united states project

How to fix the media ownership debate

A modest proposal for harnessing mergers to boost local reporting
December 20, 2012

The debate over “who owns the media” is heating up again, and has already become stuck in a bit of a 1980s time warp. That’s unfortunate. Smart media policy could actually help local news ecosystems during a critical time.

Specifically, the Federal Communications Commission, where I used to work, will soon issue new regulations governing when media companies can buy TV or radio stations or newspapers in the same communities. Progressives have, with good reason, traditionally fought against relaxing ownership rules and Free Press, the media reform group, is attacking the FCC for planning to “gut” crucial public interest safeguards, allowing dark forces (a.k.a. Rupert Murdoch) to grab more power.

I’m normally wary of media concentration, but look at what this supposed “gutting” would actually do: a newspaper and a TV station in the same town would be allowed to merge if the station is number five in the ratings or worse and if it is also in one of the top 20 markets in the country and if there would still be at least eight media voices left in the town. Not exactly radical stuff.

Let’s keep focused on the most important fact about today’s local media: the Internet has increased the number of voices and provided many other benefits, but at the same time undermined the economic models that had previously subsidized local journalism. Newspapers are still laying off reporters by the thousands, and a major FCC report (of which I was principal author) found that neither local TV stations nor independent websites have sufficiently filled the gap, especially when it comes to labor-intensive accountability reporting on courts, schools, municipal government, state legislatures, and other important civic areas.

So, if an occasional merger can save a local newspaper, we shouldn’t automatically rule it out just because it is a merger. That’s why the Newspaper Association of America and a prominent group representing minority broadcasters
support the loosened “cross ownership” rule.

Here’s another example in which a heretofore-sensible anti-merger instinct could now get in the way of helping local media: the FCC is considering the reasonable step of lifting the ban on newspapers owning radio stations in the same town. Yes, this change allows “consolidation,” but permitting a newspaper to buy a radio station—perhaps to create a local radio news channel—could actually help communities. After all, commercial news radio has been declining: only 30 all-news commercial radio stations are left, down from 50 in the 1980s.

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On the other hand, lobbyists for large media companies are going too far in the other direction, arguing that the FCC should lift most restrictions on local media mergers because, they claim, unfettered consolidation would inevitably lead to better local content. If media companies merge, they say, they’ll have more money, which they’ll spend on local journalism.

This view defies common sense and ignores recent history. Just because a media company could invest extra money in a local investigative reporter doesn’t mean it would. Indeed, the logic of corporate economics often leads companies to strip out the labor-intensive, cost-ineffective aspects of local media—i.e. reporters. As Free Press and others have pointed out, the convulsive consolidation of the radio industry led to less locally created fare, not more.

So instead of having a theological debate about consolidation—“good” vs. “evil”?—is it possible to create media policy that allows mergers that are likely to help the local media ecosystems and blocks those that are not?

One possibility is that the FCC allow more companies to merge—giving them “waivers” from the ban—if they made a strong case that such a combination would have a demonstrable positive impact on the provision of local content, including (but not limited to) journalism. When the FCC presided over the NBC-Comcast merger, the companies pledged a variety of steps to improve local news and assist other organizations in the community that were doing so. The FCC could incorporate those kinds of voluntary conditions in other local mergers.

For instance, the companies could commit to increasing the number of local reporters at either the TV station or newspaper—or provide significant financial assistance to an independent local nonprofit news outlet. And if a TV station makes concrete promises and then reneges, it could have its license renewed for a shorter duration, or the parent company could be penalized during future waiver requests.

Or, better yet, here’s my modest proposal: Congress could consider something bolder and cleaner. It could loosen the rules on media mergers—but require a substantial transaction fee for each merger, with the proceeds going to fund local journalism in that community.

Each time there is a consolidation, the participating companies would donate money to a local endowment supporting successful nonprofit or independent news providers. Throughout the country—from MinnPost in Minneapolis to The Lens in New Orleans—citizens and entrepreneurs have created digital news organizations to make up for the losses in civically important but financially dubious reporting. Local minority-owned media startups have faced the same difficulties in generating revenue and could benefit from such an idea as well. Here’s a way for the lumbering media giants to help them—even as they help themselves.

Under this scenario, companies would not have to make a case that their merger would help the community. If the economics dictate that they invest more in news, great. But if they don’t, the community will still end up better off for the merger because of the journalism being underwritten by the transaction fee.

Yes, it would add to the cost of the acquisition. But the parties would know exactly what that amount is on the front end, build it into the cost-benefit calculus (and the offer price), and decide whether it still makes sense. This is a far more market-oriented approach than past media policies. If the transaction fee deters the merger, fine. It might have the side effect of preventing mergers with weak economic rationales. But if the parties proceed, they would be helping to subsidize the local media market.

There are many practical details to work out. How could you make sure that this money is spent well? One thought: the merging companies would present a plan proving that there’s a non-partisan mechanism in place in that community that could manage a fund. My guess is that local journalism schools could often play a key role (and, no, Columbia isn’t paying me to say that). Often skilled at creating competitions for journalism awards, some locally based schools could manage the process for distributing funds, perhaps through competitive grants or through a matching system that would reward nonprofit media that has successfully raised funds from other sources.

Crucially, once the check is deposited in the fund—ideally creating an endowment that would continue subsidizing community journalism indefinitely—neither the government nor the media companies should have any say in how that money is distributed.

There’s a limit to how much consolidation should be allowed even with this tollbooth approach. And there are no doubt flaws to this community-investment idea as well. The most important thing right now is that rather than reverting to an antiquated debate about consolidation, we have an honest discussion about what would truly benefit communities.

Steven Waldman is founder of LifePosts.com, co-founder of Beliefnet, and a former newsmagazine journalist.