Order Code RL34271
The FCC’s 10 Commissioned Economic Research
Studies on Media Ownership: Policy Implications
December 5, 2007
Charles B. Goldfarb
Specialist in Telecommunications Policy
Resources, Science, and Industry Division
The FCC’s 10 Commissioned Economic Research
Studies on Media Ownership: Policy Implications
Summary
The Federal Communications Commission ( FCC or Commission) has released
for public comment 10 economic research studies on media ownership that it had
commissioned to provide data and analysis to support the policy debate on what
ownership limitations are in the public interest. These studies also provide data and
analysis useful to the on- going policy debates on how best to foster minority
ownership of broadcast stations and on tiered vs. à la carte pricing of multichannel
video program distribution ( MVPD) services, such as cable and satellite television.
The FCC also has released peer reviews of these studies that are required by the
Office of Management and Budget. In addition, Consumers Union, Consumer
Federation of America, and Free Press ( Consumer Commenters) jointly submitted to
the FCC very detailed comments on the 10 FCC- commissioned studies that included
statistical results from re- running the models in those studies, applying the same
empirical data to models revised to correct for alleged specification errors. Despite
the lack of consensus on many issues, it appears that the following general statements
can be made about the status of the data collection and analysis available to policy
makers:
! Large, systematic, detailed, and accurate data sets on media
ownership characteristics, viewer/ listener preferences, and
programming are now available for analysts and policy makers.
! Several gaps remain in data collection, however. Most significantly
the databases on minority and female ownership of broadcast and
telecommunications properties are incomplete and inaccurate, and
statistical analysis based on those data would not be reliable.
! Although the 10 FCC- commissioned studies present a large number
of statistical findings, many of these relationships are not statistically
significant across alternative model specifications. This has led the
researchers and peer reviewers to offer disclaimers that the findings
are not robust and where they find statistical relationships they
demonstrate correlation, not causality.
! The peer reviewers and the Consumer Commenters identified a
number of possible technical problems in the econometric analyses
performed in the 10 studies. The potentially most noteworthy
criticism appears to be that all but one of the studies addressed the
impact of media ownership characteristics on the programming
provided by individual cross- owned stations, not on the total
programming available to consumers in the local market, which
arguably is the key public policy concern. It has not yet been
determined whether the criticisms are valid and/ or whether the study
results are reliable.
! The Consumer Commenters claim that when they modified the
FCC- commissioned studies to take into account these criticisms,
they obtained robust results demonstrating that loosening the media
ownership limits harmed the public interest, though their results
were not always consistent across model specifications. Their
modified studies have not yet been subject to full review by others.
Contents
Introduction and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Studies and the Peer Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Study 1: “ How People Get News and Information,” by Nielsen Media
Research, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Study 2: “ Ownership Structure and Robustness of Media,” by Kiran
Duwadi, Scott Roberts, and Andrew Wise, with an appendix
entitled “ Minority and Women Broadcast Ownership Data,”
by C. Anthony Bush . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Study 3: “ Television Station Ownership Structure and the Quantity and
Quality of TV Programming,” by Gregory S. Crawford, Assistant
Professor, Department of Economics, University of Arizona . . . . . . . 14
Study 4: “ News Operations,” a study with four sections, by FCC Staff . . . 16
Section I: “ The Impact of Ownership Structure on Television
Stations’ News and Public Affairs Programming,”
by Daniel Shiman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section II: “ Ownership Structure, Market Characteristics and the
Quantity of News and Public Affairs Programming:
An Empirical Analysis of Radio Airplay,”
by Kenneth Lynch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section III: “ Factors that Affect a Radio Station’s Propensity to
Adopt a News Format,” by Craig Stroup . . . . . . . . . . . . . . . . . . . 20
Section IV: “ The Effect of Ownership and Market Structure on
[ Newspaper] News Operations,” by Pedro Almoguera . . . . . . . . 21
Study 5: “ Station Ownership and Programming in Radio,” by Tasneem
Chipty, CRA International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Study 6: “ The Effects of Cross- Ownership on the Local Content and
Political Slant of Local Television News,” by Jeffrey Milyo,
Hanna Family Scholar, University of Kansas School of
Business, and Associate Professor, Department of
Economics and Truman School of Public Affairs,
University of Missouri. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Study 7: “ Minority and Female Ownership in Media Enterprises,” by
Arie Beresteanu, Assistant Professor, Duke University
Department of Economics, and Paul B. Ellickson,
Assistant Professor, Duke University Department
of Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Study 8: “ The Impact of the FCC’s TV Duopoly Rule Relaxation on
Minority and Women Owned Broadcast Stations 1999- 2006,”
by Allen S. Hammond, IV, Professor at the Santa Clara
University School of Law, with Barbara O’Connor,
Professor of Communications at the California
State University at Sacramento, and Tracy
Westin, Professor at the University of
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Study 9: “ Vertical Integration and the Market for Broadcast and Cable
Television Programming,” by Austan Goolsbee, Robert P.
Gwinn Professor of Economics, University of Chicago
Graduate School of Business, American Bar
Foundation, and National Bureau of
Economic Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Study 10: “ Review of the Radio Industry, 2007,” by George Williams,
Senior Economist, Media Bureau, Federal Communications
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
The Filing by the Consumer Commenters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
The Consumer Commenters’ Criticisms of the FCC Studies . . . . . . . . . . . 46
Analysis should be performed at the market level, not at the level
of individual stations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Analysis of cross- ownership should distinguish between
cross- owned television stations that had been
grandfathered in 1975 and those created
subsequently by waiver of the rules . . . . . . . . . . . . . . . . . . . . . . . 47
One key study inappropriately addresses all news programming
and all public affairs programming rather than local news
programming and local public affairs programming . . . . . . . . . . 47
Some of the FCC- commissioned models fail to account for key
station and market characteristics . . . . . . . . . . . . . . . . . . . . . . . . 48
The FCC has failed to adequately account for the true level of
female and minority ownership or to analyze the impact
of relaxing ownership limits on minority ownership . . . . . . . . . . 48
The study on media ownership characteristics and media bias
employs “ contentless content analysis” that is flawed,
and has other methodological problems . . . . . . . . . . . . . . . . . . . 50
The study on vertical integration ignores several fundamental
characteristics of the industry and uses biased data . . . . . . . . . . 51
Summary of Data Collection and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Public Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
The FCC Has Failed to Collect Data Needed to Address the Impact of
the Media Ownership Rules on Minority and Female Media
Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
The FCC May Not Have Data on Program Diversity that the Courts
May Require . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
The Data Collection and Analysis Performed to Date Suggest That There
May Be Public Interest Benefits to Employing Case- by- Case
Reviews Rather than Bright- Line Ownership Limitations . . . . . . . . . . 57
The Data Collected to Date Suggest that Additional Information on
Intensity of Demand May Be Needed to Analyze the
Implications of Various À La Carte Proposals . . . . . . . . . . . . . . . . . . 61
List of Tables
Table 1. Most Important and Second Most Important Media Sources
Used by Households for Various Types of News and
Current Events Information (% of households) . . . . . . . . . . . . . . . . . . . . . . 11
1 For a detailed description and discussion of the FCC’s media ownership rules, see CRS
Report RL31925, FCC Media Ownership Rules: Current Status and Issues for Congress,
by Charles B. Goldfarb.
2 P. L. 104- 104, § 202.
3 Report and Order and Notice of Proposed Rulemaking, 2002 Biennial Regulatory Review
— Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted
Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket 02- 277; Cross-
( continued...)
The FCC’s 10 Commissioned Economic
Research Studies on Media Ownership:
Policy Implications
Introduction and Background
The Federal Communications Commission ( FCC or Commission) has released
for public comment 10 economic research studies on media ownership that it had
commissioned to provide data and analysis to support the policy debate on what
ownership limitations are in the public interest. These studies also provide data and
analysis useful to the on- going policy debates on how best to foster minority
ownership of broadcast stations and on tiered vs. à la carte pricing of multichannel
video program distribution ( MVPD) services, such as cable and satellite television.
The FCC’s media ownership rules are intended to foster the three long- standing
U. S. media policy goals of diversity of voices, localism, and competition. The
current rules place certain limits on the number of media outlets that a single entity
can own nationally and the number and type of media outlets that a single entity can
own locally. 1
In Section 202 of the 1996 Telecommunications Act, Congress instructed the
FCC to eliminate several of its media ownership rules and to modify others, in some
cases setting explicit numerical limits itself, in other cases instructing the FCC to
conduct a rulemaking proceeding to determine whether to retain, modify, or eliminate
existing limitations. 2 Congress also instructed the FCC to perform periodic reviews
of its media ownership rules to determine if they are “ necessary in the public interest
as the result of competition,” and to modify or repeal any regulation it determines to
be no longer in the public interest. The loosening of the media ownership restrictions
has led to significant consolidation of ownership in the media sector.
As part of its periodic review and in response to rulings by the U. S. Court of
Appeals for the District of Columbia Circuit, the FCC adopted an order on June 2,
2003 that modified five of its media ownership rules and retained two others. 3 The
CRS- 2
3 (... continued)
Ownership of Broadcast Stations and Newspapers, MM Docket 01- 235; Rules and Policies
Concerning Multiple Ownership of Radio Broadcast Stations in Local Markets, MM Docket
01- 317; Definition of Radio Markets, MM Docket 00- 244; Definition of Radio Markets for
Areas Not Located in an Arbitron Survey Area, MB Docket 03- 130, adopted June 2, 2003
and released July 2, 2003 (“ Report and Order” or “ June 2, 2003 Order”). The Report and
Order was adopted in a three to two vote. All five commissioners released statements on
June 2, 2003, the day that the Commission voted to adopt the item, and also released
statements that accompanied the July 2, 2003 release of the Report and Order. The Report
and Order was published in the Federal Register on September 5, 2003, at 68 FR 46285.
4 Prometheus Radio Project v. Federal Communications Commission, 373 F. 3d 372, 435 ( 3rd
Circuit 2004), ( Prometheus). This decision also is available at
[ http:// www. ca3. uscourts. gov/ opinarch/ 033388p. pdf], viewed on November 6, 2007. For
a legal perspective on the Prometheus decision, see CRS Report RL32460, Legal Challenge
to the FCC’s Media Ownership Rules: An Overview of Prometheus Radio v. FCC, by
Kathleen Ann Ruane.
5 Ibid., at 421.
6 In the Matter of 2006 Quadrennial Review — Review of the Commission’s Broadcast
( continued...)
new rules, most of which would have further loosened ownership restrictions, proved
to be controversial, were challenged in court, and have never gone into effect. On
June 24, 2004, the United States Court of Appeals for the Third Circuit ( Third
Circuit), in Prometheus Radio Project vs. Federal Communications Commission,
upheld the FCC’s findings that it would be in the public interest to further loosen
many of the media ownership restrictions, but found:
The Commission’s derivation of new Cross- Media Limits, and its modification
of the numerical limits on both television and radio station ownership in local
markets, all have the same essential flaw: an unjustified assumption that media
outlets of the same type make an equal contribution to diversity and competition
in local markets. We thus remand for the Commission to justify or modify its
approach to setting numerical limits.... The stay currently in effect will continue
pending our review of the Commission’s action on remand, over which this panel
retains jurisdiction. 4
The Third Circuit also found:
In repealing the FSSR [ Failed Station Solicitation Rule] without any discussion
of the effect of its decision on minority station ownership ( and without ever
acknowledging the decline in minority ownership notwithstanding the FSSR), the
Commission “ entirely failed to consider an important aspect of the problem,” and
this amounts to arbitrary and capricious rulemaking.... For correction of this
omission, we remand. 5
The FCC adopted on June 21, 2006, and released on July 24, 2006, a Further
Notice of Proposed Rulemaking that sought “ comment on how to address the issues
raised by the opinion of the U. S. Court of Appeals for the Third Circuit in
Prometheus v. FCC and on whether the media ownership rules are necessary in the
public interest as the result of competition.” 6 The Further Notice also initiated a
CRS- 3
6 (... continued)
Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996; 2002 Biennial Regulatory Review — Review of the
Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section
202 of the Telecommunications Act of 1996; Cross- Ownership of Broadcast Stations and
Newspapers; Rules and Policies Concerning Multiple Ownership of Radio Broadcast
Stations in Local Markets; Definition of Radio Markets, MB Dockets No. 06- 121 and 02-
277 and MM Dockets No. 01- 235, 01- 317, and 00- 244, Further Notice of Proposed
Rulemaking ( Further Notice), adopted June 21, 2006, and released July 24, 2006, at para.
