MESSAGE
| DATE | 2004-07-26 |
| FROM | From: "rc"
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| SUBJECT | Subject: [hangout] Media Oligarchies
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My Beef With Big Media
How government protects big media--and shuts out upstarts like me.
By Ted Turner
In the late 1960s, when Turner Communications was a business of billboards
and radio stations and I was spending much of my energy ocean racing, a
UHF-TV station came up for sale in Atlanta. It was losing $50,000 a month
and its programs were viewed by fewer than 5 percent of the market.
I acquired it.
When I moved to buy a second station in Charlotte--this one worse than the
first--my accountant quit in protest, and the company's board vetoed the
deal. So I mortgaged my house and bought it myself. The Atlanta purchase
turned into the Superstation; the Charlotte purchase--when I sold it 10
years later--gave me the capital to launch CNN.
Both purchases played a role in revolutionizing television. Both required a
streak of independence and a taste for risk. And neither could happen today.
In the current climate of consolidation, independent broadcasters simply
don't survive for long. That's why we haven't seen a new generation of
people like me or even Rupert Murdoch--independent television upstarts who
challenge the big boys and force the whole industry to compete and change.
It's not that there aren't entrepreneurs eager to make their names and
fortunes in broadcasting if given the chance. If nothing else, the 1990s
dot-com boom showed that the spirit of entrepreneurship is alive and well in
America, with plenty of investors willing to put real money into new media
ventures. The difference is that Washington has changed the rules of the
game. When I was getting into the television business, lawmakers and the
Federal Communications Commission (FCC) took seriously the commission's
mandate to promote diversity, localism, and competition in the media
marketplace. They wanted to make sure that the big, established
networks--CBS, ABC, NBC--wouldn't forever dominate what the American public
could watch on TV. They wanted independent producers to thrive. They wanted
more people to be able to own TV stations. They believed in the value of
competition.
So when the FCC received a glut of applications for new television stations
after World War II, the agency set aside dozens of channels on the new UHF
spectrum so independents could get a foothold in television. That helped me
get my start 35 years ago. Congress also passed a law in 1962 requiring that
TVs be equipped to receive both UHF and VHF channels. That's how I was able
to compete as a UHF station, although it was never easy. (I used to tell
potential advertisers that our UHF viewers were smarter than the rest,
because you had to be a genius just to figure out how to tune us in.) And in
1972, the FCC ruled that cable TV operators could import distant signals.
That's how we were able to beam our Atlanta station to homes throughout the
South. Five years later, with the help of an RCA satellite, we were sending
our signal across the nation, and the Superstation was born.
That was then.
Today, media companies are more concentrated than at any time over the past
40 years, thanks to a continual loosening of ownership rules by Washington.
The media giants now own not only broadcast networks and local stations;
they also own the cable companies that pipe in the signals of their
competitors and the studios that produce most of the programming. To get a
flavor of how consolidated the industry has become, consider this: In 1990,
the major broadcast networks--ABC, CBS, NBC, and Fox--fully or partially
owned just 12.5 percent of the new series they aired. By 2000, it was 56.3
percent. Just two years later, it had surged to 77.5 percent.
In this environment, most independent media firms either get gobbled up by
one of the big companies or driven out of business altogether. Yet instead
of balancing the rules to give independent broadcasters a fair chance in the
market, Washington continues to tilt the playing field to favor the biggest
players. Last summer, the FCC passed another round of sweeping
pro-consolidation rules that, among other things, further raised the cap on
the number of TV stations a company can own.
In the media, as in any industry, big corporations play a vital role, but so
do small, emerging ones. When you lose small businesses, you lose big ideas.
People who own their own businesses are their own bosses. They are
independent thinkers. They know they can't compete by imitating the big
guys--they have to innovate, so they're less obsessed with earnings than
they are with ideas. They are quicker to seize on new technologies and new
product ideas. They steal market share from the big companies, spurring them
to adopt new approaches. This process promotes competition, which leads to
higher product and service quality, more jobs, and greater wealth. It's
called capitalism.
But without the proper rules, healthy capitalist markets turn into sluggish
oligopolies, and that is what's happening in media today. Large corporations
are more profit-focused and risk-averse. They often kill local programming
because it's expensive, and they push national programming because it's
cheap--even if their decisions run counter to local interests and community
values. Their managers are more averse to innovation because they're afraid
of being fired for an idea that fails. They prefer to sit on the sidelines,
waiting to buy the businesses of the risk-takers who succeed.
