Wednesday, November 15, 2006

"Media Tracker" a useful tool for identifying media competitors by locality

A useful research tool has been relaunched by the Center for Public Integrity as part of its Telecom and Media Ownership Project. Dubbed Media Tracker, it’s an enhanced data base that identifies media outlets in any geographic area as well as the ownership of each outlet. The data base includes newspapers, television, radio, cable and broadband providers.

So, for example, if you want to see the media outlets and their owners in Philadelphia, you might enter 19104. A map shows the location of broadcast towers and a summary identifies the five largest television licensees in the area. Links for many of the largest firms drill down further into the data base.

Media Tracker is a helpful tool, but is only a starting point for many of the needs of identifying media owners. The geographic region that is used seems to follow the FCC’s Grade B contour territory, which encompasses far more licensees than viewers can receive. For example, Philadelphia shows 17 full power stations, but those included in Reading, Trenton, Bethlehem and Allentown don’t reach most of the Philadelphia market area. And, of course, the 90% of households that receive TV by satellite or cable would not likely find their providers offering duplicate network stations in any event.

Similarly, the data base kicks out 55 daily newspapers within 100 miles of Philadelphia—which includes New York City and Asbury Park, NJ. But looking at the list recalled the Umbrella Model for newspaper circulation. This model, first described by Stanford economist James Rose in the mid-1970s, noticed that the newspaper market consists of four tiers, with the lower tiers competing with those above it. The top tier consists of metropolitan dailies having regional market coverage. In Philadelphia, that would be the Inquirer and the Daily News, late of Knight Ridder. The second tier consists of satellite city dailies, which differ from the first tier in that they have more confined markets. This could include the Courier-Post, based across the river in Cherry Hill, NJ or the News Journal, out of Wilmington, DE. A third tier is made up of suburban dailies around the metropolis and cities., such as the Burlington County (NJ) Times. The fourth tier includes weeklies and “shoppers.”

In looking at the newspapers in Media Tracker, this hierarchy of markets becomes more evident. While the residents and advertisers of Philadelphia can choose from the Inquirer or Daily News, both from the same owners, residents of Camden NJ might want (and many do) buy the Philadelphia papers—OR the Courier Post—OR both. Burlington residents will have ready access to either of those papers—ad well as the County Times. Region-wide advertisers have their choice as well.

Being able to pull out this type of data is a strength of Media Tracker. But it is still a work in progress. The ultimate service would take a given ZIP code and provide a list of what media are available in that ZIP: the outlets offered by the local cable company or other broadband provider, those available from the satellite services beamed to that area, only the newspapers that circulate there, the radio stations that can be received with any AM/FM radio. (Of course, the entire notion of local media availability is undermined to the extent that anything is available to anyone via the Internet).

But even as it is configured today, Media Tracker is a helpful resource. Whether it tells us there is more or less competition in media availability in any geographic area is in the hands of the researchers who will use it.

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Thursday, November 09, 2006

NSF-Funded Study Finds Newspaper “Slant” Comes from Readers, Not from Owner

Once again, does ownership matter? A new, comprehensive, methodically unbiased study from two academic economists asks the question: “What Drives Media Slant?” Using robust statistical tools and a novel approach to measure “slant,” this National Science Foundation-funded study found that the largest single variable is that “Firms respond strongly to consumer preferences.” That is, to the extent there is a bias—or slant—in coverage-- newspaper editors tend to write for their audience. Bias comes from below, not above—from owners.

Whether it’s at the FCC hearings on ownership rules or at stacked conferences, such as National Conference for Media Reform, the rhetoric behind media ownership has been one of diversity and the implication—supported primarily by anecdotal stories—that large media companies stifle diversity. There is the subtext that the owners of the large media companies could -- if not actually do—promote their personal, political and/or cultural agendas.

This is despite the preponderance of evidence from sources that are not stakeholders or don’t have ideological axes to grind, that ownership matters, but not in the direction these advocates promote. As I have pointed out here before, describing a study undertaken at Harvard’s Kennedy School that finds the US has the most diverse and competitive media environment in the world, or the British-lead “Trust in Media” study that had a similar finding. The very well conceived content analysis study, “Does Ownership Matter in Local Television News?” from the Project for Excellence in Journalism reported very mixed, sometimes counter-intuitive results, such as that local TV stations with cross-ownership—in which the parent company also owns a newspaper in the same market—tended to produce higher quality newscasts.

