The Fritts YearsAfter an awesome 23-year run, NAB chief Eddie Fritts is about to step down. His record is awesome—but not flawless. He helped the industry shed onerous rules limiting the size and power of radio- and TV-station owners. At the end, however, he couldn't repair fissures that have divided broadcasters in fundamental ways. 3/20/2005 07:00:00 PM Eastern
Taking the stage at the National Association of Broadcasters convention in 1983, Sen. Bob Packwood delivered a broadside to the Las Vegas crowd.
NAB had no clout in Washington, he taunted broadcasters. For that matter, the country's largest trade group “couldn't lobby its way out of a paper bag.”
The blunt assessment from the chairman of the Senate Commerce Committee was an embarrassment to Eddie Fritts, the new NAB president presiding over his first annual industry confab.
The dig cut particularly deep because Fritts knew it was true.
In fact, NAB at that moment was in the middle of a futile lobbying fight with its main regulator, the FCC. The agency was preparing to add nearly 1,000 new stations to the AM and FM dials, unleashing a flood of competition to NAB members that would prove their fears of destroyed profits at many stations and would sour banks and Wall Street on the radio industry for more than a decade.
Despite the pending threat, NAB was powerless to stop the FCC.
Packwood's convention speech was a wake-up call for Fritts, who was in the process of selling his small chain of Mississippi radio stations—up to that point his only livelihood—in order to focus on his new job. “I sat there in the audience thinking, 'Holy cow, what is this all about?' But I also took Packwood's comment as a personal challenge.”
Stanley Hubbard, president of Hubbard Broadcasting, recalls NAB's disarray at the time, and his assessment was much like Packwood's. “It was just a joke, totally ineffective … it was worthless,” he says. “Eddie straightened it out.”
Now, after 23 years running NAB, the 64-year-old Fritts is stepping down. Although his contract doesn't run out until 2006, he has asked the NAB board to hire a search firm to choose his successor. A clause in Fritts' contract would obligate him to step down as early as this fall if a new president is hired, and in a recent interview, he predicted that he'll be running the trade group for just “another six months.” He will work as an NAB consultant through 2008.
More than two decades after building the NAB into an organization known for its clout, Fritts' departure comes as NAB is increasingly riven by divisions within its ranks.
A Family Divided
The networks themselves are no longer members of NAB. One by one, NBC, CBS, Fox and ABC have quit. In large part, this happened because leaders of TV- station groups, including Citadel Communications CEO and NAB Joint TV/Radio board Chairman Phil Lombardo, wanted NAB to take a harder line to win government protections from what they say have been contract abuses by the networks. They also wanted the FCC to limit the number of stations a network may own.
Fritts, always preferring unity with the networks, endured a public outburst by Lombardo at last year's NAB convention over the issue, and the situation played a role in his decision to retire ahead of schedule.
Despite the abrupt end to Fritts' tenure, Scripps Howard Broadcasting President Bill Peterson thinks the timing might be fortuitous. “Eddie has done a wonderful job,” Peterson says. “But there may be a chance to get someone who will be attuned to technology and the changes our industry is going though. It may be a good time to go though the choices.”
Several of Fritts' trade-group rivals, who also marvel at the job he has done keeping the fractious industry together, caution that NAB could find itself in a shambles again if the group doesn't restore the unity Fritts built in his early tenure.
Even before he took over the group in 1982, Fritts began piecing together how NAB had lost its once formidable muscle in Washington.
As a member of the group's radio board, he had already made his first stop for advice among the Mississippi congressional delegation. His state's senior senator, John Stennis, knew little about broadcasting and even less about the FCC. What Stennis knew better than nearly anyone, however, was Washington and how it worked.
Making NAB a Power
Fritts patiently and persistently explained how heavily regulated broadcasters were—including tight limits on the number of stations one company can own—and the troubles with the FCC's plan to add more stations to the dial.
After listening quietly, Stennis looked up and asked rhetorically, in a slow country drawl, “Do you boys really get your rules and regulations from the FCC?” His advice was simple: “Well then, you ought to be talking to us a lot.”
In talks with other lawmakers, Fritts began to understand that NAB had failed to adapt to a key transformation in Washington ushered in by President Reagan's election and the Republican party's resurgence on Capitol Hill. Because of the GOP takeover of the Senate, once all-powerful Democratic committee chairmen no longer ruled with iron fists. Rank-and-file lawmakers were gaining much more power to push their personal agendas.
