Chatalas Shrugged

We often discuss the subject of revenue models in the online world. While there are a multitude of Internet businessess and offerings, the earnings that will support many of them are elusive. This is particularly so in the area of social media, where companies have innovative services being used by many, but the sources of revenue are a work in progress. Our recent guest from Nokia acknowledged that financial expectations are uncertain for its new online services; it was more important to provide these services and gradually see what practical models emerge.

As we’re also aware, the future of print publications is perpetually debated. So it is great to learn about a business that is successfully combining traditional publishing with user generated content. 8020 Publishing is running its travel and photography magazines in a cost-efficient manner by using online editorial and photo submissions. The San Francisco-based company produces its magazines based on the best material, and suggestions, of its online community.

8020 is creating these magazines and managing its websites with a staff of less than 20, a miniscule workforce compared to many other national print publications. Even better, the company is forecasting profits by next year.

This model has proven to be so effective, 8020 has plans for similar magazines dedicated to food and cars. With one small hitch, though… it will only proceed if its dedicated online community members say the new titles are worthwhile and that they will support it.

The netroots often receive credit for energizing and organizing the progressive movement. Using social media tools, these activists have had a profound effect on national and local elections. Indeed, Barack Obama has largely built his campaign and its coffers by embracing the netroots.

Alas, these online activists aren’t always accorded respect by political insiders. At times there’s been tension between the DC hacks and the netroots about tactics and effectiveness. And I’ve heard a local democratic leader refer to the movement as “the nut-roots”.

The netroots, though, perseveres with its brand of activism that is shaping the future of politics and the party. Its third annual conference, Netroots Nation, is in mid-July in Austin. And Lawrence Lessig will be a keynote speaker.

Lessig, of course, is a tech intellect and superstar who has advanced efforts toward ensuring the Internet remains democratic and open to all. In late 2007 Lessig announced that he would dedicate significant time to the issue of corruption.

In the meantime, the members of the netroots are ecstatic that Lessig will speak at the coming conference. This tech giant’s presence gives the movement more legitimacy, connecting the netroots’ political emphasis with the technological and cultural elements of the Internet. One netroots leader, Chris Bowers at OpenLeft.com, described the importance of Lessig’s participation:

It is an expansive moment where the netroots demonstrates a wider focus on more than just elections and party politics, but also on the broader social trends that make the netroots possible.

- Jody Chatalas

We already know there are publications available on the web, and many have made online publishing the thrust of their business. Included among these are Salon, Slate, Grist and Crosscut, just to name a few. Clearly this model is well in place, and online publications will continue to emerge.

Newspapers, however, continue to straddle the line between print and pixels. They have an online presence, but still hold on dearly to their sacred cash-cows. Although the Internet makes trees and trucks expendable, newspaper executives just can’t bring themselves to fully part with those two rather expensive items.

(more…)

How a Small-time Blogger Wreaked Havoc With a Media Giant

The media landscape has changed considerably amid the emergence of the Internet. People read, listen to and watch their news and entertainment online more than ever. Furthermore, the wired world offers the ability for all citizens to create their own content, including via blogs, podcasts and videos. This trend toward online media has posed challenges to those in the traditional media. Newspapers, radio and television have had to adjust to these new realities, altering business practices and fine-tuning approaches to consumers and advertisers.

At the same time the online era has also made it increasingly easy to hold the media accountable. Everyone can be a media critic or watchdog. Citizens and organizations scrutinize the media, searching for mistakes, bias and troublesome business practices. Bloggers use their websites to comment on and publicize unfair and inaccurate coverage. And some activists even challenge broadcast licenses and organize boycotts, claiming media companies aren’t living up to their commitment to provide quality programming. The digital tools are making it easier for these activists to track the media, and to communicate, organize and raise money.

Common Complaints About the Media
Among the largest points of contention surrounding today’s media are concerns about corporate ownership and consolidation, and uneven coverage and programming. Both subjects have become increasingly political, with democrats and republicans entrenched in the debates

Today roughly six major corporations dominate the media, including Time Warner, Disney, Viacom and NewsCorp (MediaChannel.org, 2001). Beyond the big six, there are several other corporations that own large numbers of newspapers, radio and television stations, and other media entities (Columbia Journalism Review, 2007). The Federal Communications Commission (FCC) has gradually attempted to relax ownership restrictions, which would enable these companies to acquire more media properties. This concerns activists on both sides of the political aisle who believe that fewer media companies will lead to fewer and less diverse voices in the marketplace of ideas. In 2003 an odd alliance of liberal and conservative groups loudly protested proposed changes to the media ownership rules; the US Congress paid attention, and overturned the rule changes. In 2007 the FCC passed a similar rule change, and activists are hoping that congress will intercede once again.