The “What Drives Media Slant?” study is unique in several ways. Key is the method for determining slant: instead of researchers constructing a basket of content criteria and setting a handful of graduate students to laboriously try to categorize thousands of newspaper articles over a manageable period of time—often as few as two weeks-- Matthew Gentzkow and Jesse M. Shapiro draw their definition of slant directly from the words of ideologues—members of Congress. They started with a computer-driven analysis that examined the set of all two and three word phrases used by representatives in the 2005 Congressional Record, and identified those that were used much more frequently by one party than by the other.

For example, they discovered that when referring to estate tax legislation, Republicans tended to use the term “death tax,” while Democrats were partial to calling it the “estate tax.” Republicans were biased toward “tax relief,” Democrats liked to call it a “tax break.” And so it went: “personal account” for Social Security change and “war on terror” (strongly Republican) vs. “private account,” and “war in Iraq” (strongly Democratic).

The researchers were then able to take the 1000 most strongly identified terms and use computers to compare them to the full content of 400 newspapers accounting for 70% of daily circulation—far more than is possible using conventional content analysis. The key finding: “Using zip code-level data on newspaper circulation, we show that right-wing newspapers circulate relatively more in zip codes with high fractions of Republicans, even within a narrowly defined geographic market.” And by implication, these papers circulate less strongly in areas of a left leaning constituency.

The study further found that newspaper companies with publications in multiple markets followed the same principal: their papers published in “red” markets showed more of a Republican slant than those published in Democrat “blue” markets.

The political composition of the market did not account for all the explanation for slant, the study found, but it was the largest identifiable variable. The study was robust in that it controlled for many possibilities that could account for slant, but none undermined the central finding: bias is driven more from the readers, less from the editors or owners. In economist language, newspaper content is largely demand driven.

Advocates who claim to “know” that owners—often large media companies—set an editorial agenda that is their own invariably use anecdotal stories or a narrow, limited study to “prove” their point. Or they advance their position simply on faith. The empirical evidence keeps piling up that overall ownership does matter—but not in a single nor predictable direction.

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Thursday, September 28, 2006

Cutting profit margins for newspapers only a short term fix

Cutting “expected” profit margins for newspapers will not prevent long term downsizing of newspaper expenses.

In a post I made today at Rebuilding Media I talk about the inevitability of downsizing at newspapers. I suggest you read that before continuing here, though it’s not necessary.

There is no doubt that newspapers need to downsize to reflect both their shrinking circulation and their stagnant advertising. Investing in a better newspaper will not substantially change the forces pressuring the paper product.

There is one point that the critics of downsizing do hold that is legitimate. That is the profit margins that the publishers are trying to maintain. The usual number thrown out is 20%, which is well beyond the profit margin of a well-run manufacturing company—which is how newspapers are classified.

The level of profitability has eluded many of the big city newspapers, such as the beleaguered Philadelphia Inquirer, which reportedly (sub req.) had an operating margin of about 9%-- not too shabby by industrial standards, but well below the industry target.

So there is some element of reality to the perception that owners—primarily the large pension and mutual funds, but large individual holders as well—based their investment on expectations of now unrealistically high earnings ratios. Privately held newspapers-- such as Morris, Landmark, Freedom, Scripps—do not face the same degree of pressure, but even then there can be behind the scenes forces.

A closely held company may be satisfied to look at cash flow rather than profit margins. But once the stock gets split up among second and third generations of siblings, some of whom have no involvement with the publications, similar pressures evolve – opportunity costs. The value of the newspapers would be much higher in the hands of a publicly-owned company that would run them for industry- standard profit instead of being managed for cash flow or because the older generation was rewarded with the prestige or influence possible in running newspapers. Publicly owned media companies are rarely run to maximize political influence—they are run to provide a comfortable profit. It’s the privately owned, family run, smaller operations where influence or power is more likely to be salient. (See pages 19-21 of Who Owns the Media). It is the pressure to “unlock” the financial value that resulted in many family chains selling out in the 1970s and 1980s and has affected even the polices of some publicly owned companies where control has resided with the family, such as the Bancrofts of Dows Jones and now the Chandlers at Tribune Co. (sub. req.)

