[Senate Hearing 108-957]
[From the U.S. Government Publishing Office]
S. Hrg. 108-957
MEDIA OWNERSHIP
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 28, 2004
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska ERNEST F. HOLLINGS, South
CONRAD BURNS, Montana Carolina, Ranking
TRENT LOTT, Mississippi DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas JOHN D. ROCKEFELLER IV, West
OLYMPIA J. SNOWE, Maine Virginia
SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada RON WYDEN, Oregon
GEORGE ALLEN, Virginia BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire BILL NELSON, Florida
MARIA CANTWELL, Washington
FRANK R. LAUTENBERG, New Jersey
Jeanne Bumpus, Republican Staff Director and General Counsel
Robert W. Chamberlin, Republican Chief Counsel
Kevin D. Kayes, Democratic Staff Director and Chief Counsel
Gregg Elias, Democratic General Counsel
C O N T E N T S
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Page
Hearing held on September 28, 2004............................... 1
Statement of Senator Dorgan...................................... 1
Statement of Senator Fitzgerald.................................. 40
Statement of Senator McCain...................................... 1
Statement of Senator Nelson...................................... 38
Witnesses
Baker, Edwin C., Professor, Nicholas F. Gallicchio Professor of
Law, University of Pennsylvania Law School..................... 3
Prepared statement........................................... 5
Compaine, Ben, Researcher and Writer on the Information Industry. 6
Prepared statement........................................... 9
Overholser, Geneva, Curtis B. Hurley Chair in Public Affairs
Reporting, Missouri School of Journalism, Washington, D.C.
Bureau......................................................... 13
Prepared statement........................................... 16
Thierer, Adam D., Director, Telecommunications Studies, Cato
Institute...................................................... 17
Prepared statement........................................... 20
MEDIA OWNERSHIP
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TUESDAY, SEPTEMBER 28, 2004
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 9:37 a.m. in room
SR-253, Russell Senate Office Building, Hon. John McCain,
Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN McCAIN,
U.S. SENATOR FROM ARIZONA
The Chairman. Good morning. Today, the Committee meets for
the tenth time during the 108th Congress to examine the issue
of media ownership consolidation.
Since the Committee's last media ownership hearing, the
United States Court of Appeals for the Third Circuit issued its
decision in an appeal of the Federal Communications Commission
media ownership rules by several media companies and public-
interest groups. The Third Circuit found the FCC did not
provide reasoned analysis to support its chosen local ownership
limits and, therefore, remanded portions of the new local
ownership rules back to the FCC for further review.
Therefore, today the Committee will hear testimony from
academics about the Third Circuit decision and what reasoned
analysis policymakers should consider as it approaches these
difficult issues.
I look forward to hearing from today's witnesses.
Senator Dorgan?
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. Mr. Chairman, thank you very much.
Mr. Chairman, it's true we've had a lot of witnesses before
this Committee in many hearings, for which I am very
appreciative. I think this is a very important issue, and I
hope that the Federal Communications commissioners, at some
point, will come back down, perhaps when we turn the year and
go to a new Congress. But as you have correctly indicated, the
Federal court has remanded these rules back to the FCC, and
they are, I expect, now either deciding whether to appeal them
or to attempt to change them.
Mr. Chairman, you won't like me to say this, perhaps, but
there are some 30 to 40 million Americans who didn't have an
opportunity to hear your speech at the Republican National
Convention. I wish they had. In fact, I watched your speech,
thought it was quite a good speech. But there are tens of----
The Chairman. Content aside.
Senator Dorgan. Pardon me?
The Chairman. Content aside.
Senator Dorgan. No, no, I thought it was well done, and I
thought the American people should have a chance to view that.
Now, why would tens of millions not have an opportunity to view
that? Because there are, I think, 32, 35, close to 40 million
Americans who don't have pay television or cable television.
They rely on the broadcast channels, and the broadcast
channels, networks, the broadcast networks, decided, this year,
that they would air 3 hours--one hour each night, for three
nights of the Republican Convention, and 3 hours of the
Democratic Convention. So, for example, the American people did
not hear Barack Obama give the keynote speech at the Democratic
Convention, they didn't hear Rudy Giuliani and Senator McCain
give their speeches at the Republican Convention. Mr. Chairman,
you wouldn't complain about that, but I will on your behalf,
not so much because they didn't air that specific segment, but
because a couple of people made a decision about what the
American people should and should not be able to see that
evening. And it describes, once again, why concentration, I
think, is not in the public's interest.
I read the testimony today--some of it was amusing, and
some of it interesting. Ms. Overholser uses the term ``public
interest,'' which, I think, is really central to the question
here. The testimony by some suggests somehow that the airwaves
belong to those who are using them for broadcast purposes. They
don't, in fact. There has always been a public interest
standard, dating back to the 1930s. It continues to exist. And
yet it has very few shepherds here in the Congress, certainly
very few shepherds at the Federal Communications Commission.
And we ought to get back to the question, ``What is, in fact,
in the public interest?'' And what does represent the
responsibility of the Congress and the Federal Communications
Commission in making certain that we have the kind of ownership
restrictions with respect to television, radio, and broadcast
properties, and also with respect to cross-ownership with
newspapers, that serve the public interest.
It is every bit in the realm of the interests of this
Congress to be involved in these questions. Some will suggest
today it is not. That's nonsense. It is every bit within our
realm to be involved in these questions on behalf of the
American people.
So, Mr. Chairman, thank you for calling this hearing.
The Chairman. Thank you very much.
Our witnesses this morning are Professor C. Edwin Baker of
the Nicholas F. Gallicchio Professor of Law, University of
Pennsylvania Law School; Mr. Ben Compaine of Cambridge,
Massachusetts; Professor Geneva Overholser, the Curtis B.
Hurley Chair in Public Affairs Reporting of the Missouri School
of Journalism; and Mr. Adam Thierer, Director of
Telecommunications Studies at The Cato Institute.
Welcome to the witnesses. Thank you for appearing here
today.
Mr. Baker, we'll begin with you--Professor Baker.
STATEMENT OF EDWIN C. BAKER, PROFESSOR,
NICHOLAS F. GALLICCHIO PROFESSOR OF LAW, UNIVERSITY OF
PENNSYLVANIA LAW SCHOOL
Professor Baker. Thank you.
You've adequately stated the holding of the Third Circuit.
I should also admit that I'm one of those without cable TV, and
so I missed your speech, that speech----
The Chairman. I'll send you a tape.
Professor Baker. I want to outline four reasons why legal
restrictions on mass media concentration are vitally important
in a democracy.
First, the single most important reason to resist
concentration in media ownership comes from the meaning of
democracy. True democracy implies as wide as practical
dispersal of power over public discourse. Dispersal of
ownership may empirically promote diverse content, but, more
importantly, dispersal directly creates a fairer, more
democratic allocation of communicative power.
This distributive value, I suggest, was probably the single
most important consideration that prompted nearly two million
people to write, petition, or e-mail the FCC in opposition to
reducing restrictions on concentration. Without more, this
value judgment provides a proper basis to impose any limit on
media mergers in any policy designed to increase the number of
separate owners of media entities.
The Supreme Court approved the propriety of essentially
this value judgment when it held that strict limits on media
cross-ownership were appropriate to prevent an undue
concentration of economic power in the communications realm.
Second, the widest possible dispersal of media ownership
provides two safeguards of inestimable democratic significance.
Concentrated ownership in any local, state, or national
community creates the possibility of an individual
decisionmaker exercising enormous unchecked, undemocratic,
potentially irresponsible power. Although this power may seldom
be exercised, no democracy should risk the danger. Dispersal of
ownership structurally prevents the potential Burlesconi
effect. Dispersal also increases safety by increasing the
number of ultimate decisionmakers who have the power to commit
journalistic resources to exposing government or corporate
corruption or identifying other societal problems.
As the FCC put it 35 years ago, a proper objective is the
maximum diversity of ownership. We are of the view that 60
different licensees are more desirable than 50, and even the
51st is more desirable than--51 is more desirable than 50. It
might be the 51st licensee that would become the communicative
channel for a solution to a severe social crisis.
Third is a largely economic argument, more technical.
Economic theory predicts that media markets will radically fail
to provide people with the media content they want. Two facts
are important here.
First, one reason media entities fail to provide what
people want relates to what economists call ``externalities,''
both positive and negative. For example, if many non-readers of
a newspapers benefit by the paper's high quality investigative
journalism that deters or exposes corruption, those benefits to
non-readers do not provide revenue to the paper. So it has too
little profit-based incentive to produce good journalism.
Second, successful media entities tend to have particularly
high operating profits.
Given these two facts, the policy goal ought to be placing
ownership in the hands of people most likely to devote a large
portion of the media's potentially high operating profits to
providing better journalism rather than taking them out as
profit income. Sociologically, both high and mid-level
executives of publicly traded large media companies predictably
measure their success, and are rewarded, largely based on how
much profit they produce. In contrast, small, more local, more
family entities, often--not always--often identify with the
quality of their journalistic efforts and their service to
their communities. Structurally, mergers exacerbate the
undesirable focus on profit maximization.
The purchaser most willing and able to capitalize the
purchased entity's potential profits is able to make the
highest bid. But this high bid locks the purchaser into trying
to maximize profits to pay for the purchase. In contrast, the
original owner could choose to use the potential income to
provide better quality products, hire more journalists, provide
more hard news.
Fourth, it's a subtle point that must be put somewhat
delicately. The ideal legislative policy involving the media is
debatable. However, if a few media entities become too
powerful, the likelihood diminishes that subsequent debates and
legislative decisions will reflect Members of Congress's true
informed and thoughtful evaluation of the public interest.
Rather, it becomes increasingly likely that the economic
interest of these huge media corporations will largely control
public debate and legislative outcomes.
The Third Circuit rightly recognized that the FCC has not
logically explained or justified its orders. The FCC abandoned
logic and reality when it treats the Dutchess County Community
College's TV station as more significant than the New York
Times combined with the Times' local radio station.
Now the FCC must respond to the Third Circuit. Congress can
allow this process to run its course. Still, you could take
actions to give the FCC greater guidance. I will put aside my
own view of an ideal legislative policy concerning media
ownership. Rather, I mention two more moderate steps that you
could make.
First, by resolution, Congress could indicate its view that
the public interest requires the FCC to seek to prevent
excessive power due to media ownership and to try to promote
the maximum feasible dispersal of ownership consistent with
economic viability and quality media performance.
Second, Congress could find that media cross-ownership--a
newspaper/broadcasting combination, for example--creates
unnecessary and potentially excessive power within local media
systems. On this basis, Congress could prohibit such cross-
ownership except where necessary for multimedia services to be
economically feasible.
I want to end with a suggestion. The forms of democracy are
going to survive. However, the quality, capacities, and wisdom
of democracy are at stake in the political decisions that
determine the structure of the communication order, especially
in the decisions concerning the structural distribution of
ownership and control over the mass media. You have a heavy
responsibility.
[The prepared statement of Professor Baker follows:]
Prepared Statement of Edwin C. Baker, Professor, Nicholas F. Gallicchio
Professor of Law, University of Pennsylvania Law School
Thank you. I very much appreciate the opportunity to testify today.
The 3rd Circuit recently, I believe correctly, found that last
year's FCC order loosening limits on media concentration was
inconsistent with the evidence, patently unreasonable, and internally
and logically inconsistent. On that basis the 3rd Circuit stayed the
FCC order and remanded to the FCC to come up with a more reasoned
result or a better supported and reasoned explanation for its action.
In itself, this 3rd Circuit decision creates no need for Congressional
action.
Still, I will outline four reasons why legal restricts on media
concentration are vitally important in a democracy. If you agree,
Congress could take steps that would give useful guidance to the FCC as
it responds to the 3rd Circuit.
First, the single most important reason to resist concentration of
media ownership is a value judgment. True democracy implies as wide as
practical a dispersal of power within public discourse. Diversity of
ownership ought to be furthered by trying to assure that diverse sorts
of people own or control media entities, an aim that the 3rd Circuit
noted the FCC abandoned when it scrapped its only policy fostering
minority television ownership. Dispersal of ownership not only may
empirically promote diverse content. More importantly, dispersal
directly creates a fairer, more democratic allocation of communicative
power. This distributive value, I suggest, was probably the single most
significant consideration that prompted nearly two million people to
write, petition, or email the FCC in opposition to reducing
restrictions on concentration. Of course, value judgments are not
matter of empirical investigation. Rather, without more, this provides
a proper basis to impose any limit on media mergers and any policy
designed to increase the number of separate owners of media entities.
The Supreme Court approved the propriety of essentially this value
judgment when it held that strict limits on media cross-ownership was
appropriate to prevent an ``undue concentration of economic power'' in
the communications realm.
Second, the widest possible dispersal of media ownership provides
two safeguards of inestimable democratic significance. Concentrated
ownership creates the possibility of individual decision-maker
exercising enormous unchecked, undemocratic potentially irresponsible
power in whatever local, state, or national community in which the
media is concentrated. Although this power may seldom be exercised, no
democracy should risk the danger. Dispersal of ownership is the
structural method to prevent this potential ``Berlusconi'' effect.
Dispersal also increases safety by increasing the number of ultimate
decision makers who have the power to commit journalistic resources to
exposing government or corporate corruption or identifying other
societal problems. As a former FCC, echoing the Supreme Court judgment
noted above put it 35 years ago: ``A proper objective is the maximum
diversity of ownership. We are of the view that 60 different licensees
are more desirable than 50, and even that 51 are more desirable than
50. It might be the 51st licensee that would become the communication
channel for a solution to a severe social crisis.''
Third, is a largely economic argument that I develop in material
submitted along with my testimony. Economic theory predicts that media
markets will radically fail to provide people with the media content
they want. Two facts are important here. First, one reason media
entities fail to provide what people want relates to what economists
call externalities, both positive and negative. For example, if many
non-readers of a newspaper benefit by the papers' high quality
investigative journalism that deters or exposes corruption, those
benefits to the public do not provide revenue to the paper so it has to
little profit-based incentive to produce good journalism. Second,
successful media entities tend to have particularly high operating
profits. In this context, the policy goal ought to be placing ownership
in the hands of people most likely to devote a large portion of the
media entities' potentially high operating profits to providing better
journalistic products rather than trying to maximize net profits.
Sociologically, both high and mid-level executives of publicly traded
large media companies predictably measure their success largely by how
much profit they produce. In contrast, smaller, more local, more family
based entities often identify with the quality of their journalistic
efforts and their service to their communities. In any event, the
undesirable focus on profit-maximization is exacerbated by mergers. The
purchaser most willing and able to capitalize the most potential
profits of the purchased entity is able to make the high bid. But this
locks in the purchaser to trying to maximize profits. In contrast, the
original owner could choose to use that potential income to provide
better quality products--hirer more journalists, provide more
investigative journalism and more hard news.