Unless we have a climate that will allow more independent media companies to
survive, a dangerously high percentage of what we see--and what we don't
see--will be shaped by the profit motives and political interests of large,
publicly traded conglomerates. The economy will suffer, and so will the
quality of our public life. Let me be clear: As a business proposition,
consolidation makes sense. The moguls behind the mergers are acting in their
corporate interests and playing by the rules. We just shouldn't have those
rules. They make sense for a corporation. But for a society, it's like
over-fishing the oceans. When the independent businesses are gone, where
will the new ideas come from? We have to do more than keep media giants from
growing larger; they're already too big. We need a new set of rules that
will break these huge companies to pieces.
The big squeeze
In the 1970s, I became convinced that a 24-hour all-news network could make
money, and perhaps even change the world. But when I invited two large media
corporations to invest in the launch of CNN, they turned me down. I couldn't
believe it. Together we could have launched the network for a fraction of
what it would have taken me alone; they had all the infrastructure,
contacts, experience, knowledge. When no one would go in with me, I risked
my personal wealth to start CNN. Soon after our launch in 1980, our expenses
were twice what we had expected and revenues half what we had projected. Our
losses were so high that our loans were called in. I refinanced at 18
percent interest, up from 9, and stayed just a step ahead of the bankers.
Eventually, we not only became profitable, but also changed the nature of
news--from watching something that happened to watching it as it happened.
But even as CNN was getting its start, the climate for independent
broadcasting was turning hostile. This trend began in 1984, when the FCC
raised the number of stations a single entity could own from seven--where it
had been capped since the 1950s--to 12. A year later, it revised its rule
again, adding a national audience-reach cap of 25 percent to the 12 station
limit--meaning media companies were prohibited from owning TV stations that
together reached more than 25 percent of the national audience. In 1996, the
FCC did away with numerical caps altogether and raised the audience-reach
cap to 35 percent. This wasn't necessarily bad for Turner Broadcasting; we
had already achieved scale. But seeing these rules changed was like watching
someone knock down the ladder I had already climbed.
Meanwhile, the forces of consolidation focused their attention on another
rule, one that restricted ownership of content. Throughout the 1980s,
network lobbyists worked to overturn the so-called Financial Interest and
Syndication Rules, or fin-syn, which had been put in place in 1970, after
federal officials became alarmed at the networks' growing control over
programming. As the FCC wrote in the fin-syn decision: "The power to
determine form and content rests only in the three networks and is exercised
extensively and exclusively by them, hourly and daily." In 1957, the
commission pointed out, independent companies had produced a third of all
network shows; by 1968, that number had dropped to 4 percent. The rules
essentially forbade networks from profiting from reselling programs that
they had already aired.
This had the result of forcing networks to sell off their syndication arms,
as CBS did with Viacom in 1973. Once networks no longer produced their own
content, new competition was launched, creating fresh opportunities for
independents.
For a time, Hollywood and its production studios were politically strong
enough to keep the fin-syn rules in place. But by the early 1990s, the
networks began arguing that their dominance had been undercut by the rise of
independent broadcasters, cable networks, and even videocassettes, which
they claimed gave viewers enough choice to make fin-syn unnecessary. The FCC
ultimately agreed--and suddenly the broadcast networks could tell
independent production studios, "We won't air it unless we own it." The
networks then bought up the weakened studios or were bought out by their own
syndication arms, the way Viacom turned the tables on CBS, buying the
network in 2000. This silenced the major political opponents of
consolidation.
Even before the repeal of fin-syn, I could see that the trend toward
consolidation spelled trouble for independents like me. In a climate of
consolidation, there would be only one sure way to win: bring a broadcast
network, production studios, and cable and satellite systems under one roof.
If you didn't have it inside, you'd have to get it outside--and that meant,
increasingly, from a large corporation that was competing with you. It's
difficult to survive when your suppliers are owned by your competitors. I
had tried and failed to buy a major broadcast network, but the repeal of
fin-syn turned up the pressure. Since I couldn't buy a network, I bought MGM
to bring more content in-house, and I kept looking for other ways to gain
scale. In the end, I found the only way to stay competitive was to merge
with Time Warner and relinquish control of my companies.