However owned, accepting lower profit margin, while perhaps realistic, does not fundamentally change the outlook for the future of newspapers nor its employees. It would only delay the inevitable. If a newspaper that was earning 20% decides to accept a more reasonable 10% margin, for a few years it could maintain its current level of operations, watching expenses climb faster than revenue. Margins would fall, but in two, three, maybe four years hit 10%. Then what?

Of course, we would hope that management is also looking for ways to rejuvenate the business, recasting it as the source of local news and information of all sorts and in whatever format. There are some models for this. Among others,, Bluffington and are searching for locally based and branded sites that are more than just newspapers online.

Accepting lower profit margin may be needed to free up investment capital as news-papers transition to profitable news-gathers, but it still may require cutting in areas of the old (read press rooms, circulation departments, some newsroom functions) and diverting those savings to building the future.

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Wednesday, August 30, 2006

FCC Pursues New (Yawn) Ownership Rules. Does Anyone Who Matters Care?

As the FCC gears up for a new stab at concocting media ownership limits, the big media companies are continuing to downsize, resize, divest and diversify. To a great extent they look out over the highly competitive media landscape and do not see the FCC being as relevant to their future as many of the high profile media bashing critics seem to believe.

The break up of Knight-Ridder, the second largest newspaper group, is now history. Its newspapers were split up among McClatchy, MediaNews and some individual private buyers.

The Tribune Company, owner of 26 television stations and 11 large city newspapers—including the LA Times, Chicago Tribune and New York’s Newsday—is trying to sell its television holdings. This is not being forced on it by some government regulation. Rather it is the product of the same market forces that lead to Knight-Ridder’s disaggregation— stockholders who see greater value in the parts than in the sum.

Dow Jones, publisher of The Wall Street Journal and Barrons is looking to sell (sub. required) six of its small city daily newspapers “as the publisher aims to push deeper into electronic media.” And the Journal Register Co. has announced its plan to divest its daily and weekly newspapers in New England, also with the objective of focusing on their “growing online operation.”

These are just a few of the developments by large and smaller media groups. They are adjusting to the changing media landscape. Newspapers are maintaining profitability only by down sizing. Owners know that no amount of investment in the print product can meaningfully reverse the macro trends undercutting reader and advertiser interest. The television business has been splintering, as viewership of networks and broadcast stations declines, eroded by the proliferation of channels.

Even local television stations, still lucrative, are starting to squirm (sub. required) as local cable providers compete for spot advertising more than ever. Surprisingly, perhaps, the rather staid billboard industry is poaching increasingly on the advertising pie that subsidizes so much of the cost of our content media. Of all media, only the Internet is growing faster than the billboard industry, which grew at twice the pace of advertising generally in the first quarter of 2006. It is being driven by—guess what?—digital technology that is making it possible for new displays to change the message without having to glue up new sheets and can beam additional content to cell phones. Every ad dollar spent there is a dollar (or Euro) not spent on the news or entertainment media.

The cable providers recognize that the regional telephone companies are serious about providing direct competition for the ultra broadband to the home that is needed for high definition video, even as the switch to DBS has slowed down. Still, nearly one third of households get their multi-channels television from satellite, a share that has come from the hide of local cable competitors.

As we all know News Corp. spent $580 million in 2005 to buy MySpace and some smaller Web sites. What would that treasure chest have been used for pre-Web? Likely it would have been invested in television. And if regulations had prevented that, News Corp. would have been on the front lines lobbying hard at the FCC. But today, there are plenty of other opportunities and News Corp and others are pursuing them, along with hordes of MySpace and Google and Facebook wannabes who see that this frontier is still open to two entrepreneurs with a few hundred dollars a month for a server and some bandwidth.

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Wednesday, June 21, 2006

Big Media Critics Needn't Worry so Much

Alan Murray, who writes on politics for The Wall Street Journal, has a column (page 2) today with the above headline. I’d like to run the whole thing here, as some readers of this Blog may not subscribe to the print or online version of the Journal (though I have stated many times that an online subscription is one of the best uses I can think of for $50 so long as you have lunch money set aside).

So here are some excerpts (still probably too much, but I’ll risk it).
For those who worry about the pernicious effects of "big media," today is a big day. The Federal Communications Commission once again is launching an effort to ease rules that restrict media concentration, including one that prohibits newspapers and broadcast stations in the same city from owning each other.

