policy principles, see Napoli, 2001). As should be clear, these concerns with diversity and localism have much less to do with the effective functioning of media markets and much more to do with how well the media system serves the informational needs of the citizenry, provides ample opportunities for expression, and facilitates the effective functioning of the democratic process (see Baker, 2007).
Current challenges In January of 2008, the FCC released its most recent media ownership policy decision, in which the Commission left most of the existing media ownership regulations unchanged, but did decide to relax the broadcast station/newspaper cross-ownership rule (Federal Communications Commission, 2008a). This decision is likely to face court challenges by stakeholders on both sides of the issue. Those who feel that the Commission did not go far enough in its relaxation of the ownership rules are likely to challenge the Commission’s decision, as are those who oppose any relaxation of the media ownership rules. The impending court consideration of the FCC’s most recent media ownership decision is likely to illustrate perhaps the key challenge facing media ownership policymaking – establishing an analyt
ical process that satisfies relevant stakeholders and an increasingly demanding judiciary. That is, the courts today seem to be far less deferential to a regulatory agency’s “expert judgment” than they were in years past (see Candeub, 2006). Rather, they increasingly demand that policy decisions be derived from, and supported by, rigorous empirical analysis. Decisions that are not derived from such “evidence-based” policymaking are declared arbitrary and capricious. However, decisions that are become subject to detailed scrutiny of their underlying assumptions and methods (not only by the courts, but by other interested stakeholders in the proceeding); and if they do not pass muster on these fronts, they are again declared arbitrary and capricious. We saw this conundrum play itself out in relation to the FCC’s 2002 media ownership proceeding, in which the Commission created a Diversity Index to guide its decision-making on when/where it was appropriate to relax ownership regulations, only to see this index eviscerated by opponents of the resulting relaxation/elimination of ownership regulations and by the Court of Appeals for the Third Circuit (Prometheus Radio Project v. federal Communications Commission, 2004). The various assumptions and methods employed in the creation and implementation of
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the Diversity Index failed to pass critical muster (Candeub, 2006; Napoli & Gillis, 2008). The FCC’s most recent ownership decision, which focused on the relaxation of the newspaper-broadcast cross- ownership rule, is likely to face similar scrutiny in the courts, where once again the focus likely will be on the adequacy of the analytical basis for the Commission’s decision. Addressing this issue is the focal point of the next section.
Recommendations The state of our media system is constantly changing. As a result, our media ownership regu- lations are continually up for reassessment (every four years, as mandated by Congress). Conse- quently, the recommendations outlined here focus less on the question of what our media ownership regulations should look like right now, and more on the broader (and ultimately more important) question of how our media ownership regulations should be assessed, not only right now, but also in future iterations of the FCC’s media ownership proceedings. Towards these ends, this section presents seven guiding principles for contempo- rary media ownership policymaking.