Today, the only way for media companies to survive is to own everything up
and down the media chain--from broadcast and cable networks to the sitcoms,
movies, and news broadcasts you see on those stations; to the production
studios that make them; to the cable, satellite, and broadcast systems that
bring the programs to your television set; to the Web sites you visit to
read about those programs; to the way you log on to the Internet to view
those pages. Big media today wants to own the faucet, pipeline, water, and
the reservoir. The rain clouds come next.
Supersizing networks
Throughout the 1990s, media mergers were celebrated in the press and
otherwise seemingly ignored by the American public. So, it was easy to
assume that media consolidation was neither controversial nor problematic.
But then a funny thing happened.
In the summer of 2003, the FCC raised the national audience-reach cap from
35 percent to 45 percent. The FCC also allowed corporations to own a
newspaper and a TV station in the same market and permitted corporations to
own three TV stations in the largest markets, up from two, and two stations
in medium-sized markets, up from one. Unexpectedly, the public rebelled.
Hundreds of thousands of citizens complained to the FCC. Groups from the
National Organization for Women to the National Rifle Association demanded
that Congress reverse the ruling. And like-minded lawmakers, including many
long-time opponents of media consolidation, took action, pushing the cap
back down to 35, until--under strong White House pressure--it was revised
back up to 39 percent. This June, the U.S. Court of Appeals for the Third
Circuit threw out the rules that would have allowed corporations to own more
television and radio stations in a single market, let stand the higher 39
percent cap, and also upheld the rule permitting a corporation to own a TV
station and a newspaper in the same market; then, it sent the issues back to
the same FCC that had pushed through the pro-consolidation rules in the
first place.
In reaching its 2003 decision, the FCC did not argue that its policies would
advance its core objectives of diversity, competition, and localism.
Instead, it justified its decision by saying that there was already a lot of
diversity, competition, and localism in the media--so it wouldn't hurt if
the rules were changed to allow more consolidation. Their decision reads:
"Our current rules inadequately account for the competitive presence of
cable, ignore the diversity-enhancing value of the Internet, and lack any
sound bases for a national audience reach cap." Let's pick that assertion
apart.
First, the "competitive presence of cable" is a mirage. Broadcast networks
have for years pointed to their loss of prime-time viewers to cable
networks--but they are losing viewers to cable networks that they themselves
own. Ninety percent of the top 50 cable TV stations are owned by the same
parent companies that own the broadcast networks. Yes, Disney's ABC network
has lost viewers to cable networks. But it's losing viewers to cable
networks like Disney's ESPN, Disney's ESPN2, and Disney's Disney Channel.
The media giants are getting a deal from Congress and the FCC because their
broadcast networks are losing share to their own cable networks. It's a
scam.
Second, the decision cites the "diversity-enhancing value of the Internet."
The FCC is confusing diversity with variety. The top 20 Internet news sites
are owned by the same media conglomerates that control the broadcast and
cable networks. Sure, a hundred-person choir gives you a choice of voices,
but they're all singing the same song.
The FCC says that we have more media choices than ever before. But only a
few corporations decide what we can choose. That is not choice. That's like
a dictator deciding what candidates are allowed to stand for parliamentary
elections, and then claiming that the people choose their leaders. Different
voices do not mean different viewpoints, and these huge corporations all
have the same viewpoint--they want to shape government policy in a way that
helps them maximize profits, drive out competition, and keep getting bigger.
Because the new technologies have not fundamentally changed the market, it's
wrong for the FCC to say that there are no "sound bases for a national
audience-reach cap." The rationale for such a cap is the same as it has
always been. If there is a limit to the number of TV stations a corporation
can own, then the chance exists that after all the corporations have reached
this limit, there may still be some stations left over to be bought and run
by independents. A lower limit would encourage the entry of independents and
promote competition. A higher limit does the opposite.
Triple blight
The loss of independent operators hurts both the media business and its
citizen-customers. When the ownership of these firms passes to people under
pressure to show quick financial results in order to justify the purchase,
the corporate emphasis instantly shifts from taking risks to taking profits.
When that happens, quality suffers, localism suffers, and democracy itself
suffers.
Loss of Quality
The Forbes list of the 400 richest Americans exerts a negative influence on
society, because it discourages people who want to climb up the list from
giving more money to charity. The Nielsen ratings are dangerous in a similar
way--because they scare companies away from good shows that don't produce
immediate blockbuster ratings. The producer Norman Lear once asked, "You
know what ruined television?" His answer: when The New York Times began
publishing the Nielsen ratings. "That list every week became all anyone
cared about."