Another common complaint about the media is bias and slanted coverage. Not surprisingly, both republicans and democrats say the media is stacked against them. Conservatives have claimed for years that the media is liberal, saying that journalists typically vote for democrats, and that news stories reflect as much; the New York Times is a popular target of enmity by the right. The liberals counter that the right has “worked the refs” (harped on the media for being liberal) for so long that the media has made a conscious effort to provide more airtime to conservatives; the left complains that the media merely prints everything the conservatives utter without objective analysis of its truth, and that the media impose a different standard on democrats than they do republicans.

Perhaps a contributing factor to these grievances is that the media cares most deeply about the bottom line. The media corporations pressure the FCC and elected officials to make decisions that will enhance profits and growth. Journalism is viewed as a product that is valuable only as long as it contributes to the balance sheet. And the elimination of the fairness doctrine in 1987 is also attributed to the perception of uneven coverage and lack of fairness.

Media Companies Challenged by Media Watchdogs
Over the last few years, there have been several instances of groups organizing boycotts and challenging broadcast licenses over issues of local programming, indecency, and unfair coverage. They argue that media companies are shirking their responsibilities as set forth by the government. Federal law says that broadcasters may be licensed to use the public airwaves only if they serve the “public interest, convenience and necessity.”

In 2006 activists in Portland filed a petition with the FCC challenging the renewal of broadcast licenses of that city’s television stations. The Money in Politics Research Action Project contended that the stations failed to provide public interest programming, including local election coverage (Portland Mercury, 2006). The group cited a study of news coverage during the 2004 general election that showed that only one percent of news time was spent on local political coverage. FCC rules state “the basic responsibility to contribute to the overall discussion of issues confronting the community is a duty for each licensee.” The FCC eventually renewed the stations’ broadcast licenses.

Also in 2006, the Parents Television Council (PTC) challenged the broadcast license of CBS affiliate KUTV in Salt Lake City. The group claimed KUTV committed indecency violations in its rebroadcast of a “Without a Trace” episode that included a teen orgy scene (Eggerton, John, Broadcasting and Cable, 2007). After the original airing in 2004, CBS received thousands of complaints; Viacom, the CBS parent company, paid $3.5 million to dismiss all previous complaints and agreed to monitor itself more closely to avoid further violations. But when the same episode ran again, the PTC claimed that Viacom failed to live up to the consent decree, and subsequently filed the license challenge of KUTV. In 2007, CBS paid $300,000 to settle the license dispute.

Sinclair Broadcast Group, which is one of the largest media companies in number of stations owned, has faced the duel threats of license challenges and organized boycotts. Sinclair has drawn the ire of progressives who feel the company blatantly advocates for conservative causes and positions. The company requires its stations to air commentaries by Sinclair executive Mark Hyman which routinely praise republicans and denigrate democrats. And it ordered all of its ABC affiliates to block a Nightline tribute to soldiers who lost their lives in Iraq (Jensen, Elizabeth, Columbia Journalism Review, 2005).

In October 2004, less than a month prior to the presidential election, the company announced its intention to run “Stolen Honor,” a documentary critical of John Kerry’s military service in Vietnam. In response to the documentary, activists initiated a boycott against Sinclair’s local stations; they targeted local businesses, threatening to withhold support unless they stopped advertising on Sinclair stations (Journalism.org, 2005). When Burger King pulled its ads, Sinclair’s stock slipped, leading to concerns in the financial world. Sinclair subsequently changed its plans for “Stolen Honor” and instead ran a program that detailed the documentary allegations.

Activists also vowed to challenge Sinclair station licenses when they come up for renewal, guaranteeing that Sinclair’s practices remain in the glare of the FCC, congress and the public.

The Spocko Case: Blogger Takes on Disney
A recent and pertinent case of media accountability is that of Spocko, a self-described “5th tier blogger” in San Francisco who took on a major media corporation. This story highlights several of the issues involved in today’s media climate: media ownership, online activism, and legal matters.

