Media Regulation

If we were to believe the rhetoric of some in Washington and various pro-regulatory groups like Free Press, you’d think we still lived in the 1800s and that a handful of newspaper barons like William Randolph Hearst and Joseph Pulitzer still dominated our media landscape. Just today, in fact, Sen. Byron Dorgan (D-ND) introduced a “Resolution of Disapproval”–largely at the urging of Free Press and other regulatory advocates like Parents Television Council–that would overturn a half-hearted media liberalization effort undertaken by the Federal Communications Commission last December.

That FCC effort dealt with just one of the myriad regulations governing media structures in this country: the newspaper/broadcast cross-ownership rule. The newspaper/broadcast cross-ownership rule, which has been in effect since 1975, prohibits a newspaper owner from owning a radio or television station in the same media market. “No changes to the other media-ownership rules [are] currently under review,” FCC Chairman Martin noted at the time, leaving many TV and radio broadcasters wondering when they will ever get regulatory relief.

In a New York Times op-ed released at the same time as his December proposal, Martin argued that “in many towns and cities, the newspaper is an endangered species,” and that “if we don’t act to improve the health of the newspaper industry, we will see newspapers wither and die.” Moreover, he wrote, “The ban on newspapers owning a broadcast station in their local markets may end up hurting the quality of news and the commitment of news organizations to their local communities.” In other words, newspapers need the flexibility to change business arrangements and ally with others to survive.

Exhibit 1

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Not quite, says my boss Ken Ferree, president of PFF, in testimony this morning before the House Committee on Energy and Commerce Subcommittee on Telecommunications and the Internet. Even though there’s a heated battle going between large sports leagues and video distributors over where sports programming sits on the dial and what the price is charged for it, the bottom line is that there is no reason for the government to be called in to regulate this game. As Ken argues:

there are powerful forces acting on both sides of the bargaining equation. On the one hand, sports programming networks own extremely valuable content, which, generally speaking, distributors wish to carry. On the other hand, program distributors are under tremendous pressure to control consumer rates; limiting programming costs is perhaps the most direct means of achieving that end. The market, not regulatory authorities or appointed arbitrators, is best positioned to balance those interests.

Read Ken’s entire statement to the Committee here. [And there’s more coverage of the hearing over at Broadcasting & Cable.]

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Business Week media columnist Jon Fine penned a “Requiem for Old-Time Radio” this week that illustrates the troubles facing one of America’s oldest media sectors. Fine expresses the same sort of reverence and nostalgia I often do when talking about what radio meant to some of us in our youth:

“I remember what we now call “terrestrial radio” with ridiculous fondness. I recall huddling with it long past bedtime, the volume set low, hoping to hear something I loved. Thus the truism of how radio is the most intimate medium: You’re in bed with the lights out, the music and the DJ’s voice going straight into your brain, the images created are yours alone.”

Radio really did inspire the imagination of a entire generations like that in the past. But, as Fine notes, those generations got old, and so did radio. “Realities of the music world—the explosion in both expression and availability, first on independent labels and now everywhere, thanks to the Internet—began overtaking commercial radio stations well over 20 years ago.” Indeed, as I documented in part 5 of my “Media Metrics” series, the competition for our ears has never been more intense:

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In the previous installment of my ongoing “Media Metrics” series, I highlighted the radical metamorphosis taking place in the market for audible information and entertainment. I showed that this previously stable sector now finds itself in a state of seemingly constant upheaval, especially thanks to the blistering pace of technological change we are witnessing today.

In this sixth installment of the Media Metrics series, we will see how a similar transformation has taken place in the video marketplace over the past three decades. Again, using the analytical framework I presented in the first installment, we will see that today we have more choice, competition, and diversity in every part of the video value chain. [You might also be interested in reviewing the third installment in this series dealing with advertising competition and the fourth installment dealing with changing media fortunes.]

Kenneth Goldstein of Winnipeg, Canada-based Communications Management, Inc., has put together a set of enlightening television value chains that compares the state of the marketplace in 1975 to present.

Exhibit 1

Exhibit 2

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I’ve covered this before as part of my ongoing media DE-consolidiation series, which aims to show how media markets are far more dynamic that critics care to admit, but Time Warner has finally made the split off of its AOL division official. Again, to appreciate the significance of this shakeup, one must recall that when this marriage was struck back in 2000, media critics where in full-blown Chicken Little mode over the deal. Critics claimed the AOL-Time Warner deal represented “Big Brother,” “the end of the independent press,” and a harbinger of a “new totalitarianism.”

It was all complete nonsense, of course, but it was all too typical of the sort of irrational emotionalism that characterizes debates over media policy in this country. I’ve been doing my best to deflate some of that hot air with my ongoing “Media Metrics” series of essays, which illustrate exactly how much better off citizens are today than ever before in terms of the media options at their disposal. [1, 2, 3, 4, 5] And this ongoing “Media DE-Consolidation series” has shown that there are just as many major media marketplace crack-ups as their are build-ups. It’s a very dynamic marketplace regardless of what the critics say.

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In the first installment of my Media Metrics series, I presented an analytical framework that can be used to evaluate the state the media marketplace and specific media sectors. I also argued that within each segment of the media value chain (Content options >> Distribution options >> Receiving options >> Storage options) we see more choice, competition, and diversity than ever before in human history. As this fifth installment of the series will show, nowhere is that fact more evident than in the market for audible information and entertainment, which has undergone radical transformation over the past decade.

For most of the past century, the audible information and entertainment sector was generally thought of as broadcast radio, the recorded music industry, and the live music business. It was a fairly stable industry that did not witness business model-shattering type changes. For radio, AM gave way to FM. For recorded music, vinyl gave way to tapes and CDs. And live music simply found larger (and more) venues.

Today, however, stability has given way to volatility. This entire marketplace is in a state of seeming constant upheaval. Everything has changed and continues to change at a rapid pace as “disruptive technologies” fly at us with increasingly regularity. Old business models are breaking down, and new ones are multiplying. Long-standing industry players are shedding assets or even disappearing as underdogs rapidly enter the sector and become big dogs overnight. You want a textbook example of Schumpeterian creative destruction in action? This market is it.

Exhibit 1

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