The rules were written back when "cable" was used to tow cars and "the net" went next to the fishing box.

Opponents launched a pre-emptive attack against the FCC yesterday, unveiling a new Web site, Backed by groups ranging from the Consumer Federation of America to the National Council of Churches, the coalition urges visitors to "fight back" and help "save your local media from corporate control."

I won't be signing up. On the list of things that keep me awake at night, "media concentration" ranks pretty low. "Media proliferation," on the other hand, ranks higher….

The worriers make much of the fact that power already is concentrated in the hands of "a few" giant companies: Time Warner, News Corp. (Fox), Walt Disney Co. (ABC), Viacom Inc. (CBS), General Electric Co. (NBC), Bertelsmann AG, Sony Corp. (phew, I get winded naming them). Of course, that list of biggies doesn't even include Tribune, Gannett Co., New York Times Co. and Dow Jones & Co., publisher of The Wall Street Journal. Nor does it include Yahoo Inc., Google Inc. or Microsoft Corp. Or smaller companies like HDNet, Mark Cuban's high-definition-television network….

But at some point, rules need to reflect reality. And the reality is this: Access to the media is more open and democratic today than it ever has been in the history of the world.
If you want to read the whole thing, drop me an email and I can send you a link that is good for seven days.

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Thursday, May 25, 2006

Local Ownership for Philadelphia Newspapers Not Necessarily Good News-- Nor Bad News

That faction of the universe that holds that big media conglomerates are bad for journalism should take no comfort in the announcement Tuesday that a group of Philadelphia investors will buy The Philadelphia Inquirer and Daily News from McClatchy, flipping it from the Knight-Ridder acquisition. The event is, by itself, neither positive nor negative.

In some quarters there is a nostalgia for “local ownership” of the media. The superficial rationale is easy to understand. Local ownership presumably means that decisions are not made in some far off corporate building by executives more interested in profits that Pulitzers.

But as I have been writing for decades, local ownership not only is not a free pass for better service to a community but may actually be a step backward. The case of Philadelphia is the perfect example. Indeed, I was astounded, though pleased to see, for the first time in my memory, that The New York Times’ report on Wednesday actually included a brief history of the vindictive ownership of The Inquirer before the Knight chain bought it:

Walter Annenberg, a wealthy businessman whose family owned The Inquirer from the 1940's until the late 1960's, used The Inquirer to settle personal scores, promote his own political views and crush his business and political rivals.

Annenberg treated The Inquirer as an arm of his own will," said John Morton, a newspaper industry analyst….

The other -- and dominant -- paper in Philadelphia during the 1950s and 1960s was the Evening Bulletin, owned by the McLean family. The Bulletin was a decent if bland paper. It took localism seriously. Indeed, while working for a weekly alternative newspaper in the early 1970s we did a spoof of The Bulletin, highlighting the provincial outlook of the paper with the banner headline “Six Philadelphians Die in New York Nuclear Holocaust.” The accompanying article focused on these six and their Philadelphia neighborhoods, while noting in passing the supposed elimination of the entire city of New York. It was our take on the effects of a local perspective all the time.

The Inquirer, as accurately characterized in The Times article, was also locally owned, but used as a personal organ by Annenberg. When the Knight chain—headquartered in far-off Miami—took over, The Inquirer became more professional, addressing regional issues and trends, investigating city government, bolstering its national and international coverage and especially developing investigative reporting. Meanwhile, The Bulletin only became more neighborhood oriented. It died. The Inky, and its feisty tabloid relative, the Daily News, survived, though in recent years it’s declining circulation—an erosion of 18% over 10 years —has taken its toll on the resources and therefore quality of the editorial.

The new owners, including an advertising/pr executive, the head of a publicly owned home building company, a union pension find and other investors with a local connection—have no publishing experience. That is not necessarily bad, if they recognize their limitations and adhere to their promises to keep hands off editorial decisions. But in the end that is almost impossible. They need to keep the papers reasonably profitable, to keep up both salaries and plant and equipment and, in the case of the union, preserve the pension payments for its members. While they may refrain from deciding on what political candidates to endorse or subjects to investigate, they will have final say over budgets, which means staffing and resources.