1 ( footnote omitted).
7 Section 629 of the FY2004 Consolidated Appropriations Act, P. L. 108- 199, modifies
Section 202 of the 1996 Telecommunications Act, instructing the FCC to perform a
quadrennial review of all of its media ownership rules, except the National Television
Ownership rule.
8 Further Notice at para. 4.
9 Ibid., at para. 5.
10 “ Statement of Commissioner Michael J. Copps, Concurring in Part, Dissenting in Part,”
June 21, 2006, available at [ http:// hraunfoss. fcc. gov/ edocs_ public/ attachmatch/ DOC-
266033A3. pdf], viewed on November 6, 2007, and “ Statement of Commissioner Jonathan
S. Adelstein, Concurring in Part, Dissenting in Part,” June 21, 2006, available at
[ http:// hraunfoss. fcc. gov/ edocs_ public/ attachmatch/ DOC- 266033A4. pdf], viewed on
November 5, 2007.
11 In footnote 59 of the Prometheus decision, the Third Circuit had instructed the FCC to
address in its rulemaking process proposals for advancing minority and disadvantaged
businesses and for promoting diversity in broadcasting that the Minority Media and
Telecommunications Council ( MMTC) had submitted in the proceeding in 2003.
( Prometheus, 373 F. 3d at 421.)
12 Language in S. 2332, a bill approved by the Senate Commerce, Science, and
Transportation Committee by unanimous consent on December 4, 2007, would direct the
( continued...)
comprehensive quadrennial review of all of its media ownership rules, as required
by statute. 7
The Further Notice did not present specific new rules for public comment.
Rather, it discussed each rule that was remanded ( the local television ownership
limit, the local radio ownership limit, the newspaper- broadcast cross- ownership ban,
and the radio- television cross- ownership limit) plus two additional rules ( the dual
network ban and the UHF discount on the national television ownership limit), and
then invited comment on how to address the issues remanded by the court. It also
asked commenters to address “ whether our goals would be better addressed by
employing an alternative regulatory scheme or set of rules.” 8 In addition, the Further
Notice sought comment on, but did not discuss, the proposals to foster minority
ownership that had been submitted by the Minority Media and Telecommunications
Council ( MMTC) in the 2002 biennial review proceeding that the Third Circuit had
taken the Commission to task for failing to address in its June 2, 2003 Order. 9 Two
of the commissioners dissented in part from the order adopting the Further Notice, 10
criticizing the lack of discussion of proposals to foster minority ownership, 11 and the
absence of specific proposed rules. 12
CRS- 4
12 (... continued)
FCC to address these criticisms. The bill would modify Section 202 of the 1996
Telecommunications Act by adding three provisions that would ( 1) require the FCC to
publish in the Federal Register any proposal to modify, revise, or amend any of its
regulations related to broadcast ownership at least 90 days before voting to add the proposal,
providing at least 60 days for public comment and 30 days for reply comments; ( 2) require
the FCC to initiate, conduct, and complete a separate rulemaking proceeding to promote the
broadcast of local programming and content by broadcasters, including radio and television
broadcast stations, and newspapers, before voting on any change in the broadcast and
newspaper ownership rules, and require the FCC to conduct a study to determine the overall
impact of television station duopolies and newspaper- broadcast cross- ownership on the
quantity and quality of local news, public affairs, local news media jobs, and local cultural
programming at the market level; and ( 3) establish an independent Panel on Women and
Minority Ownership of Broadcast Media to make recommendations to the FCC for specific
Commission rules to increase the representation of women and minorities in the ownership
of broadcast media, and require the FCC to conduct a full and accurate census of the race
and gender of individuals holding a controlling interest in broadcast station licenses, provide
the results of the census to the Panel, study the impact of media market concentration on the
representation of women and minorities in the ownership of broadcast media, and act on the
Panel’s recommendations before voting on any changes in its broadcast and newspaper
ownership rules.
13 “ FCC Names Economic Studies to be Conducted as Part of Media Ownership Rules
Review,” FCC Public Notice, November 22, 2006, available at [ http:// hraunfoss. fcc. gov/
edocs_ public/ attachmatch/ DOC- 268606A1. pdf], viewed on November 6, 2007. The ten
studies are: ( 1) “ How People Get News and Information,” by Nielsen Research; ( 2)
“ Ownership Structure and Robustness of Media,” by C. Anthony Bush, Kiran Duwadi, Scott
Roberts, and Andrew Wise, of the FCC; ( 3) “ Effects of Ownership Structure and Robustness
on the Quantity and Quality of TV Programming,” by Gregory Crawford of the University
of Arizona; ( 4) “ News Operations,” by Kenneth Lynch, Daniel Shiman, and Craig Stroup
of the FCC; ( 5) “ Station Ownership and Programming in Radio,” by Tasneem Chipty of
CRAI; ( 6) “ News Coverage of Cross- Owned Newspapers and Television Stations,” by
Jeffrey Milyo of the University of Missouri; ( 7) “ Minority Ownership,” by Arie Bersteanu
and Paul Ellickson of Duke University; ( 8) “ Minority Ownership,” by Allen Hammond of
Santa Clara University and Barbara O’Connor of the California State University at
Sacramento; ( 9) “ Vertical Integration,” by Austan Goolsbee of the University of Chicago;
and ( 10) “ Radio Industry Review: Trends in Ownership, Format, and Finance,” by George
Williams of the FCC.
14 “ Commissioner Michael J. Copps Comments on the FCC’s Media Ownership Studies,”
FCC News, November 22, 2006, available at [ http:// hraunfoss. fcc. gov/ edocs_ public/
attachmatch/ DOC- 268611A1. pdf], viewed on November 6, 2007, and “ Commissioner
Jonathan S. Adelstein Says Public Notice on Media Ownership Economic Studies is ‘ Scant’
and ‘ Undermines Public Confidence’,” FCC News, November 22, 2006, available at
[ http:// hraunfoss. fcc. gov/ edocs_ public/ attachmatch/ DOC- 268616A1. pdf], viewed on
November 6, 2007.
On November 22, 2006, the FCC announced that it had commissioned ( or had
begun conducting internally) 10 economic studies as part of its review of the media
ownership rules. 13 The two commissioners who had dissented in part from the order
adopting the Further Notice each issued statements raising questions about the
transparency of the process by which the contractors were selected and the peer
review process that would be used. 14 On July 31, 2007, the FCC released the 10
studies, making them available on its website, and giving the public 60 days to
CRS- 5
15 “ FCC Seeks Comment on Research Studies on Media Ownership,” MB Docket No. 06-
121, FCC Public Notice, DA- 07- 3470, released July 31, 2007, available at [ http:// hraunfoss.
fcc. gov/ edocs_ public/ attachmatch/ DA- 07- 3470A1. pdf], viewed on November 6, 2007. The
studies are available at [ http:// www. fcc. gov/ ownership/ studies. html] ( viewed on November
6, 2007). Subsequently, the FCC released a public notice extending the comment period to
October 22, 2007, and the reply comment period to November 1, 2007. See, “ Media Bureau
Extends Filing Deadlines for Comments on Media Ownership Studies,” MB Docket No. 06-
121, FCC Public Notice, DA- 07- 4097, released September 28, 2007, available at
[ http:// fjallfoss. fcc. gov/ edocs_ public/ attachmatch/ DA- 07- 4097A1. pdf], viewed on
November 6, 2007.
16 The OMB requirement appears in the OMB Peer Review Bulletin, 70 Fed. Reg. 2664.
In these peer reviews, the reviewer is instructed to evaluate and comment on the theoretical
and empirical merit of the information, by considering, among other things: ( 1) whether the
methodology and assumptions employed are reasonable and technically correct; ( 2) whether
the methodology and assumptions are consistent with accepted economic theory and
econometric practices; ( 3) whether the data used are reasonable and of sufficient quality for
purposes of the analysis; and ( 4) whether the conclusions, if any, follow from the analysis.
The reviewer is instructed not to provide advice on policy or to evaluate the policy
implications of the study. The peer review is not anonymous; the reviewer will be identified
and the review will be placed in the public record. Also, the federal agency must assess
whether potential peer reviewers have any potential conflicts of interest. The OMB
requirement does not provide guidance on how the peer reviewers should be selected.
17 “ Joint Statement by FCC Commissioners Michael J. Copps and Jonathan S. Adelstein on
Release of Media Ownership Studies,” FCC News, released July 31, 2007, available at
[ http:// fjallfoss. fcc. gov/ edocs_ public/ attachmatch/ DOC- 275674A1. pdf], viewed on
November 6, 2007.
18 The peer reviews are available at [ http:// www. fcc. gov/ mb/ peer_ review/ peerreview. html],
viewed on November 6, 2007. In addition, the FCC identified approximately 20 other
submissions filed by commenting parties in the Media Ownership proceeding as containing
scientific information on which it might rely in its rulemaking proceeding, and implemented
a peer review process for these. Those peer reviews are available to the public at
[ http:// www. fcc. gov/ mb/ peer_ review/ reviews. html], viewed on November 26, 2007. I was
asked by Jonathan Levy, Deputy Chief Economist of the FCC, to perform a peer review of
one of those submissions, “ Big Media, Little Kids: Media Consolidation & Children’s
Programming,” a report by Children Now dated May 21, 2003, that was submitted to the
FCC in 2006. My peer review is available at [ http:// www. fcc. gov/ mb/ peer_ review/
docs/ prtpgoldfarb. pdf], viewed on November 26, 2007.
submit comments ( and then 15 additional days to submit reply comments). 15 These
studies consist of hundreds of pages of text and very large data sets. Concurrent with
the public comment period, the studies underwent a peer review process that is
required by the Office of Management and Budget ( OMB) of all “ influential
scientific information” on which a federal agency relies in a rulemaking proceeding. 16
The two dissenting commissioners issued a joint statement criticizing the shortness
of the public comment period and raising questions about the peer review process. 17
On September 5, 2007, the FCC released the peer reviews of these studies. 18
CRS- 6
19 In the Matter of 2006 Quadrennial Regulatory Review — Review of the Commission’s
Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996; 2002 Biennial Regulatory Review — Review of the
Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section
202 of the Telecommunications Act of 1996; Cross- Ownership of Broadcast Stations and
Newspapers; Rules and Policies Concerning Multiple Ownership of Radio Broadcast
Stations and Local Markets; Definition of Radio Markets; Ways to Further Section 257
Mandate and to Build on Earlier Studies, MB Docket Nos. 06- 121, 02- 277, and 04- 228 and
MM Docket Nos. 01- 235, 01- 317, and 00- 244, Second Further Notice of Proposed Rule
Making, adopted and released August 1, 2007 ( Second Further Notice).
20 In the Matter of 2006 Quadrennial Regulatory Review — Review of the Commission’s
Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996; 2002 Biennial Regulatory Review; Cross- Ownership of
Broadcast Stations and Newspapers; Rules and Policies Concerning Multiple Ownership
of Radio Broadcast Stations in Local Markets; Definition of Radio Markets; Ways to
Further Section 257 Mandate and to Build on Earlier Studies, MB Docket Nos. 06- 121, 02-
277, and 04- 228 and MM Docket Nos. 01- 235, 01- 317, and 00- 244, Further Comments of
Consumers Union, Consumer Federation of America, and Free Press, October 22, 2007.