Fourth is a subtle point that must be put somewhat delicately. The
content of idea legislative policy involving the media is debatable.
However, if the country allows a few media entities to become too
powerful, the likelihood diminishes that subsequent debates and
legislative decisions will reflect members of Congress informed and
thoughtful evaluation of the public interest. Rather, it becomes
increasing likely that the economic interests (or ideological
interests, as we see in Italy) of these huge media corporations will be
able to largely control the political debate and political outcomes.
The 3rd Circuit rightly recognized that the FCC had not logically
explained or justified its order. The FCC abandons logic and reality
when it treats the Dutchess County Community College's TV station as
the equivalent in the communications realm of an ABC television station
in NYC and more significant than the NY Times combined with the Times'
local radio station.
Now the FCC must respond to the 3rd Circuit by showing that any
rule changes are based on a realistic empirical industry analysis that
takes account of market shares and actual industry conditions or, as I
suggested, it could justify its position on defensible and consistent
normative judgments. Congress can allow this process to run its course.
Still, if you agreed with my arguments about media ownership, Congress
could take actions to give the FCC greater guidance.
I will put aside my own view of an ideal legislative policy
concerning media ownership. Rather, I mention two moderate steps that
you could make.
First, by resolution, Congress could indicate its view that the
public interest requires the FCC to seek to prevent excessive power due
to ownership in any portion of the communications order and to try to
promote the maximum feasible dispersal of ownership consistent with
economic viability and quality media performance.
Second, Congress could find, as the FCC once did, that cross-
ownership of different sorts of media serving a single community--a
newspaper/broadcasting combination, for example--creates unnecessary
and potentially excessive power within local media systems. On this
basis, Congress could prohibit such cross-ownership except where the
FCC found them to be necessary for multi-media service to be
economically feasible.
I want to end by saying that, although the forms of democracy will
survive, the quality, capacities, and wisdom of democracy are at stake
in the political decisions that determine the structure of
communication order, especially the decisions concerning the structural
distribution of ownership and control over the mass media.
The Chairman. Thank you very much, Professor.
Mr. Compaine?
STATEMENT OF BEN COMPAINE, RESEARCHER AND WRITER ON THE
INFORMATION INDUSTRY
Mr. Compaine. Thank you, Mr. Chairman, Senator Dorgan.
My name is Ben Compaine. I've been tracking media-ownership
trends since the first edition of my book, ``Who Owns the
Media,'' was compiled in 1978. Let me note up front, I have
never been employed by a major media company, nor have I been a
paid consultant to one.
I start with a very different point of view. I start by
questioning one of the fundamental assumptions of media
ownership, that it is more concentrated than ever. The
viewpoint I take is measuring whether consumers of the media,
all of us, have access to a greater universe of diverse content
from more sources than 15 or 20 years ago, or is there a
concentration resulting in fewer sources and implicitly less
diversity? This applies to entertainment, culture, news, and
opinion. I would suspect we all agree that a goal is to have
enough players to ensure that sources and diversity are
sufficient to satisfy small, as well as mass, audiences.
I want to make three points today. First, that television
is more competitive than it has ever been. Second, that radio
is more concentrated, only in comparison to an extremely
fragmented industry that existed before 1996. Third, that the
Internet is already proving itself as a popular, ubiquitous and
effective medium for expanding distribution of content,
including both video and audio, for more players and access to
more sources of information for consumers than we could have
reasonably expected even 15 years ago. I'll elaborate on each
of these points. The more comprehensive data will be coming in
a study I've just finished that will be published later this
year by the New Millennium Research Council.
Television. The viewer market-share of the three
traditional television networks--CBS, ABC, and NBC--has
declined substantially since 1980. During the 1960s and 1970s,
on a typical weekday evening, the three networks averaged about
56 percent of all households with television. In 2003, on a
weekday evening during prime time, those networks only had a 20
percent rating. Adding in the audiences they and their parent
companies have gained through networks available by
multichannel means, such as cable and satellite, in 2003, their
combined audiences was less than in 1970 and into the 1980s.
Let me make that as clear as possible. In 2003, Viacom,
with CBS plus all its cable networks, Disney, with ABC and all
its cable networks, NBC with its newly acquired cable networks,
account for 18 percent fewer households during prime time than
the pre-merger, pre-cable, three-network days.
Moreover, there's the additional competition from newer
networks, including Time Warner's WB and News Corporation's
FOX. The five broadcast networks together aggregate to a 26
percent rating. Adding in the rating of these five broadcast
networks with the cable networks owned by the same corporate
families, such as CNN and HBO, with Time Warner, the five major
providers of television programming account for an average 53
percent rating in December 2003. That's less than the three old
broadcast networks had into the 1980s.
Turn to radio. Issues need a context. Taken out of context,
the radio has seen a substantial consolidation in the last
decade. The largest operator owns 8.6 percent of the almost
14,000 radio stations nationwide. But the four largest
aggregate under 15 percent.
The context, however, is that of an industry that has seen
an increase of six times in the number of radio stations over
35 years, with no meaningful change in the limits of station
ownership. In 1947, when a de facto limit of 13 stations to an
owner was in place, there were about 1,200 stations. By 1980,
the limit was 14 stations, but there were over 8,700 stations.
A single owner could own no more than .16 percent of stations
nationally. In 1990, by which time the cap had gone to 12
stations, we were closing in on 11,000 stations.
So it should be no surprise that, like a bottle of seltzer
that had been well shook, when the cap was removed in 1996 the
industry burst into a long-delayed hive of activity. Even if
the ownership limits had been eased from 1947 into the 1990s to
maintain the same ratio of ownership to number of stations, the
cap would have been about 88, and the changes we have seen in
recent years would have looked far less dramatic.
Often lost in the radio discussion is that National Public
Radio, a loose network of more than 700 not-for-profit stations
that broadcast common national programming for much of the day,
would be the second-largest radio chain. It claims to be
available everywhere in the U.S.
There's also the growing interest in national satellite
television/radio services. In January, they had 1.6 million
subscribers. At their current rate of growth this year, they're
expected to reach four million by the end of the year.
To be sure, the number of separate owners of radio stations
in local markets is lower than prior to the lessening of the
regulatory limits of the 1990s. Still, larger markets have 15
or more separate owners, in addition to non-commercial
stations. And in most of even the smallest markets, there are
more competitors in radio than broadcast television and
newspapers combined.
Finally, as a segue to my comments on the Internet,
thousands of radio and radio-like stations are available via
the Internet, stations from around the globe. Many of those
with the highest listenership were owned by non-broadcasters.
For the Internet, barely 10 years after its coming out as a
consumer medium, has about two-thirds of Americans online for
everything from e-mail to government forums to shipping, porn,
family photos, and watching television. The Internet has
already had a profound impact on access to information.
Of the five largest media companies, the websites of only
one--Time Warner--are among the top ten organizations whose
websites get the most unique visitors per month. The sites run
by the Federal Government agencies are among the most
frequented.
The number of hours spent listening to Internet radio grew
by triple digits between 2003 and the same period this year.
Users with broadband, more than half of Internet users now,
spend far more time using the Internet radio than dial-up
users. In addition, new devices are becoming available to make
Internet radio accessible apart from personal computer,
including access via various wireless technologies. Indeed,
video and film via the Internet are on the verge of becoming
mainstream. Devices are on the market that allow even today's
broadband users to download movies and video programming for
storage on personal video recorders for viewing at their
convenience.
So what does this have to do with the Third Circuit? The
Third Circuit was looking for new ways of looking at things,
new ways of justifying actions of the FCC. About a year ago,
this Committee heard testimony from my friend Eli Noam. He has
completed some landmark work on the revenue side of the media
industry. It is helpful, but only part of the mosaic that is
media competition. A substantial piece of the debate must be on
the sources of content and distribution avenues that are
readily and inexpensively available to most consumers. We need
to look beyond what percentage of the audience watches what
company's shows at any given time. I think a more important
measure is what viewers and listeners can, should they choose
to do so, just as easily watch or listen to content from a
reasonable number of other sources. Mass media, after all,
means that it caters to a mass interest. It is unlikely that
there should be, or could be, 20 television shows on at the
same time that are all mass-interest.
As television viewers, most of us, at any given moment, are
in the 75 percent that is watching one of the programs that may
derive from a small number of providers. But, at other times,
you're a part of the other 25 percent that is divided into many
small audiences watching one of the many other providers. Both
the 75 percent and the 25 percent are not the same people all
the time.
So where does that leave me with some policy issues? I have
one observation and question. The observation is that Congress
certainly has the prerogative, but I suspect it cannot micro-
manage, effectively, television and radio regulation. This is
perhaps what Senator Dorgan was alluding to. I think that
technology and industry are changing too fast for the way
Congress does, and should, work. I believe the FCC understands
forces and trends well, and should be given latitude to do its
job. This is a cumbersome process, as is most of democracy, but
the courts have served as a viable check on, as well as a
motivator to, the Commission.
Finally, my question may be more controversial. When almost
90 percent of households view television via a cable or
satellite connection--90 percent--why are we--and most of the
10 percent are folks like Professor Baker, who choose not to
get it--why are we still making a regulatory distinction
between broadcast and other avenues of video distribution?
There is a certain paradox in CBS being fined for the Janet
Jackson Super Bowl fiasco, when more than 90 percent of those
viewing it were doing so over cable or satellite. If ESPN had
carried the same thing, there would have been no fine, though
perhaps the same controversy.
The value of a television broadcast license today is almost
exclusively in the must-carry mandate that goes with it. I'll
bet that if you gave broadcasters the right to retain that--
which I'm not urging, but if you gave them the right to keep
must-carry but turn off their transmitters, that the FCC would
be flooded with returned spectrum as licensees would opt to
jettison what little is left of their public DC service
obligation, as well as regulation, and move their operation
directly to a multichannel platform.
Thank you, and I'll be delighted to answer any questions.
[The prepared statement of Mr. Compaine follows:]
Prepared Statement of Ben Compaine, Researcher and Writer on the
Information Industry
My name is Ben Compaine. I've been tracking media ownership trends
since the first edition of my book, Who Owns the Media?, was compiled
in 1978. Let me note up front that I have never been employed by any
major media company nor have I been a paid consultant for any major
media company.
The concerns you address today about media ownership are not new
ones. In 1978 the Federal Trade Commission held two days of public
hearings in this city as part of its investigation of mergers and
acquisitions in publishing. After shifting through the anecdotal
stories of the critics and the pessimistic scenarios of doomsayers, the
FTC under President Carter could find no basis for any rule making,
policy changes or legislative suggestions.
But the focus in 2004 is on television and radio--areas which have
a richer history and basis of government regulation and court
involvement. So this morning I will restrict my comments to these
areas.
I start by questioning one of the fundamental assumptions of media
ownership: that it is more concentrated than ever. Typical is a Seattle
Times editorial last March that stated flatly, ``The news industry in
America is already far down the road to media concentration.'' In the
same editorial they cite CNN, Fox News, National Public Radio--all
separately owned sources of news that have been added to the media menu
in the last two decades. None have been subtracted.
The viewpoint I take is measuring whether consumers of the media--
all of us--have access to a greater universe of diverse content from
more sources than 15 or 20 years ago. Or is there a concentration
resulting in fewer sources and implicitly less diversity? This applies
to entertainment, culture, news and opinion. I suspect we would all
agree that a goal is to assure enough players to ensure that sources
and diversity are sufficient to satisfy small as well as mass
audiences.
I want to make three points today:
First, that television is more competitive than it has ever
been, in number of different networks and owners of networks.
The audience is more fragmented than it has ever been. Far from
being more concentrated, by important measures it is far less
so.
Second, that radio is more concentrated only in comparison to
an extremely fragmented industry that existed before 1996. No
other industry could have expanded 10 fold and still have no
owner hold more properties at the end than at the start of that
period. In absolute terms radio is still highly competitive and
as diverse as ever.
Third, that the Internet is already proving itself as a
popular, ubiquitous and effective medium for expanding
distribution of both video and audio for more players and
access to more sources of information for consumers than we
could have reasonably expected even 15 years ago. And the
technology continues to improve to provide more competition for
existing players.
I will elaborate briefly on each point. More comprehensive data on
these and additional points are in a paper that I just completed that
will be made available by the New Millennium Research Council here in
Washington within a few weeks. I urge you to look through that paper.
Television
The viewer market share of the three traditional television
networks--CBS, ABC, NBC--has declined substantially since 1980. During
the 1960s and 1970s, on a typical weekday evening, the three networks
on average were watched by about 56 percent of all households with
televisions. (See Figure 1) In 2003 on a weekday evening during prime
time those networks had only a 20 percent rating. Adding in the
audiences they and their parent companies have gained through networks
available by multichannel means such as cable or satellite, in 2003
their combined audience was less than in the 1970s and into the 1980s.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: Ben Compaine, ``Debunking Media Consolidation Myths:
Competition in the Media Industry,'' New Millennium Research Council,
Washington, D.C., 2004. Copyright c2004 Ben Compaine.
Let me make that as clear as possible. In 2003, Viacom, with CBS
plus all its cable networks, Disney, with ABC and its cable networks,
and NBC, with its newly acquired cable networks, accounted for 18
percent fewer households during prime time than in the pre-merger, pre-
cable three network days.
Moreover, there is additional competition from newer networks,
including Time Warner's WB and News Corporation's Fox. The five
broadcast networks together aggregated to a 26 percent rating. Adding
in the rating of these five broadcast networks with the cable networks
owned by the same corporate family (e.g., CNN, HBO, etc. with WB), the
five major providers of television programming accounted for an average
51 percent rating in December 2003. This was less than three broadcast
networks had into the 1980s.
In television we all know that there are orders of magnitude more
choices today than 25 years ago and, even with numerous acquisitions
and startups by the old networks and their new parents, we have more
networks, from more owners than in the days of three networks and seven
station limits for any owner.
Radio
On to radio. Issues need a context. Taken out of context, the radio
industry has seen substantial consolidation in the last decade. The
largest operator of radio stations in 2004 owned about 8.6 percent of
the almost 14,000 radio stations nationwide. The four largest groups
owned under 15 percent of all stations, a total not even close to any
level of oligopoly by antitrust standards.
The context, however, is that of an industry that had more than
tripled in the number of stations over three decades with no change in
the limits of station ownership. In 1947, when a de facto limit of 13
stations to an owner was in place, there were about 1200 radio
stations. By 1980 the limit was the same, but there were over 8700
stations. A single owner could hold no more than 0.16 percent of
stations nationally. In 1990, by which time the cap had been raised to
12 stations, we were closing in on 11,000 stations.
So it should be no surprise that, like a bottle of seltzer that had
been well shook, when the cap was removed in 1996 the industry burst
into long delayed hive of activity. Even if the ownership limits had
been eased from 1947 into the 1990s to maintain the same ratio of
ownership to the number of stations, the cap would have been about 88
and the changes we have seen in recent years would have looked far less
dramatic.