A few years earlier, NAB, or any other lobby group, needed to get tight with only three or four chairmen and their few allies in order to win legislative favors.
NAB's previous leadership had failed to recognize the shift. “The whole nature of the town was being dramatically changed,” Fritts says. “It seemed to me the kind of reception we got from the Mississippi delegation could be replicated in the halls of Congress many times over” through members' outreach to their local members of Congress.
NAB organized one of the first legal political action committees and set about growing its meager budget into a campaign war chest that would help friendly lawmakers fund reelection bids and systematically build the 50 state broadcast associations into grassroots lobbying machines.
“Every election, you have 50 or so new members in every Congress. You have to do more education of members on your industry. You have to make sure local broadcasters go see them, introduce them to the staffs, show them around stations and talk about what broadcasters do,” Fritts says.
“I preached that gospel for 23 years,” he adds, “and I think we were very efficient and have our credibility and have been very effective.”
Lobbying Paid Off
Derided by some as little more than a country businessman—in appearance, Fritts does not fit the image of a Washington power broker—he quickly figured out how to make his strategy work in Washington.
Fritts was “cut from the same cloth” as the politicians he was lobbying, says Gordon Hastings, president of the Broadcasters' Foundation. “He had been to Rotary Club meetings. He had been to the Kiwanis meetings. Eddie understands how to make a local United Way campaign work.
“Eddie Fritts,” Hastings continues, “understood how to ring the bell of every single member of the United States Senate and every single member of the House of Representatives.”
Fritts taught broadcasters that they could be powerful political forces in their own community. They had “the ultimate lobbying presence, because the lobbying was done right in the legislator's home constituency,” Hastings explains. “The smaller the market, the greater the importance of that direct connection.”
Says Russ Withers, president of Withers Broadcasting Co. and a member of the NAB executive committee, “Nobody could compete against rolling out all the radio and TV people in all of the states. He had them organized and focused, first by letter and telephone and now by e-mail and fax.”
But at first, to transform NAB, Fritts needed money, and lots of it. So he began transforming the annual NAB Convention from a narrowly focused industry meeting where broadcasters batted around common concerns into a hardware show for all facets of broadcast-station and electronic-communications production equipment. (See story, page 36.)
Enormous profits from exhibitors' fees allowed NAB to build its cash reserves from a paltry $1.5 million in 1983 to $81 million today. The money helps fund NAB's Television and Radio Political Action Committee (TARPAC), which donated $883,000 to federal candidates in the 2004 election cycle and has $354,513 in cash on hand.
Fritts' efforts to build TARPAC, along with his grassroots lobbying, soon paid off. The regulatory funk that had stuck to the industry soon began to wash off.
In 1984, at congressional urging, the FCC dropped a requirement that broadcasters meet with local community leaders to ascertain their markets' programming needs.
Significantly, the FCC also lifted restrictions limiting station-group owners to seven radio and seven TV outlets nationwide and embarked on a steady ownership deregulation drive that culminated with the 1996 Telecommunications Act.
When Broadcasters Ruled
Throughout the 1980s, other regulations hated by broadcasters fell, including the Fairness Doctrine, which required stations to air programs on controversial subjects and include contrasting points of view.
Congress also lengthened the term for a broadcast license from three to eight years and, in all but the most egregious cases of neglecting local community needs, granted each owner virtual certainty of winning license renewal.
The legislative success had a hugely positive impact on NAB's membership levels as well.
More station owners began to see the payoff of a strong presence in Washington and began pushing the group's roster to record levels. Four years after Fritts took the helm, TV membership reached a record high of just over 940 stations. The National Radio Broadcasters Association, a trade group for FM stations, was persuaded to become part of NAB, and radio membership soared to more than 5,000.
Fritts strengthened his congressional team by hiring Coca-Cola Bottling lobbyist Jim May to run the Capitol Hill lobbying shop in 1988.
“My 15 years at NAB were some of the happiest and most productive of my career,” says May, now president of the Air Transport Association, the airlines' trade group. “As a boss, he was a guy who gave you latitude to get the job done as you saw fit. But Eddie was always an active participant from start to finish in any lobbying effort.”
Gary Chapman, chairman and CEO of LIN Television, believes Fritts' best years may have been the early 1990s. At that time, member TV networks differed with owners of independent stations over the seemingly conflicting goals of whether to demand that cable carry every TV station for free or whether to pursue an alternative that would let stations negotiate with cable to receive payment for carriage of their stations.