21 The Consumer Commenters’ submission also includes a weblink [ http:// www. fcc. gov/
ownership/ materials/ newly- released/ newspaperbroadcast061506. pdf] to a 27- page internal
FCC memorandum by then- FCC chief economist Leslie M. Marx, dated June 15, 2006 and
entitled “ Summary of Ideas on Newspaper- Broadcast Cross- Ownership,” which they
obtained through a Freedom of Information Act request and which they allege demonstrates
that the FCC’s process for commissioning media ownership studies was biased. The
opening sentence of the memorandum states: “ This document is an attempt to share some
thoughts and ideas I have about how the FCC can approach relaxing newspaper- broadcast
cross- ownership restrictions.” At p. 14, the memorandum states: “ In this section I discuss
some studies that might provide valuable inputs to support a relaxation of newspaper-broadcast
cross- ownership limits.” ( footnote omitted). Although Ms. Marx was no longer
the chief economist when the FCC announced that it had commissioned the 10 media
ownership studies ( an August 21, 2006 FCC News Release announced that Michelle P.
Connolly had been named FCC chief economist), several of the studies suggested in Ms.
( continued...)
On August 1, 2007, the FCC adopted a Second Further Notice of Proposed Rule
Making19 that briefly described, and sought comment on, the proposals of the MMTC
submitted in the 2002 biennial review proceedings, several additional informal
MMTC suggestions, and the proposals by the Advisory Committee on Diversity for
Communications in the Digital Age to foster minority and female ownership.
On October 22, 2007, Consumers Union, Consumer Federation of America, and
Free Press ( Consumer Commenters) submitted to the FCC very detailed comments
on the 10 FCC- commissioned media ownership studies. 20 The Consumer
Commenters identify a number of alleged specification errors — some raised by the
peer reviewers, some by the Consumer Commenters themselves — in the major
statistical studies commissioned by the FCC, and then present statistical results from
re- running the models in those studies, applying the same empirical data to models
revised to correct for the alleged specification errors. These revised models yield
very different statistical results that, according to the Consumer Commenters,
demonstrate that loosening the media ownership rules would not be in the public
interest. 21
CRS- 7
21 (... continued)
Marx’s memorandum were among those later commissioned by the FCC. The memorandum
lists a number of media ownership- related hypotheses that are of interest to policy makers
and thus might merit analysis, but it also lists for each a finding that would support
loosening the cross- ownership limits, thus suggesting a preferred outcome. The
memorandum also provides a list of possible authors for the studies.
22 The FCC identified and referred to these studies as Study 1, Study 2, etc. For ease of
presentation, in this report the studies will be referred to by their study number rather than
by their title.
23 See footnote 4 above.
24 Often, it is not possible a priori to predict the likely relationship between a specific
ownership variable and programming market outcome. For example, on one hand one might
expect the owner of multiple stations in a market to have diverse programming on those
stations to attract as many total viewers/ listeners as possible. On the other hand, one might
expect the owner of those stations to offer the same type of programming on all the stations
in order to take advantage of cost savings from economies of scale or scope. Given such
potentially conflicting market incentives, it is not surprising that, in most cases, tests for a
relationship between an ownership variable and a programming market outcome were not
statistically significant. Still, a number of statistically significant relationships were
( continued...)
The Studies and the Peer Reviews
In aggregate, the ten economic studies relating to media ownership
commissioned by the FCC 22 perform two functions — data collection and data
analysis.
Systematic data collection is needed because the Third Circuit decision requires
“ the Commission to justify or modify its approach to setting numerical limits” 23 but
there has been a dearth of systematic data available on which to base a justification
of any specific proposed rule. The 10 FCC- commissioned studies, their peer reviews,
and the critiques and revised models submitted by the Consumer Commenters, in
aggregate provide a significant body of data and analysis on ownership characteristics
and programming needed to perform the analysis required by the Third Circuit.
Unfortunately, the databases on minority ownership and programming remain far less
complete and clean, despite a heroic effort by an FCC staffer to construct a time
series database for 2001- 2005 from existing sources.
The data analyses performed in the ten studies tend not to reach strong policy
conclusions. Typically, the analyses attempt to determine whether there is a
statistical relationship between particular aspects of media ownership in a market
( such as newspaper- broadcast cross- ownership) and particular market outcomes
( such as the quantity of local news or local public affairs programming), holding
other variables that might affect the market outcomes constant. Often, a statistically
significant relationship between two variables is found with one particular model
specification, but if a small change is made in the way the model is specified the
relationship is no longer found to be statistically significant. This led many of the
researchers and peer reviewers to emphasize that the statistical findings were not
robust. 24 Where relationships are identified, the researchers tend to emphasize that
CRS- 8
24 (... continued)
identified, though different studies sometimes had different findings or, within a single
study, a slight difference in how a model was specified yielded a different result, suggesting
that the results were not very robust.
these demonstrate correlation, not causality. A few of the studies seek to test for such
statistical relationships without holding other variables constant, thus overstating the
magnitude of any relationships they find.
Three of the studies had findings suggesting that non- ownership variables, such
as the demographics or commute time in a market, were better predictors of the
amount or type of programming aired than were ownership characteristics. This led
some researchers to suggest that media ownership characteristics may not be
significant determinants of programming.
None of the studies presents statistical analysis of the relationship between
ownership characteristics and minority programming. Although Study 2 collected
data on many types of programming, including minority programming, and those data
were used in Study 3 to analyze the relationships between various ownership
characteristics and different types of programming, no results are shown for minority
programming — though results are shown for Spanish language programming. The
two studies directly addressing minority ownership — Study 7 and Study 8 — do not
address minority programming at all.
Perhaps what is most noteworthy about these 10 studies is that they highlight
the large number of variables that may be relevant to a full analysis of media
ownership issues. The following is a partial list of variables that the researchers
identified as relevant to their analyses:
! station ownership and affiliation characteristics, such as whether the
station is owned by or affiliated with a major broadcast network,
owned by a large station group that does not also own a network,
affiliated with a non- major broadcast network, co- owned with one
or more broadcast stations in its local market, cross- owned with a
newspaper in its local market, cross- owned with a cable system in its
local market, owned by a provider of a cable program network,
locally owned, owned by a minority, or owned by a female.
! local market characteristics, such as the number of broadcast stations
( television or radio) in the market, the size of the market in terms of
population or advertising revenues generated, market concentration,
the number of co- owned stations in the market, the number of cross-owned
media entities in the market, demographic factors ( such as
age, race, ethnicity, English as a second language, income, and
education levels), or the average commute time ( for radio).
! quantitative measures of programming, at both the station and the
market level, such as the amount of prime- time and non- prime- time
local news programming ( including and excluding sports and
CRS- 9
25 This report presents, in summary fashion, the findings of a large number of data- intensive
studies. In order to keep it from being encumbered by hundreds of footnotes, specific page
citations are not provided for each finding.
weather), local public affairs programming, national news
programming, national public affairs programming, minority
programming, female programming, children’s programming,
violent programming, adult programming, general interest
programming, or Spanish language programming.
! measures of program quality, such as program ratings and the
amount of advertising shown on the programming ( which one
researcher identified as a negative measure of quality).
! broadcast network programming sources, such as whether the
programming was produced by an affiliate of the broadcast network,
by an affiliate of a competing broadcast network, or by an
independent studio.
! cable network programming sources, such as whether the
programming was produced by an affiliate of the cable or satellite
operator, by an affiliate of a major media company that does not
have cable or satellite systems, or by an independent program
producer.
! the cable tiers on which program networks are placed.
! regulatory variables, such as whether a particular network is covered
by must- carry and retransmission consent requirements.
The studies showed that not all of these variables can be unambiguously defined and
that, at times, data are not available to directly measure these variables, so proxy
measures must be used.
The following is a brief snapshot of each study and its peer review. 25
Study 1: “ How People Get News and Information,” by Nielsen
Media Research, Inc.
This study consists of a telephone survey that provides estimates of Internet and
media usage patterns, opinions, and attitudes among adults in the United States. A
sample of 141,324 phone numbers was selected, with survey data collection
conducted from May 7- 27, May 29- 31, and June 1- 3, 2007. There were 3,101
completed interviews, or 2.2% of the total sample; each of those completed
interviews elicited responses to 43 questions. The questions included:
! In an average week, how much time do you spend, in total, watching
or listening to broadcast television channels?
CRS- 10
! In an average week, how much time do you spend, in total, watching
or listening to broadcast television channels to get information on
news, current affairs, and local happenings?
! Which of the following types of information do you get from
broadcast television channels — emergencies, classified ads or
economic opportunities, local cultural events, local news or local
current affairs, national or international news, opinion or
commentary on news and current affairs, sports, weather and traffic?
The same or similar questions were asked with respect to cable or satellite television
channels, the Internet, daily local newspapers, weekly local newspapers, daily
national newspapers, and broadcast radio. In addition, respondents were asked which
one source they considered the most important, and which source they considered the
second most important, for breaking news, for more in- depth information on specific
news and current affairs topics, for local news and current affairs, and for national
news and current affairs. Respondents also were asked for information on their
highest level of schooling completed, household income, urban/ suburban/ rural
location, race, age, and gender.
In addition, respondents were asked, “ If you would be reimbursed, are there any
channels you would be interested in dropping from your [ cable] service? If yes,
which channels would you be interested in dropping from your service if you could
receive a reduction in the cost of your service?” and “ Are there any channels that you
would like to receive, but do not currently subscribe to because you would have to
subscribe to a larger package of channels? If yes, which channels would you like to
receive, but do not currently subscribe to because you would have to subscribe to a
larger package of channels?” These questions do not relate to the media ownership
proceeding, but could generate information that would be relevant to proposals by
FCC Chairman Kevin Martin to allow cable television subscribers to selectively drop
channels from tiered cable packages and have their bills reduced by the per-subscriber
fees that the cable operator pays for those channels or to allow subscribers
to purchase all cable channels on an à la carte basis.
Nielsen presents the data collected in the survey, but does not attempt to analyze
the data or reach conclusions. Rather, it provides a very large data set that is
available for researchers in and outside the Commission to use in their own analyses.
Some of the findings are presented in Table 1.
CRS- 11
Table 1. Most Important and Second Most Important Media Sources Used by Households for Various Types of News
and Current Events Information (% of households)
Media Source Most important
source of
Breaking News
Second most
important
source of
Breaking News
Most important
source for more
in- depth
information
Second most
important
source for more
in- depth
information
Most important
source of local
news and
current affairs
Second most
important
source of local
news and
current affairs
Most important
source of
national news
and current
affairs
Second most
important
source of
national news
and current
affairs
Cable News
Channels
35.1 18.9 30.1 19.5 11.2 12.6 38.5 19.5
Broadcast
Television
Stations
28.9 26.3 20.1 22.7 38.2 20.2 23.3 19.4
Internet/
Websites
16.4 15.4 23.5 13.5 6.7 14.0 16.8 18.1
Radio stations 8.2 16.3 5.5 10.5 7.2 18.6 5.7 10.0
Local
Newspapers
5.1 9.3 9.8 14.1 30.1 21.3 4.8 14.0
National
Newspapers
1.5 3.9 4.7 8.0 1.7 3.0 5.9 9.3
Other 1.8 4.2 3.2 4.3 1.8 4.4 1.8 4.2
None 1.8 3.1 1.7 3.5 2.6 3.1 2.4 3.0
Don’t Know 1.0 2.4 1.3 3.8 0.5 2.6 0.6 2.5
Refuse 0.3 O. 3 0.1 0.2 0.0 0.2 0.1 0.1
Source: Nielsen Media Research, Inc., “ Federal Communications Commission Telephone Study” ( Study 1), at pp. 87- 94.
CRS- 12
26 Also, high levels of income and education are correlated with Internet access.
The peer reviewer, John B. Horrigan, Associate Director for Research at the
Pew Internet & American Life Project, concludes that the Nielsen study represents
a credible effort, but raises “ two significant issues worthy of note.” First, the low
response rate to the survey as well as certain survey design concerns may have
generated a sample that is more reflective of the behaviors and attitudes of well-educated
and higher- income Americans than of the public at large. “ Because high
levels of income and education are positively correlated with interest in news and
current affairs, this may have substantive consequences on the survey’s result.” 26
Second, according to Horrigan, inclusion in the questionnaire of a question eliciting
the specific Internet news sites watched, but not of analogous questions eliciting
information on the specific broadcast, cable, or satellite news channels watched or
the specific local or national newspapers read, may constrain the usefulness of the
survey data to address questions that may be relevant for the media ownership
proceeding. For example, he claims the survey design may limit the ability of
analysts to explore whether the Internet is a substitute or complement to traditional
media.