Often lost in the radio discussion is that National Public Radio, a
loose network of more than 700 not-for-profit radio stations that
broadcast common national programming for much of the day, would be the
second largest radio chain. It claims to be available everywhere in the
U.S. There is also the growing interest in the national satellite-
distributed radio services. In the January they had 1.6 million
subscribers. At their current rate of growth that is expect to reach 4
million by the end of the year.
To be sure, the number of separate owners of radio stations in
local markets is lower than prior to the lessening of regulatory limits
in the 1990s. Still, larger markets have 15 or more separate owners--in
addition to noncommercial stations--and in most of even the smallest
markets there are more competitors in radio than television and
newspapers combined.
Finally, as a segue to my comments on the role of the Internet,
thousands of radio and radio-like stations are available via the
Internet. Stations are available from around the globe. Many of those
with the highest listenership were owned by non-broadcasters. About 40
percent of listeners accessed stations from outside their local market.
Internet
Barely 10 years after its ``coming out'' as a consumer medium,
about two-thirds of Americans are using the Internet for everything
from e-mail to news to weather to government forms to shopping, porn,
sharing family photos, listening to radio and watching ``television.''
The Internet already has profound implications for access to
information.
Of the five largest media companies, the websites of only one (Time
Warner) are among the top 10 organizations whose websites get the most
unique visitors per month. The sites run by Federal Government agencies
are among the most frequented.
In 2004 for the first time more Internet household had broadband
than used dial-up connections. With research that shows that households
with always-on broadband used the Internet more than narrowband users,
the expectation is that Internet access for information, commerce and
communications will continue to grow.
The number of hours spent listening to Internet radio grew by
triple digits between 2003 and the same period in 2004. Users with
broadband spend far more time using Internet radio than dial-up users.
In addition, new devices are becoming available to make Internet
radio accessible apart from a personal computer, including access via
various wireless technologies. Indeed, video and film via the Internet
are on the verge of becoming more mainstream. As some of the local
telephone carriers upgrade their systems with fiber optic cable to the
curb or the home, the transmission speed of downloads will be
competitive with cable and satellite services. Devices are on the
market that allow even today's broadband users to download movies and
video programming for storage on personal video recorders for viewing
at their convenience.
Need to Consider Choices Available, Not Choices Made
About a year ago this committee heard testimony from my friend Eli
Noam. He has completed some landmark work on the revenue side of the
media industry. It is helpful, yet only part of the mosaic that is
media competition. A substantial piece of the debate must be on sources
of content and distribution avenues that are readily and inexpensively
available to most consumers. We need to look beyond what percent of the
audience watches what company's shows at any given time. A more
important measure is whether viewers and listeners can, should they
choose to do so, just as easily watch or listen to content from a
reasonable number of other sources. ``Mass media'' after all, means
that it caters to a mass interest. It is unlikely that there should be
20 television shows on at the same time that are all mass interest.
As television viewers, most of us at any given moment are in the 75
percent that is watching one of programs that derive from a small
number of providers. But at other times, we are part of the other 25
percent that is divided into many small audiences watching one of the
many others providers. Both the 75 percent and the 25 percent are not
the same people all the time.
Policy Issues
My findings lead me an observation and a question for policy-
makers:
The observation is that while Congress certainly has the
prerogative, it cannot micromanage effectively television and
radio regulation. The technology and industry are changing too
fast for the way Congress does and should work. I believe the
current FCC understands the forces and trends well and should
be given latitude to do its job. Though a cumbersome process--
as is most of democracy--the courts have served as a viable
check on as well as motivator to the Commission.
My question may be more controversial. When almost 90
percent of households view television via a cable or satellite
connection, why are we still making a regulatory distinction
between broadcast and other avenues of video distribution?
There is a certain paradox in CBS being fined for the Janet
Jackson Super Bowl fiasco when more than 90 percent of those
viewing were doing so over cable or satellite. If ESPN had
carried the same thing there would have been no fine (though
perhaps the same controversy). The value of a television
broadcast license today is almost exclusively in the ``must
carry'' mandate that goes with it. If that were retained should
broadcasters be allowed to turn off their transmitters, my
hunch is that the FCC would be flooded with returned spectrum
as licensees would opt to jettison what little is left of their
public service obligation and regulation and move their
operation directly to a multichannel platform.
Thank you for having me here. I expect I've raised as many
questions as I've answered and would be delighted to respond to any you
have, now or later.
Benjamin M. Compaine
Ben Compaine is a researcher and writer on issues of the economics
and technologies of the information industry. He has been a Research
Consultant for the Program on Internet and Telecoms Convergence at MIT
as well as executive director of the Program on Information Resources
Policy at Harvard University. From 1994 to 1997 he was the Bell
Atlantic Professor of Telecommunications at Temple University. From
1986 to 1994 he was President and Chief Executive of Nova Systems Inc.,
a software firm. He is the author, co-author or editor of 10 books. His
best known book, Who Owns The Media? was published as an all-new third
edition in 2000. Other books include The Digital Divide: Facing a
Crisis or Creating a Myth? (2001) and The Information Resources Policy
Handbook (1999). His articles have appeared in trade, popular, and
scholarly journals, including Telecommunications Policy, Science
Digest, Foreign Policy, Reason, Daedalus and the Journal of
Communication. His research and teaching interests include Internet and
telecommunications policy, mass media economics, and the social and
cultural implications of changing information technologies. A political
science major at Dickinson College, he received his M.B.A. from Harvard
University and Ph.D. from Temple University. He has been a consultant
and invited speaker at conferences and seminars in Europe, South
America, Asia, Australia as well as in the United States and Canada.
The Chairman. Thank you.
Professor Overholser?
STATEMENT OF GENEVA OVERHOLSER, CURTIS B. HURLEY CHAIR IN
PUBLIC AFFAIRS REPORTING, MISSOURI SCHOOL OF JOURNALISM,
WASHINGTON, D.C. BUREAU
Professor Overholser. Thank you, Mr. Chairman. Good
morning, Senators. And thanks very much for the opportunity to
be here with you. It really is an honor.
I have to tell you that despite my typically lengthy
academic title, in all honesty, the experience that I bring to
this table this morning is in 35 years as a newspaperwoman,
including as editor of the Des Moines Register. And it is
experience that makes me care a great deal about the state of
the media in the country today, and I appreciate your attention
to this matter.
I would like to make one primary point. The story of media
in our country today is very much like the story of the
American diet. We have more different kinds of food than ever,
more widely available than ever, yet many Americans are failing
to get adequate nutrients, even as we grow fatter. We are
overfed, but we are undernourished.
The same, I would add, is true of media. There are ever-
more numerous ways to get information, but that is a very
different thing from having an improved media diet. We are
bombarded with information, but we are starving for journalism.
It is journalism I hope this Committee will concern itself
with, the original production of content serving the public
interest. This is expensive to produce, and it is produced only
by owners who believe it worth investing in. These owners are
in decreasing supply.
They are disappearing in large part because the media-
company owners find themselves compelled to return profits few
other industries can even dream of. As long-time editor Harold
Evans has put it, ``Media companies are not having trouble
staying in business; they're having trouble staying in
journalism.''
The FCC has it in its hands to make matters worse by
enabling media owners to take their companies still further
from the concerns and needs of local citizens. I doubt that I
need to prove to this, of all groups, that the presence of
greater numbers of media outlets has not ensured improved media
performance. Certainly, the public thinks it has not.
A new Gallup Poll found media credibility at its lowest
point in decades. Fifty-five percent of respondents said they
have either ``not very much'' confidence or ``none at all'' in
the media's fairness and accuracy.
Nor do my colleagues in the Academy report improved media
performance. Again and again they find that straight news
content has given way to celebrity and crime news. Stories with
public-policy content decrease; conflict and sensation take
their place.
These trends hold across all media in no small part because
these new kinds of stories are far cheaper to produce. Now that
the business of media is increasingly business, rather than
news, cuts in news-gathering staff have become the norm,
especially in television and radio and news magazines, but
also, alas, in newspapers. There is a burgeoning of media
outlets, but a constricting of journalism. As the Report on the
State of the News Media 2004 put it, ``Much of the new
investment in journalism today, much of the information
revolution generally, is in disseminating the news, not in
collecting it.''
I'm here to speak specifically about newspapers, whose
decline in importance is greatly overstated. Newspapers
continue to be important, first, in sheer numbers of readers.
On any given Super Bowl Sunday, more Americans read their
Sunday paper than watch the game, and I don't hear a lot of
talk about football's demise in this country. Newspapers
continue to be important, too, in the influential role they
play in citizens' lives. A Consumers Union study this year
found that Americans rely on newspapers much more than other
media for local news and information. Finally, newspapers
influence other media to a substantial degree because of the
size of their news-gathering resources.
Yet newspapers are undergoing great strains due to the
pressure of maintaining high profit margins, which necessitates
short-term business focus. As one observer has said, ``Being a
cash cow is a strategy.'' Not only do we see lower-quality
news, but we see companies unwilling to serve customers in whom
advertisers have no interest.
The FCC is in a position to keep this situation from
worsening. Newspaper companies are already reducing competition
in communities across the country by what they call clustering,
buying newspapers in adjoining markets, cutting their costs,
and doing away with previously independent voices and
newsrooms.
The companies that own newspapers, and often own other
media, of course, do not need our assistance to further
increase the returns to their mostly institutional investors
while reducing the number of newsrooms and newsgatherers in any
given town, yet this is precisely what happens with greater
consolidation.
I want to say a word here about this ``gift of synergy''
that we will supposedly derive from the so-called ``convergence
of media.'' Convergence is, indeed, likely to be good for media
business, but it is almost sure to be bad for journalism. Far
from increasing the amount or quality of the news-gathering,
convergence provides additional means of distribution. There is
nothing wrong with that, per se; but consider, you have block
of reporting by Reporter A, who spends a given amount of time
producing that reporting and a given amount of time putting it
together for his newspaper. Now his employer asks him to
disseminate the same report on the radio, on the Internet, and
on television. How much time does each new method of
dissemination require from him? Even if it's only half an hour,
that's an hour and a half that Reporter A could have used
before for reporting. And if you think companies will increase
the staff to compensate for this loss in reporting time, I have
many a story to tell you. The temptation to drop these savings
to the bottom line is simply too great.
My view is that diversity of ownership is important. We
have fine newspapers from privately owned companies and fine
newspapers from publicly held companies, and bad newspapers
from both. But there is a long-term trend toward disinvestment
in journalism that needs addressing in every possible way, and
really affects the civic health of this country.
I welcome all models of ownership, from the few
independently family owned papers remaining to institutional
ownership, such as the St. Petersburg Times enjoys, to
nonprofit media, such as NPR, to foundation-supported
investigative reporting, like the Center for Public Integrity,
which is conducting the kind of reporting that too few media
are willing to invest money in anymore.
I believe that a wide range of media will serve the public
best, and I welcome the democratization we see with
proliferation of outlets, particularly on the Web. But we
should be under no illusion about what media, by and large, are
producing substantial, responsible, thorough, digging, edited
news reports. It is newspapers. Every time they are combined
with a local television station, there is at least one less TV
reporter who might actually spy a story the profit-pressured
newsroom did not. That means fewer nutrients into the local
media diet.
And when the newspaper and the broadcast outlets and the
Web all join into one report, what values are likely to
prevail? As Robert Haiman of the Poynter Institute has put it,
``There's going to be a tremendous clash of values: the
journalism values of newspapers, the entertainment values of
television, and the no holds barred, raw, unedited, anarchic
values of the Internet.'' Let's guess how likely it is that
those stodgy old values of journalism will win on this terrain.
I leave you with this thought. We have plenty of media
today. We have an ever-declining supply of journalism. I ask
you to keep that distinction in mind in the decisions before
you.
Thank you.
[The prepared statement of Professor Overholser follows:]
Prepared Statement of Geneva Overholser, Curtis B. Hurley Chair in
Public Affairs Reporting, Missouri School of Journalism, Washington,
D.C. Bureau
Good morning, and thank you for this opportunity. It is an honor to
be with you.
I would like to make one primary point: The story of media in our
country today is very much like the story of the American diet: We have
more different kinds of food than ever, more widely available. Yet many
Americans are failing to get adequate nutrients, even as we grow ever
fatter. We are overfed, but we are undernourished.
The same is true of media. There are ever more numerous ways to get
information, but that is a very different thing from having an improved
media diet. We are bombarded with information, but we are starving for
journalism. It is journalism I hope this committee will concern itself
with: the original production of content serving the public interest.
This is expensive to produce, and it is produced only by owners who
believe it worth investing in. Those owners are in decreasing supply.
They are disappearing in large part because media company owners
find themselves compelled to return profits few other industries can
dream of. As longtime editor Harold Evans has put it, media companies
are not having trouble staying in business. They are having trouble
staying in journalism. The FCC has it in its hands to make matters
worse by enabling media owners to take their companies still further
from the concerns and needs of local citizens.
I doubt that I need to prove to this of all groups that the
presence of greater numbers of media outlets has not ensured improved
media performance. Certainly the public thinks it has not. A new Gallup
Poll found media credibility at its lowest point in decades. Fifty-five
percent of respondents said they have either ``not very much''
confidence or ``none at all'' in the media's fairness and accuracy.
Nor do my colleagues in the academy report improved media
performance. Again and again they find that straight news content has
given way to celebrity and crime news. Stories with public-policy
content decrease; conflict and sensation take their place. These trends
hold across all media, in no small part because the new kinds of
stories are far cheaper to produce. Now that the business of media is
increasingly business, rather than news, cuts in newsgathering staff
have become the norm--especially in television and radio and
newsmagazines, but also in newspapers. There is a burgeoning of media
outlets, but a constricting of journalism: As the report on the State
of the News Media 2004 put it: ``Much of the new investment in
journalism today--much of the information revolution generally--is in
disseminating the news, not in collecting it.''
I am here to speak specifically about newspapers, whose decline in
importance is greatly overstated. Newspapers continue to be important,
first, in numbers of readers. On any given Super Bowl Sunday, more
Americans read their Sunday paper than watch the game. I hear little
talk of football's demise. Newspapers continue to be important, too, in
the influential role they play in citizens' lives. A Consumers Union
study this year found that Americans rely on newspapers much more than
other media for local news and information. Finally, newspapers
influence other media to a substantial degree because of the size of
their newsgathering resources.
Yet newspapers are undergoing great strains due to the pressure of
maintaining high profit margins, which necessitate short-term business
focus. As one observer has said, being a cash cow IS a strategy. Not
only do we see lower-quality news, but we see companies unwilling to
serve customers in whom advertisers have no interest. The FCC is in a
position to keep this situation from worsening. Newspaper companies are
already reducing competition in communities across the country by what
they call ``clustering''--buying newspapers in adjoining markets,
cutting their costs and doing away with previously independent voices--
and newsrooms. The companies that own newspapers (and often other
media, of course) do not need our assistance to further increase the
returns to their mostly institutional investors while reducing the
number of newsrooms and newsgatherers in any given town. Yet this is
precisely what happens with greater consolidation.