ABC/Disney owns a national network of radio and television stations and affiliates. In 1996 Disney closed one of the biggest deals in media history when it acquired Capital Cities/ABC for $19 billion. That deal brought Disney the ABC television network and its 10 owned and operated stations, considerable cable television holdings, over 20 radio stations, and seven daily newspapers (Spring, Greg, Los Angeles Business Journal, 1995).

Today, Disney represents media consolidation to the extreme, with a wealth of properties across the media spectrum. Included among its portfolio are ten television stations and 21 radio stations. In addition Disney properties include cable stations (ESPN, Disney Channel, E!), magazines and newspapers, film (Disney, Miramax), online services, books, professional sports teams, theme parks and retail stores (Columbia Journalism Review, 2007). Its earnings in 2007 were $35.5 billion, 3.6 percent above its 2006 numbers (BusinessWeek, 2008).

Needless to say, the Disney label on its myriad properties is of immense benefit. To this day, Disney has come to represent family-friendly programming and society looks favorably upon the Disney brand. Not only is that helpful in the marketing of its products, but also in advertising sales, the primary revenue source of media companies. As a result of its sterling reputation, selling advertising on a network of stations under the Disney umbrella is a beneficial position in the market.

But media activists have been concerned about the programming on Disney stations, claiming that it favors conservatives. Critics of Disney cite several examples of its rightward tilt, and disdain for fairness. In 2007 it broadcast the controversial miniseries “Path to 9/11,” created by conservative filmmakers, and which was considered to be historically inaccurate in its premise that the Clinton administration was to blame for not preventing the 2001 attacks. A few years prior, though, Disney refused to distribute Michael Moore’ documentary “Fahrenheit 9/11,” claiming it was overly political (Boehlert, Eric, Media Matters, 2007). Disney even put Rush Limbaugh on its Monday Night Football broadcast; he was fired after a few weeks when he made racially offensive comments on air.

Meanwhile, the radio is where some of the most egregious offenses occur. Talk radio, one of the most commonly utilized media formats, has trended to the right politically for two decades. A 2007 report, “The Structural Imbalance of Political Talk Radio,” confirms that our radio airwaves are dominated by conservative voices. Among the findings in the report: weekday programming on the 257 news/talk stations controlled by the top five commercial stations is 91 percent conservative; each weekday, in terms of actual minutes, there is ten times as much conservative talk as progressive; and in the top 10 radio markets, 76 percent of the news/talk programming is conservative (Center for American Progress, 2007). This rightward tilt has led to increasingly partisan rancor regarding fairness on the public airwaves, and concerns that those with radio licenses are not serving the listening needs of all our country’s citizens.

One ABC/Disney radio station, KSFO in San Francisco, found itself under fire for its incendiary and conservative commentary. The station features several radio hosts who had a history of racial intolerance and for advocating violence. Included among the various hosts’ documented comments:
• Referring to Senator Barack Obama, who has a black father and a white mother, as a “halfrican.”
• Asking a caller to prove he wasn’t a Muslim, encouraging him to “say Allah is a whore… say you love eating pig.”
• Calling the country of Indonesia “just another enemy Muslim nation,” and threatening “You keep screwing around with stuff like this, we’re going to kill a bunch of you. Millions of you.”
• Commenting that for Egyptians and Arabs “lying is as natural as breathing.”
• Threatening House Speaker Nancy Pelosi: “We’ve got a bull’s-eye painted on her big, wide laughing eyes.”
• Saying of New York Times executive editor Bill Keller, and nine other Times editors, “Hang ‘em.”

In 2006 a blogger and activist who goes by the pseudonym of Spocko, compiled a series of these offensive comments from KSFO and posted them on his blog, SpockosBrain. In conjunction, he started a letter-writing campaign to KSFO advertisers, informing them of some hosts’ penchant for inflammatory comments and urging them to cancel their ads. Spocko not only directed the advertisers to the distasteful audio clips, but also appealed to their business sense. One of these letters, dated November 20, 2006 and addressed to AT&T, includes the following verbiage:

Thanks to radio hosts from KSFO your brand is being associated with torturing and killing people. Would your marketing people be happy to hear your commercial ran after Lee Rogers said this about a black man in Lincoln, Nebraska?