Study 2: “ Ownership Structure and Robustness of Media,” by
Kiran Duwadi, Scott Roberts, and Andrew Wise, with an
appendix entitled “ Minority and Women Broadcast
Ownership Data,” by C. Anthony Bush
The main purpose of this study, which was performed by members of the FCC
staff, was to assemble the most comprehensive possible data set concerning media
ownership. These data were used by researchers to perform some of the other
studies. The data cover the period 2002- 2005, and update a 2002 Commission study
that examined media ownership of various types ( cable, satellite, newspaper, radio,
and television) for 10 radio markets in 1960, 1980, and 2000, and expands upon that
study by adding data on the availability and penetration of Internet access and by
examining all designated market areas ( DMAs), not just 10 markets. The focus of
the study is data collection, not data analysis, although the effort generated many data
tables that can provide the empirical basis for analysis.
The researchers’ primary task was to combine multiple data sets and then
consolidate these “ metadatasets” to the DMA level. Data were collected on more
than 1,700 television stations, 13,500 radio stations, 7,800 cable systems, and 1,400
newspapers across four years, for a total of more than 100,000 observations and more
than 13 million data points. The authors provide the caveats that they were unable
to know with certainty the accuracy of every observation and that the final results
could only be as accurate as the underlying data sets that they combined. They
believe the collected data give an accurate description of the various media for the
four year period.
CRS- 13
The authors list five findings:
! Media ownership was fairly stable over the 2002- 2005 period, in
contrast to earlier periods, which were characterized by substantial
consolidation across most forms of media, especially following
enactment of the 1996 Telecommunications Act.
! Multichannel video ( cable and satellite) penetration has continued
to grow since the previous report; in 2005, cable and satellite
operators combined served 83.5% of television households, up from
80.3% in 2002.
! For broadcast television, the data reveal a slight increase in the
number of stations and a slight decrease in the number of owners.
The number of locally owned stations remained fairly constant. The
number of co- owned television and radio stations increased by more
than 20%. Minority- owned television stations fell by three stations,
from 20 in 2002 to 17 in 2005 ( out of more than 1,700 television
stations). Female- owned television stations fluctuated slightly but
ended in 2005 with the same number, 26, as in 2002.
! For broadcast radio, the number of stations increased moderately.
The number of owners decreased about 5%, and the number of
locally owned stations fell 3.7%. Co- owned radio/ television
combinations increased 19%. Minority- owned radio stations
increased less than 1%, while female- owned stations fell 6.9%.
! The number of daily newspapers decreased slightly, the number of
newspaper owners decreased by about 8%, and locally owned
newspapers decreased by about 5%. The number of same- city
newspaper- broadcast combinations stayed the same.
The appendix uses aggregate data from the FCC Form 323 on broadcast
ownership to construct a time series for 2001 through 2005. The data show that for
that period:
! There was no substantial growth or decline in minority ownership of
commercial radio stations ( increasing from 376 to 390, then falling
to 371, and finally increasing to 378 over those years).
! There was a decline in minority ownership of commercial television
stations ( from 20 to16 and then increasing to 17).
But the author of the appendix raises concerns about the reliability of the
minority ownership data, which were constructed from “ noisy” or incomplete data
bases. In 2003, the biennial filing deadlines became staggered, tied to the
anniversary date of each station’s renewal application filing date, so the data no
longer contain a single “ snapshot” of minority and female ownership for all stations
in the industry that could be used a benchmark for measuring industry ownership
trends. In addition, stations whose licensees are sole proprietorships or partnerships
CRS- 14
27 On September 11, 2007, Gregory Crawford was named chief economist of the FCC. See
“ Gregory Crawford Named FCC Chief Economist,” FCC News, released September 11,
2007, available at [ http:// hraunfoss. fcc. gov/ edocs_ public/ attachmatch/ DOC- 276574A1. pdf],
viewed on November 6, 2007.
comprised entirely of natural persons ( rather than corporate or business entities) are
exempt from the biennial filing requirement and need only submit such information
voluntarily if they choose. Moreover, in the initial years of filing the new biennial
forms, many stations failed to complete their forms correctly, resulting in their
responses to a relevant question being omitted from an electronic ownership
database. Review of station filings for 2001 suggests that the filings are not complete
with respect to ownership information. Furthermore, review of the ownership report
data from all periods and the literature suggests that these data contain significant
errors. There is no verification of Form 323 data or quality control over the data.
The author concludes that Form 323 data are inadequate for the purpose at hand,
but these data could be used to augment more reliable data. “ At best, we have
extensive samples or a virtual census of minority and female broadcast ownership
data. We do not have an actual census, although perfect information on transactions
and a perfect base year ... would result in a census. We do not have statistical
random samples. In summary, the data contain noise due to errors in the databases
that were used to construct the data.”
Nonetheless, he compares the Form 323 data to data collected in the Census
Bureau’s Survey of Business Owners ( SBO) for 2002. In doing so, he finds “ that, for
2002, 95% confidence intervals contain our estimate of 184 Black owned commercial
radio stations, our estimate of 36 Asian owned commercial radio stations, our
estimate of 145 Hispanic owned commercial radio stations, our estimate of 6 Native
American owned commercial radio stations, and our estimate of 5 Native Hawaiian
owned commercial radio stations.... In light of the SBO data our estimate of the
number of Minority owned TV stations is reasonable.”
The peer reviewer, Robert Kieschnick, Associate Professor and Finance and
Managerial Economics Area Coordinator at the University of Texas at Dallas,
commends the authors “ for the work that they expended in putting these data together
as the source data are diverse and in some cases incomplete or subject to error.” He
finds the methodology and assumptions employed are reasonable and technically
appropriate, the data used are reasonable, and the conclusions about the pattern of
changes in media ownership appear to follow from the data.
Study 3: “ Television Station Ownership Structure and the
Quantity and Quality of TV Programming,” by Gregory S.
Crawford, Assistant Professor, Department of Economics,
University of Arizona27
This study analyzes the relationship between the ownership structure of
television stations and the quantity and quality of certain television programming in
the United States between 2003 and 2006. It focuses on seven types of programming
— local news and public affairs, minority, children’s, family, indecent, violent, and
CRS- 15
religious — identifying alternative definitions used for each of these programming
types. It also uses two definitions of programming quality — the number of
households who choose to watch a program as a share of households that have access
to that programming ( a market rating definition) and the number and length ( in
minutes and seconds) of advertisements included on the program, using the
assumption that households do not like advertising and that program quality therefore
decreases as the amount of advertising increases. The study uses the ownership data
developed in Study 2. The major findings of the study are:
! Broadcast television provides more news, religious, and violent
programming than cable television.
! Cable television provides more public affairs, children’s, and adult
programming than broadcast television.
! Niche, or special interest, programming ( minority, adult, religious)
is less widely available than general interest programming ( news,
children’s, family).
! Program production and/ or availability is falling across time for
network news ( though not local news), public affairs, family, and
religious programming, and rising across time for Latino, children’s,
adult, and more violent programming.
! News and violent programming are the most highly rated
programming types, with Latino/ Spanish- language, children’s, and
family programming substantially lower, and non- Latino minority
and religious programming lower still.
! The relative quality ( in terms of ratings) of news programming is
declining, as is the relative quality of certain measures of children’s
programming, but more violent programming is gaining.
! Affiliates of the four major broadcast television networks provide
more advertising minutes at higher prices than do other broadcast
television stations and this advantage appears to be increasing over
time. From the perspective of viewers, this represents a decline in
program quality.
! The strongest finding with respect to ownership structure relates to
local news: television stations owned by a parent that also owns a
newspaper in the area offer more local news programming. By some
methods, television stations owned by corporate parents with larger
annual revenue also offer more local news, but by other methods
they offer less.
! Local ownership is correlated with more public affairs and family
programming.
CRS- 16
! Although there are differences in the amount of violent
programming across network affiliates, it does not appear to be
correlated in an economically or statistically significant way with
ownership structure.
! Effects of ownership structure on other programming types or on
outcomes in the advertising market are either economically
insignificant, statistically insignificant, or differ in their predicted
effects according to the method of analysis.
The peer reviewer, Lisa M. George, Assistant Professor of Economics at Hunter
College of the City University of New York, finds that, “ Overall, the study considers
an interesting question with appropriate data and methods and should ultimately
prove useful for policy purposes.” But she has three general comments. With respect
to the robustness of the analytical results, “ While the regressions in the analytic
portion of the study are consistent with standard econometric methods, the paper does
not include specifications that would demonstrate the robustness, or reveal the
fragility, of regression results.” With respect to the relationship between the
empirical estimates and conclusions, “ the empirical analysis does not include cable
television, yet the paper discusses cable television at great length. Similarly, the
paper includes text and tables concerning viewership and ratings, yet no ratings data
are included in the regressions. The regressions also consider only prime- time hours,
yet this caveat is rarely mentioned.” With respect to the theoretical assumptions
about advertising, the peer reviewer claims “ the assumption that advertising is
inversely related to quality cannot be justified in light of existing economic theory.
An important idea in the economics literature on two- sided markets is that
advertising in media markets functions like a price. In other words, viewers “ pay”
for broadcast television with advertising minutes. Just as a better steak costs more
than a lesser cut and thus commands a higher price, a better television program
typically costs more than a weaker program and would be expected to command
more not less advertising time.”
Study 4: “ News Operations,” a study with four sections, by
FCC Staff
This study, which is divided into four sections, each of which was performed
by a member of the FCC staff, collects data on the size and scope of the news
operations of radio and television stations and newspapers. It also analyzes the
relationship between the nature of news operations and market characteristics,
including ownership structure.
Section I: “ The Impact of Ownership Structure on Television
Stations’ News and Public Affairs Programming,” by Daniel Shiman.
This section of the study examines the relationship between the ownership
characteristics of broadcast television stations and the quantity of news and public
affairs programming they broadcast, based on the scheduled news and public affairs
programming of almost all full power broadcast analog television stations in the U. S.
for two weeks in each year, over the four year period 2002- 2005. It uses modeling
CRS- 17
28 For example, it might be that news programming is especially popular in Washington,
DC, where government is the major industry, so that all DC stations tend to provide a lot of
news programming. But Washington, DC has more stations that are owned and operated
by one of the four major broadcast networks than do other markets. Thus, if the statistical
analysis were not to account for the high level of demand for news in Washington, DC, the
results might overstate the relationship between network owned and operated stations and
the amount of news programming provided.
techniques to control for unobserved market- specific, broadcast network- specific,
and time- specific factors, 28 and also to check for robustness of statistical results.
This section finds that certain ownership characteristics have a statistically
significant impact on the quantity of news programming provided by stations, but
most ownership characteristics do not have a statistically significant impact on the
provision of public affairs programming. Specifically:
! Television- newspaper cross- ownership is associated with 18
additional minutes ( 11%) per day in news programming.
! Television stations that are owned and operated by one of the four
major broadcast networks are associated with 22 additional minutes
( 13%) per day of news programming.
! Television stations that have a co- owned television station in a
market are associated with 24 additional minutes ( 15%) per day of
news programming.
! For stations that are owned by large stations groups, but not by the
four major networks, each additional co- owned station nationally
tends to have a quarter minute less of news programming per day.
! Local ownership of a television station is associated with six
minutes ( 4%) less news programming per day.
! Televison- radio cross- ownership does not have a statistically
significant impact on the amount of news programming provided,
but is associated with an additional 3 minutes ( 15%) of public affairs
programming.
! Most of the ownership characteristics studied do not have a
statistically significant impact on the provision of public affairs
programming. However, higher parent revenues for a station are
associated with the provision of less public affairs programming.