Let me say a word here about this gift of synergy that we will
supposedly derive from so-called ``convergence'' of media. Convergence
is indeed likely to be good for media business, but it is almost sure
to be bad for journalism. Far from increasing the amount or quality of
the newsgathering, convergence provides additional means of
distribution. There is nothing wrong with that per se. But consider:
You have a bloc of reporting by reporter A, who spends a given amount
of time producing that reporting and a given amount of time putting it
together for his newspaper. Now his employer asks him to disseminate
the same report on the radio, on the Internet and on television. How
much time does each new method of delivery require from him? Even if
it's only half an hour, that's an hour and a half less time each day
spent on reporting. And if you think companies will increase the staff
to compensate for this loss in reporting time, I have many a story to
share with you. The temptation to drop these savings to the bottom line
is simply too great.
My view is that diversity of ownership is important. We have fine
newspapers from privately owned companies and fine newspapers from
publicly held companies--and bad newspapers from both as well. But
there is a long-term trend toward disinvestment in journalism that
needs addressing in every possible way. I welcome all models of
ownership, from the few independent family owned papers remaining to
institutional ownership such as the St. Petersburg Times enjoys, to
nonprofit media such as NPR to foundation-supported investigative
reporting like the Center for Public Integrity.
I believe that a wide range of media will serve the public best,
and I welcome the democratization we see with the proliferation of
outlets on the Web. But we should be under no illusion about what
media, by and large, are producing substantial, responsible, thorough,
digging, edited news reports: Newspapers. Every time they are combined
with a local television station, there is at the least one less TV
reporter who might actually spy a story the profit-pressured newsroom
did not. That means fewer nutrients into the local media diet. And when
the newspaper and the broadcast outlets and the Web all join into one
report, what values are likely to prevail? As Robert Haiman of the
Poynter Institute put it, ``There is going to be a tremendous clash of
values--the journalism values of newspapers, the entertainment values
of television and the no-holds-barred, raw, unedited, anarchic values
of the Internet.'' Let's guess how likely it is that the values of
journalism will win.
I leave you with this thought: We have plenty of media today. We
have an ever-declining supply of journalism. I ask you to keep that
distinction in mind in the decisions before you.
Thank you.
The Chairman. Thank you very much.
Mr. Thierer?
STATEMENT OF ADAM D. THIERER, DIRECTOR, TELECOMMUNICATIONS
STUDIES, CATO INSTITUTE
Mr. Thierer. Good morning. And thank you, Mr. Chairman, for
your invitation to testify here this morning on the important
issue of media ownership regulation.
This hearing is especially timely for me, since I have a
new book on this issue due out early next year entitled, Media
Myths: Making Sense of the Debate Over Media Ownership.
I chose that title because I have come to the conclusion,
after studying this issue, that the debate over media ownership
is really being driven more by a mythology than anything close
to reality. That is, while critics of media liberalization have
had a great deal of success employing very heated rhetoric and
extremely emotional rationales for mass media regulation,
claims about the lack of diversity or the end of localism and
the supposed death of our democracy simply do not square with
reality. Indeed, by all impartial measures, citizens are better
off than they ever have been before in this country. Regardless
of what the underlying business structures or ownership
patterns look like, the real question in this debate must
always be this: ``Do citizens have more news, information, and
entertainment choices at their disposal today than in the past?
The answer to that question, I believe, is unambiguously yes.
There are seven leading myths about modern media I'd like
to quickly summarize for you here today that my research has
unearthed.
First, and probably the most commonly repeated myth, is
that diversity is disappearing in media. The reality, I argue,
however, could not be more different. Today's media environment
is more diverse than ever before and is characterized by
information abundance, not information scarcity. To the extent
there is a media diversity problem today, it is that citizens
suffer from what you might call information overload. The
number of media options has become so overwhelming that most of
us struggle to manage all of the information choices at our
disposal on a given day. Consider that in 1979 most households
had only six or fewer local television stations to choose from,
but today they have an average of seven over-the-air broadcast
television networks and an average of 102 cable or satellite
options to choose from. Also, the number of radio stations in
America since 1970 has roughly doubled, from around 6,700 to
almost 13,500 today. And there are more magazines and
periodicals and weekly being produced now than in any time in
our nation's history.
A second common myth is that localism in media is
disappearing. The truth is, while we not know exactly how much
local fare citizens demand, citizens still receive a wealth of
information about developments in their local communities. That
is, although citizens are increasingly opting for more sources
of national news and entertainment, local information and
programming are still quite popular and certainly will not
disappear in a deregulated media marketplace.
The third myth concerns concentration and the mistaken
belief that only a few companies control the entire media
universe. Contrary to this widely circulated myth, the media
marketplace is vigorously competitive and not significantly
more concentrated than in past decades. A McKinsey & Company
analyst recently noted that, quote, ``There are more than a
hundred media companies worldwide, and entertainment media are
still fragmented compared with other industries.'' And an FCC
survey of various media markets across America from 1960 to
2000 also showed that, quote, ``Collectively, the number of
media outlets and owners increased tremendously over that 40
year period with an average of a 200 percent increase in the
number of outlets and 140 percent increase in the number of
owners.'' And media expert Eli Noam, of Columbia University,
has nicely summarized what we must always understand, that
bigness in media is a relative term, when he says, quote,
``While the fish in the media pond have grown in size, the pond
did grow, too, and there have been new fish and new ponds.''
The fourth myth involves assertions about the future of
democracy somehow being at risk in this debate, and I won't
spend a lot of time on this, even though I do in my book. But
these arguments strike me as quite preposterous, since the
increased media availability and communications connectivity we
have seen in America in recent years and decades has given us
the ability to learn more about our democracy, and debate more
on our democracy, than ever before.
A fifth myth is that regulation is needed to preserve high
quality journalism and entertainment. I find these arguments
very troubling since, at root, media quality is fundamentally a
subjective matter. Government should have no say over, or even
attempt to influence, the quality of news or information or
entertainment in America. The good news, however, is that, with
so many media outlets available today, citizens have a wider
range of options from which to choose, meaning they can decide
for themselves what level of quality they desire--soft news,
hard news, or whatever else.
A sixth myth is that the First Amendment somehow justifies
extensive media-ownership controls, or can be used as a
regulatory tool to mandate access to media outlets. This is,
without doubt, in my opinion, the most dangerous of all the
media myths. In reality, the First Amendment was written, not
as a constraint on private speech or actions, but, rather, as a
direct restraint on government actions as they relate to
speech. If the First Amendment is to retain its force as the
bulwark against government control of the press, it cannot be
used to justify ownership rules or media access mandates.
A seventh and final myth is that new technologies or media
outlets, including the Internet, have little bearing on this
debate. To the contrary, new technologies and outlets do have
an important relationship to this debate and call into question
the wisdom of the existing media ownership restrictions. In
particular, the rise of the Internet and the World Wide Web is
radically changing the nature of modern media in America.
Anyone who thinks differently might want to ask Dan Rather this
week what he thinks about the impact of new technologies on
traditional media.
With 72 percent of Americans now online and spending an
average of 9 hours weekly on the Internet, surfing through the
roughly 170 terabytes of information available online, which is
17 times the size of the Library of Congress print collections,
I do not see how anyone can seriously argue that the Internet
is not fundamentally transforming our media universe. More
generally, my research has found that all media compete, in the
very broad sense of the term, and that citizens frequently
substitute one type of media for another. What else explains
cable and satellite companies stealing so much audience share
from traditional broadcasters, or satellite radio networks
quickly eating in traditional radio's market share, or the fact
that millions of Americans now purchase or receive daily
additions of national newspapers, such as the USA Today or the
Wall Street Journal and the New York Times? This is, I believe,
a healthy, competitive market at work, a market in which
citizens exercise their right to be as finicky as they want in
substituting one media option or outlet for another.
In conclusion, our media world has changed, and changed in
almost every way, for the better. To the extent there ever was
a, quote, ``golden age of American media,'' I believe we are
living in it today. There has never been a time in our nation's
history when citizens have had access to more media outlets,
more news, more information, or more entertainment. This
conclusion is supported by a solid factual record, which I have
provided--much of which--in the appendix to my testimony.
In such an age of media abundance, the question of who owns
what, or how much they own of anything else, is irrelevant. No
matter how large any given media outlet is today, it is
ultimately just one of many fish in a large and growing media
pond. Indeed, as the FCC concluded when revising these rules,
quote, ``The question confronting media companies today is not
whether they will be able to dominate the distribution of news
and information in any market, but whether they will be able to
be heard at all among the cacophony of voices vying for the
attention of Americans,'' end quote. I completely agree with
the FCC. The media world has changed, and so must the rules
that govern it.
Thank you for inviting me here today, Mr. Chairman, and I'm
happy to discuss questions in the Q&A period.
[The prepared statement of Mr. Thierer follows:]
Prepared Statement of Adam D. Thierer, Director, Telecommunications
Studies, Cato Institute
Good morning, my name is Adam Thierer and I serve as Director of
Telecommunications Studies at the Cato Institute. Thank you, Mr.
Chairman, for your invitation to testify here this morning on the
important issue of media ownership regulation. This hearing is
especially timely for me since I have a new book on this issue due out
early next year entitled, Media Myths: Making Sense of the Debate over
Media Ownership.
I chose that title because I have come to the conclusion that the
debate over media ownership is being driven more by myth than reality.
That is, while critics of media liberalization have had great success
employing heated rhetoric and extremely emotional rationales for media
regulation, claims about a lack of ``diversity,'' the end of
``localism,'' or the supposed ``death of democracy'' simply do not
square with reality.
Objective facts reveal that such rhetoric and claims are baseless.
Indeed, by all impartial measures, citizens are better off today than
they have ever been before. Regardless of what the underlying business
structures or ownership patterns look like, the real question in this
debate must be this: ``Do citizens have more news, information, and
entertainment choices at their disposal today than in the past?'' The
answer to that question is unambiguously ``yes.''
There are 7 leading myths about modern media. I'll quickly
summarize each one for you.
Debunking the Media Myths
The first, and probably most commonly repeated myth, is that
diversity will disappear absent extensive government regulation of the
media. The reality, however, could not be more different. Today's media
environment is more diverse than ever before and is characterized by
information abundance, not scarcity. Citizens enjoy more news and
entertainment options than at any other point in history. To the extent
there is a media diversity problem today, it is that citizens suffer
from ``information overload.'' The number of media options has become
so overwhelming that most of us struggle to manage all the information
at our disposal. Consider that in 1979 most households had 6 or fewer
local television stations to choose from, but today the average U.S.
household receives 7 broadcast television networks and an average of
102 cable or satellite channels per home.\1\ Also, the number of radio
stations in America has roughly doubled from about 6,700 in 1970 to
almost 13,500 today. And there are more magazines and periodicals being
produced now than at any time in our nation's history. In 2003, there
were 17,254 magazines produced up from 14,302 in 1993.\2\
---------------------------------------------------------------------------
\1\ Federal Communications Commission, In the Matter of 2002
Biennial Regulatory Review--Review of the Commission's Broadcast
Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996, FCC 03-127, June 2, 2003, p. 15, http:/
/hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-127A1.pdf, cited
hereafter as FCC, Media Ownership Proceeding.
\2\ The Magazine Handbook 2004-5, (New York, NY: Magazine
Publishers of America, 2004), p. 5, http://www.magazine.org/content/
Files/MPA%5Fhandbook%5F04.pdf.
---------------------------------------------------------------------------
A second common myth is that ``localism'' in media is disappearing.
The truth is, while we do not really know exactly how much local fare
citizens demand, citizens still receive a wealth of information about
developments in their communities. That is, although citizens are
increasingly opting for more sources of national news and
entertainment, local information and programming are still popular and
will not disappear in a deregulated media marketplace.
The third myth concerns concentration and the mistaken belief that
only a few companies control the entire media universe. Contrary to
this widely circulated myth, the media marketplace is vigorously
competitive and not significantly more concentrated than in past
decades. A McKinsey & Company analyst recently noted that ``There are
more than 100 media companies worldwide. . .and entertainment and media
are still fragmented compared with other industries such as
pharmaceuticals and aerospace.'' \3\ An FCC survey of various media
markets across America from 1960 to 2000 also showed that,
``Collectively, the number of media outlets and owners increased
tremendously over the 40-year period,'' with an average of a 200
percent increase in the number of outlets and a 140 percent increase in
the number of owners.\4\ Media expert Eli Noam of Columbia University
has nicely summarized why we must understand that ``bigness'' is a
relative term in media: ``[W]hile the fish in the pond have grown in
size, the pond did grow too, and there have been new fish and new
ponds.'' \5\ But, in any event, competition and concentration are not
mutually exclusive. Citizens can have more choices even as the
ownership grows slightly more concentrated as it has in some sectors in
recent years.
---------------------------------------------------------------------------
\3\ Michael J. Wolf, ``Here Comes Another Wave of Media Mergers,''
The Wall Street Journal, February 21, 2002.
\4\ Scott Roberts, Jane Frenette and Dione Stearns, ``A Comparison
of Media Outlets and Owners for Ten Selected Markets: 1960, 1980,
2000,'' Federal Communications Commission, Media Ownership Working
Group Study no. 1, September 2002, p. 2, http://hraunfoss.fcc.gov/
edocs_public/attachmatch/DOC-226838A2.pdf.
\5\ Eli M. Noam, ``Media Concentration Trends in America: Just the
Facts,'' In the Matter of 2002 Biennial Regulatory Review--Review of
the Commission's Broadcast Ownership Rules and Other Rules Adopted
Pursuant to Section 202 of the Telecommunications Act of 1996, January
2, 2003, p. 2, http://www.citi.columbia.edu/research/readings/
mediaconcentration.pdf.
---------------------------------------------------------------------------
The fourth myth involves assertions about the future of our
democracy somehow being at risk. These arguments strike me as quite
preposterous since increased media availability and communications
connectivity have given Americans the ability to learn and debate more
about our democracy than ever before. More importantly, civil discourse
and a healthy democracy are the product of a free and open society
unconstrained by government restrictions on media structures or
content. If government can simply ordain any ownership structures or
business arrangements it wishes in the name of serving ``democracy,''
then it raises serious censorship concerns.
A fifth myth is that regulation is needed to preserve high quality
journalism and entertainment. I find these arguments very troubling
since, at root, media quality is a subjective matter. Government should
have no say over, or even attempt to influence the quality of news or
entertainment in America. The good news, however, is that with so many
media outlets available today, citizens have a wide range of options
from which to choose, meaning they can decide for themselves what level
of ``quality'' they desire.