“Now you start with the Sears Diehard the battery cables connected to his testi*les and you entertain him with that for awhile and then you blow his bleeping head off.” (Audio link)

You should know the person calling for the execution and torture of the black man in that clip READS THE AT&T commercials on the air. Right now on KSFO Lee Rogers is THE VOICE of AT&T to the SF Bay area. (Audio Link)

Sadly, calling for the death and torture of individuals and groups of people is a regular occurrence on KSFO 560 AM, owned by ABC Radio Disney.

And…

I understand you can’t listen to all the shows you advertise on – no one can. You rely on the accurate representation of the sales reps and the show description. But you don’t need to take my word, listen to the programs. You probably won’t have to listen long to hear something that offends or disgusts you. If you wish to hear the complete context on any clip or the audio during a date your ad ran contact me I have an educational archive of audio clips, I’ve listed a few below.

I want to emphasize that if you withdraw your ads you aren’t limiting their free speech, just removing your paid support of it. Some other company without the values you describe on the AT&T website can support them. You can choose to advertise elsewhere. This is really about YOU. Do YOU want to be associated with these comments? Do you want your company and brand to be associated with these comments?

(Excerpts from Mike Stark diary on Daily Kos website, 2007.)

This campaign resonated with some advertisers. MasterCard, Bank of America and the Michigan Economic Development Corporation pulled ads from KSFO programming after hearing excerpts and determining it was divisive. A spokesman from the Michigan Economic Development Corporation said, “the speech was about as offensive as one could imagine.” (Garofoli, Joe, San Francisco Chronicle, 2007). Visa, Netflix and others also reportedly curtailed advertising on KSFO.

In December, 2006, ABC Radio Networks responded by sending a cease and desist letter to Spocko’s Internet service provider claiming that the excerpts on his site violated copyright law. The letter demanded the audio clips be removed immediately. The service provider, 1&1 Internet, took down Spocko’s website soon thereafter. 1&1 said it was acting on the advice of its lawyers, and that “the decision was made to remove the copyrighted material from our servers until the matter is resolved, whether by the parties involved or the judicial system.” (Cohen, Noam, New York Times, 2007).

The altercation got the attention of liberal bloggers, who gave the story widespread coverage. The case raised the hackles of digital freedom advocates who were concerned that ABC/Disney’s action would have a chilling effect on online debate, and that corporations can silence critical voices by merely threatening legal action. One organization, the Electronic Frontier Foundation (EFF), came to Spocko’s defense in the matter, providing legal consultation.

The foundation countered ABC/Disney’s claim, asserting that fair use applies to the excerpts posted by Spocko. EFF attorney Matt Zimmerman, in a letter dated January 25, 2007, wrote that the “characterization of Spocko’s criticism as copyright infringement is false. The use of these audio clips was clearly protected fair use under copyright law” (Electronic Frontier Foundation, 2007).

Under copyright law (US Code 17 107. Limitations on Exclusive Rights: Fair Use), fair use permits the use of copyrighted material for the purposes of commentary, parody, education, or artistic expression. Fair use is determined by the consideration of four factors: the purpose and character of the use; the nature of the copyrighted work; the amount and substantiality of the portion used; and the effect of the use upon the potential market or value of the copyrighted work. All four factors favor Spocko:

1. The purpose and character of the use.
The use of copyrighted words for criticism and commentary is permitted under copyright law. In Chicago Board of Education v. Substance, Inc., 2003, the Seventh Circuit Court of Appeals wrote, “Copyright should not be a means by which criticism is stifled with the backing of the courts.” This case involved standardized tests created and copyrighted by the Chicago Board of Education. A teacher published the tests to demonstrate that they were deficient. The courts ruled in favor of the board of education because it would be “goodbye to standardized tests in the Chicago public school system” (Stull, Jillian Clark, Journal of Law and Education, 2006). Nonetheless, facets of the decision upheld fair use for criticism; the ruling states that fair use facilitates “criticism of copyrighted works by enabling the critic to quote enough of the criticized work to make his criticism intelligible.” As Zimmerman at EFF notes, Spocko is covered in this regard because he posted audio excerpts of KSFO broadcasts in order to criticize its content and to provide context for commentary about talk radio in the area.