The author provides several caveats about the analysis. First, despite the use of more
than 6,700 observations for more than 1,700 stations, the effective sample sizes are
rather small for some of the variables of interest — for example, only 30 television
stations are jointly owned with a newspaper ( for 120 observations). Second, the
analysis does not include cable channels and Internet news programming. The
constant availability of news, weather, and sports programming on such cable
CRS- 18
channels as CNN, Fox News, MSNBC, the Weather Channel, and ESPNews, as well
as Internet news programming, is likely to affect the audience interested in local
broadcast stations’ news shows, most likely reducing it. Third, the analysis does not
distinguish between local and non- local news programming, even though the supply
and demand factors involved may differ. Fourth, the analysis addresses the quantity
of news programming, not its quality. Individual stations might choose to respond
to demand for news programming by increasing the quality of programming
provided, rather than the quantity.
The peer reviewer, Philip Leslie, associate professor of economics and strategic
management, Stanford Graduate School of Business, identifies some “ noteworthy
strengths” of the data — there are a large number of observations, the panel structure
allows for the use of various fixed effects to control for other factors that affect
programming, and there is a high level of detail on programming and ownership. He
also identifies “ a few important limitations to the data,” most of which are
acknowledged in the study. He concludes that the data are valuable and should be
taken seriously, but that while the limitations do not undermine the analysis, “ they
do lead me to question the broader relevance of the findings.” One limitation that he
identifies is the data include no information on the number of viewers for each station
( or each television program), and consequently each station is weighed equally in the
analysis. “ Since we ultimately care about the impact on consumers, and some
stations are more important to consumers than others, this presents a limitation on the
data.”
Section II: “ Ownership Structure, Market Characteristics and the
Quantity of News and Public Affairs Programming: An Empirical
Analysis of Radio Airplay,” by Kenneth Lynch.
This section of the study examines the extent to which there is a relationship
between the ownership characteristics of a radio station and the quantity of
informational ( news and public affairs) programming it broadcasts, using data from
a sample of more than 1,000 radio stations and appropriate control variables. Airplay
data were collected for six 20- minute segments for each station. The econometric
technique used produces two sets of results that must be considered jointly: the
change in the likelihood of airing news ( or public affairs) programming, and the
change in the amount of news ( or public affairs) programming that is aired if the
station airs news ( or public affairs) programming at all. It is noteworthy that market
characteristics, such as market size, length of commute time, the audience share that
is male, the audience share that is minority, income levels, education levels, age
distribution, etc. explain a greater amount of variation in the quantity of news and
( especially) public affairs programming aired than station ownership variables. The
findings related to station ownership include:
! As owners expand their radio operations by acquiring more radio
stations ( either in- or out- of- market), the stations they own are more
likely to air at least some news programming, but the quantity of
news aired on each station may fall such that the overall quantity of
news is not significantly affected. These relationships hold whether
looking at all news programming or only local news programming.
CRS- 19
! The geographic distance between the parent and the station does not
significantly affect the quantity of news aired by stations in the
group that might air news, but it has a negative and significant effect
on the probability stations air any news at all. These relationships
hold whether looking at all news or only local news.
! While it appears that stations that received a waiver of FCC rules
covering radio- newspaper combinations are significantly more likely
to air news and public affairs programming, only three of the 1,013
stations in the sample required such a waiver and thus “ any
inferences drawn from the parameter estimates for this covariate are
essentially anecdotal.”
! A radio station cross- owned with an in- market television station is
less likely to air news programming than are other radio stations, but
if it does air news the quantity aired will be relatively larger than that
of stations that are not cross- owned. The overall marginal effect is
that in- market television cross- ownership increases the expected
quantity of news programming by about 110 seconds ( 31%). These
relationships are not statistically significant when looking only at
local news.
! As owners expand their radio operations by acquiring more radio
stations ( either in- or out- of- market), the stations they own are more
likely to air at least some public affairs programming, and the
quantity of public affairs programming aired on each station is likely
to increase; although neither of these relationships are statistically
significant on their own, the combined effects are significant. Since
only 8% of the stations in the sample aired local public affairs
programming during the six 20- minute segments for which airplay
data were collected, the ability to draw meaningful inferences from
those data is limited.
! There are too few instances of radio cross- ownership with
newspapers in the sample to draw meaningful inferences.
The peer reviewer, Scott Savage, assistant professor of economics at the
University of Colorado, deems the methodology and assumptions reasonable and
generally consistent with accepted theory and econometric practices, but “ would like
to see a much stronger justification for the important ownership variables of interest
in the model and a clearer description of their expected signs. This would also help
make the results discussion clearer.” He finds “ the dataset would have to be
augmented by other measures of market concentration if the study really wanted to
make concrete conclusions about economies of scope and market power effects. For
example, does it necessarily follow that a ‘ large owner’ with many in- market stations
has more market share and market power than a ‘ small owner’ with a single in-market
station? More importantly, ‘ number of in- market stations’ and ‘ total number
of stations’ may be endogenous when they depend on the unobserved preferences of
radio listeners. Ultimately, more discussion and/ or evidence is required to make
causal claims.”
CRS- 20
29 This relationship was statistically insignificant for one definition of news format used by
the researcher and statistically significant for the other definition used by the researcher, but
in both cases was negative.
Section III: “ Factors that Affect a Radio Station’s Propensity to
Adopt a News Format,” by Craig Stroup.
This section examines whether ownership structure affects a radio station’s
propensity toward adopting a news format, using Arbitron data on the format choices
of about 8,000 radio stations between 2002 and 2005 and employing the fixed effects
regression technique to take into account non- observable factors that influence radio
stations’ format choices. Instead of examining actual radio broadcasts ( as does
section II of this study), this section considers a station’s format and assumes that
news format radio stations broadcast more news than stations with other formats.
This allows the researcher to collect data over time and to observe the format
ramifications of stations that undergo ownership changes. The format definitions
used do not distinguish between local news programming and other news
programming. Some of the findings of this section are:
! Although 65% of all full power radio stations broadcast in FM,
rather than AM, only about 25% of news stations broadcast in FM.
Holding other factors constant, AM stations are six times more
likely to be news stations than FM stations. This is not surprising
since AM service offers sound- quality that is inferior to that of FM
and therefore is more likely to be used for non- music formats.
! A radio station that is cross- owned with a newspaper in the same
market is four to five times more likely to be a news station than a
radio station that is not cross- owned.
! A radio station that is cross- owned with a television station in the
same market is about twice as likely to be a news station than a non-cross-
owned station.
! Commercial stations are only about 25% as likely to adopt a news
format as noncommercial stations.
! Stations with a local marketing agreement ( LMA) — the sale by the
licensee of discrete blocks of time to a “ broker” who supplies the
programming to fill that time and sells the commercial spot
announcements in it — may be less likely to be news stations. 29 A
review of this relationship for stations that newly enter an LMA,
however, suggests that entering into an LMA may make a station
more likely to be a news station, but news stations may be less likely
to enter into LMAs.
! Having a sibling news radio station in the market appears to increase
a station’s propensity to adopt a news format by about 50%.
CRS- 21
! Radio stations with owners in the same DMA appear to be no more
likely to be news stations than others. But radio stations with
owners in the same state appear to be significantly more likely to be
news stations.
The peer reviewer, Scott Savage, assistant professor of economics at the
University of Colorado, finds the methodology and assumptions reasonable and
generally consistent with accepted theory and econometric practices and the data of
sufficient quality for the econometric model employed. But he finds that the study
would benefit from a more explicit description of the model, more economic
discussion of the choice of independent variables and their a priori expectations, and
a discussion of the potential economic mechanisms that underlie the relationships
uncovered in the data.
Section IV: “ The Effect of Ownership and Market Structure on
[ Newspaper] News Operations,” by Pedro Almoguera.
This section studies the effect of ownership characteristics on the news
operations of newspapers, based on a sample of 134 newspapers in the largest 60
designated market areas ( DMAs) for 14 randomly chosen days ( with the constraint
that each day of the week is included twice) in 2005. The local market is defined as
the Metropolitan Statistical Area ( MSA), rather than DMA, because the latter is
geographically narrower and therefore more closely coincides with the circulation
area of newspapers. The absolute amount of space allocated for news in the “ general
news” section of the newspaper is used as a quantity measure of news operations.
Some of the findings of this section are:
! There is no observable relationship between a newspaper’s news
operations and cross- ownership with a television station or radio
station in the same market.
! Newspapers that are co- owned with other newspapers within the
same Metropolitan Statistical Areas are associated with a 5%
decrease in the absolute amount of news provided. But co- owned
newspapers outside the market have no effect on news operations.
! The level of newspaper concentration in the market ( as measured by
the Herfindahl- Hirshman Index) has no effect on news operations.
! Belonging to a joint operating agreement with another newspaper in
the market has no effect on a newspaper’s news operations.
The peer reviewer, Philip Leslie, associate professor of economics and strategic
management, Stanford Graduate School of Business, finds that although the data
come from multiple sources they are “ mainly well explained,” though focused on
larger markets and thus not representative of all newspapers in the United States.
Professor Leslie finds it “ unclear how exactly the identity of which newspapers
compete in which markets is assigned.” He indicates that although restricting the
definition of news operations to the quantity of news in the general news section of
a newspaper is “ potentially troublesome ... since it can arbitrarily exclude valid news
CRS- 22
30 These measures include format counts, format concentration, percentage of station airplay
devoted to music, percentage of station airplay devoted to news, percentage of station
airplay devoted to sports, percentage of station airplay devoted to talk entertainment,
percentage of station airplay devoted to advertising, advertisements by day part, percentage
of station programming that is live, percentage of station programming that is
network/ syndicated and voice- tracked, number of syndicated programs, and number of on-air
personalities. These various measures of programming are intended to provide
information relevant to the wide variety of programming issues that have been raised by
parties in the media ownership proceeding.
content in other parts of the newspaper,” nonetheless “ there is no obviously right
approach.” He proposes that there be “ some robustness checks on this issue.” He
also states that since the data do not include a source of exogenous variation in
ownership structure, “ it is less clear whether the analysis uncovers a causal effect or
a mere correlation.” Finally, Professor Leslie indicates that the data provided show
a positive relationship between co- ownership of newspapers in the same market and
the percentage of total newspaper space ( news plus advertising) taken up by news,
which he believes is “ at odds with” the negative relationship between newspaper co-ownership
and the absolute amount of news. But he provides no explanation why,
a priori, one should consider these results at odds.
Study 5: “ Station Ownership and Programming in Radio,” by
Tasneem Chipty, CRA International, Inc.
This very large study evaluates the effects of ownership structure on numerous
different measures of program content, 30 advertising prices, and listenership for ( non-satellite)
broadcast radio, using both descriptive and regression analyses. It relies on
data from a number of different sources, including the database on radio station
programming that the FCC commissioned Edison Media Research to construct in
2005 ( Edison Database), station characteristic and demographic data from BNA
Financial Network ( BNAfn), ratings data from Arbitron, advertising cost data from
SQAD, and additional demographic data from the U. S. Census Bureau. It performs
analysis using market- level averages, station- level averages, and station- pair
analysis. As a result, it has literally thousands of statistical results that researchers
can cull through. Most of the regressions do not show statistically significant
relationships between the ownership variables and programming variables being
tested, which is not surprising given the breadth of variables covered.
Among the study findings are:
! If market size is not taken into account, markets with greater
ownership concentration offer fewer formats and have more pile- up
( multiple stations with the same format). But smaller markets have
( by definition) fewer stations and have greater ownership
concentration ( because the FCC’s media ownership rules permit
owners to own a larger fraction of stations in smaller markets,
relative to bigger markets). Controlling for the number of stations
and the interaction effects between number of stations and
concentration, concentration has no statistically significant effect on
CRS- 23
the number of available formats. However, the results suggest that
stations are more spread out across existing formats in more
concentrated markets — concentrated markets have significantly less
pile- up, as measured by less format concentration. These results are
robust. Also, markets with more stations have more formats and less
pile- up.