A sixth myth is that the First Amendment justifies extensive media
ownership controls, or can be used as a regulatory tool to mandate
access to media outlets. This is, without doubt, the most dangerous of
all the media myths. In reality, the First Amendment was not written as
a constraint on private speech or actions, but rather as a direct
restraint on government actions as they relate to speech. If the First
Amendment is to retain its force as a bulwark against government
control of the press, it cannot be used to justify ownership rules or
``media access'' mandates.
A seventh and final myth is that new technologies or media outlets,
including the Internet, have little bearing on this debate or cannot be
used as justification for relaxing existing media ownership rules at
all. To the contrary, new technologies and outlets do have an important
relationship to this debate and call into question the wisdom of
existing media ownership restrictions. In particular, the rise of the
Internet and the World Wide Web is radically changing the nature of
modern media. (Anyone who thinks differently might want to ask Dan
Rather what he thinks about the impact of new technologies on
traditional media!) With 72 percent of Americans now online and
spending an average of nine hours weekly on the Internet \6\ surfing
through the 170 terabytes of information available online--which is
seventeen times the size of the Library of Congress print collections
\7\--I do not see how anyone can seriously argue that the Internet is
not fundamentally transforming our media universe.
---------------------------------------------------------------------------
\6\ FCC, Media Ownership Proceeding, p. 148.
\7\ Peter Lyman and Hal R. Varian, How Much Information? 2003,
School of Information Management and Systems, University of California
at Berkeley, 2003, http://www.sims
.berkeley.edu/research/projects/how-much-info-2003/
printable_report.pdf.
---------------------------------------------------------------------------
More generally, my research finds that all media compete in a broad
sense and that citizens frequently substitute one type of media for
another. What else explains cable stations stealing so much audience
share from traditional broadcasters, or that 88 percent of Americans
now subscribe to cable and satellite TV even though ``free, over-the-
air'' television remains at their disposal? \8\ What else explains how
satellite radio, an industry that did not even exist prior to December
2001, today boasts over 2 million subscribers and is rapidly eating
into traditional radio's market share? Or the fact that millions of
Americans purchase daily editions of national newspapers such as the
USA Today, The Wall Street Journal and The New York Times? In fact, 49
percent of The New York Times' daily circulation is now outside the New
York area and it offers home delivery in 275 markets.\9\ Such
statistics reveal a healthy, competitive market at work; a market in
which citizens exercise their right to be as finicky as they want in
substituting one media option or outlet for another.
---------------------------------------------------------------------------
\8\ Federal Communications Commission, Tenth Annual Video
Competition Report, January 5, 2004, p. 115, http://hraunfoss.fcc.gov/
edocs_public/attachmatch/FCC-04-5A1.pdf, cited hereafter as FCC, Video
Competition Report.
\9\ Robert J. Samuelson, ``Bull Market for Media Bias,'' The
Washington Post, June 23, 2004, p. A21.
---------------------------------------------------------------------------
Conclusion
Our media world has changed, and changed in almost every way for
the better. To the extent there was ever a ``Golden Age'' of American
media, we are living in it today. There has never been a time in our
Nation's history when citizens had access to more media outlets, more
news and information, or more entertainment. This conclusion is
supported by a solid factual record. Advocates of media regulation, by
contrast, continue to base their case for government regulation on
emotional appeals and baseless ``Chicken Little'' doomsday scenarios.
In such an age of abundance, the question of who owns what, or how
much they own, is irrelevant. No matter how large any given media
outlet is today, it is ultimately just one of hundreds of sources of
news, information and entertainment that we have at our disposal.
``Indeed,'' as the FCC concluded when revising these rules, ``the
question confronting media companies today is not whether they will be
able to dominate the distribution of news and information in any
market, but whether they will be able to be heard at all among the
cacophony of voices vying for the attention of Americans.'' \10\
---------------------------------------------------------------------------
\10\ FCC, Media Ownership Proceeding, p. 149.
---------------------------------------------------------------------------
I completely agree with the FCC. The media world has changed and so
must the rules that govern it. Thank you for inviting me here today to
discuss the facts about media in America.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Table 2.--Media Outlet Ownership in Select Markets
[Comparison of Media Outlets and Owners for 10 Selected Media Markets (1960-2000)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1960 1980 2000 % Change 1960-2000
Market Rank City -------------------------------------------------------------------------------------------
Outlets Owners Outlets Owners Outlets Owners Outlets Owners
--------------------------------------------------------------------------------------------------------------------------------------------------------
# 1 New York, NY 89 60 154 116 184 114 107% 90%
# 29 Kansas City, MO 22 16 44 33 53 33 141% 106%
# 57 Birmingham, AL 28 20 44 34 59 38 111% 90%
# 85 Little Rock, AR 17 14 35 30 60 33 253% 136%
# 113 Lancaster, PA 14 10 21 16 25 20 79% 100%
# 141 Burlington, VT/Plattsburgh, NY 15 13 37 28 53 34 253% 162%
# 169 Myrtle Beach, SC 6 6 22 16 38 23 533% 283%
# 197 Terre Haute, IN 12 8 26 19 33 22 175% 175%
#225 Charlottes8ille, VA 5 13 10 23 14 188% 180%
# 253 Altoona, PA 11 9 19 12 23 15 109% 67%
-------------------------
195% 139%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Federal Communications Commission, Media Ownership Working Group, September 2002.
Table 3.--S-Curves for Various Technologies
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Table 4.--The Relentless March of Technology
------------------------------------------------------------------------
1970 1980 1990 2002-4
------------------------------------------------------------------------
Percentage of households 95.3% 97.9% 98.2% 98.2%
with TVs
------------------------------------------------------------------------
Total number of broadcast 875 NA 1,470 1,744
Television Stations
------------------------------------------------------------------------
Average number of TV sets 1.4 1.7 2.1 2.4
per household
------------------------------------------------------------------------
Average daily time spent 5:56 6:36 6:53 7:44
viewing TV (hours &
minutes)
------------------------------------------------------------------------
Percentage of households 98.6% 99% 99% 99%
with Radios
------------------------------------------------------------------------
Total number of broadcast 6,751 NA 10,819 13,476
Radio Stations
------------------------------------------------------------------------
Percentage of households 0 1.1% 63% 87%
with VCRs
------------------------------------------------------------------------
Percentage of households 0 0 0 50%
with DVD players
------------------------------------------------------------------------
Percentage of households 0 0 5% 70%
with Cell Phones
------------------------------------------------------------------------
Total number of cell phones 0 NA 5.2 158.7
subscribers Million Million
------------------------------------------------------------------------
Cell phone average monthly NA NA $80.90 $49.91
bill
------------------------------------------------------------------------
Percentage of homes 6.7% 19.9% 56.4% 68%
subscribing to Cable
Television
------------------------------------------------------------------------
Percentage of total NA 42% 93% 95%
households to which cable
television is available
------------------------------------------------------------------------
Estimated TV market share of 55% 49% 31% 21%
``Big 3'' (ABC, CBS, NBC)
------------------------------------------------------------------------
Estimated TV market share of 1% 3% 20% 35%
Basic Cable
------------------------------------------------------------------------
Percentage of homes 0 0 1% 24%
subscribing to Direct
Broadcast Satellite (DBS)
TV
------------------------------------------------------------------------
Percentage of homes with a 0 0 22% 66%
Personal Computer
------------------------------------------------------------------------
Percentage of homes with 0 0 0 74.9%
Internet Access
------------------------------------------------------------------------
Sources: Consumer Electronics Association, eBrain Market Research;
Cellular Telecommunications and Internet Association; Statistical
Abstract of the United States, 2003; Federal Communications
Commission; Nielsen Media Research
Table 5.--Media Trends of Yesterday and Today
------------------------------------------------------------------------
circa 1970 today
------------------------------------------------------------------------
Extremely high barriers to entry Much lower entry barriers thanks to
explosion of new technologies and
media outlets
------------------------------------------------------------------------
High distribution costs Lower costs of distribution
relative to past
------------------------------------------------------------------------
Primary business strategy = One-to- Primary business strategy = One-to-
many; broadcasting; focus on one; narrowcasting; focus on
appeasing mass audiences; less appeasing niche or splintered
media specialization audiences; hyper-specialization of
media
------------------------------------------------------------------------
Distinct media sectors with own Greater competition/substitution
sphere of influence among media sources and outlets
------------------------------------------------------------------------
Limited media outlets; limited Explosion of both sheer number of
overall choices media outlets and overall range of
choices
------------------------------------------------------------------------
People complained about People complain of ``information
``information scarcity'' overload''
------------------------------------------------------------------------
``Big 3'' dominated television and 7 broadcast TV networks and a 500-
control 90 percent of audience channel universe of cable and
satellite choices
------------------------------------------------------------------------
3 nightly national newscasts shown Dozens of national newscasts shown
once per evening on a 24-7 basis, including foreign
languages
------------------------------------------------------------------------
We had to go to the library to The library comes to us via the
retrieve hard-to-find information Internet and online services
------------------------------------------------------------------------
Limited number of electronic In addition to many phones, TVs and
communications or information radios, each home today usually
devices in the home (phone, TV, has at least a few of the
radio) following: CDs, DVDs, VCRs,
computers, Internet access,
interactive software, cell phones
and other mobile communications
devices, etc.
------------------------------------------------------------------------
3 minute coast-to-coast long 3 minute coast-to-coast long
distance call cost $1.35 distance call cost roughly 15
cents
------------------------------------------------------------------------
Table 6.--The Expanding Video Programming Marketplace On Cable and
Satellite TV
------------------------------------------------------------------------
------------------------------------------------------------------------
News: CNN, Fox News, MSNBC, C-Span, C-Span 2, C-Span 3, BBC
America
Sports: ESPN, ESPN News, Fox Sports, TNT, NBA TV, NFL
Network, Golf Channel, Speed Channel, Outdoor Life Network
Weather: The Weather Channel
Home Renovation: Home & Garden Television, The Learning
Channel, DIY
Educational: The History Channel, The Biography Channel
(A&E), The Learning Channel, Discovery Channel, National
Geographic Channel, Animal Planet
Travel: The Travel Channel, National Geographic Channel
Financial: CNNfn, CNBC, Bloomberg Television
Shopping: The Shopping Channel, Home Shopping Network, QVC
Female-oriented: WE, Oxygen, Lifetime
Male-oriented: Spike TV
Family/Children-oriented: Nickelodeon, Disney Channel,
Cartoon Network, WAM (movie channel for 8-16 year olds),
Noggin (2-5 years)/The N Channel (9-14 years), PBS Kids,
Hallmark Channel, Discovery Kids, Animal Planet, ABC
Family, Boomerang, The Family Channel (FAM), HBO Family
African-American: BET, Black Starz!
Foreign/Foreign Language: Telemundo (Spanish), Univision
(Spanish), Deutsche Welle (German), BBC America (British),
TV Asia, ZEE-TV Asia (South Asia) ART: Arab Radio and
Television, The Filipino Channel (Philippines), Saigon
Broadcasting Network (Vietnam), The International Channel,
HBO Latino
Religious: Trinity Broadcasting Network, The Church Channel
(TBN), World Harvest Television, Eternal Word Television
Network
Music: MTV, MTV 2, VH1, VH1 Classic, Fuse, Country Music
Television, Great American Country, Gospel Music
Television Network
Movies: HBO, Showtime, Cinemax, Starz, Encore, The Movie
Channel, Turner Classic Movies, AMC, IFC, Sundance, Bravo,
(Action, Westerns, Mystery, Love Stories, etc . . .),
Flix,
Other or General Interest Programming: TBS, USA Network,
TNT, SciFi Channel
------------------------------------------------------------------------
Table 7.--2003 New Magazine Launches by Interest Category
------------------------------------------------------------------------
------------------------------------------------------------------------
Crafts/Games/Hobbies/ Computers (10) Teen (6)
Models (45)
------------------------------------------------------------------------
Metro/Regional/State Women's (10) TV/Radio/
(45) Communications/
Electronics (6)
------------------------------------------------------------------------
Sports (33) Men's (10) Art/Antiques (5)
------------------------------------------------------------------------
Automotive (29) Children's (8) Business/Finance (5)
------------------------------------------------------------------------
Special Interest (23) Comics/Comic Technique Motorcycles (5)
(8)
------------------------------------------------------------------------
Health (19) Entertainment/ Bridal (3)
Performing Arts (7)
------------------------------------------------------------------------
Home Service/Home (17) Literary Reviews/ Aviation (2)
Writing (7)
------------------------------------------------------------------------
Music (15) Photography (7) Gaming (2)
------------------------------------------------------------------------
Sex (13) Pop Culture (7) Gardening (2)
------------------------------------------------------------------------
Ethnic (11) Religious/ Military/Naval (2)
Denominational (7)
------------------------------------------------------------------------
Epicurean (11) Dogs/Pets (6) Science/Technology (2)
------------------------------------------------------------------------
Fashion/Beauty/Grooming Dressmaking/Needlework Media Personalities
(11) (6) (1)
------------------------------------------------------------------------
Fitness (11) Fishing/Hunting (6) Mystery/Science
Fiction (1)
------------------------------------------------------------------------
Travel (11) Political/Social Topics ......................
(6)
------------------------------------------------------------------------
....................... TOTAL: 440
------------------------------------------------------------------------
Table 8.--A Clear Channel Radio Monopoly?
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Table 9.--Internet Radio Stations
------------------------------------------------------------------------
------------------------------------------------------------------------
LaunchCast (radio.yahoo.com)
Rhapsody (www.listen.com)
Live 365 (www.live365.com)
Net Radio.com (www.netradio.com)
eoRadio (www.eoradio.com)
Totally Radio (www.totallyradio.com)
Soul Patrol (http://www.soul-patrol.net)
SnakeNet Metal Radio (www.snakenetmetalradio.com)
Recovery Net (www.recoverynetradio.com)
Beethoven.com (www.beethoven.com)
Web-Radio (www.web-radio.fm)
Radio@Netscape (www.spinner.com)
NPR Online (www.npr.org)
VH1's SonicNet.com (http://www.sonicnet.com/)
------------------------------------------------------------------------
Table 10.--Do the ``Big 3'' Own Everything?
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Table 11.--Cable Ratings Share Now Tops Broadcasters
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Table 12.--An Assortment of Media Fun Facts
General Media Facts or Trends:
``A weekday edition of the New York Times contains more
information than the average person was likely to come across
in a lifetime in seventeenth-century England.'' \11\ A 1987
report estimated that more new information has been produced
within the last 30 years than in the last 5000.\12\
---------------------------------------------------------------------------
\11\ Richard Saul Wurman, Information Anxiety (New York: Doubleday,
1989), p. 32. Likewise, William Van Winkle of Computer Bits magazine
argues that, ``A Sunday edition of the New York Times carries more
information than the average 19th-century citizen accessed in his
entire life.'' William Van Winkle, ``Information Overload,'' Computer
Bits, February 1998, http://www.computerbits.com/archive/1998/0200/
infoload.html.