2. The nature of the copyrighted work.
This factor recognizes that some works are more deserving of copyright protection than others (Rich, Lloyd, 1996). Informational works are differentiated from entertainment; creative work typically falls closer to the core of copyright protection. Facts and information are more acceptable for dissemination than fiction, particularly if the material is in the public interest. News and talk show material is more likely to be subject to appropriation for fair use purposes. In Spocko’s case, the audio excerpts he used were taken from broadcasts intended to be, and presumably described by the radio station as, informational in nature.

3. The amount and substantiality of the portion used.
The excerpts Spocko posted were merely fragments of KSFO’s total broadcasts. The short clips were taken from programs that broadcast several hours each day and hundreds of hours per year, and clearly are not significant in terms of quantity. In addition, KSFO has claimed that the comments in question are anomalies and not common in respect the total number of broadcast hours. That would indicate that the excerpts are not considered to be the “heart” of the work.

4. The effect of the use upon the potential market or value of the copyrighted work.
If the use of the material deprives the copyright owner of income, or impairs a potential market for the work, the material is more likely to be protected. In Spocko’s case, the copyrighted material, those broadcast words that he posted, have not become less valuable as a result of being heard on a blog. KSFO can still use its material in any way it chooses to try to make money. And while ABC/Disney may claim it has been financially harmed because of the loss of advertising, it is irrelevant in regard to fair use. In Campbell v. Acuff-Rose Music the Supreme Court said, “the role of the courts is to distinguish between biting criticism that merely suppresses demand and copyright infringement which usurps it.” Spocko is using the material for criticism, and he cannot be held liable for the decline in advertising revenue.

On all counts, Spocko’s use of KSFO material is protected by fair use. He has a new service provider, and the audio clips can be found around the Internet after sympathetic bloggers made them available to draw attention to the issue.

Similarly, the circumstances surrounding documentaries’ use of copyrighted material serves to support fair use in case of Spocko. Upon facing exorbitant costs to use movie clips in Wanderlust, a documentary about American road movies, the Independent Film Channel (IFC) decided to aggressively cite fair use so the film could be completed within budget. Alarmed by the prospect of nearly $500,000 in fees for clips from movies such as “Easy Rider” and “The Grapes of Wrath,” the IFC turned to entertainment lawyer Michael C. Donaldson to provide insight on copyright law (Dutka, Elaine, New York Times, 2006). Donaldson indicated that under fair use filmmakers, news gatherers, critics and educators can use material for free so long as they add something to it, use just the amount needed to make a point, and don’t harm its value. Armed with this information, the IFC told copyright holders that unless they accepted $1,000 per clip, the documentary would move forth and use the material, citing fair use as the defense. Fair use, in this instance, provides an obvious application to Spocko’s situation: he surrounded the clips with description and commentary, he used small portions to make his criticism, and his use of the excerpts did not lessen the value of the material.

There were other legal issues brought forward by the Spocko case. The EFF claimed that the ABC/Disney letter amounted to intimidation, and that the corporation could be liable for misuse of the Digital Millennium Copyright Act (DMCA) for misrepresentation of liability (17 USC 512(f)). The DMCA allows copyright owners to issue subpoenas to identify alleged copyright violators (Electronic Frontier Foundation, 2006). Since Spocko is covered by fair use, ABC/Disney may be misusing the DMCA and intellectual property law in efforts to subdue him.

Amid the controversy, Spocko also raised the possibility that he may face a CyberSLAPP suit (an online version of Strategic Lawsuits Against Public Participation). In such suits, a target of criticism files a lawsuit, often frivolous, so it can issue a subpoena to an Internet service provider to discover the identity of an anonymous critic (Cyberslapp.org). Online activists claim that these suits are attempts at intimidation and that they lead to a chilling effect on freedom of expression. Spocko, citing fear for his safety, has steadfastly maintained his pseudonym and resisted sharing his identity.