The new owners, incorporated as Philadelphia Media Holdings, might be wonderful. Or they might end up being meddlesome, voicing displeasure with an article critical about Toll Brothers (the holding of the largest single investor) or some other interest of one of the major stockholders. I have made the argument elsewhere that there is something to be said for owners who run media properties as "merchants" rather than as "missionaries."

My message is that local ownership is not, by its very nature, desirable, any more than a geographically removed corporate owner is, by its very nature, undesirable.

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Thursday, May 04, 2006

"Trust in Media" survey adds to data that no firms dominate U.S. news media

The “Trust in Media” survey conducted by the BBC, Reuters and the Media Center released today has something in it for almost anyone. It found that the media were trusted a bit more than governments, Fox News was the most trusted news source in the U.S. Al Jazeera most trusted in the Middle East and the BBC (surprise?) most trusted globally. Blogs, says the report, are the least trusted form of news, with 25% of respondents finding them trustworthy. (Actually I find that surprisingly high, as by their very nature blogs are much like op-ed columns, expected to have a point of view).

But if you only read the headline and the executive summary you miss out on much of the nuance of the survey. From where I sit, it is yet another data point (see many others in my media competition study), that the media in this country is more diverse and competitive than anywhere else on the globe.

Here’s my analysis.

Although the headline says that Fox News, by a fraction over CNN, is the most trusted source in America, that turns out to be a plurality of only 11%. The third most trusted source, ABC News, was named only by 4%. That is, the other 74% split their answers among dozens of others. Unlike the U.K. or Germany, newspapers are predominantly local, so large numbers of people no doubt identified their local newspaper as their source, fragmenting the cited sources.

The table, culled from the survey’s report, shows the considerable disparity in American media versus several other nations. Among the 10 nations surveyed, only India had a profile similar to the U.S, where the most oft cited source (AAJ TAK) was also as low as 11%,

Most trusted specific news sources mentioned spontaneously
Source: Compiled from BBC/Reuters/Media Center Poll: Trust in the Media

One could interpret these finding several ways. A cynic might say that no American provider instills much trust. In the U.S., local newspapers were considered slightly more trustworthy (mentioned by 81%) than national television (75%). But overall, the media in the U.S. get higher trust scores than in the U.K. or Brazil, and about the same as Germany. In the U.K., television news is trusted by only 55% of those surveyed, but that is almost three times as much trust as in newspapers (19%). In Brazil, national newspapers and television are viewed about equally, though overall lower than in the U.S. (about 68%). Germans have the highest trust component, with public radio, television and newspapers all cited by about four-fifths of respondents.

Conclusion: If one is worried about the “power” of individual media owners or programmers, then the “Trust in Media” survey should help ease such concerns. In the UK one third of the audience believes in the government-controlled BBC. In Brazil, privately held Rede Globo holds the faith of over half the population. In the U.S., trust is fragmented. It is a positive sign for diversity of content that there are no dominate, pervasive sources of news and information, public or private.

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Friday, March 17, 2006

This week's FCC fines for indecent content of TV broadcasters just a cost of doing business

You may have seen on Wednesday that the FCC fined CBS as well as some local broadcasters a total of about $4 million for violations of decency standards. This included instances of violence as well as impermissible sex.

Though the headlines were about the fines, the broader subtext is about equity: First Amendment equity. The larger issue is the double standard that is applied to broadcast television—even though only a handful of households even obtain their signal via traditional broadcast—is different than that applied to the other hundreds of channels we can view. Any programming that does not start out life from a broadcast station has the same First Amendment privileges as the print media. In short, the boundary is obscenity and libel. Broadcasters have a tighter reign, called indecency.

Adam Thierer has a concise review of the history of the legal rationale for why programs on television have fewer content rights than others. If it was cable network ESPN that carried the 2004 Super Bowl in which Janet Jackson had her infamous “wardrobe malfunction” there would have been no cause for FCC action. But it was broadcaster CBS, and it was hit with a $550,000 levy. In today’s video world, such a distinction is ludicrous.

The time is right to level the playing field for content. Broadcasters, however, will need to pay a price to buy themselves out of what Thierer describes as “asymmetrical regulatory policy that unfairly singles out one set of speakers [i.e., broadcasters] relative to all others.” The asymmetrical regulation is an artifact of three rationales created by Congress and the courts: 1) spectrum was perceived as scarce, 2) broadcast signals were considered “pervasive” and 3) in return for being allowed to use this scare spectrum broadcasters had to serve in the “public interest.” So the bargain was free spectrum in return for some public service obligations.