\12\ Susan Hubbard, in Carol Collier Kuhlthau, ed., Information
Skills for an Information Society: A Review of Research (Syracuse, NY:
ERIC Clearinghouse on Information Resources, December 1987).
According to Ben Bagdikian, there are 37,000 different media
outlets in America. That number jumps to 54,000 if all
weeklies, semiweeklies, advertising weeklies and all
periodicals are included, and to 178,000 if all ``information
industries'' are included. And yet Bagdikian is a leading
critic of media deregulation and the title of his most recent
book is The New Media Monopoly! \13\
---------------------------------------------------------------------------
\13\ Bagdikian, p. 29.
An FCC survey of large and small media markets across
America from 1960 to 2000 revealed that, ``Collectively, the
number of media outlets and owners increased tremendously over
the 40-year period,'' with an average of a 200 percent increase
in the number of outlets and a 140 percent increase in the
number of owners.\14\
---------------------------------------------------------------------------
\14\ Scott Roberts, Jane Frenette and Dione Stearns, ``A Comparison
of Media Outlets and Owners for Ten Selected Markets: 1960, 1980,
2000,'' Federal Communications Commission, Media Ownership Working
Group Study no. 1, September 2002, p. 2, http://hraunfoss.fcc.gov/
edocs_public/attachmatch/DOC-226838A2.pdf.
By 2007, the average American will spend 3,874 hours per
year using major consumer media, an increase of 792 hours per
year from the 3,082 hours per year that the average person
spent using consumer media in 1977.\15\
---------------------------------------------------------------------------
\15\ Joe Mandese, ``Study: Media Overload on the Rise,'' Television
Week, May 17, 2004, http://www.tvweek.com/planning/051704study.html.
As of 2003, household penetration rates for various new
media and communications technologies were very high and
growing fast: VCR (88 percent); DVD (50 percent); DBS (24
percent); cell phones (70 percent); personal computers (66
percent); Internet access (75 percent). With the exception of
VCRs, none of these technologies were in American homes in
1980.\16\
---------------------------------------------------------------------------
\16\ Various sources.
In 2002, the average consumer spent $212 for basic cable,
$100 for books, $110 for home videos, $71 for music recordings,
$58 for daily newspapers, $45 for magazines, $45 for online
Internet services, and $36 on movies.\17\
---------------------------------------------------------------------------
\17\ Plunkett's Entertainment & Media Industry Almanac 2002-2003
(Houston: Plunkett Research Ltd., 2002), p. 7.
A three minute coast-to-coast long-distance phone call which
cost roughly $1.35 in 1970 only cost 15 cents in 2003.\18\
---------------------------------------------------------------------------
\18\ Noted in Christina Wise, ``The Good Ol' Days Are Now: Cox,''
Investor's Business Daily, April 19, 2004, p. A22.
---------------------------------------------------------------------------
Television/Video Competition:
88 percent of Americans now subscribe to cable and satellite
``pay TV'' sources even though ``free, over-the-air''
television remains at their disposal.\19\
---------------------------------------------------------------------------
\19\ Federal Communications Commission, Tenth Annual Video
Competition Report, January 5, 2004, p. 115, http://hraunfoss.fcc.gov/
edocs_public/attachmatch/FCC-04-5A1.pdf, cited hereafter as FCC, Video
Competition Report.
The FCC has found that, ``In 1979, the vast majority of
households had six or fewer local television stations to choose
from, three of which were typically affiliated with a broadcast
network. Today the average U.S. household receives seven
broadcast television networks and an average of 102 channels
per home.'' \20\
---------------------------------------------------------------------------
\20\ FCC, Media Ownership Proceeding, p. 15. ``Non-broadcast
television programming continues to proliferate. Today, there are more
than 308 satellite-delivered national non-broadcast television networks
available for carriage over cable, DBS and other multichannel video
program distribution (``MVPD'') systems. In 2002, the Commission also
identified at least 86 regional non-broadcast networks, including 31
sports channels, and 32 regional and local news networks. We are moving
to a system served by literally hundreds of networks serving all
conceivable interests. Programming in particular abundance are sports,
entertainment, and informational in nature. The four largest broadcast
networks own both broadcast and cable channels. Their share of
viewership is far greater than their share of the channels received by
the typical American household. Of the 102 channels received by the
average viewing home, the four largest broadcast networks have an
ownership interest in approximately 25 percent of those channels.''
Ibid., pp. 48-49.
There are more than 308 satellite-delivered national non-
broadcast television networks available for carriage over
cable, DBS and other systems today. The FCC concludes, ``We are
moving to a system served by literally hundreds of networks
serving all conceivable interests.'' \21\
---------------------------------------------------------------------------
\21\ FCC, Media Ownership Proceeding, p. 48-49.
---------------------------------------------------------------------------
Newspapers and Magazines:
In 1900, the average newspaper had only 8 pages.\22\ In the
year 2000, by contrast, according to the Encarta encyclopedia,
``Daily general-circulation newspapers average[d] about 65
pages during the week and more than 200 pages in the weekend
edition.'' \23\
---------------------------------------------------------------------------
\22\ Benjamin M. Compaine, ``The Newspaper Industry,'' in Benjamin
M. Compaine and Douglas Gomery, eds., Who Owns the Media? Competition
and Concentration in the Mass Media Industry (Mahwah, N.J.: Lawrence
Erlbaum Associates, 3rd Edition, 2000), p. 7.
\23\ ``Newspaper,'' Microsoft Encarta Online Encyclopedia, 2004,
http://encarta.msn.com/encyclopedia_761564853/Newspaper.html
There were 17,254 magazines produced in 2003, up from 14,302
in 1993. ``For virtually every human interest, there is a
magazine.'' \24\
---------------------------------------------------------------------------
\24\ The Magazine Handbook 2004-5, (New York, NY: Magazine
Publishers of America, 2004), p. 5, http://www.magazine.org/content/
Files/MPA%5Fhandbook%5F04.pdf.
There were 440 new magazine launches in 2003, up from 289
new launches in 2002.\25\ Another source puts the number much
higher at 949 new launches last year.\26\
---------------------------------------------------------------------------
\25\ Ibid., p. 7.
\26\ Samir Husni, Samir Husni's Guide to New Magazines 2004, 19th
Edition, http://www
.shgncm.com/shgncm/.
---------------------------------------------------------------------------
Radio:
The number of radio stations in America has roughly doubled
since 1970. As of March 2004, there were 13,486 radio stations
in America, up from 6,751 in January 1970.
Satellite radio (XM & Sirius), an industry that did not even
exist prior to December 2001, today boasts over 2 million
subscribers nationwide according to company reports.
Internet/Online Services:
72 percent of Americans are now online and spend an average
of nine hours weekly on the Internet.\27\
---------------------------------------------------------------------------
\27\ FCC, Media Ownership Proceeding, p. 148.
The World Wide Web contains about 170 terabytes of
information on its surface; in volume this is seventeen times
the size of the Library of Congress print collections.\28\
---------------------------------------------------------------------------
\28\ Peter Lyman and Hal R. Varian, How Much Information? 2003,
School of Information Management and Systems, University of California
at Berkeley, 2003, http://www.sims
.berkeley.edu/research/projects/how-much-info-2003/
printable_report.pdf.
Although less than 10 years old, online auction giant E-Bay
has grown so massive that it now handles more daily trading
traffic than the Nasdaq Stock Market according to CEO Meg
Whitman.\29\
---------------------------------------------------------------------------
\29\ Leslie Walker, ``EBay Gathering Puts Highs, Lows On Full
Display,'' The Washington Post, July 1, 2004, p. E1, http://
www.washingtonpost.com/wp-dyn/articles/A17604-2004Jun30.html.
Online search giant Google recently reported that its
collection of 6 billion items includes ``4.28 billion web
pages, 880 million images, 845 million Usenet messages, and a
growing collection of book-related information pages.'' \30\
---------------------------------------------------------------------------
\30\ ``Google Achieves Search Milestone With Immediate Access To
More Than 6 Billion Items,'' Google Press Release, February 17, 2004,
http://www.google.com/press/pressrel/6billion.html.
The Internet Archive ``Wayback Machine'' (www.archive.org)
offers 30 billion web pages archived from 1996 to the present.
It contains approximately 1 petabyte of data and is currently
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``This eclipses the amount of text contained in the world's
largest libraries, including the Library of Congress. If you
tried to place the entire contents of the archive onto floppy
disks . . . and laid them end to end, it would stretch from New
York, past Los Angeles, and halfway to Hawaii.'' \31\
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\31\ ``Frequently Asked Questions,'' Internet Archive Wayback
Machine, http://www
.archive.org/about/faqs.php.
The Chairman. Thank you very much.
Professor Overholser, I've noticed an interesting thing in
reading local newspapers which are owned by large chains, that
if you scan most any part of the first section of the paper,
you see a story, the headline or the bold print, and underneath
you'll see, in tiny wording, ``New York Times,'' ``Washington
Post,'' ``Knight Ridder,'' ``Reuters.'' Almost totally
disappearing is any local or that newspaper-owned reporters
reporting on national media stories. Do you--can you comment on
that?
Professor Overholser. Absolutely, Senator. I think that
what you're observing is cost savings. Now, I do think it's
important that local newspapers bring national and
international news to a given community, and they're not likely
to have their own reporters abroad. Alas, it's all too true
that more of that news hole in that newspaper is taken up by
wire, even to the expense--at the expense of local news, which
simply is not being undertaken as much. And this phenomenon
that you're observing is true on a larger scale for a newspaper
like, for example, the Des Moines Register, would choose to do
extensive agricultural reporting, which was a costly
undertaking, but it was of national value. They are doing very
little of it. And that story plays out across the country.
Now, what you can do about that--I mean, I think we ought
to have a national commission that looks at the paltry quality
of local news, because it makes a difference. But that's, of
course, not immediately in your hands, except to the extent
that the FCC can make that worse by creating still more means
of these companies saving money, and dropping it to the bottom
lines, and not serving local needs.
I mean, I'm amazed to hear my colleague say that this
supposed ``golden age of American media'' means we have a
public that knows more about democracy than ever before. I
haven't seen the evidence of that.
The Chairman. Well, that leads me, Mr. Thierer, to one of
your statements--in your beginning statement, ``Regardless of
what the underlying business structure or ownership patterns
look like, the real question in this debate must be, `Do
citizens have more information and entertainment choices at
their disposal today than in the past?' '' Well, you regard--
you disregard the fundamental problem. We have media controlled
by major corporations in America, which leads to the usual
media caution, which leads to the usual media consolidation,
which leads to, as my friend to my right here often says,
``many voices and one ventriloquist.'' And we see that time
after time in news reporting, including an avoidance of
controversial issues. That's the nature of corporate America,
to avoid controversy, because they're only interested in one
thing, and that's the bottom line. So I disregard--I disagree
with your fundamental principle, when you say, Regardless of
what the underlying business structure of ownership patterns
look like. That, to me, is incredibly and extremely relevant in
this discussion and debate. And I'll be glad to hear your
response.
Mr. Thierer. Sure. Basically, I hear a lot of arguments in
this debate, what I classify--I would classify as, sort of, a
neo-conspiratorial puppet-master theory of mass media
domination. The idea that somehow a handful of guys in New York
or L.A. are puppeteering all media ideas or outputs or whatever
else, I find this notion to be absolutely absurd. And even if
there was any truth to this notion, that somehow a few guys
sitting in New York or L.A. were controlling all of our
thoughts, it's going to--they're going to be very hard-pressed
to do that. They're going to be hard-pressed to control the
people under them--the journalists, the editors. And, of
course, there are so many other checks on what they are doing.
All's it takes is one Drudge Report story to break news about--
that something is going fishy on--in a major media outlet.
The Chairman. Well, perhaps this--obviously, you
misconstrued my statement, but perhaps we should do a study,
for example, of the overseas presence of the major networks in
America today. It's well known that when CBS was acquired, the
then-CEO went all over Europe, ``You're fired, you're gone,
you're done,'' no more news bureau in Rome, none--reduced it
drastically in Moscow, take it out in London. This is true of
all the networks. When you look at the presence of reporting of
major television networks and reporters, the bottom line is
profit and loss. I'm not talking about controlling media; I'm
talking about profit and loss, Mr. Thierer. There's two
different things there.
And so the facts are facts. The facts are that, as compared
with the 1970s, the reporting of what's going on in the world
has been dramatically--I say dramatically--reduced for cost-
cutting reasons. And we'll do--we'll have some study, but, I
mean, it's just a fact. And maybe that's satisfactory to you.
Maybe that's fine with you. And I understand Cato's libertarian
views. But I believe that when the bottom line is the only, or
certainly the overriding, objective of any organization, the
days of Edward R. Murrow are long, long gone.
Mr. Thierer. Could I make a couple of quick responses----
The Chairman. Sure.
Mr. Thierer.--very briefly?
First of all, as you say, the facts are the facts. And the
facts are, we had far many more embedded reporters in Iraq for
this most recent conflict than we did during the previous
conflict or the Vietnam War or anything else. So regardless of
the profitability----
The Chairman. First of all, that's not true. We had more
reporters in Vietnam than we had in Iraq. But we had a new
concept, and that was embedded reporters; and that was for a
conflict. I'm not talking about for a conflict. And, by the
way, most of those are gone now. And I'm not talking about a
major conflict, which absorbs the attention of the American
people. I'm talking about everyday reporting of events that are
going on over the world, and that means news bureaus in
capitals of countries all over the world. They have been
dramatically reduced or eliminated.
Go ahead, please.
Mr. Thierer. For the major networks, I would agree that is
probably the case, because, of course, a lot of their news has
been cut as they face increased competition from cable and
satellite television news sources. Those 24/7----
The Chairman. They're establishing news bureaus over there?
Mr. Thierer. Well, they have, certainly, a fair amount of
presence across the world. Whether or not they have a bureau in
every major capital is a different story. Of course, they're on
the move so much that they are reporting from a lot of
different regions and countries.
The Chairman. Well, we just have a fundamental difference
of opinion. And I tell you, mine is shared by almost every
objective journalist or expert on journalism in America.
Mr. Compaine, I also find it interesting that, quote, ``My
findings lead me to an observation and a question for
policymakers. The observation is that, while Congress certainly
has the prerogative, it cannot micromanage, effectively,
television and radio regulation.'' Micromanage by setting an
ownership cap? I'm sorry, but, again, we have a very different
view of the role of Congress and our oversight responsibilities
of tens, if not hundreds, of billions of dollars worth of
spectrum and how it's allocated and how it's used. So, you
know, I don't believe we've been micromanaging at all. We are
responding--we are responding--to an unprecedented number of
our constituents, of American citizens, who contacted the FCC
at the time of this rulemaking, expressing their deep and
abiding concern about media consolidation. That's what our job
is.