When all companies are quarterly earnings-obsessed, the market starts
punishing companies that aren't yielding an instant return. This not only
creates a big incentive for bogus accounting, but also it inhibits the kind
of investment that builds economic value. America used to know this. We used
to be a nation of farmers. You can't plant something today and harvest
tomorrow. Had Turner Communications been required to show earnings growth
every quarter, we never would have purchased those first two TV stations.
When CNN reported to me, if we needed more money for Kosovo or Baghdad, we'd
find it. If we had to bust the budget, we busted the budget. We put
journalism first, and that's how we built CNN into something the world
wanted to watch. I had the power to make these budget decisions because they
were my companies. I was an independent entrepreneur who controlled the
majority of the votes and could run my company for the long term. Top
managers in these huge media conglomerates run their companies for the short
term. After we sold Turner Broadcasting to Time Warner, we came under such
earnings pressure that we had to cut our promotion budget every year at CNN
to make our numbers. Media mega-mergers inevitably lead to an overemphasis
on short-term earnings.
You can see this overemphasis in the spread of reality television. Shows
like "Fear Factor" cost little to produce--there are no actors to pay and no
sets to maintain--and they get big ratings. Thus, American television has
moved away from expensive sitcoms and on to cheap thrills. We've gone from
"Father Knows Best" to "Who Wants to Marry My Dad?", and from "My Three
Sons" to "My Big Fat Obnoxious Fiance."
The story of Grant Tinker and Mary Tyler Moore's production studio, MTM,
helps illustrate the point. When the company was founded in 1969, Tinker and
Moore hired the best writers they could find and then left them alone--and
were rewarded with some of the best shows of the 1970s. But eventually, MTM
was bought by a company that imposed budget ceilings and laid off employees.
That company was later purchased by Rev. Pat Robertson; then, he was bought
out by Fox. Exit "The Mary Tyler Moore Show." Enter "The Littlest Groom."
Loss of localism
Consolidation has also meant a decline in the local focus of both news and
programming. After analyzing 23,000 stories on 172 news programs over five
years, the Project for Excellence in Journalism found that big media news
organizations relied more on syndicated feeds and were more likely to air
national stories with no local connection.
That's not surprising. Local coverage is expensive, and thus will tend be a
casualty in the quest for short-term earnings. In 2002, Fox Television
bought Chicago's Channel 50 and eliminated all of the station's locally
produced shows. One of the cancelled programs (which targeted pre-teens) had
scored a perfect rating for educational content in a 1999 University of
Pennsylvania study, according to The Chicago Tribune. That accolade wasn't
enough to save the program. Once the station's ownership changed, so did its
mission and programming.
Loss of localism also undercuts the public-service mission of the media, and
this can have dangerous consequences. In early 2002, when a freight train
derailed near Minot, N.D., releasing a cloud of anhydrous ammonia over the
town, police tried to call local radio stations, six of which are owned by
radio mammoth Clear Channel Communications. According to news reports, it
took them over an hour to reach anyone--no one was answering the Clear
Channel phone. By the next day, 300 people had been hospitalized, many
partially blinded by the ammonia. Pets and livestock died. And Clear Channel
continued beaming its signal from headquarters in San Antonio, Texas--some
1,600 miles away.
Loss of democratic debate
When media companies dominate their markets, it undercuts our democracy.
Justice Hugo Black, in a landmark media-ownership case in 1945, wrote: "The
First Amendment rests on the assumption that the widest possible
dissemination of information from diverse and antagonistic sources is
essential to the welfare of the public."
These big companies are not antagonistic; they do billions of dollars in
business with each other. They don't compete; they cooperate to inhibit
competition. You and I have both felt the impact. I felt it in 1981, when
CBS, NBC, and ABC all came together to try to keep CNN from covering the
White House. You've felt the impact over the past two years, as you saw
little news from ABC, CBS, NBC, MSNBC, Fox, or CNN on the FCC's actions. In
early 2003, the Pew Research Center found that 72 percent of Americans had
heard "nothing at all" about the proposed FCC rule changes. Why? One never
knows for sure, but it must have been clear to news directors that the more
they covered this issue, the harder it would be for their corporate bosses
to get the policy result they wanted.
A few media conglomerates now exercise a near-monopoly over television news.