Negotiated carriage would have benefited network stations and big affiliates because they had more leverage over cable. Independent stations and smaller broadcast groups, with their staple of syndicated shows and paid programming—and less clout—would have had little sway to demand cable carriage.
In January 1991, NAB's TV board met at the Ritz Carlton in Naples, Fla., for eight contentious hours of debate. At Chapman's suggestion, the board voted to go for broke and fight for both options. A victory would let each station choose whether to demand must-carry or negotiate a carriage deal with its local cable operator.
NAB's legislative campaign was brutally effective. “We had everyone from the networks to the smallest stations,” Chapman says. “They were all working their congressmen and senators back home. We did it state by state, congressman by congressman. When you get every TV company working for a single cause, it's a very powerful thing.”
Congress passed the Cable Act of 1992, giving TV stations the option of either demanding mandatory cable carriage or taking their chances at receiving compensation. To top off the battle, NAB was forced to battle for a Senate override of President George H.W. Bush's veto—the only veto of the elder Bush's presidency. Says Chapman of the one-vote override: “It was the height of our success in dealing with Congress.”
Good Times to Tough Losses
NAB continued to rack up Washington victories, but going forward, the wins usually required broadcasters to compromise their agenda to some degree.
In 1996, Congress eliminated caps on national radio station ownership. But a vote to raise the cap on the national TV-audience reach to 35% of television households didn't go far enough for the networks; they wanted to own even more stations and raise the cap to 50%.
It was high enough for network affiliates. They feared that expansion would give the networks too much leverage and all them to dictate affiliation contract terms. (Eventually, Congress set the cap at 39%, just enough to keep any of the networks from having to divest any stations.)
The deregulation moves that were begun in 1996 eventually backfired on the industry. The waves of consolidation, including creation of the 1,200-station Clear Channel radio group, sparked a backlash against broadcast owners and other big-media companies that continues today and has even been woven into debates over indecency complaints. (Because some broadcast groups are so big, critics say, they sneer at FCC fines.)
But in the '90s, consolidation seemed to be a part of the broader media revolution that included the still-novel Internet. Against that backdrop, broadcasters in 1997 were “loaned” a second channel to inaugurate digital service, a grant then-FCC Chairman Reed Hundt and other critics derided as a “$70 billion giveaway” because it was generally conceded that broadcasters would never give the “original” channel back.
NAB also won what eventually may be seen as an illusory victory in 2000, by persuading Congress to drastically scale back the FCC's plan to establish a noncommercial low-power FM radio service.
Grassroots Groups Galvanize
Although broadcasters hailed the vote as a defensive win that protected their existing stations from new interference, the lobbying battle did something else: That move, along with Clear Channel's growth, spurred the development of anti–big-media grassroots organizations like Free Press and Code Pink to stall the FCC's 2003 broadcast-ownership proceedings. Resolution of several issues desperately sought by NAB members now may not be settled until a Supreme Court review. There is also a good chance the FCC will expand the number of low-power radio stations.
Andrew Schwartzman, president of Media Access Project—an activist group that has fought for decades to impose public-interest obligations on broadcasters—concedes that NAB has few rivals for lobbying success. He predicts, however, that NAB's hard-line stances will ultimately prove short-sighted, as new broadband technologies eat stations' audiences beyond the losses already inflicted by cable.
Unless broadcasters accept public-interest obligations, Schwartzman says, rivals will eventually persuade Congress to strip stations of the nearly exclusive reign over broadcast-channel bands they have enjoyed since the 1930s.
Instead, NAB should been bold enough to embrace low-power radio stations as an example of the free, noncommercial, public-service programming broadcasters can offer better than anyone else.
“The most telling example of what has been wrong with NAB is the fact that its press release about Eddie's departure brags about his role blunting low-power radio,” Schwartzman says. “This service should be embraced as the farm team for the next generation of broadcasting, not fought off as an infidel.”
Despite harsh words for NAB's strategy, Schwartzman praises Fritts for his “constant commitment to civility and willingness to try settling our differences.”
Gary Shapiro, president of the Consumer Electronics Association, whose group has lost high-profile battles with broadcasters over FCC rules requiring nearly all TV sets to include tuners that receive stations' DTV signals and requiring DTV equipment to incorporate anti-copying safeguards, says NAB used its lobbying prowess for the “wrong issues.”