In the last 15 years or so, however, the level of public service obligations eroded. The fairness doctrine has been rescinded, as have old regulations on network ownership of programming and prime time access limits. Despite the recent fines, the scope for sex and violence on broadcast programs is far more liberal today than 20 years ago. In effect, just about the only limit today’s license holders have is the modern boundaries of indecency, a boundary that is restrictive only when compared to the nearly anything goes content permitted print and non broadcast video.

In 1996 the broadcasters could have bought their way out of their asymmetry. That was when they lobbied hard and successfully to be given new spectrum to make the transition to digital from analog. A few lonely voices in Congress, Sen. Robert Dole being the most prominent, thought it was time to make broadcasters pay for the spectrum the same way satellite providers, cell phone operators and the like all must bid for the spectrum they use.

There should be a price for broadcasters to win full First Amendment rights

Broadcasters want it both ways. The cable operators had to invest tens of billions of dollars to build and upgrade their systems. DBS providers have to launch satellites and often subsidize user hardware beyond the TV set. Broadcasters have none of these expenses. (In reality most broadcasters today have paid for their spectrum in buying it from someone else, but that is not relevant here). Broadcasters have also been given the benefit of “must carry” rights on cable and DBS, whereas nonbroadacst networks must negotiate with those carriers for a space on their systems. In many cases they also must pay dearly to get such carriage.

To remove all content restrictions specific to broadcasters, as logical as it seems when looking at the greater freedom of everyone else in the video universe, should not be a one-sided deal. It would seem that symmetry would be achieved only when broadcasters must pay for their transmission pipeline the way their competitors do and negotiate with the cable and DBS providers for carriage. Then it would be equitable to admit that their remaining public service obligations are moot and content regulation can be made a level field with other video providers.

My guess is that when push comes to shove, broadcasters would be willing to put up with their few limits on content if the alterative was paying billions for spectrum and losing their must carry rights. If content equality is really important to them, then they could go to Congress and offer to give up their current benefits in exchange for a level playing field. In the meantime a few hundred thousand dollars here and there is simply one of the costs of doing business.

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Friday, March 03, 2006

The "non-media monopoly" as seen by the smart money

Among the worst performing publicly owned companies over the past three years are a collection of media companies, all associated with the popular misconception of “media monopoly.” This turns into an oxymoron when these so-called monopolies have such poor financial performance that they are among the bottom of the barrel among all sorts of competitive companies in other industries.

The reason we have laws prohibiting business monopolies (dating back to the 1890 Sherman Antitrust Act) is that capitalist economics don’t work when there is no competition. Prices can be set higher than they would be if there were competitors in the market. This pricing effect starts to be measurable even before there is literally one supplier: an oligopoly, where two or three suppliers dominate a market, can also set prices higher than they would be in a competitive market.

I count myself among a handful of voices that not only hold that all the trends and forces have been moving media in the opposite direction—away from concentration-- and back it up with empirical research, not merely a handful of anecdotes and speculations of what “could” happen. Adam Thierer has added more data in his Media Myths in contrast to the rhetoric of the “sky is falling” crowd.

In the case of the media, the most vociferous of those who fear concentration of ownership in few hands are not particularly concerned with the economic consequences of ownership. Indeed, Ben Bagdikian, in his book The Media Monopoly, does not discuss the economic concept of monopoly at all. According to the index of the fourth edition, he devotes part of two pages to a discussion of profits. He, as well as Robert McChesney and other critics make their argument on the presumed negative influence on civic discourse and culture that could be an outcome if a handful of individual owners did indeed set the agenda and determined what we all read, heard and viewed.

But there is a nexus between the two concepts of monopoly. Because if there were in fact a handful of big media companies that precluded competition in the marketplace of ideas, that would be reflected in the success of those same entities in the marketplace for products—the economic marketplace. That is, if you and me and everyone else could only go to Time Warner, News Corporation, CBS, Gannett, Disney, Bertelsmann, Viacom, Clear Channel, Comcast (geez, it gets to be a long list for a concentrated industry…) then presumably these companies would be raking it in. Can a small number of media companies—out of tens of thousands that are players in the U.S. alone— be truly dominant without that translating to the bottom line?