In March of 2007, ABC/Disney sold its 24 radio stations to Citadel Broadcasting Corp. for $1.35 billion. In March of 2008, Citadel did not renew the contract of Melanie Morgan, one of KSFO’s talk radio hosts to which some of Spocko’s excerpts are attributed. KSFO said the decision to end the relationship with Morgan was due to an “across the board cost-cutting mandated by our parent company” (WorldNetDaily, 2008). Citadel reported 4th quarter losses of $848 million in February, 2008, and an annual loss of $1.29 billion; the previous year the company had $48 million in annual losses (Associated Press, February, 2008). Spocko contends that his actions indirectly led to Morgan’s termination, as ad revenue declined due to his efforts. He also says that Citadel will continue to struggle financially: “The number one source of revenue for the ABC Radio Network is advertising. With Disney gone they will no longer have the brand muscle to sell bulk ads or the deep pockets to sustain them from other sources during down times,” (Richman, Josh, Political Blotter, 2008).

The case of Spocko demonstrates the ease with which activists and organizations can hold the media accountable. Armed with digital tools, media critics can scrutinize, organize and publicize in an efficient manner. As these activists continue these efforts, it will be engrossing to assess whether they are ultimately effective in holding the media to higher standards that are in the public’s best interest.

Resources

Associated Press. Citadel Broadcasting 4Q loss widens. February 29, 2008.
http://news.moneycentral.msn.com/ticker/article.aspx?Feed=AP&Date=20080229&ID=8262248&Symbol=CDL

Boehlert, Eric. Spocko, Glenn Beck, and ABC. Media Matters. January 6, 2007.
http://mediamatters.org/columns/200701160012

BusinessWeek, Disney Co. Earnings. 2008.
http://investing.businessweek.com/research/stocks/earnings/earnings.asp?symbol=DIS

Center for American Progress. The Structural Imbalance of American Talk Radio. June, 2007.

Cohen, Noam. Bloggers Take on Talk Radio Hosts. New York Times. January 15, 2007
www.nytimes.com/2007/01/15/technology/15radio.html

Columbia Journalism Review. Who Owns What? 2007.
http://www.cjr.org/resources/

Dutka, Elaine. No Free Samples for Documentaries: Seeking Film Clips With the Fair-Use Doctrine. New York Times. May 28, 2006.
http://www.nytimes.com/2006/05/28/movies/28dutk.html

Eggerton, John. CBS Tempts FCC Ire Over ‘Trace’. Broadcasting & Cable, October 29, 2007.
http://www.broadcastingcable.com/article/CA6494954.html

Electronic Frontier Foundation. Spocko, KSFO, and the Blogosphere’s Allergy to Copyright Thuggery. January 12, 2007.
http://www.eff.org/deeplinks/2007/01/spocko-ksfo-and-blogospheres-allergy-copyright-thuggery

Garofoli, Joe. Trying to censor blogger: Owner of conservative radio station KSFO demands liberal critic quit using audio clips. San Francisco Chronicle. January, 11, 2007.

Jensen, Elizabeth. Sinclair’s Shadow: Canned news and conservative commentary – Coming soon to a station near you? Columbia Journalism Review. May/June 2005.
http://cjrarchives.org/issues/2005/3/jensen.asp

Journalism.org, State of the News Media, 2005.
http://www.stateofthenewsmedia.org/2005/narrative_localtv_ownership.asp?cat=5&media=6

MediaChannel.org. Media Ownership. 2001.
http://www.mediachannel.org/ownership/

Portland Mercury, Local TV News Fails, December, 2006
http://www.portlandmercury.com/portland/Content?oid=97453&category=22107

Rich, Lloyd L. How Much of Someone Else’s Work May I Use Without Asking Permission?: The Fair Use Doctrine, Part I. 1996.
http://www.publaw.com/work.html

Richman, Josh. Spocko weighs in on Melanie Morgan’s layoff. Political Blotter. March 4, 2008.
http://www.ibabuzz.com/politics/2008/03/04/spocko-weighs-in-on-melanie-morgans-layoff/

Spring, Greg. Los Angeles Business Journal, August 1995.
http://findarticles.com/p/articles/mi_m5072/is_n32_v17/ai_17377197

Stark, Mike. Spocko Rocks ABC! Micky Mouse blinks! Updated: Spocko jumps in
DailyKos. January 3, 2007.
http://www.dailykos.com/story/2007/1/3/202110/2838

Stull, Jillian Clark. Copyrighted Standardized Tests: Is There a “Fair Use?”
Journal of Law and Education, October, 2006.
http://findarticles.com/p/articles/mi_qa3994/is_200610/ai_n17190730/pg_1

WorldNetDaily. Melanie Morgan off KSFO airwaves: Move America Forward founder connected to talk radio audience for 14 years. March 03, 2008
http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=57965

In December the Federal Communications Commission (FCC) relaxed its media ownership rules. And in doing so it most likely invited confrontation with the US congress.

