It’s somehow appropriate that my first column following the 250th birthday of the United States should involve the laws of our land. No, not the dumb ones, like the law here in Kentucky that requires you to take a shower or bathe at least once a year.
Specifically, there are laws requiring the FCC to issue reports covering important things, like how many radio or TV stations an entity can own. When Congress passed the Telecommunications Act in 1996, Section 202(h) required the FCC to “review … all of its ownership rules biennially as part of its regulatory reform review …” In a massive bill passed in 2004 (the “Consolidated Appropriations Act, 2004”), Congress inserted Section 629, which changed the television ownership cap to 39 percent national audience reach (up from 35 percent) and dropped the word “biennial” from the Telecom Act, inserting “quadrennial” instead.
If that rule didn’t keep the FCC folks busy enough, Congress passed the RAYBAUM Act in 2018. Congress and the President like catchy names for bills, and the RAYBAUM acronym stands for Repack Airwaves Yielding Better Access for Users of Modern Services Act. Yes, that’s RAYBAUMSA, but RAYBAUM rolls off the tongue more easily. RAYBAUM required the FCC to publish a biennial report (so far, not changed to quadrennial) on the state of the communications marketplace and to submit the report to both the House and Senate committees, as well as publish it on the FCC website.
You’re probably thinking, “Ed, why should I care about all that, especially after a holiday weekend?” Both the Quadrennial Report and the Communications Marketplace Report are due this year. It matters because these reports become the basis for changing the media ownership rules.
Where the Industry Stands on Ownership Rules
If you follow the trades, you know there are those in the industry who advocate for looser ownership restrictions, especially for radio. Some comments filed with the FCC suggested that the local ownership rules for radio be scrapped entirely, while others believe the current rules, established in the Telecom Act of 1996, should stay in place.
As usual, the arguments on both sides make sense, but there are nuances. The FCC received over 2,200 comments on the docket (link at the end of this column), though the vast majority came from individuals submitting the same pre-written comment supported by the MusicFIRST Coalition and the Future of Music Coalition, opposing any local ownership changes. These individuals weren’t original, perhaps, but the fact that 2,000 people took the time to support a cause in an FCC proceeding counts for something.
On the broadcast side, joint comments from a group of smaller owners (Connoisseur, Midwest, Mid-West Family, Townsquare, Bonneville, Legend, and Frandsen) pointed out the loss of audience and ad revenue for local radio in recent years, driven by the rise of digital competitors that don’t face the restrictions and obligations placed on broadcast licensees. They supported eliminating the local ownership rules. A quick look at other comments from smaller ownership groups suggests they agree.
Meanwhile, iHeart took a different approach in its submission, supporting unlimited ownership in the AM band while retaining ownership caps for the FM band. With AM’s continuing decline, this argument has merit.
The Conundrum of Consolidation
Here’s why this is such a conundrum: we know the local radio business is hurting. The joke about “flat is the new up” is real when it comes to revenue. No matter how many studies show the value of local radio to advertisers, many still prefer digital, despite its shaky statistics. If an ownership group could own an even larger number of stations in a market, especially the stronger signals, it could spread costs across more stations and offer a stronger option for advertisers, ideally bringing in more business.
However, small operators might get squeezed out. Any owner left with one or two stations, especially in a niche format, would need a solid core of local advertisers who genuinely support what the station is doing, or else risk losing them.
The wild card here is money — not just revenue, but financing. We’ve seen the bankruptcies, including a couple that are ongoing as I write this piece. Lots of debt is fine if the marketplace is improving, but if ownership restrictions are removed and we see another debt-fueled buying spree like the one that followed passage of the Telecom Act in the late ’90s, the industry will be heading for another fall: more good people out of work, more syndication and automation, and very little local presence, fulfilling the prophecies of those who oppose any change to the local ownership rules.
Looking back, the Telecom Act was a watershed moment for commercial radio. We went from small groups (the 20/20 rule) to huge radio conglomerates owning hundreds of stations across dozens of markets. The track record hasn’t been good, but then again, who could have foreseen the competition local radio faces today?
What a Fair Trade-Off Might Look Like
Much as foreign entities aren’t allowed to own more than a small percentage of a U.S. broadcast station, could there be a requirement limiting how much debt an operator can carry? Can the FCC ensure that an operator, whether a small group or one of the majors, has enough cash invested to maintain the local presence needed?
I doubt we want to return to the days of studio location rules or add requirements for certain amounts of local presence, like the old news/public affairs percentages that existed prior to 1981. Still, if we’re going to allow a near-monopoly in local broadcast radio to exist, shouldn’t there be a quid pro quo? That’s why it matters.
If you want to read the comments on the quadrennial review, here’s the link.
For the comments on the competitive market report, go here.
Let’s meet again next week.
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