Relevancy In assessing and formulating media ownership policies, assessments of our current media system in relation to its past are not what’s relevant – assessments of our current media system in relation to its contemporary potential are. This point reflects the fact that most assess- ments of media ownership policies begin with an assessment of the contemporary media environ- ment, in terms of the technologies, content, and sources available to the citizenry. The key point here is that increases in the number of outlets, or channels, or platforms for the delivery of media content do not represent de facto evidence that our media system is serving the needs of the citizenry better than it was in the past, and that, consequently, regulation of the ownership of our media outlets no longer serves the public interest. And, more importantly, even if a compel- ling case can be made that our media system is serving the citizenry and the democracy better than it was in the past, the point here is that the past should not represent the primary benchmark against which the contemporary media environ
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ment, and against which contemporary media ownership policies, should be assessed. Rather, the key question should be, is the contemporary media environment reaching its full potential (as dictated, in large part, by the contemporary technological environment) in terms of its ability to serve the informational needs and interests of the citizenry and, more broadly, the needs of our democracy? just as it would be illogical to assess an individ- ual’s performance on a test when that individual is 30 years old against that individual’s performance on the same test when that individual was 15 years old, so too is it illogical to assess the contempo- rary performance of our media system against its performance in decades past, when the techno- logical environment was vastly different. Policymakers’ goals should be focused on maxi- mizing our contemporary potential for a demo- cratic media system, on maximizing the contem- porary technological tools at hand to craft a media system that is as diverse and competitive as it can be, and that serves the informational needs and interests of local communities to the fullest extent that is technologically and economically possible. The past plays little, if any, meaningful role in such assessments. Value-driving Assessing and formulating media ownership policies is as much a values-driven process as it is an empirical process Recent iterations of the assessment of U.S. media ownership policies seem to have become increas- ingly convinced that the answers to questions related to exactly how many radio or television stations one company can own, or whether cross- ownership of broadcast stations and newspapers in the same market should be permitted, can be effectively answered via quantitative data analyses and econometric formulas (see, e.g., Federal Communications Commission, 2003). As was noted above, this tendency has been fueled in large part by the analytical orientation of the courts. While social scientific research is a valuable tool in all areas of policymaking, we are naively asking too much of it if we expect social science to be able to give us specific and definitive answers to questions such as these. Or, it may be the case that social scientific research has, in some contexts related to media ownership policy, been cynically, rather than
naively, employed, with the understanding that such research can only tell us so much, thereby allowing the inconclusiveness of the subsequent findings to be utilized as evidence that no harms from adopting a desired policy proposal are likely to emerge. Subjective value judgments about what are the appropriate levels of ownership restrictions in order to best reflect fundamental First Amendment and democratic principles can not (and should not) be removed from the equation. This is not meant to be a values statement in and of itself; rather, it is simply a reflection of the limitations of contempo- rary methods of policy analysis, the nature of the objectives inherent in media ownership policies, and the underlying values associated with these objectives. Certainly, as is the case in many policymaking fields, social scientific analysis has been embraced in communications policymaking as a powerful tool (see Connolly & Kwerel, 2007) – but while it may be a very effective hammer, that does not mean it can perform the functions of a saw or a wrench. There are other tools that ultimately need to be brought to bear in media ownership policy- making. The hammer can not do everything. And value-based judgments ran not be extracted from media ownership policymaking (see Baker, 2007; Candeub, 2006). Importance of established sectors The primary goal of media ownership policies is not to preserve or promote the health of estab- lished industry sectors, particularly if it comes at the expense of the development of new industry sectors. The FCC’s overarching policy goals are compe- tition, diversity, and localism (Federal Communi- cations Commission, 2008a). If new technologies and new content delivery platforms are arising that threaten the established business models and revenue streams of the traditional media, this would seem to represent exactly the kind of increased competition and diversity that policy- makers hope for. Allowing increased concentration in a traditional media sector so that this sector may be able to better withstand this competition from new media seems, in this context, a somewhat paradoxical objective for policymakers to pursue. Policymakers of all stripes have praised the democratizing potential of the Internet, character- izing it as, in many ways, the ideal for our contem