! Cross- ownership of radio stations with local newspapers and/ or
local television stations does not appear to have a noticeable effect
on the number of formats or on format pile- up.
! Markets with a large number of radio stations owned by large
national radio companies appear to have more formats and less pile-up.
! Commonly owned stations in the same market are 5% more likely
to have the same format than stations owned by different owners.
However, this pattern is reversed when looking only at pairs of FM
stations. Station ownership characteristics are less good predictors
than market demographic factors of whether stations in a market will
offer the same format.
! Commonly owned stations in different markets are more likely than
other stations to have the same format.
! In large markets, consolidation of ownership has no statistically
significant effect on any of the format measures. In small markets,
consolidation is associated with fewer formats.
! Operating in a market with other commonly owned stations does not
have a statistically significant effect on how a station is
programmed.
! Newspaper- radio cross- ownership is associated with longer blocks
of uninterrupted talk in the morning drive time slot and longer
blocks of uninterrupted news programming in the evening.
! Stations that have large national owners offer more syndicated
programs and spend a greater percentage of airtime on
network/ syndicated programming.
! National ownership is associated with a statistically significant
negative effect on length of an uninterrupted block of music in the
evening.
! Commonly owned stations in different markets are programmed
more similarly than separately owned stations in different markets.
! There appears to be minimal association between radio- newspaper
or radio- television cross- ownership in a market and radio
CRS- 24
programming. Analysis of more than 10 programming content
variables yields only rare examples of statistically significant
relationships, and those are small in magnitude.
! Local radio consolidation is associated with 4% less music, 3% less
local programming, 3% less live programming, and 18% less news
programming in the evening ( though this last effect is estimated
from a sample of only FM stations).
! All else equal, radio stations in concentrated markets offer
substantially longer segments of uninterrupted sports programming
in the evening. The pattern of results suggests that this expanded
offering is offset with shorter segments of news programming in the
evening.
! Commonly- owned news stations in the same market overlap in 14-
22% of their programming and commonly- owned news stations in
different markets overlap in 8- 14% of their programming, depending
on the measure of overlap. Commonly- owned sports stations in the
same market have no overlap in their programming, and commonly-owned
sports stations in different markets have overlap in 5- 9% of
their programming. The overlap in programming across commonly-owned
news stations is statistically significant and there may be
more overlap within markets than across markets. There is no
statistically significant overlap in sports programming for
commonly- owned stations, either within or across markets. This
result likely reflects practices in the underlying sports broadcast
rights market, where a live ( often local) sporting event typically is
broadcast by a single radio station within a radio market.
! Consolidation in local radio markets has no statistically significant
effect on advertising prices.
! Advertising prices decrease as the number of stations in the market
increases.
! National ownership of radio stations has a statistically significant
negative effect on advertising prices.
! Radio cross- ownership with television in a market has a statistically
significant positive effect on advertising prices in large markets
across a number of specifications, but not in small markets.
! Consolidation in local radio markets has no statistically significant
effect on average listening to radio.
! Listeners served by large radio groups, as measured by the number
of commercial stations owned nationally by in- market owners, listen
more.
CRS- 25
! All else equal, concentration in large markets is associated with
lower average station ratings, suggesting that listeners in large
markets are not tuning in as much as listeners in small markets.
! Stations operating in markets with other commonly owned stations
achieve higher ratings than independent stations.
! Cross- ownership of radio stations with local newspapers has a
statistically significant positive effect on listenership. There are no
other statistically significant effects of ownership structure on
listenership.
The peer reviewer, Andrew Sweeting, assistant professor of economics at Duke
University, finds the econometric analysis simple and the specifications explained in
a transparent way that should make the results straight- forward to replicate. He
offers one general caveat — these results reflect correlations in the data between
ownership and programming and there is no direct evidence of causal effects.
Professor Sweeting also offers several specific caveats:
! When a coefficient is identified as being statistically significant at
the 5% level, that means that if there was really no statistical
correlation between the outcome variable and the explanatory
variable, one would nonetheless expect to see a “ t- statistic” as large
as the one reported less than 5% of the time. Thus when seeing
thousands of coefficients one should expect some of them to be
statistically significant even when there is no true correlation.
Therefore, at a minimum, reviewers of the data results should attach
importance to patterns that are robust across several specifications,
as these are more likely to indicate true correlations.
! Although many of the regressions are repeated with and without
controls for market demographics, since those demographics may
provide a reason for differences in programming ( for example, one
would expect fewer urban and gospel stations in markets with
smaller African- American populations), the results that do not take
into account the demographics should be ignored.
! For the analysis based on station- pairs, when creating pairs the
number of observations tends to increase dramatically, which tends
to lead conventionally- calculated standard errors to fall and the
coefficients to appear to be more significant than they may actually
be. Thus one has to be careful when discussing statistical
significance.
! In the Edison data base, different stations were monitored on
different days and this could give misleading impressions of
programming overlap. For example, some common owners switch
syndicated shows across stations in the same market, so that they
might appear in the data base as being offered on both stations even
CRS- 26
31 Although most stations broadcast a 30 minute news program, some broadcast a one- hour
news program, so the sum of total news and non- news content exceeded 30 minutes.
though they were never available on both stations on the same day
( which seems the more relevant criterion for overlap).
! The study presents many different measures of programming, but
some may be more relevant for policy than others. For example, it
may be important to know how ownership affects the number of
commercials played or the amount of local news programming, but
it is less clear that the balance of music and DJ banter or whether the
banter comes in long or short blocks matters.
Study 6: “ The Effects of Cross- Ownership on the Local
Content and Political Slant of Local Television News,” by
Jeffrey Milyo, Hanna Family Scholar, University of Kansas
School of Business, and Associate Professor, Department of
Economics and Truman School of Public Affairs, University
of Missouri.
This study examines whether cross- ownership of a newspaper and television
station influences the content or slant of local television news broadcasts, by
comparing the late evening local news broadcasts of 29 cross- owned television
stations located in 27 different markets with those of their major network- affiliated
competitors in the same market, for three evenings in the week prior to the November
2006 election. In total, 312 late evening local newscasts were recorded for a total of
104 stations, and these recordings were coded and analyzed for local news content
and political slant.
The study findings include:
! Local television stations broadcast approximately 26 minutes of total
news coverage, 31 with about 80% of this time devoted to local
stories. However, a fair amount of local news is devoted to sports
and weather. Local news excluding sports and weather accounts for
less than half of total broadcast news time. State and local political
coverage averages just less than three minutes per newscast during
the week under study.
! The newscasts of television stations that are cross- owned with
newspapers are associated with one or two more minutes of total
news coverage ( 4- 7%) than those of non- cross- owned stations. But
radio cross- ownership and other ownership and network
characteristics ( such as network affiliation or parent company
household coverage) are not significant determinants of total news
coverage.
CRS- 27
! The newscasts of television stations that are cross- owned with
newspapers are associated with 80 to100 seconds ( 6- 8%) more local
news coverage ( including sports and weather) than those of non-cross-
owned stations. After accounting for time- slot effects, none
of the other ownership variables are significant, although the
affiliates of old- line networks ( NBC, CBS, and ABC) offer several
minutes more of local news than the affiliates of newer networks
( Fox, CW, and MyNetwork). The pattern of results is very similar
for local news coverage excluding sports and weather, except that
the positive association between television- newspaper cross-ownership
and the amount of local content is largely mitigated.
These results suggest that television stations cross- owned with
newspapers offer significantly more sports and weather coverage
than their non- cross- owned counterparts, but no less of other local
news.
! Television- newspaper cross- ownership is positively, but not
significantly, associated with the amount of state and local political
coverage in newscasts. But television- radio cross- ownership is
significantly associated with an 80 to 100 second reduction — about
a 50% reduction — in the amount of state and local political
coverage in newscasts. Parent companies with greater household
coverage also provide significantly more state and local political
news, as do Fox network affiliates.
! The amount of time allotted to state and local political candidates
speaking for themselves is about 10 seconds ( 40%) greater on the
newscasts of television stations that are cross- owned with
newspapers than on the newscasts of non- cross- owned stations.
Similarly, cross- owned television stations offer about 20 seconds
( 30%) more coverage of state and local political candidates than
non- cross- owned stations, while Fox affiliates show between 30 to
45 seconds more candidate coverage. Other ownership or network
controls are not significantly associated with these measures of
political coverage.
! The amount of time allotted to the coverage of partisan issues ( the
author identifies 12 issues that he categorizes as Democratic issues
and 10 issues that he categorizes as Republican issues, based on
examining party and candidate websites in the week before the
general election) does not vary by cross- ownership status, nor does
the amount of time allotted to covering the results of political
opinion polls, however both CBS and NBC affiliates devote
substantially less time to opinion polls compared to other networks.
! Based on four measures of partisan slant — differences in speaking
time allowed to candidates of each party, differences in time spent
covering the candidates of each party, differences in time spent
covering issues identified as Republican or Democratic, and
differences in time spent on opinion polls favoring one party or the
CRS- 28
32 It should be noted that the choice of a measure for political slant is the most controversial
( continued...)
other — it appears that both cross- owned and non- cross- owned
stations allocate political coverage fairly evenly. On every measure
though, the cross- owned stations exhibit a slight and insignificant
Republican- leaning slant. However, Professor Milyo provides the
caveat that there is no baseline for determining whether coverage is
appropriately balanced or not and therefore no inferences about
balance should be made based upon the absolute value of any of
these measures.
! For three of the four measures of partisan slant, there appears to be
a significant positive association between the Democratic voting
preferences in the local electorate in 2004 ( as measured by the vote
percentage in the 2004 presidential election for John Kerry) and
Democratic slant in the 2006 newscasts of the local stations. This
result implies that partisan slant is determined at least in part by
demand market forces — stations catering to the voting preference
of viewers in their newscasts.
! The study cannot identify market- wide effects, for example, whether
cross- owned stations have some impact on their market as a whole.
The peer reviewer, Matthew Gentzkow, assistant professor of economics at the
University of Chicago Graduate School of Business, finds the author’s multiple
regression analysis methodology reasonable, but initially was unable to replicate the
results because of what was determined, after discussion with the author, to be two
errors in the coding of the data set used to produce the original results. After
correcting for these errors, the peer reviewer still could not replicate some of the
results. He nonetheless concludes that “ my impression from having worked with the
data is that the corrections are unlikely to change either the direction or the statistical
significance of the coefficients of primary interest.”
Professor Gentzkow states “ the data collected for this study represent a
significant advance. The data give a rich, fine- grained picture of the news coverage
of local television stations unlike anything that was available before. The sample
selection criteria make sense, and maximize the power of the within- market
comparisons the author makes. An obvious caveat is that the data cover only three
days in November 2006. The differences found may or may not be similar to
differences that would be found in other periods. The author acknowledges this issue
clearly....”
Professor Gentzkow explains that coding the content of a news broadcast is
challenging and inherently subjective, but states that the author focused primarily on
measures such as minutes of news in particular categories that are well- defined, easy
to interpret, and potentially replicable, though the procedure for identifying the
partisan issues used to measure political slant was more subjective than some of the
other measures. 32
CRS- 29
32 (... continued)
aspect of this study and that Professor Gentzkow has performed several studies of political
slant in the media using the types of measures of political slant used by Professor Milyo.
In the study, Professor Milyo states, “ I follow Gentzkow and Shapiro in using speaking time
of candidates as one metric for partisan slant. I also use several measures that are very
similar in spirit to those employed by Gentzkow and Shapiro; in particular, time devoted to
all candidate coverage, time devoted to issues favored by one party or the other, and time
devoted to polls favoring one party or the other.” Thus, some critics have claimed that
Professor Gentzkow cannot provide an objective peer review.
Professor Gentzkow raises one concern with the results as reported. All of the
specifications of primary interest include both a main effect of the newspaper- cross-ownership
variable and an interaction between this variable and the radio- cross-ownership
variable. The conclusions as reported are based on the main effect
coefficients without taking account of the interaction. This means that the reported
differences apply only to the subset of stations that are not cross- owned with radio
rather than to the sample as a whole.