So let’s go to the ticker tape. Last year Adam Thierer and Dan English published a paper, “Testing ‘Media Monopoly’ Claims: A Look at What Markets Say” that I wrote about in September. They asked “If the media market were indeed full of monopolists, wouldn’t a lot of people be investing in media stocks?” In brief, Thierer and English found that Time Warner, Viacom, News Corp., Clear Channel, and Comcast lost a combined 52 percent of their value (in terms of market capitalization) over the previous five years.

The latest evidence along these lines is the recent compilation in The Wall Street Journal identifying the best and worst performing stocks (subscription required). Among the 50 poorest performers were six media companies, four with major holdings in the fading newspaper segment, but also two major broadcasters, including the largest owner of radio stations. Among the best performing media companies were younger and thus more volatile entrants.

Worst and Best Performers, Total Return, Past 3 Years
Source: The Wall Street Journal, Feb 27, 2006, R1. Compiled by L.E.K. Consulting LLC.

Although one might criticize Wall Street as being obsessed with last quarter's and the next quarter's earnings, over the longer haul the financial markets tell a story of substance. Out of 76 industry sectors (from home construction to computer hardware), the publishing industry was 72nd over the three year period, broadcasting and entertainment was 63rd. This is not the stuff of a concentrated industry ownership. Time to move on.

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Saturday, February 04, 2006

Why Being Big Means Little: The Lessons for Media Businesses from Western Union

On January 27, 2006, Western Union sent its final telegram, 150 years after it sent its first. There’s a bit of a message for the media industry in this historical footnote.

In the late 19th century and into the 1930s, Western Union was the pinnacle of the communications business. Indeed, believing that telegraph was the be all and end all of communications technology, Western Union turned down the offer to buy Alexander Graham Bell’s telephone patents in 1876 for $100,000. (They soon realized their mistake and actually hired Thomas Edison to develop a telephone device, which he did. But Bell’s fledgling company won a patent infringement suit against the giant Western Union which then withdrew from voice telephony).

But Western Union thrived for a time, even as the Bell System overtook it in size. In 1900 Western Union sent 63 million telegrams. In its peak year, 1929, it handled 200 million telegrams. Telegram service was slowly eroded by the increased availability and decreasing price of long distance voice. But it also lost market share as teletypewriters were introduced, a newer technology that did not require skilled Morse code operators. Much later, facsimile spelled the end to what was left of the telegram’s commercial market. In the past year 20,000 telegrams were sent, mostly as novelties or as formal notifications.

What does this say to and about the media industry? Western Union, at one time the monopoly national communications company, was co-opted by new technologies. Though profitable for many years after its heyday, it’s decline brought it to bankruptcy and rebirth as a money transfer service—a very different business. Even then, it was blindsided by an upstart, PayPal, as the first mover in the Internet money transfer business. Its belated response,, closed shop the end of 2005.

So the lessons, once again, are, first, that bigness guarantees nothing when it comes to the future, even when at one point a near monopoly. (The same could be said for AT&T, which survives in name only because Southwestern Bell, the company that bought the remains of the old Ma Bell in 2005 and assumed the AT&T name.) Previously I wrote about how none of the 10 largest retailers in the U.S. in 1962 were around 30 years later. Second, just because newer technologies and players don’t ruin a business or an industry overnight that doesn’t mean that a long decline, with occasional ups amidst the many downs, is in progress. Finally, even when a player does make a strategic move into a concentric market (as W.U. did from electronic text to electronic money), the game is not necessarily won. For the moment, Western Union still has a decent business transferring money internationally. But newer players, such as PayPal, are nipping at its heals.

The media industry was much like banking for the first seven decades of the 20th century, staid and predictable. Newspaper publishers knew exactly who their competitors were—other newspapers. Broadcasters knew that once they got their sinecure from the FCC they were set. Book publishers came and went with easy entry and exit, but with the “security” of knowing that “the book” as a format was forever. Hollywood studios understood that the bottleneck of distribution and marketing would keep the number of major competitors manageable.