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porary media system, in which barriers to entry are low, and the diversity of information sources is tremendous. Why, then, should policymakers’ response to the model of competition and diversity that is the Internet be to allow the structure of our other industry sectors to be less like the Internet, in which barriers to entry for individual proprietors become virtually insurmountable, and in which the diversity of available sources is allowed to narrow considerably? And why are such consolidation processes deemed necessary in an environment in which our traditional media outlets/firms are in the same position as the rest of us in terms of their ability to capitalize on the wide range of opportunities that the Internet and other new media technologies provide, and, moreover, to be able to leverage their formidable established brand identities as a key source of competitive advantage in the process? Consider, for instance, the contemporary newspaper industry. Today, the per-reader revenues generated from an on-line newspaper reader do not yet match the per-reader revenues of a traditional newspaper reader. The ongoing migration of news readers from the print world to the online world is, consequently, a key reason that many analyses indicate that traditional news- papers are suffering financially. It is the alleviation of this suffering that is put forth by many policymakers and stakeholders as a key rationale for the relaxation or elimination of the broadcast station – newspaper cross-owner- ship rule (see Federal Communications Commis- sion, 2008a). The question that needs to be asked, is, is it the job of communications policymakers to help the traditional newspaper industry to successfully navigate the rapidly changing media environ- ment? And, if so, is the relaxation or elimination of ownership regulations really an appropriate or effective means of doing so? It seems difficult to answer either of these questions in the affirmative. Of course, the argument is often made that ownership regulations represent a handicap that unfairly burdens the traditional media while not applying to the new media, thereby undermining the traditional media’s ability to compete. This argument neglects the fact that the tradi- tional media already have tremendous advantages
in their ability to compete in the new media envi- ronment via factors such as their established brand identities, their tremendous content produc- tion resources, and their reservoirs of archived content. In this regard, having a substantial toehold in the traditional media, no matter how heavily ownership in this sector is regulated, represents a significant source of competitive advantage for any entity seeking to compete in the new media environment. The substantial concentration of audience attention around web sites owned and operated by traditional media outlets (see, e.g., Dahlberg, 2005) suggests that the existing competitive environment already contains a healthy skew in favor of the traditional media. From this standpoint, it becomes difficult to accept the notion that ownership regulations represent a set of shackles that unfairly constrain the traditional media. Distribution of resources In assessing the contemporary media environ- ment, the number of outlets or channels is far too superficial a unit of analysis. Instead, the distribu- tion of resources for the production of content should be the focus. Many assessments of the state of media ownership policy begin with detailed catalogs of all of the technologies, outlets, channels, and content options available to the contemporary media consumer (see, e.g., Federal Commu- nications Commission, 2003). This abundance of choice is then put forth as a key reason why ownership regulations no longer are necessary. Such catalogs, however, represent a far too superficial take on the nature of the contempo- rary media environment, and one that neglects fundamental characteristics of the economics of media content and the strategic dynamics within contemporary media industries. Specifically, when we scratch the surface of this portrait of abundance, we find that, in fact, it is a much more limited array of content that is circulating through this multi-channel environment over and over, and that is feeding into, and supporting, many of the new content delivery platforms, outlets, and sources that are becoming available. Noting, for instance, that in the past decade the number of television channels available in the average household has more than doubled does not, by any stretch of the imagination, mean
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that the amount of programming available in the average household has similarly increased. Most new cable channels, for instance, exist primarily to repurpose programming originally produced by or for other channels. Consider, for instance, how many different HBO channels are available today, and how often any one episode of The Sopranos has been viewable across all of these channels – not to mention any one episode’s subsequent availability (multiple times) on the basic cable network A&E. The economics of media content production literally can not support the incredible increase in available channels that has taken place. Recycling and repurposing are the rule, not the exception, in contemporary television programming. If the ratio of channel choices to hours of original program- ming were to be determined, the results would be startling. Similar principles are at work on-line, where enthusiasm about the apparently unlimited array of information sources finally is beginning to be tempered by the recognition that much of the information that is flowing across the Internet is originating from relatively few sources. Google primarily aggregates news produced by tradi- tional news outlets. It is not, in and of itself, a news source. On-line news production and consump