There is always a risk that news organizations can emphasize or ignore
stories to serve their corporate purpose. But the risk is far greater when
there are no independent competitors to air the side of the story the
corporation wants to ignore. More consolidation has often meant more
news-sharing. But closing bureaus and downsizing staff have more than
economic consequences. A smaller press is less capable of holding our
leaders accountable. When Viacom merged two news stations it owned in Los
Angeles, reports The American Journalism Review, "field reporters began
carrying microphones labeled KCBS on one side and KCAL on the other." This
was no accident. As the Viacom executive in charge told The Los Angeles
Business Journal: "In this duopoly, we should be able to control the news in
the marketplace."
This ability to control the news is especially worrisome when a large media
organization is itself the subject of a news story. Disney's boss, after
buying ABC in 1995, was quoted in LA Weekly as saying, "I would prefer ABC
not cover Disney." A few days later, ABC killed a "20/20" story critical of
the parent company.
But networks have also been compromised when it comes to non-news programs
which involve their corporate parent's business interests. General Electric
subsidiary NBC Sports raised eyebrows by apologizing to the Chinese
government for Bob Costas's reference to China's "problems with human
rights" during a telecast of the Atlanta Olympic Games. China, of course, is
a huge market for GE products.
Consolidation has given big media companies new power over what is said not
just on the air, but off it as well. Cumulus Media banned the Dixie Chicks
on its 42 country music stations for 30 days after lead singer Natalie
Maines criticized President Bush for the war in Iraq. It's hard to imagine
Cumulus would have been so bold if its listeners had more of a choice in
country music stations. And Disney recently provoked an uproar when it
prevented its subsidiary Miramax from distributing Michael Moore's film
Fahrenheit 9/11. As a senior Disney executive told The New York Times: "It's
not in the interest of any major corporation to be dragged into a highly
charged partisan political battle." Follow the logic, and you can see what
lies ahead: If the only media companies are major corporations,
controversial and dissenting views may not be aired at all.
Naturally, corporations say they would never suppress speech. But it's not
their intentions that matter; it's their capabilities. Consolidation gives
them more power to tilt the news and cut important ideas out of the public
debate. And it's precisely that power that the rules should prevent.
Independents' day
This is a fight about freedom--the freedom of independent entrepreneurs to
start and run a media business, and the freedom of citizens to get news,
information, and entertainment from a wide variety of sources, at least some
of which are truly independent and not run by people facing the pressure of
quarterly earnings reports. No one should underestimate the danger. Big
media companies want to eliminate all ownership limits. With the removal of
these limits, immense media power will pass into the hands of a very few
corporations and individuals.
What will programming be like when it's produced for no other purpose than
profit? What will news be like when there are no independent news
organizations to go after stories the big corporations avoid? Who really
wants to find out? Safeguarding the welfare of the public cannot be the
first concern of a large publicly traded media company. Its job is to seek
profits. But if the government writes the rules in a way that encourages the
entry into the market of entrepreneurs--men and women with big dreams, new
ideas, and a willingness to take long-term risks--the economy will be
stronger, and the country will be better off.
I freely admit: When I was in the media business, especially after the
federal government changed the rules to favor large companies, I tried to
sweep the board, and I came within one move of owning every link up and down
the media chain. Yet I felt then, as I do now, that the government was not
doing its job. The role of the government ought to be like the role of a
referee in boxing, keeping the big guys from killing the little guys. If the
little guy gets knocked down, the referee should send the big guy to his
corner, count the little guy out, and then help him back up. But today the
government has cast down its duty, and media competition is less like boxing
and more like professional wrestling: The wrestler and the referee are both
kicking the guy on the canvas.
At this late stage, media companies have grown so large and powerful, and
their dominance has become so detrimental to the survival of small, emerging
companies, that there remains only one alternative: bust up the big
conglomerates. We've done this before: to the railroad trusts in the first
part of the 20th century, to Ma Bell more recently. Indeed, big media itself
was cut down to size in the 1970s, and a period of staggering innovation and
growth followed. Breaking up the reconstituted media conglomerates may seem
like an impossible task when their grip on the policy-making process in
Washington seems so sure. But the public's broad and bipartisan rebellion
against the FCC's pro-consolidation decisions suggests something different.
Politically, big media may again be on the wrong side of history--and up
against a country unwilling to lose its independents.
Ted Turner is founder of CNN and chairman of Turner Enterprises.
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