But all that is out the window (or, perhaps, Widows), much as is the old telegram. Newspaper circulation continues its decades long slide. Knight Ridder reports lower earnings each quarter. Television networks are making their hit shows available for download the day after broadcast. Some Hollywood movies are released on DVD and cable the same time as in the theater. Podcasts and vodcasts come from regular folks and media heavyweights alike. Radio emanates from satellite and the Internet. Video on demand fills 42” high definition screens—and 3” cell phone screens.

Where will you be the day your hometown daily newspaper ends its print run or the TV listings start to show only the names of new programs available each day, not the time they are on?

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Monday, January 02, 2006

Is there a need for public broadcasting in the mega channel world?

Is there a future for public broadcasting in the U.S.? Last month a blue ribbon panel headed by former Netscape CEO James Barksdale and former FCC Chairman Reed Hundt took a stab at addressing this in a report, “Digital Future Initiative: Challenges and Opportunities for Public Service Media in the Digital Age.”

As the title indicates, there are no dearth of challenges for public broadcasting. In the Foreword they write: “Our nation’s media marketplace is becoming increasingly fragmented and on-demand…. If today’s public broadcasters can successfully adapt to this new environment, the potential for enhanced public service through digital media is vast…”

The report is a fine inventory of needs. But it fails to ask what should have been the initial premise: Is there a need for a publicly funded media entity today?

Timothy Karr, though a supporter of publicly funded media through the self-styled media reform advocacy group Free Press, has been quoted as agreeing that “PBS has a problem supporting programs that are competitive in today's commercial market.” Then why the need, with all continuing political controversy that has accompanied publicly funded media?

The report goes on to identify areas they believe could sustain a need for public service media (expanded from the original 1967 legislation of Public Broadcasting). Much of the report centers on educational needs. “Emerging digital media technologies hold great potential as educational tools,” the authors tell us. But after identifying the sorry state of education today, they add “We believe that in the digital future, all Americans should continue to be able to depend on public broadcasters to furnish them with the reliable, unbiased information they need in the course of their lives.

Sure there are educational needs, but there are local state and federal programs to address these needs. Yes, the public needs reliable and unbiased information, but has that been provided by public broadcasting? And more to the point, are there mechanisms for the public to get the information they want and need without it going through a publicly funded enterprise?

The question at hand: in today’s highly competitive, multichannel world, is there a need for publicly funded media, particularly TV? The historical argument for publicly funded media has been that there were few channels for TV. Commercial broadcasters would not tackle hard issues, controversial topics, or quality children’s programming.

This must be balanced against policy issues of real or imagined political pressure, real or imagined content biases, and the actual cost—from taxes or tax-like fees.

The money is not really the issue. All told in 2003 public broadcasting had revenue of $2.3 billion. Federal appropriations for public broadcasting is about $400 million, which account for only about 16% of the total budget. The rest comes from foundations (7%), business underwriting (15%), state governments (14%) and a smattering of university, local government and contracts.

The question is really about priorities and feasibility. What can public media bring to the party that is not now being provided by the History Channel, the Biography Channel, the Discovery Channel and the like, not to mention the bottomless pit of content—much available for the taking—via the Internet?

Indeed, the very audience that these taxes and foundation dollars goes to support is the audience that can most afford cable subscriptions, broadband connections, DVD rentals and purchases as well as being most likely to have the skills needed to find the information they want. Public media’s core constituency, as described by the public broadcasters’ own promotions are “affluent, influential, educated, discerning, and diverse. They are the decision makers and opinion leaders…” Central Michigan Public Television claims that its audience penetration “runs deeper into upscale households than any other medium. According to surveys conducted by Roper Reports, public television viewers have high incomes and are likely to have invested in stocks, bonds and mutual funds.”

The “Digital Future” report may have started from the wrong base. If they need to work so hard at finding a role, then maybe it is time for public broadcasting to sunset itself. Indeed, the Digital Future panel could have started out with this point of view: If a public media organization did not exist today, what are the compelling arguments that would rally the public to support the creation of such a service?

If public television disappeared tomorrow in the US, mostly a small elite would notice. Today, unlike 20 or even 10 years ago, there are alternative structures to a public media organization if there is a constituency for some type of content or service that doesn’t now exist. The best of what PBS provides will be quickly picked up by existing or new channels, sites or whatever. “Sesame Street” would not evaporate nor need to hawk sugared cereal to survive. Democracy would not be threatened. Civic discourse would not see a ripple.

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