tion continues to be heavily weighted toward web sites associated with traditional news outlets (see Katz & Rice, 2002). Bloggers bookend links to news stories produced by traditional news outlets with their own opinion and commentary. They are seldom, at this point, producing news (see Wall, 2005). In these ways, substantial growth in the number of channels can dramatically obscure very modest growth, or even relative stagnation in the growth of available content. In fact, the dramatic fragmentation of the contemporary media envi- ronment can actually provide disincentives for the production of additional content, as it has become more difficult, in some contexts, to attract a suffi- cient audience to generate the necessary financial return. Recycling and repurposing have become the antidote to fragmentation. In such an environment, it is essential that poli- cymakers and policy analysts see the forest through the trees and avoid confusing channel or outlet availability with content availability. “Content,” as Michael Eisner famously said, “is king.” It is content that serves the informational needs of the citizenry. How much diverse and original content is being produced (particularly in relation to news/ journalism) is what should matter most to policy- makers, not how many different paths the same
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content can travel to reach the audience. This shift in analytical focus provides a very different portrait of the contemporary media environment and, by association, the lens through which policymakers should assess the relevance of media ownership regulations. Burden of proof In assessing and formulating media ownership policies, the burden of proof should be equally distributed. Assessing the potential benefits of any policy changes is equally as important as assessing the potential harms. Recent iterations of the FCC’s media ownership proceedings seem to have started from the position that, if harms associated with the relaxation or elimination of particular ownership regulations could not be effectively demonstrated, then the regulations would be relaxed or eliminated. Such a stance represents a very uneven analytical playing field, in which those opposed to relaxing or elimi- nating ownership regulations face a much higher burden of proof (in what are, ultimately, adver- sarial proceedings conducted by the FCC) than those in favor of relaxing or eliminating ownership regulations. Given the magnitude of the issues at stake (First Amendment freedoms, the effective functioning of the democratic process), it would seem more than reasonable for policymakers to engage in an analytical process in which the burden of proof is more equally distributed, in which rules designed to enhance the democratic process and to promote a more equitable distribution of speech rights be considered not only in terms of the potential harms associated with their elimination, but also in terms of the potential benefits. How and why, for instance, would our media outlets better function in a more deregulated ownership environment? Such questions should receive equal attention as questions related to what harms might come from the relaxation or elimina- tion of existing ownership regulations. Only then can a balanced cost-benefit analysis take place. Rigorous data gathering In assessing and formulating media ownership policies, demands for rigorous data analysis must be accompanied and supported by rigorous data gathering. As was noted previously, it is important for poli- cymakers to place appropriate boundaries around
the extent to which empirical analyses are relied upon on their media ownership decision-making. At the same time, to the extent to which such analyses do come into play, it is vital that the infor- matio environment be as conducive as possible to thorough and reliable analyses. Unfortunately, the last two media ownership proceedings demonstrated a troubling paradox – while the FCC tries to assess and formulate policy on the basis of rigorous empirical analysis related to questions such as the relationship between ownership structure and provision of various types of content, and on trends in ownership structure and characteristics across markets and over time, the Commission does not gather, or have access to, the data necessary to effectively investigate these questions. The result was that most of the analyses conducted or commissioned by the FCC were subjected to withering criticisms by the courts or other stakeholders on the basis of their data shortcomings. The Commission’s minority media ownership data have been widely acknowledged to be entirely inadequate to effectively guide poli- cymaking (Napoli & Karaganis, 2008). The necessary broadcast programming data for engaging in the Commission’s desired analyses of the relationship between ownership structure and the availability of various categories of programming are virtually non-existent (Napoli & Karaganis, 2008). In addition, the various forms of media ownership data provided by a wide range of commercial data providers have various inad- equacies when used for policy purposes, and, perhaps more importantly, often are only acces- sible to policymakers and other stakeholders at substantial cost, and with substantial access limi- tations (Napoli & Seaton, 2007). Overall, this scenario is equivalent to trying to build a house without wood or cement. If the poli- cymakers going to engage in, and rely upon, these kinds of rigorous research activities, they need to have at their disposal the necessary raw materials to do so effectively (for specific proposals, see Napoli & Karaganis, 2008). Otherwise, it is simply a case of garbage in, garbage out. And certainly, the public interest deserves better than that. Feasible alternative policymaking In assessing and formulating media ownership policies, “putting the horse back in the barn” is not impossible.