The recently approved policy allows companies to own a newspaper and a television or radio station in the same city. The 3-2 decision overturns some measures of long-standing regulation preventing media cross-ownership. Under the new ruling newspapers in the top 20 media markets are allowed to merge with broadcast stations in the same market, provided the television station isn’t among the top four rated in the city. Smaller market mergers would need to prove that the newspaper faces financial crisis.

There is also speculation that the FCC will seek to alter rules regarding the number of television and radio stations a company can own in the same city. Presently, the limit is two television stations in the large media markets as long as both aren’t among the four largest in an eight-station market. As for radio, companies are limited to owning up to eight stations in a particular market.

These prospective rule changes are already attracting attention from a variety of organizations opposed to media consolidation. Public meetings held at the end of 2007 typically drew large numbers of comments critical of loosening cross-ownership laws, arguing that it isn’t in the public’s interest. Critics will next set their sights on influencing elected officials, hoping they will intercede and kill the FCC decision.

Congressional interference in FCC rulings is not unprecedented. In 2003 similar changes to the laws were moving forth under then-chair Michael Powell. The FCC removed the restrictions on newspaper and television ownership; it also increased the percentage of media ownership permitted in a single market to 45 percent (up from 35 percent), and decided that broadcast licenses would no longer be reviewed based upon “public interest” considerations. These new rules passed the FCC by a 3-2 vote, but an odd alliance of liberal and conservative groups loudly protested, getting the attention of the US Senate and House. Congress overturned the media rule changes, but before that was enacted the US Third Circuit Court of Appeals struck down the FCC decision, claiming that the FCC had not adequately justified the new rules.

The maelstrom of discontent surrounding the 2003 proposal was in large part fueled by the repercussions of the controversial 1996 Telecommunications Act, which loosened radio ownership caps. The act relaxed ownership percentage restrictions with the stated objective of increasing competition and diversity. But critics claim that competition, localism and diversity have actually receded since those rule changes. Concerns about the radio ownership trends since 1996 are often cited as reasons to oppose further media consolidation efforts.

Another wrinkle in the ownership discussion is the emergence of online media. Most of the newspapers and broadcast stations now have an Internet presence, attracting an audience and advertising. And opinions about consolidation of online media are just as contentious as those regarding traditional media. Google and its search technology and ad placement techniques are front and center in this conversation. Those wishing to compete with Google favor consolidation; Google, though, is challenging Microsoft’s recent bid for Yahoo!, claiming that the proposed acquisition raises issues of competition and policy, and threatens innovation.

Pros and Cons of Relaxing Media Ownership Rules
There are several arguments for and against the relaxation of media ownership regulations. Those in favor of changing the rules, typically media companies and free-market and deregulation proponents, assert that:
•    The rules are outdated. They went into effect in 1974, and were not even applied retroactively; the New York Times Company already owns a radio station in the city.
•    Competition will be enhanced, as companies will have more capital to challenge the media conglomerates.
•    Costs will be more readily controlled due to consolidation. And the opportunity to repurpose content will lead to savings across platforms.
•    Media companies will be in a better position to create new products and services demanded by the consumers. New and diverse market segments can be a greater focus of attention.
•    Traditional media, and newspapers in particular, are suffering as advertising is moving to the Internet. Allowing media to combine will help them be more efficient.
•    The Internet has produced millions of new and diverse voices in the form of websites, blogs and more. Everybody now has the ability to reach a large audience, and being a media conglomerate isn’t necessarily an advantage anymore.

Of course, the anti-consolidation forces are armed with arguments against the rule changes:
•    Media conglomerates are large enough already. Consolidation trends are well-documented, and the actual number of media companies has dwindled over the years.
•    The 1996 Telecommunications Act serves as an example of tampering with the ownership laws. That act resulted in mergers of several media companies, which was the opposite of its goal to increase competition.
•    News outlets in communities are too tightly controlled by too few companies.
•    Consolidation leads to less diverse opinions and voices available in the media; the marketplace of ideas becomes limited.
•    Fewer opportunities for reaching the public and voicing concern.
•    Market-based competition is diminished, resulting in less innovation and higher prices for advertising and content.
•    It undermines the community-oriented communications crucial to democracy; media have become too large and lost touch with their audience.

