[Ecommerce] FYI: Story in Advertising Age on FCC rule change

[Manon Anne Ress]

In Advertising Age: View Point
May 19, 2003
Go Slow on FCC Rule Change

Media Agency CEO says it's too soon to let big media get bigger
by David Verklin

Forum

Consolidation of ownership is one of the major forces transforming all 
sides of the media landscape.  If the Federal Communications Commission 
votes June 2 to ease media-ownership restrictions further, consolidation 
may well become the dominant market force, outstripping the two other 
driving factors: technology and globalization.

The argument for easing the rules is that increasing competition from 
satellite and cable TV and the internet has changed the competitive 
environment in which traditional media operate.  Current restrtictions 
prohibit, among other things, a company from owning TV stations that 
reach more than 35% of US households and from owning a newspaper and a 
TV station in the same city.

In recent years, consolidation has transformed both media infrastructure 
and its content.  Since the Telecommunications Act of 1996 went into 
effect, removing many barriers to consolidation, there are at least 
1,100 fewer radio station owners, the Washington Post reported.  In 
almost half the nation's radio market, 80% of the audience listens to 
outlets controlled by three companies.  In the US TV industry, seven 
companies now control 98% of the audience, 98% of advertising revenues 
and 32 of the top 35 networks.  There used to be thousands of cable TV 
operators.  Now there are three big ones and three midsize ones.

In US print media, the top five newspaper publishers own more that 200 
dailies.  Gannett Co. alone owns more than 90. Six companies make 
virtually the entire US magazine business.  In outdoor advertising, 
three companies control an estimated 50% of the locations in the top 
countries.

And the media-buying business is no different.[SNIP]

In the United States, seven major media buyers, including Carat North 
America, now control more than 70% of all network TV Advertising spending.

With all of this consolidation already in motion, why is the FCC in such 
a hurry to provide further incentives-- particularly when we know so 
little about how satellite TV and the Internet will relate to 
traditional media? Why the rush to judgement?

[SNIP]

Threat to Ethics

The greatest threat posed by increased consolidation may in fact, not 
come from issues of distribution and content but from business 
practices.  As consolidation increases, and there are fewer and fewer 
businesses buying and selling media, the pressure to make each deal 
increases exponentially.  And the potential for unethical behavior 
increases as well.

This is a problem that, in large part, we as an industry have not had to 
face, but we have seen how pressure from pressure for profits from 
public companies in other businesses led to excess.

Major Wall Street investment banks are paying record fines for allowing 
pressure for profits from investment banking to affect the credibility 
of research; accounting firms have been damaged by permitting pressures 
for profits from their consulting practices to influence audits.  Such 
excesses in our industry may seem unlikely, but how many of us thought 
that Arthur Andersen would just evaporate?

The most important question may not be whether ownership restrictions 
should be eased, but whether they should be replaced with more 
appropriate restrictions.  Should ther be a restriction prihibiting 
companies from owning both satellite and terrestrial TV systems?  Or a 
prohibition against any advertising firm controlling more than a 
particular percentage of advertising volume?

 From a business standpoint, reducing regulation sounds instinctively 
like a good thing.  But, in this case, it may not be in the interest of 
business or the public.  The wisest course for now is to wait and see. 
The media world is changing so rapidly that we may know more even in 
another six months to a year.

David Verklin is CEO of Aegis Group's Carat North America, New York.


-- 
Manon Anne Ress
Consumer Project on Technology
www.cptech.org
PO Box 19367, Washington, DC 20036
manon.ress@cptech.org, voice: 1.202.387.8030, fax: 1.202.234.5176