There has never been more comments to the FCC on any single
issue than there was on media consolidation. And for us to
consider the issue of overall media ownership, and call that
micro-managing, we just have a different view of what the role
of Congress is.
Mr. Compaine. Senator, I wasn't suggesting that you
shouldn't be having hearings or setting an overview. I just
think that things are moving so quickly that today's 39 percent
might not be the best number in four or 5 years, and that
Congress isn't set up to come back every three or 4 years to
look at that.
But I want to--I think I agree with you on some--well,
maybe I shouldn't--maybe not; we'll see. I think that on--the
thing about the--all those letters to the FCC, part of it is--
it's a little bit like the question, ``Do you still beat your
wife?'' If people are asked the question, ``Should the FCC
allow greater media concentration,'' I mean, everyone's going
to say no. And I think a lot of those responses were part of
that reaction, that--you know, ``We don't want more
concentration.'' And it's a much more complex question than
that.
My feeling is that we should be getting all this spectrum
back from the broadcasters, as I know you wanted to impart. We
have much greater uses for it. When so few people are actually
using over-the-air, I think that--let's, sort of, say, ``Look,
we've had all this trouble trying to get the public interest
standard, what is it and how do we enforce it and''--why don't
we just somehow say to these folks, ``Return your spectrum.
We'll let you stay on cable. We've got much better uses for
this stuff than what you're doing for it. And you'll pay for--
you know, anything that you do keep, you've got to pay for.'' I
mean, this----
The Chairman. You just described my legislation, which
was----
Mr. Compaine. Well----
The Chairman.--voted down, 13 to nine, and this----
Mr. Compaine. No, I know. And I was----
[Laughter.]
Mr. Compaine. That's why I say I think I agree with you
more than----
The Chairman. I thank you. I thank you, Mr. Compaine. I
really do.
Mr. Thierer, let me come back to you, one other point, real
quick. And, look, even though we disagree, we're glad you're
here. And we think that your views contribute enormously to
this debate.
Under the rules the FCC issued last year, Business Week
stated, quote, ``Even in midsized cities such as San Antonio,
for instance, one company might own the leading newspaper, two
TV stations, eight radio stations, and several cable
channels.'' Does that concern you?
Mr. Thierer. My general response to these sorts of
questions is simple, that there's, sort of, an ex-ante/ex-post
question in this debate, which is, Do you want preemptive,
prophylactic forms of regulation governing these issues, or do
you prefer to go with a typical standard we apply to all other
industries in this country for market-power concerns, which are
the antitrust laws, which seem to work fairly well in these
other areas? I would prefer the former--the latter, rather,
where we basically look at these issues and say, if there is a
serious market-power problem that creeps up after we allow the
rules to disappear, we'll handle it then. I think that's the
better way to approach this than--instead of attempting to
honestly, as Mr. Compaine says, micromanage the exactly right
number. We don't know what the exactly right number is. Is 102
cable channels too many? Too few? I don't know.
The Chairman. Well, I would argue that nowhere in history
have you been able to unbundle once the merger or consolidation
has been completed in the media, that I know of. But, anyway--
--
Professor Baker, do you have a comment on that?
Professor Baker. Actually, I think, with enough political
will, de-bundling is possible, but it's not likely with the
huge conglomerates. But the Supreme Court approved the FCC's
forcing the sale of some newspaper/television combinations at a
time where it was more interested in diversity than it is now.
But the general point is absolutely right. We ought to be
concerned with diversity in the market, like in San Antonio,
which could have been incredibly limited under the FCC's rule.
Also, as to the antitrust versus other types of regulation,
antitrust law is designed to limit the situation where one
company can exercise control over price. Even in situations
where one company can't exercise control over price, like the
price of advertising, it can exercise control over the content
that most people in that area are going to receive. And when
that's the case there should be a concern. And that's the
reason you need different rules in the communications realm
than the general antitrust concern with power over price.
That's even reinforced by the fact that concerns about power
over content, power over voice, is integral to our notion of
democracy. So I think antitrust, though I have no criticism of
it, is an inadequate standard in the communications realm.
The Chairman. Thank the witnesses.
Senator Dorgan?
Senator Dorgan. Mr. Chairman, thank you very much.
This has been an interesting discussion, and has raised a
lot of questions.
First of all, have any of you ever planted corn with a
tractor?
All right. Let me read you something the Farm Bureau says
about radio ownership and farming, because it goes directly to
the question that we're raising today. They say that, ``The
trend today in radio is to restrict and eliminate timely
weather information, local news, up-to-the-minute market
reports, and so on, affecting production agriculture. The trend
today, instead of improving and maintaining these services,
many radio stations are eliminating or curtailing farm news.
And this relates, in large part, to media ownership rules,
which allow large ownership groups to acquire multiple radio
licenses.''
Now, in point of fact, if you're a farmer out there, you're
wondering about the weather, you're wondering about the
markets, and somebody a thousand miles away buys up that local
station, puts in a homogenized bit of music and fires the local
newscaster. And the question is, Is that in the public
interest? It might be part of the market system, but it
certainly is not in the public interest. So one cannot say
there are more choices, there's more competition, and good for
everybody.
Now, let me just make a couple of comments, then I have a
couple of questions.
Part of the argument here, Mr. Chairman, has been
interesting. The circumstance of restricted choices has been
described as a circumstance of expanded opportunities. Mr.
Overholser, you suggested certain restaurants--we have 13,000
McDonald's restaurants in the country. Now, if those
McDonald's, tomorrow, announced they have one new salad on the
menu, and we were having this discussion about restaurants and
menus, some of you would probably argue that there are 13,000
new choices for Americans. It's only one salad, of course.
Right? But you'd be here arguing that, ``Look at the diversity,
look at the competition, look at the new things, look at the
expanded opportunities,'' 13,000 new menu items. Nonsense.
And, Mr. Thierer, I think you've contributed to this
discussion. I disagree strongly with you, but you contribute by
being here. I appreciate that. But I must say this, I have
always thought that the conservative dogma, the conservative
doctrine, is one that embraces and nourishes and refreshes the
notion of competition. And, in fact, I think you're arguing
exactly against that point, which is surprising.
Now, I'll give you all a chance to respond to all of that.
First, let's respond to the question of corn. Since you've not
planted corn, you won't be too concerned about farm radio
broadcasts. But do you accept the fact that these are
diminishing all across the country because of changes in
ownership and increasing media concentration?
Mr. Compaine. I would--my wife is from Kansas, and I've
seen a lot of corn. But I would suggest that needs a lot more
investigation, because farmers were in the lead back in the
early 1980s in using online services, from the Agriculture
Department and others, in getting information. Long before the
Internet, the agricultural community were buying Radio Shack
TRS-80s before most people had these. I suspect that many of
those farmers are getting much more specific information than
they can get from that radio report by going online to specific
sites that are giving them exactly what they need for even a
smaller geographical area and perhaps for the specific kind of
corn or a specific brand.
So there may be some the--some of what you say, but I think
most of it is just because farmers have found a better source
of information.
Senator Dorgan. But Mr. Compaine, you're making an excuse
for diminished services farmers are complaining about, so I
don't understand that.
Let me make one other point, if I might, and then ask
some--just a couple of questions.
Jim Goodman has appeared before this Committee a number of
times. He's a broadcaster from North Carolina. And he talks
about this question that some of you have raised about
increased competition, increased diversity for viewers. And,
you know, for example, there is, perhaps, increased competition
between a program in which you see people eating maggots
competing with a program of people wife swapping. I'm not sure
those exist in exactly the same timeframe, but they're both on
network television. And so that competition now exists. And Mr.
Goodman appears before this panel, I think, on two or three
occasions--he's a television owner, and he says, ``You know
something? I can't keep these programs off my television even
if I think they're not appropriate because I am told from on
high that, `You are to broadcast those programs. If not, you'll
lose the opportunity to have your affiliation with the
network.' ''
So, you know, this issue of competition and local ownership
versus centralized control is one, I think, that's well
documented by testimony at the very table that you're now
sitting.
So let me ask a couple of questions. Then I have
colleagues, I know, that are anxious to ask question, as well.
The point that you made, Ms. Overholser, about better
journalism, you know, I, frankly, don't think we can do much
about that. But I happen to think increased competition leads
us in the other direction. If you have, for example, in one
community, as we have in North Dakota, all of the commercial
radio stations being purchased by one company, I would ask any
of you, Does that advance the interest of increased choices for
consumers--better news, better information--or does it retard
those interests, in your judgment? I mean, this is not theory;
I'm just describing the case of Minot, North Dakota. The FCC
allowed one company to buy all the commercial radio stations in
that community. Does that advance the interest, Mr. Thierer?
Mr. Thierer. Actually, I know Minot, South Dakota, if you
check it up on the--North Dakota, I'm sorry--if you check it up
on the Well Connected site, you can find that there are a few
other owners of media outlets in that community.
Senator Dorgan. All the commercial radio stations----
Mr. Thierer. Oh, on the commercial radio stations--I'm
talking about broadly of other types of media outlets.
Senator Dorgan. We're just talking past each other. I'm
talking----
Mr. Thierer. But in a very small----
Senator Dorgan.--about commercial radio stations.
Mr. Thierer.--community, there might be a situation where
one owner does own most of the media outlets, depending on the
size of that community.
However, going back to your farming question, to bring this
full circle, I come from a family of farmers in Illinois, and
when I was home--when I was home recently visiting some of
them, I saw the most amazing sight while driving out of the
state. I was driving past a farm where there was actually a
satellite dish, for whatever reason, affixed to an old
dilapidated outhouse. Now, I don't know, I'm hoping they're not
watching satellite television in there. But the point is, is
that it was a great sign of the times, that there was new
technology in an old agrarian setting. And if you go out and
you watch farmers do their work, you see them on cell phones,
you see many of them have pagers now, and Blackberries. It's an
amazing technological revolution that's happening in the
farming community.
Do they have enough farming news in all local newspapers
and media outlets today? I don't know. Farmers are one of many
constituents of news and information, and they're going to have
to compete with others. And, of course, farming is on the
decline, relative to other types of industry. So we have to
take those realities into account, in terms of what's reported.
Of course a hundred years ago there was more agrarian
reporting. There was more agriculture, in relative terms.
Senator Dorgan. Why should they expect to have to compete
with others if they are the customers of a radio station in a
farming community that has decided that, ``We're now owned by a
company a thousand miles away, and we want to do voice tracking
and pour homogenized music over that radio station.'' Why is
that not dis-serving the very consumers for which we gave the
license for that radio station to be on the air?
Mr. Thierer. But if there is--certainly there must be some
sort of an audience for those stations, or else they would go
off the air. Because, quite frankly, the media is a business,
and a lot of people live in denial about that. The only way
that that commercial station's going to remain viable in that
community or any other is if it has listeners. Advertisers
aren't going to shower these companies with dollars unless
there's an audience.
Senator Dorgan. Well----
Mr. Thierer. Somebody must be listening.
Professor Overholser. I wonder if I can make a quick
response, Senator Dorgan, to your good point, which, of course,
is that you all can't keep, you know, profit pressures from
causing great diminishment of journalism. But I mention it
because I think is important to keep this distinction in mind.
A proliferation of outlets is what everybody keeps citing to
say we're good, we're better than ever, when, in fact, a
decline in journalism is what we need to keep in mind. And I
believe that the FCC ownership rule changes enhance the
opportunity for businesses to draw still further away from
their local communities.
And if you ask me, the remarkable response that you all got
from your constituents after the FCC rule changes came in such
degree and at that moment precisely because there are, indeed,
people for whom the answer to your question, ``You ask anyone,
do you really want greater consolidation,'' they'll say no.
Indeed, there were quite a few people, including owners of
newspaper companies and television companies. And the coverage
of those rules was very poor. There's a marvelous Columbia
Journalism Review article about just how poor it was. And is it
a coincidence when the owners wanted these rules changes? So I
think there is an important connection.
Senator Dorgan. The Chairman indicated--and I'm pleased he
did--that the FCC rules that have now been remanded back, at
least in part, would have allowed, in the largest cities in
this country, one corporation to own three television stations,
eight radio stations, the newspaper, the dominant newspaper,
and the cable company itself. I think that's nuts. And I think
to make the case that that somehow is moving in the public
interest is absurd. This issue that there is this proliferation
of opportunities for the American people--go to the news sites
on the Internet, and I'll tell you that the most visited news
sites on the Internet are owned by the same dominant companies
that are on broadcast television, that--there are only five or
six--essentially five large combines here, and there are a
handful of people that are now determining what the American
people see, hear, and read. And a handful of people decided
that John McCain should not be heard by 40 million people who
don't have cable television. Shame on them, in my judgment. And
I hope----
The Chairman. I agree.
[Laughter.]
Senator Dorgan. Well, I knew John McCain would agree,
because he gave a great speech, and I wish he'd have given it
at our convention. But----
[Laughter.]
Senator Dorgan.--and I wish it had been--I wish it had been
televised there.
But the fact is, this is a very important debate. Mr.
Chairman, you've been great in doing these hearings and
allowing the American people to have at least some glimpse into
this controversy. I appreciate that.
And thank the witnesses for being here.
The Chairman. I thank you.
And our two colleagues have been very patient. I would
point out, too, that NPR and PBS carried the conventions in
their entirety, and their ratings were very good. It's
interesting.
Senator Nelson. And so did C-SPAN.
The Chairman. And C-SPAN--yes, C-SPAN, as well. Yes.
Senator Fitzgerald?
Senator Fitzgerald. You can let Senator Nelson----
The Chairman. Senator Nelson?
STATEMENT OF HON. BILL NELSON,
U.S. SENATOR FROM FLORIDA
Senator Nelson. Mr. Chairman, I wish you'd have given that
speech at our Boston convention, as well.
[Laughter.]
Senator Nelson. Senator Dorgan, I think it's nuts, too,
where you get that kind of concentration in a market. And I
want to give you an example of that. I have an example of a
tale of two media markets in Florida. The owners, as we were
considering this media ownership rule and the cross-ownership,
naturally, had come and made the arguments. Well, look at the
Tampa market. Media General owns the Tampa Tribune, and they
also own one of the prominent stations there, the NBC
affiliate, Channel 8. And they pointed out the advantages of
sharing the newsroom and all of that, which is a legitimate
argument. But the big difference between the Tampa market, on
this issue of cross-ownership, and the Orlando market is that
the Tampa market has a vigorous competition between two
newspapers; not just the one newspaper that also owns the
television station--the Tampa Tribune--but a vigorous
competition with the St. Petersburg Times; whereas, the Orlando
market, the dominant newspaper, by far, is the Orlando
Sentinel. If the Orlando Sentinel--the Chicago Tribune, in
fact, owned news stations, such as the television stations,
then I think you would start to move to a monopoly position
away from more competition. And I just simply don't think that
that's healthy.