Study 7: “ Minority and Female Ownership in Media
Enterprises,” by Arie Beresteanu, Assistant Professor, Duke
University Department of Economics, and Paul B. Ellickson,
Assistant Professor, Duke University Department of
Economics
This study examines the data collected in the 2002 Survey of Business Owners
( SBO) to identify the extent of female and minority ownership in the radio,
television, and newspaper industries in the United States, and to provide a direct
comparison with the broader universe of U. S. businesses. It also makes a few
recommendations regarding how the FCC should proceed in analyzing minority and
female ownership of media enterprises. The authors emphasize that, due to the
nature and quality of the available data, they are not able to reach strong conclusions,
so their recommendations should be viewed more as points of discussion than
prescriptive for policy.
The study finds:
! Based on the most complete data source available ( the 2002 SBO),
minorities and females are under- represented in the three industries
relative to their proportion of the U. S. population, though these
patterns hold across the broad run of industries, as well.
! Approximately 51.1% of the U. S. population is female, but women
own only 14.01% of radio stations, 13.68% of television stations,
20.25% of newspapers, and 17.74% of all non- farm businesses.
! Approximately 13.40% of the U. S. population is Hispanic, but
Hispanics own only 3.71% of radio stations, 6.04% of television
stations, 1.58% of newspapers, and 3.85% of all non- farm
businesses.
CRS- 30
! Approximately 12.68% of the U. S. population is Black, but Blacks
own only 4.35% of radio stations, 4.89% of television stations,
2.44% of newspapers, and 1.82% of all non- farm businesses.
! Approximately 1.22% of the U. S. population is American Indian,
but American Indians own only 0.17% of radio stations, no
television stations, 1.00% of newspapers, and 0.47% of all non- farm
businesses.
! Approximately 4.41% of the U. S. population is Asian, but Asians
own only 2.27% of radio stations and 3.24% of newspapers. Asians
own 6.03% of television stations and 6.21% of all non- farm
businesses.
! The figures listed above are for non- publicly- traded enterprises. If
publicly- traded companies were included, the ownership shares of
women, Hispanics, Blacks, American Indians, and Asians would be
slightly lower.
! Since the observed ownership asymmetries are economy- wide, they
are undoubtedly linked to broad systematic factors not specific to
these particular industries. While a full accounting of the causes of
these systematic trends is beyond the scope of this analysis, it
appears that access to capital is a primary cause of under-representation
for minorities. This is suggested by a review of the
market shares of the top 4, top 8, top 20, and top 50 firms in a full
set of industries for which data are available. The concentration
ratios in the information category, and specifically in radio and
television broadcasting, are very high, which is indicative of high
barriers to entry, most likely in the form of capital requirements. A
review of the Survey of Consumer Finances, conducted every three
years by the U. S. Federal Reserve, shows that the ratio of median net
worth between whites and nonwhites was about 6.6, and the average
ratio of mean net worth between whites and nonwhites was 3.5.
Thus, minorities on average have significantly less personal capital
at their command to meet the capital requirements of a media
enterprise. Deeper analysis with more data would be needed to
address the position of females.
! The data currently being collected by the FCC is extremely crude
and subject to a large enough degree of measurement error to render
it essentially useless for any serious analysis.
The author makes the following recommendations:
! The FCC should take steps to improve its data collection process.
Strong effort should be made to ensure a full, consistent, and
accurate reporting of ownership status and its composition, as a long
run endeavor.
CRS- 31
! Information on minority and female ownership should be carefully
tracked and integrated into the main firm database in a coherent
fashion. Currently, the FCC simply flags as minority- or female-owned
any firm with greater than 50% female or minority
ownership. This information is maintained as a separate and
incomplete spreadsheet that is not linked to the broad census of
firms.
! Firms should be classified not only by race and gender, but also by
whether the company is publicly traded or privately owned. Efforts
also should be made to track the demographics of minority as well
as majority stakeholders.
! More broadly, the FCC should further examine the rationale behind
this exercise. The Commission should ask whether there are
quantifiable benefits to increasing minority and female ownership
and how ownership policies affect change; to what extent media
content is driven by demand ( that is, consumer preferences for
certain types of programming or for slanted news coverage) rather
than supply ( that is, owner preferences); whether owner preference
can only be imposed through a controlling interest rather than a
minority interest; whether publicly- traded firms feel pressure to be
broadly representative in their programming; how non- traditional
media, such as the Internet, change the debate.
The peer reviewer, B. D. McCullough, Professor of Decision Sciences at Drexel
University, states that “ The FCC should have contracted with the authors to do a full-blown
study of the problem rather than simply conduct a small and perfunctory
analysis.” He states this issue requires sophisticated analysis that might show the
extent to which the ownership disparity is explained by such relevant variables as
education and industry experience. In the absence of such analysis, all the disparity
is incorrectly attributed to the single factor of race or gender. Moreover, the minority
categories are too aggregated — for example, Hispanics “ lumps together Puerto
Ricans, Mexicans, and Cubans, despite overwhelming evidence that these groups are
remarkably dissimilar in terms of mean education, income, health, etc.”
Professor McCullough questions the authors’ claim that lack of access to capital
is a primary cause of under- representation for minorities, since the analysis “ does not
include education, work experience, or any of a host of other variables.” The actual
assertion of “ a link between race and access to capital would require a great deal of
[ additional] work.”
With respect to the authors’ recommendation that the FCC track and integrate
information on minority and female into the main firm database, Professor
McCullough states the authors “ should have offered their considered opinion on how
to define the variables they want collected.”
CRS- 32
Study 8: “ The Impact of the FCC’s TV Duopoly Rule
Relaxation on Minority and Women Owned Broadcast
Stations 1999- 2006,” by Allen S. Hammond, IV, Professor at
the Santa Clara University School of Law, with Barbara
O’Connor, Professor of Communications at the California
State University at Sacramento, and Tracy Westin, Professor
at the University of Colorado
The purpose of this study is to ascertain the impact of the relaxation of the
television duopoly rule on minority and female ownership of television broadcast
stations. In 1996, that rule was amended to allow the ownership of two television
stations in certain markets, provided only one of the two was a VHF station, the
overlapping signals of the co- owned stations originated from separate ( though
contiguous) markets, and the acquired station was economically “ failing” or “ failed”
or not yet built. Because the FCC did not begin collecting data on the race and
gender of broadcast station owners until 1998, the period studied was 1999 to 2006.
The study does not provide econometric analysis. Rather, it ( 1) identifies the
transactions resulting in television duopolies that could not have occurred before the
rule change and ( 2) determines the number of commercial broadcast television
stations that were purchased or sold by minority or women owners in markets in
which a television duopoly was introduced that could not have existed before the rule
change.
The study finds:
! From 1999 to 2006, the relaxation of the duopoly rule did not appear
to have a positive impact on minority and female ownership of
television stations; instead, the major beneficiaries were the largest
25 television broadcast station owners.
! The relaxation of the duopoly rule codified the existing contractual
relationship ( local management agreements or LMAs) between
group station owners and the stations they managed. LMAs allowed
television broadcasters ( that were not allowed to be jointly owned)
to combine their operations to reduce their costs by sharing staff
and/ or programming, to expand their market reach by combining
signal coverage, to increase their advertising revenue shares by
controlling access to a larger percentage of a desirable market
segment and/ or providing more opportunities to air programming.
! Some group station owners leveraged their control of LMAs into
control of access to attractive syndicated programming as well as
access to programming affiliated with emerging networks.
! The broadcast group owners that benefitted from the relaxation of
the duopoly rule were primarily the largest broadcast group owners
( those in the top 25 based on revenue, national market reach, and/ or
CRS- 33
33 See Study 8 at p. 29 and also the source cited in that study, Harry A. Jessell, “ Sikes
Ready to Move on TV Ownership: Chairman Wants to Expand Number of Stations a
Licensee May Own Both Locally and Nationally, Broadcasting, April 20, 1992, at p. 10.
number of stations owned). As of 2005, they accounted for 83 of the
109 ( 76%) duopolies identified.
! Many of the group owners that managed “ sister” ( LMA) stations
acquired those stations outright once the duopoly rule was relaxed.
! Only one minority- owned duopoly was created. It has since been
dissolved. Since there were no preexisting minority- owned
duopolies, there were no surviving minority- owned duopolies.
! Across all markets in which minority- owned television stations
operated between 1999 and 2006, the number of minority- owned
television stations dropped by 27%.
! Within markets entered and/ or occupied by television duopolies, the
number of minority- owned stations dropped by more than 39%. By
contrast, in non- duopoly markets the number of minority- owned
stations dropped by 10%.
! The duopolies created in markets in which female- owned television
stations operated were non- female owned. Since there were no pre-existing
female- owned duopolies, there were no female- owned
television duopolies.
! 36% of the female- owned stations operating in duopoly markets
were sold. All of the stations were sold to non- female, non- minority
owners.
! Female- owned stations were more likely to be found in non- duopoly
markets.
In addition, the study presents, but does not analyze, a number of hypotheses
about the relationship between the revised duopoly rule and minority/ female
ownership that have some logical appeal but remain untested and unproven. For
example, it presents an argument made in 1992 by a minority broadcaster who was
concerned that increasing ownership caps or loosening duopoly rules would reduce
opportunities for minority ownership. 33 That broadcaster claimed that relaxation of
ownership rules in 1985 caused an increased demand for stations that were attractive
as second television properties in a market, and the resulting sharp increase in station
prices placed minority- owned stations in “ double jeopardy” — they couldn’t afford
to trade up to the better facilities and the stations against which they were competing
were rapidly becoming parts of large broadcast groups capable of bringing significant
economies of scale to the market.
CRS- 34
34 The FCC’s minority tax certificate program used the market- based incentive of deferral
of payment of capital gains taxes to encourage the owners of broadcast and cable properties
to sell their properties to minorities. Tax certificates also were issued to investors who
provided start- up capital to minority- controlled companies.
35 See Statement of William E. Kennard, General Counsel, Federal Communications
Commission, Before the United States House of Representatives Committee on Ways and
Means, Subcommittee on Oversight, on FCC Administration of Internal Revenue Code
Section 1071, January 27, 1995, at p. 10, indicating that between 1978 and 1994 the FCC
granted approximately 390 tax certificates, of which approximately 330 involved sales to
minority- owned entities — 260 for radio station sales, 40 for television station sales, and 30
for cable television transactions.
This argument, on its face, appears reasonable, but on its own does not
demonstrate how significant the relationship is between the dual ownership rule and
minority ownership. During the time period cited by the minority broadcaster, the
FCC’s old minority tax certificate program34 was in place and appeared to be
successfully fostering the sale of broadcast properties to minority owners. 35 The dual
ownership rule was loosened in 1996, just one year after Congress eliminated the tax
certificate program. The authors found that minority ownership has fallen
significantly since 1999 ( the first year that data on minority- and women- ownership
were available). But they do not perform analysis that helps determine how much of
that decline is attributable to the loosened dual ownership rule, how much to the
elimination of the tax certificate program, and how much to other factors.
The peer reviewer, B. D. McCullough, Professor of Decision Sciences at Drexel
University, states “ This report is fatally flawed by a fundamental logical error that
pervades every aspect of the analysis.” Referring to a finding in the study that
minority- owned stations were four times more likely to be sold in duopoly markets
than in non- duopoly market, Professor McCullough states
In the context of their report, their obvious implication is that the existence of
duopoly is the reason that minority stations were observed to be sold more
frequently in duopoly markets rather than in the non- duopoly markets. This
could only be logically inferred if the duopoly and non- duopoly markets were
identical in all other respects, which the authors did not show because they could
not show this.
Since the markets are not identical, some effort must be made to control for the
differences between the duopoly and non- duopoly markets.... There exists a
wide variety of statistical and econometric techniques to control for these
differences, yet the authors employ not a single one.... The authors had access
to the BIA database and could easily have made some effort to control for
confounding variables. That the authors did not bother to control for
confounding variables completely vitiates their analysis of minority- owned
stations. The same is true for the “ women- owned” portion of their report.
