Rich, including some minorities, get richer
NTIA report shows consolidation generally pushed out smaller minority operators but rewarded some of the bigger players
By Bill McConnell -- Broadcasting & Cable, 1/21/2001 7:00:00 PM
The broadcast consolidation wave sparked by the 1996 Telecommunications Act slowly pushed minorities out of the business, but that trend was reversed in the past two years as minorities gained a bigger share of the pie.
Minority groups aren't exactly celebrating over the numbers, which were released last week by the National Telecommunications and Information Administration.
Most minority owners, they say, are single-station or small- group owners who find it increasingly difficult to compete against the giant station groups grabbing local market share and offering advertisers the chance to reach huge audiences through combination ad buys.
Last year's gains, minority advocates add, are a one-time fluke attributable to Clear Channel Communications' sale of 110 stations in order to clear antitrust concerns raised by its acquisition of AM FM Inc. Minority buyers, some of whom were excluded from the tally because of the government's definition of minority-owned, purchased more than a third of the stations spun off by Clear Channel.
"If not for this one deal, the numbers would have been worse," said Thomas Hart, a Washington lawyer who often works with minority owners.
NTIA's last report was issued in 1998, and, since then, minority owners' share of broadcast station ownership climbed from 2.9% to 3.8%. The total number of minority-owned outlets grew from 337 to 449. When it comes to counting just TV ownership, the numbers show a depressing decline, according to the government. Minorities now control 23 full-power TV stations, down six from 1990 when the government started tracking ownership by African-Americans, Hispanics, Asians and Native Americans.
Although consolidation has been wonderful for many individual minority owners-selling stations lets them get rich-many see a big downside to the trend.
Since Congress let loose the consolidation flood by relaxing station ownership caps, the Clinton administration and the FCC of William Kennard have struggled in vain to stem the tide.
Along with public advocacy groups, they argued that promoting minority ownership is a government obligation, partly because all segments of American society should have access to the airwaves and also because of fear that media conglomerates will have too much power with which to influence politics and the public.
Departing Commerce Secretary Norman Mineta used last week's report as a chance to call on the Bush administration to pursue new minority-ownership initiatives: "With minorities owning less than 4% of all commercial broadcast stations in the U.S., we need to address the issue of how we can do more to promote minority participation."
Mineta didn't offer much in the way of specific proposals, however. Without giving an endorsement, he urged Congress to seriously consider new tax breaks for media owners that sell to minorities. He also said the government should consider redefining what qualifies as a "minority-owned" company.
A new definition would be a boon to a few big minority-controlled companies, which otherwise might not qualify for tax breaks or other initiatives created by the government and also would help smaller minority owners tap the equity markets, a must for any company that aims to build the critical mass needed to compete in today's market. Because the traditional measure of minority ownership requires 51% of a company's voting stock be held by a minority owner, some of today's most successful media companies don't fit the government definitions (see story at right).
A tax certificate would allow companies to defer capital gains on sales to minority buyers, an incentive to offer African-American, Asians and others a break on the price. A tax-certificate program created in 1978 helped minorities buy 288 radio stations, 43 TV stations and 31 cable companies. But Congress killed the program in 1995 after allegations of abuse.
FCC Commissioner Michael Powell, Senate Commerce Committee Chairman John McCain (R-Ariz.) and even Senate Majority Leader Trent Lott (R-Miss.) have endorsed the idea.
"There is a lot of bipartisan support for this issue," Mineta said.
The National Association of Broadcasters, with many members that could benefit from a tax break, has endorsed the idea. "We realize there's much room for improvement," NAB President Eddie Fritts said last week. The tax certificate "proved extremely effective in attracting more minorities into the ownership ranks."
Reviving the tax certificate is all the more important, according to minority advocates, because other avenues for attracting minority buyers traditionally locked out of the business are dwindling.
For instance, a federal appeals court last week killed the FCC's latest attempt to impose minority- and female-recruiting requirements on broadcasters and cable companies (see story, previous page). Also, there is a "distress-sale" policy that allows owners threatened with a license revocation to sell to minorities at a reduced price rather than face an FCC review, but opportunities to take advantage of it are rare.
Special funds to invest in minority buyers have made little dent. The Quetzal Fund, which has $170 million from large media companies to leverage investments in minorities, could help only a handful of minority buyers. The Telecommunications Development Fund, which gets a small portion of proceeds from FCC spectrum auctions, has made no broadcast investments.
To bolster support for new minority programs, the NTIA report also details the difficulties African- Americans and others face.
The top difficulties among station owners surveyed were obtaining advertising, accessing capital and losing skilled personnel to competitors. Adding to the competition, many white-controlled or large public companies such as Univision and Telemundo, are taking market share by tapping minority audiences, too.
A study by telecommunications lawyer Kofi Ofori added highlights to the government's picture. Racial motivations directly account for two of six variables that hurt radio stations' advertising revenue and may partially account for the other variables, according to Ofori's survey of 120 stations. The most critical factor hurting revenues, he found, was the lack of a news/talk format. News/talk stations, despite their relatively small audience size, consistently outperform other stations in attracting ad revenue, according to Ofori.
In descending order of importance, other factors are relatively low audience-size ranking, audience not inside the critical 25- to 54-year-old range, programming to minorities; ownership by minorities, and a lack of an in-market combo.
"Perhaps the most important finding was that income of listeners was not among the top factors," he said. Ofori noted that the difference in average income between news/talk listeners and those of other station types was small: 37% of talk listeners in the $75,000-plus range vs. 29% for non-news/talk.
The racial breakdown of the audiences was much starker. For news/talk stations, non-white listeners accounted for 27% of the audience whereas, at other types of stations, African-American and Hispanic listeners accounted for 49% of the audience.
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