“In recent months, the Federal Communications Commission (“FCC”) has signaled that, after more than two decades, they are open to revisiting the outdated rules that govern the local ownership of radio stations. Because of this unique opportunity, our industry, working with the National Association of Broadcasters (NAB), undertook a project to develop a radio industry proposal that could be presented to the FCC ahead of its 2018 quadrennial ownership review to help frame the next generation of these rules.
“Months of work by NAB board members and staff recently culminated in the NAB’s proposal to modify the current rules, which was sent to the FCC’s media bureau chief on June 15. Prior to its submission to the FCC, this proposal had been developed and vetted by a special committee of the NAB Board formed for this purpose, as well as by the full radio board itself. At both the committee and board level, the proposal to revise the ownership limits was debated and voted upon openly, and, at both levels of review, it passed with a substantial majority of support (it bears clarifying that what some have pejoratively characterized as ‘a faction’ was in fact a substantial majority).
‘As we believe this is an issue of paramount importance for the future of the radio industry, we have taken an active part in these discussions, and, like others, we have further studied the issues involved so that we may come to a carefully considered decision. We wanted to share our conclusions in this regard, in the hope that it helps to clarify the public dialogue on this topic. To be clear, we are fully supportive of and have endorsed the NAB proposal.
“It might be helpful to start with a little history as to why these rules exist. Regulation of public airwaves emerged in the 1930’s out of an effort to manage interference across the radio spectrum. Broadcast media ownership rules were introduced in 1940: the driving force then, as it has been for the many modifications that have taken place in the last 80 years, was the government’s desire to ensure that no one entity could exert too much influence over the flow of information, either nationally or in a single community.
“Reflecting the dynamic nature of media competition, these rules have undergone several modifications over the eight decades of their existence, each time to relax common ownership limits to reflect the competitive impact from changing technology. The proposal that the NAB sent to the FCC is simply the latest logical development in a conversation that dates back to 1940 and which, for the past eighty years and in each modification, has only been moving in one direction.
“The current numerical ownership limits were established by the Telecommunications Act of 1996. In the 22 years since then, the emergence of digital and social media, not to mention the pervasive use of smartphones and other devices, has fundamentally disrupted how information is disseminated locally and nationally. The competitive landscape for information, as well as audio entertainment, has changed dramatically. In radio, our main competitors (Facebook, Google, Spotify, Pandora, YouTube and SiriusXM, for example) did not even exist in 1996. And yet, our rules are based on that era.
“Given the vastly different competitive landscape in the information marketplace, it follows logically that the rules that were intended to limit advantage and undue influence must themselves adapt or be eliminated altogether. The rules that were originally intended to level the playing field for other competitors 80 years ago are now a constraint that inhibits radio’s ability to compete, as well as attract capital and investment. After all, on the internet, none of our competitors are subject to any of these limitations, nor were Sirius and XM subject to similar limitations to prevent their merger ten years ago.
“In addition, we would note that there are several other important factors that further reinforce our decision on this topic: First, ownership restrictions limit the ability of local stations to take advantage of economies of scale that could bolster the industry’s financial position at a time of unprecedented competition. For radio companies to continue to serve the public interest by providing local news, local sports, local weather, and essential emergency programming, these companies need to be economically viable entities, free to compete for assets, capital, and resources on a level playing field with their competitors.
“Second, common ownership will drive more format diversity, as the NAB noted in its letter to the FCC. This serves the best interests of both audiences and advertisers. Companies will use their additional stations to experiment and develop new and micro-targeted formats, rather than compete with their existing stations. These new formats will serve specific communities and demographics in ways that most of commercial radio does not do today. This will help radio serve its audience better by providing greater consumer choice, serve its advertisers better by offering broader audience reach, and help our industry compete with the virtually unlimited channels and micro-targeted audio audiences offered by digital and satellite competitors.
“Finally, while elimination of the cross-ownership restrictions between radio, TV, and newspapers by the FCC in 2017 was a welcome and long overdue step (particularly for the newspaper business, where we believe this step, if enacted a decade ago, could have helped to save hundreds of companies and thousands of jobs), it seems counter-intuitive to us that radio companies are now allowed to expand into other forms of media, but not to expand our offerings in radio itself. Cross-ownership only makes sense if it is also accompanied by the opportunity and choice to expand within our own industry, and in the form of media that we know best.
“At the same time, we are of course aware of the arguments against modification of the ownership rules and have considered them carefully in arriving at our conclusions. We have heard an argument that the NAB’s proposal will hurt the value of AM radio. As significant owners of AM radio stations, we have an abiding interest in the value of these assets. Nevertheless, our self-interest does not override the fact that media ownership rules were not intended to provide economic subsidies or determine winners and losers, and to use them in that way today, to advance the interest of one class or company in particular, is a perversion of their intent. Rather, the best way to ensure the value of AM stations, and to deliver for the listeners of this service, is to provide essential and important programming, and unique and valuable benefits to advertisers. In that regard, we can point to several AM stations that continue to be successful: Entercom’s [all-news siblings] WINS and WCBS-AM in New York and [all-news] WBBM-AM in Chicago, as well as iHeartMedia’s [news/talk] KFI in Los Angeles. These were four of the top ten billers in our industry in 2017.
“Of course, it is also a reality that many AM stations are struggling in today’s competitive environment. We think that the FCC has already addressed this issue through its AM Revitalization Effort and has given AM stations, and their owners, every available opportunity to ensure their success and longevity, short of stepping in to interfere with the functioning of a free market. This would not be the appropriate role of a regulatory agency, nor would it comport with the free market principles to which we subscribe.
“We have also heard an argument that common ownership offers no benefit to the advertiser. We disagree, and, as noted above, believe that the benefits of common ownership that accrue to the listener in the form of greater format diversity will also benefit the advertiser. Our experience in competition with digital media has been that a key point of differentiation between offline and online advertising is the latter’s ability to micro-target audiences for an advertiser, based on very specific audience characteristics. We know that advertisers value this capability, and that it drives dollar shifting from radio to digital. In conjunction with investment into and development of our own data collection and advanced audience insights, the prospect of being able to offer a greater number of unique formats, along with the localism that is our medium’s hallmark, will enhance radio’s ability to present a competitive advertising solution versus digital and social media. Yes, it is better for our advertisers if we can deliver a better product.
“Complete agreement on any issue is difficult, but given the opportunity before the FCC right now, it was vital that we find consensus. Therefore, we are pleased that the NAB was able to develop a proposal that represented the consensus of a substantial majority of its board of directors, and we thank the staff members of the NAB and the members of the ownership committee (that was formed for this purpose) for their service to the industry. Anything short of providing the FCC with a framework for reforming the radio ownership rules would have been an abdication of the job that the NAB and its board are obligated to perform.
“We respect dissenting views on this topic and hope that our thoughts, as expressed in this letter, have added to the public discourse. We know that all opinions are the result of strong feelings about what is in the best future interests of this industry, which we all love.”