‘Tyranny of the Media’: Will New FCC Regs Enforce Majority Rule?

Controversy over corporate media consolidation has been brewing for decades. In 1975, the Federal Communications Commission enacted a rule prohibiting a single media company from owning both a newspaper and radio or TV station in the same city. Twenty-eight years later, the issue drew national attention when former FCC Chairman Michael Powell introduced a plan to overturn the ban. His proposal drew protests from three million people, and was eventually dropped. Now, current FCC chairman Kevin Martin is attempting yet again to repeal the ban before the end of this year, with a Congressional vote set for Dec. 18.

Just as before, the proposal is drawing heavy criticism from both sides, as anti-consolidation advocates argue that it goes too far in removing checks on big media while media executives gripe that it doesn’t go far enough to protect their interests. Bill Moyers ran an excellent segment on his PBS show illustrating the heart of the anti-consolidation argument: cross-ownership can have a disproportionately large impact on smaller outlets, many of which are minority-owned. Many of these outlets can find themselves all too quickly wiped out by consolidation, leaving their readers and listeners without a media source focused on their interests.

Last week, Martin presented justifications for overturning the ban in a Times OpEd, arguing that financially beleaguered newspapers should be allowed to cross-own and share newsgathering resources with other outlets so they can cut costs and stay afloat.

But from an economic standpoint, do the arguments on either side hold up? Wharton economist Joel Waldfogel addresses this issue in his new book The Tyranny of the Market. When fixed costs are large, he argues, a market will only produce products that appeal to masses of people, leaving minority groups with fewer or no products geared towards their interests. The high-fixed-costs scenario certainly applies to daily newspapers, and as such, a single market typically has only one major newspaper working to appeal to the largest possible group of consumers. The effect of this scenario, Waldfogel states, is that minority groups are often left in the lurch. “If a market is heavily African-American, the paper targets itself to be more appealing to African-American readers,” he told Freakonomics. “If it’s heavily white, the paper targets itself to be less appealing to African-American readers.”

So if newspapers are permitted to snap up TV and radio stations in their markets, will they apply the same “grab the biggest numbers” strategy? “It’s hard to say,” Waldfogel said. “With radio, a typical market has twenty or more stations, so not all [of them] go after the big cluster of listeners. With newspapers, there’s direct evidence that owners go after the big mass of readers. Although local TV has not been studied as extensively, there are typically few local stations per market, and they don’t seem to go after niches the way radio stations do. That suggests that both entities in a jointly owned group would go after the big mass of audience.”

Martin has stressed that his proposal is “significantly more modest” than Powell’s desired changes in 2003, and certain restrictions would still apply. For example, companies would be prohibited from owning both a newspaper and a broadcast station in a top-20 market where fewer than eight other media outlets are independently owned. In addition, he writes in his OpEd, newspapers and TV stations under joint ownership would need to maintain full editorial independence (though how exactly this would be accomplished remains a mystery).

Still, should the FCC open the door for hungry media magnates to start snapping up outlets in the largest U.S. markets, it seems likely that those outlets serving smaller (i.e., less profitable) groups and interests will be the first to go.