But let me ask you about a specific that has come up here
today. The majority of the FCC and Mr. Compaine and Mr. Thierer
seem to think that the Internet provides a multitude of voices
to compete with the media giants. The Third Circuit considered
this, and they rejected that.
Now, are you aware--could you share with the Committee--of
any independent websites that compete in this way? For example,
do you know of any independent Internet site that has had the
resources to cover the war in Iraq?
Mr. Thierer. Of course not, because a lot of those sites
are small upstarts. They're not going to have those resources.
In fact, the companies that have the resources are the very
large companies that many people obviously on this Committee
would like to break up. And you can't have it both ways. You're
going to have some companies that are going to be quite large,
and some that are quite small that play more of a marginal
role. But the economics of America's media marketplace are not
those of a corner lemonade stand. It takes a lot of scale,
sometimes, to provide the resources and the types of services
that we want to cover a lot of those things. At the same time,
there can be a very important role played by bloggers on
websites or independent news sources. I mean, think about what
the Drudge Report did, whether you like it or not, regarding
the impeachment of President Clinton. I mean, that is
important, and that changed history. And so there are other
examples like that, and there are going to be countless more as
new technologies evolve in the future. That's my opinion. The
Internet doesn't change everything, at least not yet, but it
changes a lot.
Mr. Compaine. But, if I may, there--I've looked at articles
about the Middle East on Al Jazeera, the Times of London, the
Guardian, the Times of India, which is one of the most accessed
news sites in the United States. So they're not necessarily
U.S. companies, but that should be an attraction, that we can
get different perspectives. You get a very different
perspective reading Al Jazeera's English-language news reports
than you would getting any American news report, likely. So I
think that there are far more sources there.
Senator Nelson. You know, I agree with that, and I
celebrate that fact, that we have that information at the
access of our fingertips. Someone like you would go there. But
the normal American consumer would not necessarily do that and
they get this steady diet of information from their local
market. And if you consolidate that, and you lessen the
competition, then it just seems like we're arguing against--I'd
like to hear Ms. Overholser----
Mr. Thierer. But do they only get their news from local
markets? And what is a media market today? Is Tampa the
relevant market? Is Orlando the relevant market? Or are Tampa
and Orlando citizens also receiving a lot of news and
information from other national sources? Again, FCC statistics,
88-and-a-half percent of Americans currently voluntarily open
their purses and wallets and purchase cable and satellite
television network subscriptions, even though they have free
over-the-air television choices at their disposal. Pretty soon,
that number is going to creep up and up and up, and we'll be
looking at 95-97 percent penetration. At that point in time, a
lot of people have voluntarily said, ``Hey, I'm willing to take
other sources of news. It's relevant news.'' And then a lot--
more and more people online--that's new type of information.
It's not local, it's not national; it's a little bit of both.
It can be local and national.
Professor Overholser. I agree with much of this. In fact, I
think the question of who competes with whom is changing. But I
would like to respond to your good point, Senator Nelson, about
the competition in a given city, for example, or the Tampa Bay
area. I mean, you know, when I first covered the Colorado
legislature 35 years ago, I would sit around that table at the
legislature, and there were radio reporters from around the
state, and there were reporters from newspapers around the
state, and there were reporters from the AP and the UPI, et
cetera, et cetera. And there is a loss in that particular
decline. There may be bloggers at the table in Denver, but what
I'm talking about is the kind of--it is expensive to produce a
report, and people don't just go sit at the legislature and
produce an edited report that the public needs to know.
Now, in the Bay Area, you've got the St. Pete Times, which
is owned by the Poynter Institute for Media Studies, which
doesn't have to ask more than 10 percent net income before
taxes. It's a terrific media competition. And no doubt, there
are bloggers and everybody else. But who--you know, we really
do need to worry about whether we're protecting this stream of
reporting that the public needs. And it's great we have this
diverse blogging community. And it makes a difference. It will
improve standard journalism sources. But I don't think, when we
talk about putting all the local media in essentially the same
hands, that we should blithely think that that won't make a
real difference. It will make a real difference. You have one
less television reporter, it makes a difference. People notice
things in a given community; and if you don't have reporters
noticing things, it won't be noticed.
Senator Nelson. Mr. Baker, did you want----
Professor Baker. I agree with that. I mean, out--the
Internet's great. And for some people, reading Al Jazeera could
be great. I'm not sure what percentage of the population of
Tampa does that. My guess is, it's not so large. And my guess
is, Al Jazeera doesn't report much about what's going on in
Tampa. And if people want local news, that's just not going to
provide it.
The sources of local news that the Internet provides have
not, in any study I've seen, been demonstrated to be of any
significant amount. There's local discussion. Internet is
great. But you need resources to produce good news, the type of
journalism society has, and that's going to come from media
entities.
What we need is a structure that will increase the
likelihood that the people at the heads of entities are willing
and able to put resources into journalism. And a
conglomerated--a consolidated structure is not the structure
that's going to do that. I think that's the point that--I'm
very pleased, I think the Senators understand that well. It's
not surprising that the Senators would understand the media
quite well, but I think you've shown that very clearly. But
it's of vital importance that we have people that are willing
to put resources into production of good quality journalism.
Senator Nelson. Thank you, Mr. Chairman.
The Chairman. Senator Fitzgerald?
STATEMENT OF HON. PETER G. FITZGERALD,
U.S. SENATOR FROM ILLINOIS
Senator Fitzgerald. Thanks, Mr. Chairman.
Mr. Thierer, I wanted to ask you where you're from in
Illinois.
Mr. Thierer. Born in Peoria. I know how it plays in Peoria,
Senator.
Senator Fitzgerald. Oh, that's great. That's great.
Mr. Thierer. Family's in the Roanoke area.
Senator Fitzgerald. Well, fabulous, and welcome to the
Committee.
Mr. Thierer. Yes.
Senator Fitzgerald. And please say ``Hi'' to your family.
Mr. Thierer. I will.
Senator Fitzgerald. I tend to believe that we really don't
have any problems with concentration in media at the national
level. As Mr. Thierer said, 88 percent of the households
subscribe to cable or satellite television. We have all sorts
of national news outlets in print media and in broadcast media,
and there are almost an infinite variety of choices on the
Internet. However, if you go into local markets, the one place
I do see concentration is not so much with television or radio
stations, although there could be a few small markets where one
owner owns all the radio stations in town. But I see
concentration among small-monopoly local newspapers. And if I
think of cities around Illinois, we really only have two
vigorous newspapers in Chicago. If I look at Peoria, we have
the Peoria Journal Star. They have a monopoly in Peoria. The
Rockford Register has a monopoly in Rockford. The State Journal
Register has a monopoly in Springfield. The Decatur Herald has
a monopoly in Decatur. There's a Champaign News Gazette,
there's a Bloomington Pantagraph. There's one newspaper in each
of those towns, and they have a monopoly. And they have a
monopoly on the local, you know, political endorsements.
Fortunately, all those papers I mentioned endorsed me when I
ran for election.
[Laughter.]
Senator Fitzgerald. They have a monopoly on that.
Candidates certainly have to go through that. If you're a car
dealer in the town, and you want to advertise your latest
sales, you've only got one place you can go buy ads,
essentially: your local newspaper. Now, that's why many
investment analysts will always tell you, if you want to own a
newspaper, own one where it's a monopoly, in a small town.
Never own a second newspaper in a town. When there are two
newspapers in a town the size of Peoria, rarely can they
survive. Typically, one of them is run out of business. And I'd
bet if you go back far enough, there were more than one
newspaper in all those towns I've mentioned.
But nobody seems to be mentioning this problem. And I think
this is an obvious--if some of our panelists are for
regulation, why not do something about local media monopolies?
Shouldn't they be outlawed?
Mr. Compaine. This is something that I've been tracking
for--back to my dissertation in 1978. There are a couple of
responses. One is that these papers do have other--the local ad
dealer--the local car dealer can use direct mail. Direct mail
has been one of the most thriving forms of competition to
newspapers. You know, whether it's hung on the door--all sorts
of approaches. Eighteen percent of our advertising is spent on
direct mail, still.
It's an economic problem. The newspaper industry is a
declining industry. In 1930s, we sold enough newspapers for 1.3
newspapers for every household. Now we sell less--less than
half the households buy a newspaper. So it's a matter of
economics. As you say you can't support--there aren't enough
advertisers, because advertisers are now advertising on cable--
local advertisers--and direct mail, there are weekly
newspapers--there just isn't enough advertising to go around to
support multiple newspapers. The only reason papers today are
surviving even at the lower level of investment--and the reason
they can exist is because they don't have direct competition.
But they have competition----
Senator Fitzgerald. And they're pretty good businesses,
aren't they----
Mr. Compaine. Well, they are, because----
Senator Fitzgerald.--if they have a local monopoly?
Mr. Compaine. They are, exactly, but only because they're
the only one in town. They don't have price--much pricing
competition. If you look at the price of a newspaper today in
real dollar terms, it's the same as it was 20 or 30 years ago.
From the consumer's point of view, they can't raise prices the
way monopolists can because people just aren't that interested.
Despite the fact that the surveys say people say they get most
of their local news from the newspapers, newspaper circulation
in every one of your towns all around the country is declining,
not only relative to households, but in absolute numbers. And
that says something about----
Senator Fitzgerald. All right. For the panelists who favor
some kind of controls to prevent concentration in media, are
you at all concerned about concentration at the local level, or
is it--should we just ignore it because it's only local?
Professor Overholser. Well, that's my primary concern,
Senator. I think the local level--I agree with you, on the
national level we probably have less to be worried about. On
the local level, I'm quite concerned. I don't see it being
economically likely that we'll start having additional numbers
of newspapers. But if you have a local newspaper and a decent
local television news and a local radio reporter, and you've
got people blogging and carrying on, you'll have more vitality.
I would have--I would--I mean, not only----
Senator Fitzgerald. Should we do something, though, to try
to----
Professor Overholser. But what would you do?
Senator Fitzgerald.--prevent these--well, that's what I'm--
--
Professor Overholser. Create new----
Senator Fitzgerald. I mean, I don't favor any regulation of
the media at all, really.
Professor Overholser. See, what I think is that what the
FCC did was make it more likely that there would be less
competition at the local level, and that, I think, is ill
advised. We already have a problem with lack of competition.
And if those newspapers, by the way, which we declare to be a
declining business--we're not demanding two-and-a-half times
the profits that most industries demand--they might actually
reinvest in their news so that, for example, the St. Pete
Times, whose circulation is growing considerably--many
newspapers that actually reinvest in their newsrooms are
finding that good journalism is good business. But, alas, the
notion that it's a dying industry, and treating them as a cash
cow, is contributing to the paucity of local news in many
communities.
Senator Fitzgerald. Professor Baker?
Professor Baker. National concentration is a problem in
terms of power over the public sphere about national debates,
issue agendas. But local concentration is an immediate problem
of people getting inadequate nourishment of local democracy.
And so, in some ways, that's the more pressing of the two,
though both are important.
The policies of the government have been directed toward
newspapers. And the Newspaper Preservation Act was an attempt
to create more competition, to keep newspapers alive. It was a
newspaper-directed regulatory policy that made an exception and
treated them differently than antitrust laws do, generally.
Newspapers don't need to be a dying industry. In some
countries--in Japan and the Scandinavian countries--partly due
to government policy, the readership of newspapers is almost
four times what it is in the United States.
The FCC rules could have an affect on this. Newspapers, as
pointed out, when they invest in journalism may not maximize
their profits, but they do get more readers. You can expand the
readership of a local paper by having a better paper, but it's
costly to do so, which is the reason why some corporate owners
have decided they would rather have it be a dying industry,
they'd rather cut their circulation.
If you allow consolidation, the likelihood of that type of
judgment occurring more and more increases. There's also other
effects--the cross-ownership of a broadcaster and a paper, the
ownership of the television station and the one newspaper in a
town, not only increases huge power; the tendency is for the
reporters at the newspaper to have to take on new jobs, which,
as was pointed out, means they can do less journalism, so you
decrease the quality of the most important of the local news
sources: the newspaper. At the same time, you reduce the
overall expenditure of resources on journalism when you combine
the broadcaster and the local newspaper.
So there are things to be done. There could be policies
that were solely newspaper directed that would be perfectly
constitutional and would make at least debatable sense. I've
argued for some. But those aren't on the table at this point.
But the things that FCC has--was doing was taking away
regulations that made perfect sense in terms of maintaining
both quality at the local level and competition at the local
level.
Mr. Thierer. Senator, if I could make one quick point,
building on your last argument about newspapers that--it is
true that newspapers are in relative decline as an industry,
but, by all the statistics the government currently collects,
other forms of periodicals--whether they be weeklies,
semiweeklies, various types of journals, magazines,
newsletters--are all increasing; and, in some cases, increasing
quite rapidly. In fact, I know in many communities you go home,
and it's not just the local big newspaper you get, you
sometimes get a free weekly reader sometimes. I get the McLean
Herald out in my subdivision. So there are other forms of news
and information, printed information, that are competing with
newspapers; not keeping them traditionally to be just
monopolies, but maybe quasi-monopolies. But the better news is,
of course, you can go to other communities and find news now on
the Internet, and download other types of information. Not all
of it's going to be about your local community, but, again,
some of that is being driven by a natural organic shift in our
society away from local news toward national sources. I'm not
sure what's made that happen. I don't know how the USA Today
went from nothing in 1982 to the world's most popular paper
today. I don't read it, I don't like it; it just happened. But
that's the reality. Forty-nine percent of The New York Times
delivery is now out-of-market to the doorstep or to business.
Professor Overholser. That happened on the backs of once-
great newspapers, like the Des Moines Register, also owned by
the Ganette Company.
[Laughter.]
The Chairman. I thank the witnesses. This has been helpful.
I think it's an issue, as I mentioned in my remarks to Mr.
Compaine, that has a great deal of interest around America, far
more than many of us had expected when we took up this issue,
because some of the aspects of it are rather arcane.
I remain concerned about continued consolidation. I think
that radio is the miner's canary. And yet I am also confident
that the National Association of Broadcasters, who refuse to
allow even low-power FM stations to come into being--I'd be
interested, sometime, in your views on that, Mr. Thierer--the
blocking by the National Association of Broadcasters of low-
power FM stations will probably prevail here again. But we
won't give up the fight, because sooner or later people are
going to be very disturbed at the situation as it is evolving,
which, as I said, I think the 1,200--going from a hundred-and-
some stations to 1,200 stations in just a few years is ample
evidence of what can happen in other aspects of the media.
I thank the witnesses for being here today, and I thank you
for your input. And you've contributed, and I appreciate you
taking the time and effort to prepare your statements, present
them, and respond to our questions--in your case, Mr. Thierer,
insults, as we----
Mr. Thierer. I'm used to it.
[Laughter.]
The Chairman. So we look forward to continuing this debate.
You've all contributed, and I appreciate it very much.
This hearing is adjourned.
[Whereupon, at 11 a.m., the hearing was adjourned.]