Recommendation
As in 2003, the congress and senate should intervene and repeal this recent FCC decision regarding media ownership. The decision was hurried amid an arbitrary deadline; the required public hearings were sparse, hastily announced and poorly organized. Public comments ran almost entirely in opposition to these new rules, and elected officials seem to be uneasy about them as well.

Among the duties of the FCC, as laid out in the Communications Act of 1934, are to act in the “interest of the public convenience, interest, or necessity,” and to grant spectrum licenses to broadcasters for commercial use, provided the broadcasters act in the public interest. However, over the last few decades we’ve seen the FCC gradually move from its focus on public interest. During the 1980s the FCC eliminated the Fairness Doctrine, which required broadcasters to give airtime to opposing voices on matters of public importance.

Going further, the manner in which the 1996 Telecommunications Act has impacted the radio business provides more concern about the affects of relaxing media ownership restrictions. The act aimed to foster innovation, competition and diversity in radio. But as a result of the new law, now just a few large companies dominate the radio industry. This consolidation has actually made radio less competitive, with less local content, and more commercialization. Ten major companies control two thirds of listeners, revenue and spectrum in the country now; meanwhile 4,300 smaller owners fight for the remaining 33 percent. Radio station ownership has declined by a third since 1996 as smaller stations sold to conglomerates rather than compete with them.
Clear Channel and Viacom together control roughly 45 percent of the audience and sales revenue. Clear Channel owns over 1,200 stations in 300 markets, and the consolidation has enabled the company to cut costs and staff. Clear Channel largely relies on syndicated programming which has resulted in less attention to local programming; the company often uses a technology called voice-tracking to make it appear that the hosts are local and live, when the programs have really been recorded in a far-away location.

Similarly, some of the largest media corporations will benefit from the latest FCC decision, among them such behemoths as NewsCorp, Disney, General Electric and Cox which have considerable numbers of entities across most media platforms, including the Internet. There is genuine cause for concern that greater media consolidation will have a negative effect on the marketplace of ideas. Ideally media should represent the community and the public interest, but instead money and earnings reports have become the primary focus.

Proponents of less stringent media ownership rules frequently cite the Internet to demonstrate greater competition and access, and an increased number of voices in the market. But while acknowledging the tremendous growth of online media and its effect on society, the emergence of the Internet still isn’t reason enough to ease the regulations. The true power of broadcast companies lies in the license to use public spectrum. In this Internet era, television and radio stations are increasing in value. And in reality, few (if any) online media ventures based on content have become financially successful. Instead, those that are viable are websites owned wholly or partly by the larger media corporations.

In regard to the Internet, though, media consolidation is becoming a concern, too. Companies such as Google, Microsoft, Yahoo!, IAC, NewsCorp and AOL have the vast majority of holdings related to online ventures. At some point rules surrounding online ownership may become necessary, just as they have been in the world of traditional media.

Conclusion
This latest FCC rule change seems to fall in line with the recent attempts to cater to media conglomerates over the public’s best interests. This is all the more reason for congress to over-turn the FCC’s December ruling, much like it did in 2003.

What is truly required is a comprehensive assessment of media ownership and trends, which would include a thorough examination of the various broadcast, newspaper and online components. The piecemeal approach of the recent FCC plans merely serves an influential minority of moneyed interests. The current administration is politically weak, but is nonetheless seeking to pass corporate-friendly laws that have little public support.

Arguably there are more pressing issues the FCC should attend to, including improving coverage of local events and greater ownership of stations by companies controlled by women and minorities. These relevant matters need to be considered in an analysis of the media in the US.

Congress should kill the latest FCC decision and require an expansive appraisal of the current state of the media. Recommendations from this report can become the basis for future communications actions, which a new presidential administration can consider beginning in 2009.

Current FCC member Michael Copps says that the media consolidation debate is crucial to society. “At stake… are our core values of localism, diversity, competition and maintaining the multiplicity of voices and choices that undergird our marketplace of ideas and that sustain American democracy.” The US congress would do well to respect this viewpoint, and invalidate this latest attempt to modify the existing media ownership rules.