NAB, which only recently began speaking out against Washington's effort to crack down on indecency, was a year too late voicing opposition publicly, Shapiro says. He also laments that little became of an NAB/CEA plan to promote digital television to consumers.
“NAB has never made an effort to market DTV to the public,” Shapiro says. “Their whole strategy is asking the government to regulate some other industry, such as requiring digital must-carry on cable or DTV tuners on CEA members.” He complains that NAB's offer to jointly market DTV amounted to nothing more than offering free airtime for promotional spots.
Some within NAB agree Fritts focused too much on Washington and too little on promoting DTV as a business. TV-station owners are on track to spend $16 billion building out digital studios and towers, and there is no sign the switch to DTV will generate any extra profit to cover the expense. As a consequence, their profits are stagnant. “Eddie and NAB never provided any real business leadership,” laments one longtime NAB member.
On the radio side of the industry, members complain that NAB allowed Congress to stifle stations' Internet streaming with stiff royalties that Web traffic doesn't justify. Local competition from satellite radio also sneaked up on NAB in the form of weather and traffic channels that, although distributed nationally, are targeted to specific markets.
He Did It His Way
Fritts accepts little of the criticism—especially for the rise of satellite radio. Thanks to the consolidation permitted by the 1996 deregulation, the radio industry is poised to compete effectively with new technologies that have naturally developed, he says. Before 1996, fewer broadcast companies were publicly traded or had access to Wall Street capital. Few markets had Spanish-language stations, and fewer still served Korean-speaking and other immigrant populations.
“Consolidation allowed broadcasters to do that,” Fritts says.
He also dismisses suggestions that NAB has dropped the ball on DTV and disputes Shapiro's claim that NAB wouldn't put up cash to promote digital TV.
“He's as full of [stuffing] as a Christmas turkey,” says Fritts, using another word. “We put up $1 million cash money, in addition to on-air spots. Gary was all fired up until we said you've got to put in some money too. Then he decided he didn't like the logo and wouldn't participate.
“Plus,” Fritts adds, “we are promoting DTV in markets where broadcasters have tested their markets to find out what consumers want.”
He believes that broadcasters and NAB are poised to compete in the digital age, because their spectrum is as robust as any portion of the airwaves and a good chunk of their product is going to be free. “The consumer market is going to fragment into a mindset of 'I want what I want when I want it,' and I submit broadcasters will find a way to package that content in new and different ways.”
As radio goes digital, it too will be well-positioned to compete in terms of sound quality with satellite radio. To meet the threat of the satellite service's commercial-free channels, Fritts notes that big broadcasters like Clear Channel are “retrenching” to cut down ad time and constantly reevaluating their playlists to ensure that they are offering a competitive product.
“Broadcasting has a great future. I'm confident and excited about it.”
With $81 million in the bank, there is plenty to promote digital TV, as well as to wage political campaigns when Congress begins rewriting telecom laws in the next few months. On NAB's agenda will be winning cable-carriage rights for the extra programming channels that going digital allows them to add, pursuing deregulation of local-ownership limits and setting a hard deadline for turning off old analog TV channels.
As for NAB, Fritts admits he is disappointed the networks are no longer members. (In his view, their self-imposed exile is temporary, and he still refers to them as “members.”)
“I'm frustrated there's fragmentation in our membership,” Fritts says. “One of the challenges for my successor will be to further unify the industry. I've found we're at our best when we speak with one voice.”
Other NAB critics aren't so sanguine about the direction the organization seems to be taking; Fritts' pending departure is one in a long line of bad signs, they say.
Democratic FCC Commissioner Jonathan Adelstein laments the NAB board's decision to reject public- service–programming obligations in return for an FCC mandate that would have required cable operators to carry most of their new digital channels. Adelstein says Fritts supported that solution.
“They should listen to good advice from good people like Eddie,” Adelstein says. Fritts “recognizes the importance of public interest for the long-term health of the broadcasting industry.”
Decker Anstrom, former president of the National Cable & Telecommunications Association and a veteran of the cable industry's fight against expanded carriage obligations, agrees. “If his members continued to listen to him, they'd be in a better position than they are now.”
As he is on his way out, however, Fritts isn't taking shots at his board. “I'm grateful that the various boards have let me stay as long as I have,” he says. “I've been asked, 'How do you keep a board of 60 people happy?' My answer: by keeping 31 of them happy.
“Recently, someone told me I arrived here on my own terms and I'm leaving on my own terms,” Fritts says. “I'm very comfortable with that.”
Additional reporting by Kim McAvoy