David Barrett: Changing News Sources Having "Profound Effect" on Industry Money Flow

Hearst's president says broadcasters unfairly limited compared to competitors

By John Eggerton -- Broadcasting & Cable, 11/4/2009 1:07:58 PM

Some of the current economic hit broadcasters are taking is cyclical, broadcasters told the FCC Wednesday, but some of it is systemic and rooted in changes to the media marketplace that won't be undone by a rising stock market.

Hearst Television President David Barrett said changes in news sources have had a "profound effect" on where dollars and viewers are going.

He cited the Boston TV market, as an example. He said that from 2003-2004, aggregate revenues were "north of $500 million." By 2008-2009, that figure was $300 million. That drop is driven by big changes in how ad dollars are being allocated in the marketplace.

"Money in this industry follows the audience," he said, "and the audience has gone to different and scattered places."

That sober assessment came in an FCC workshop on the upcoming review of media ownership rules.

Barrett said that broadcasters were unfairly limited compared to competitors. He pointed out that a cable operator serving 85% of the Boston market could own one of the top TV stations as well, while two of the top four stations in a market were prevented from being co-owned. That is not in the public interest, he argued, if stations are marginalized because of that inequity.

George Mahoney, VP and general counsel for Media General, said the industry was unlikely to see the auto category return "the way it was" [as a major driver of local news revenues], and that he hoped the real estate drop was cyclical, but that there was lots of Web competition for those ads.

Mahoney said that the FCC has to look at the reality of the marketplace, which is that Google is taking ad dollars out of markets large and small by "scraping" a lot of local news sources and putting local ads next to them. He was arguing that the FCC should not set some arbitrary limits on the size of markets allowed to combine news resources.

"There are real threats to the vitality of local media platforms in small markets," he said, and the FCC ought to be very concerned when it sees stations going dark or dropping news in the kind of small and mid-sized markets where Media General has stations. "It is a real issue."

James Winston, of the National Association of Black Owned Broadcasters, disagreed. He said he thought no change was needed, that the FCC had drawn reasonable lines, and that it had a waiver policy in place.

In fact, he said the waiver policy had been used to blur those bright lines to the extent of eradication. Winston said he thought the industries troubles were primarily cyclical and there would be a further wave of consolidation when the economy rebounded.

Both broadcasters argued that the Internet is a competitor that needs to be taken in to account by the FCC, but at the same time said it was primarily a competitor for ad dollars and not the local news and information that is broadcasters' stock and trade.

Jessica Gonzalez, policy counsel for the National Hispanic Media Coalition, said that the commission should not place too much emphasis on that competition as a substitute, saying that many people do not have access to the Internet, and that of those that do, most still get their news from newspapers and broadcasters.