The authors do document that the number of minority- and/ or women- owned
broadcast stations changed during this time. Their error is to attribute this
change solely to the relaxation of the duopoly rule, without consideration of any
simultaneously occurring economic or demographic phenomena.
CRS- 35
36 In the Matter of 2006 Quadrennial Regulatory Review — Review of the Commission’s
Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996; 2002 Biennial Regulatory Review — Review of the
Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section
202 of the Telecommunications Act of 1996; Cross- Ownership of Broadcast Stations and
Newspapers; Rules and Policies Concerning Multiple Ownership of Radio Broadcast
Stations and Local Markets; Definition of Radio Markets, MB Docket Nos. 06- 121 and 02-
277 and MM Docket Nos. 01- 235, 01- 317, and 00- 244, Reply Comments of the National
Association of Broadcasters, Attachment entitled “ The Declining Financial Position of
Television Stations in Medium and Small Markets,” January 16, 2007.
37 The NAB study is one of submissions that the FCC had peer reviewed. The peer
reviewer, Robert Kieschnick, Associate Professor and the Finance and Managerial
( continued...)
It may well be true that the Duopoly Rule relaxation was the cause of the decline
in the number of minority- owned and/ or women- owned broadcast stations, but
the authors have not provided any evidence thereof.
There was another economic study addressing the television duopoly rule
submitted in the proceeding. In its reply comments, the National Association of
Broadcasters ( NAB) included a December 2006 study entitled “ The Declining
Financial Position of Television Stations in Medium and Small Markets,” 36 which
provides financial data to support its contention that “ a relaxation of this rule to
permit co- ownership of television stations in smaller markets would provide needed
financial relief to television broadcasters, and allow television stations to compete
more effectively with cable operators and other multichannel video programming
distributors.” The study examines the profitability of television stations in markets
51- 175 for the data years 1997, 2001, 2003, and 2005. It finds:
profit margins are already at risk today, especially for the lower rated affiliated
stations. It is clear that overall these stations show declining profitability in the
years examined. Furthermore, those stations located in the smallest of markets
are also now at a stage where the average low rated station experienced actual
losses. Declining network compensation coupled with increasing news expenses
adds to the tenuous financial situation of these small market stations.
It concludes that: “ As this study demonstrates, a relaxation of the television duopoly
rule to permit common ownership of two stations in smaller markets would provide
needed relief for these struggling stations, thereby increasing the strength of local
television.”
The NAB study is based on a selective choice of data. It uses only the financial
data for odd- numbered years, omitting the data for even- numbered years when
political advertising generally adds to the revenues of television stations without
imposing comparable costs. Television station profitability tends to be higher in
even- numbered years. Given that station revenues and profitability follow a
relatively predictable cyclical pattern, it is appropriate to analyze data that
incorporates the entire cycle, not just the predictably lower performance period in the
cycle, to determine the real financial health of the industry. The NAB study therefore
appears to be biased. 37
CRS- 36
37 (... continued)
Economics Area Coordinator, University of Texas at Dallas, identifies “ a number of
concerns with the data reported and statements made about the reported data,” and states “ I
do not see that the report provides sufficient information to reach its conclusion....” The
peer review is available at [ http:// www. fcc. gov/ mb/ peer_ review/ docs/ prtpkieschnick. pdf],
viewed on November 28, 2007.
38 “ Must have” programming refers to programming for which a significant number of
MVPD subscribers have such a strong intensity of demand that they would not subscribe to
an MVPD service that does not carry that programming. Although demand varies somewhat
from geographic market to geographic market, examples of programming that often is
categorized as must have are major sports programming and the programming of local
broadcast stations affiliated with major networks.
Study 9: “ Vertical Integration and the Market for Broadcast
and Cable Television Programming,” by Austan Goolsbee,
Robert P. Gwinn Professor of Economics, University of
Chicago Graduate School of Business, American Bar
Foundation, and National Bureau of Economic Research
This study examines the prevalence of vertical integration in television
programming, presenting findings relating to whether integrated producers
systematically discriminate against independent content in favor of their own content.
It separately addresses prime- time broadcast programming and cable network
carriage. Its focus is on the impact of vertical integration on independent
programmers — whether broadcast networks discriminate against programming they
do not have an ownership stake in and whether cable and satellite operators
discriminate against cable networks they do not have an ownership stake in. It
attempts to measure this by performing regression analysis on the ratings of, and
advertising revenues generated by, in- house and independent programming carried
by vertically integrated broadcast networks. If the ratings for and/ or advertising
revenues generated by their in- house programming is consistently lower than those
of the independently produced programming that they carry, that would suggest that
they favor their own programming, even when it is less sought out by viewers.
Similar analysis is performed for cable networks, focusing on the number of
subscribers and viewers of and on subscriber fees and advertising revenues generated
by the vertically integrated and independent cable networks carried by MVPDs. This
study does not address another issue related to vertically integrated cable or satellite
providers — whether they use their position strategically by refusing to make their
in- house “ must have” programming available to competing distributors. 38
The principal findings of the study are:
! Using four different measures of vertical integration, in each case the
data document that a large fraction — typically the majority — of
the programming on any broadcast network during prime- time was
made “ in- house.”
! The distribution of independently produced programs — those with
no affiliation with a network company at all — is fairly evenly
CRS- 37
spread across the networks, while the programs produced by
production companies that have an ownership tie with a network are
“ overwhelmingly more likely” to be broadcast on their affiliated
network.
! From the perspective of how many people watch a particular
program, on the margin, there is little evidence that independently
produced prime- time broadcast programming differs from in- house
programming in the same time slot. Just as many people watch one
as watch the other.
! But from the perspective of a program’s total advertising revenue,
vertically integrated prime- time broadcast programs perform worse
than independent ones. Independent shows in the same time slot and
the same season must have 16% greater advertising revenues to get
on the air. Even controlling for the demographic characteristics of
the audience, the advertising revenues on the margin are
significantly lower for the vertically integrated shows than for
independent programming, consistent with them being held to a
lower standard than the independents.
! The non- in- house programming aired by a broadcast network can be
produced by an entirely independent program producer or by a
program producer that has an ownership affiliation with another
broadcast network. When this distinction is taken into account, on
the margin the vertically integrated programs have 25% less
advertising revenues and the fully independent programs have 23%
less than programs made by production companies with ownership
ties to rival broadcast networks. This result suggests that a cost-based
efficiency explanation for vertical integration — that networks
apply a lower standard to their own programs because they can make
them more cheaply — probably will not suffice. Those efficiencies
would not exist when the programming is truly independently
produced, and thus one would expect the networks to require
independent programming to generate more advertising revenues
than in- house programming to gain network carriage. That the
networks appear to demand approximately the same amount of
advertising revenue generation suggests that efficiencies from in-house
production is small.
! It is possible that the differential in advertising revenues generated
by truly independent programming and programming produced by
companies with ownership affiliations with rival networks may
reflect that rival networks have more bargaining power over
syndication revenue ( revenues generated by the programming when
it is no longer aired on prime- time network television). If a
broadcast network can’t get part of the syndication profits from the
program’s producer, it may require that show to generate higher
advertising revenue to put it on the air.
CRS- 38
! With respect to cable program networks, there are network- level
data on the performance of channels nationally and system- level
information about what networks a system carries, but there are not
system- level data on network performance, so the evidence is more
suggestive than the evidence available on the broadcast networks.
! The concentration, on a national basis, of the largest MVPDs has
grown over time with the considerable consolidation of cable and the
rapid growth of DBS.
! On a market- by- market basis, however, the opposite has occurred.
Each market has gone from a virtual monopoly for the local cable
franchise to a market where the cable franchise shares the market
with the two major DBS providers ( and now there is beginning to be
entry in some markets from the two major telephone companies,
AT& T and Verizon).
! Of the top 15 cable networks, as measured by the size of their prime-time
audience, the share of vertically integrated networks — defined
as networks that have an ownership affiliation with an MVPD ( but
excluding networks that have an ownership affiliation with a major
media company that does not own an MVPD, such as Disney or
Viacom) — has been falling over time, from eight in 1997 to four in
2005. The share of cable networks owned at least in part by an
MVPD fell from 40% in 1996 to 20% in 2005. But many of the
cable networks without any MVPD ownership are owned by giant
media companies. “ It is difficult to find a single major cable
network owned by someone other than a major media
conglomerate.”
! There is a very small negative effect of vertical integration on the
number of subscribers a cable channel has. When a channel goes
from being independent to being owned by an MVPD, it loses
subscribers. But there is a small positive effect of vertical
integration on the subscriber growth rate. When a channel goes
from being independent to being owned by an MVPD, its subscriber
growth rate increases by a small amount. Looking at the subset of
networks where there are data on the number of viewers as well as
the number of subscribers, holding the number of subscribers
constant, the number of viewers actually watching the channel falls
when it becomes vertically integrated.
! Looking at the impact of becoming vertically integrated on the
amount of license revenue the cable network gets from the
distribution systems and the amount of advertising revenue it
generates ( that is, the two sources of revenues for the programming)
and the amount spent on programming ( that is, the cost of providing
the programming), there is very little evidence that vertical
integration of a channel has any noticeably beneficial impact on
CRS- 39
revenues or costs. The same network performs exactly as well
before and after it is vertically integrated.
! Since some of the economics literature suggests that the efficiencies
of vertical integration flow only to start- up networks, not to well
established ones, analysis also was performed for the subset of
networks that were started since 1997. Results for these younger
networks showed no major differences from the results for all
networks. There is no evidence that when new networks become
vertically integrated it increases subscribers or changes their
subscriber growth rates.
! Excluding the major vertically integrated cable network that are
carried on virtually all major cable systems, and focusing instead on
11 wholly or partially vertically integrated basic cable networks that
have carriage rates between 5% and 90%, nine of those cable
networks showed evidence that cable systems are significantly more
likely to carry the cable network if they have an ownership interest
in the network. But for nine of the 11 networks, the higher the DBS
share in the local market, the more attenuated that relationship
becomes. For those nine, the interaction of vertical integration with
the DBS share has a significant negative coefficient. This evidence
suggests, perhaps, an explanation for vertical integration rooted in
competitive pressures rather than efficiencies. The DBS share that
makes the vertical integration effect equal to zero averages around
20- 25%. Thus for at least a subset of the networks there is evidence
consistent with the view that DBS competition reins in the ability of
cable systems to use a vertically integrated position to promote their
own channels.
! At the network level, there is little evidence that vertically integrated
cable networks attract more subscribers, grow faster, raise more
advertising revenues or licensing fees, or have lower programming
costs.
The peer reviewer, David Waterman, Professor, Indiana University Department
of Telecommunications, generally finds the regression analysis used in the broadcast
portion of the study to be a valid methodology. But he states, “ the results of this
regression must be regarded as suggestive rather than conclusive, at least in the
absence of a more detailed vetting of the results’ robustness to alternative model
specifications. As the report acknowledges, program profits [ rather than revenues]
are the desired measure and meaningful cost measures are not available.” He
indicates that “ there are large differences in prime- time program costs by program
format ( e. g., sitcom, variety, drama) as well as by network, that may not be captured
by the model, and could thus bias or invalidate the results.”
With respect to the cable portion of the study, Professor Waterman notes that
“ the overwhelming majority of ‘ independent’ cable networks successfully launched
in the period of the study are owned by affiliates of large media conglomerates who
do not have cable system interests ... which implies that the financial resources or
CRS- 40
bargaining leverage in common to the large corporations which also own numerous
other established networks, rather than vertical integration itself, may be the most
significant advantage that successful cable network suppliers now have.” He states
that the study uses regression techniques that show vertical integration to have little
or no positive effect on cable network performance. But “[ i] n my opinion, this
regression analysis, while interesting and suggestive, employs a methodology that
makes interpretation of the results questionable.” The primary measure of vertical
integration in the study — the ratio of the total national subscriber base of the MVPD
that owns the network to the network’s