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Many discussions of media ownership regulation inevitably contain the statement “we can’t put the horse back in the barn,” or “we can’t put the genie back in the bottle.” These statements typically are made in support of the point that, once relaxed or eliminated, media ownership regulations can not later be strengthened or re-introduced. The logis- tical, political, or legal roadblocks to such actions generally are considered insurmountable. But history tells us that, if the political will is there, such reversals in policy direction are indeed possible. We need only consider the government- mandated break-up of AT&T in the early 1980s (Coll, 1986) as a reminder that communications policies that have facilitated increased concen- tration of ownership can be, and have been, reversed. The point here is simply that, when assessing and formulating media ownership regulations, there is no logical reason that the institution of more stringent regulations is an option that needs to be taken completely off the table.
Conclusion This article has attempted to provide historical background on the issue of media ownership policy in the United States, and to outline a set of principles that can inform and guide future media ownership policymaking and policy analysis. These principles certainly can not lead to answers to all of the questions that inevitably will confront policymakers dealing with the issue of media ownership, but it is hoped that these prin- ciples can illuminate productive paths for future analysis and contribute to decision outcomes that can better fulfill the full range of objectives associ- ated with media ownership regulation.
References Bachen, C., Hammond, A.S., IV, & Sandoval, C. (2007). Serving the public interest: Broadcast news, public affairs programming, and the case for minority ownership. In P.M. Napoli (Ed.), Media diversity and localism: Meaning and metrics (pp. 269-308). Mah- wah, NJ: Lawrence Erlbaum Associates. Baker, C.E. (2007). Media concentration and democ- racy: Why ownership matters. New York: Cambridge University Press.Candeub, A. (2006). The First Amend- ment and measuring media diversity: Constitutional principles and regulatory challenges. Northern Ken- tucky Law Review, 33, 373-399. Coll, S. (1986). The deal of the century: The break-up of AT&T. New York: Atheneum Books.
Connolly, M., & Kwerel, E. (2007). Economics at the Federal Communications Commission: 2006-2007. Review of Industrial Organization, 31, 107-120. Dahlberg, L. (2005). The corporate colonization of online attention and the marginalization of critical communication? journal of Communication Inquiry, 29(2), 160-180. Federal Communications Commission (2003). 202 Biennial Regulatory Review – Review of the Commis- sion’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommuni- cations Act of 1996, 18 FCC Red 13620. Federal Communications Commmission (2008a). 2006 Quadrennial Regulatory Review – Review of the Com- mission’s Broadcast Ownership Rules and Other Rules Pursuant to Section 202 of the Telecommunications Act of 1996. Federal Communications Commission (2008b). Pro- moting Diversification of Ownership in the Broadcast- ing Services. Goldfarb, C.B. (2008, March). The FCC’s broadcast media ownership rules. CRS Report for Congress. Re- trieved May 14, 2008 from: http://fpc.state.gov/docu- ments/organization/103. Katz, I.E., & Rice, R.E. (2002) Social consequences of Internet use: Access, involvement and interaction. Cambridge, MA: MIT Press. Napoli, P.M. (2001). Foundations of communications policy: Principles and process in the regulation of elec- tronic media. Cresskill, N): Hampton Press. Napoli, P.M., & Gillis, N. (2008). Media ownership and diversity assessment: A social science research agenda. In R. Rice (Ed.), Media ownership: Research and regu- lation (pp. 303-322). Cresskill, NJ: Hampton Press. Napoli, P.M., & Karaganis, ]. (2007). Toward a federal data agenda for communications policymaking. Com- mLaw Conspectus: The Journal of Communications Law & Policy, 16(1), 53-96. Napoli, P.M., & Seaton, M. (2007). Necessary knowl- edge for communications policy: Information asym- metries and commercial data access and usage in the policymaking process. Federal Communications Law Journal, 59, 295-329. Prometheus Radio Project v. Federal Communications Commission, 373 F.3d 372 (2004). Wall, M. (2007). Blogs of war: Weblogs as news. Jour- nalism, 6(2), 153-172.
Philip M Napoli is Associate Professor, Graduate School of Business, and Director of the Donald McGannon Communication Research Center, Fordham University, New York. He can be contacted pnapol i@fordham .edu