FCC Votes To Curb Media Consolidation in Local TV Markets

The Federal Communications Commission (FCC) voted on Monday to make changes to its broadcast ownership attribution rules that advocates say will help curb a wave of corporate media consolidation in local TV markets.

FCC commissioners approved the changes by a 3-2 vote along party lines at their monthly meeting. The new rules are designed to curb “joint sales agreements” by closing a legal loophole exploited by broadcasting companies that circumvent local TV ownership rules by sharing advertising revenues with companies they are supposed to be competing against.

The FCC’s move will make it harder for big telecom conglomerates to effectively control more than their fair share of TV stations in any given local market by setting up outsourcing agreements with smaller companies that remain effectively under the conglomerate’s control.

Federal ownership limits, for example, are designed to prevent broadcasters from controlling two or more TV stations in a local market where there are fewer than eight unique TV station owners or controlling two or more of the top four stations in a local TV market. To circumvent these rules, some broadcasting companies create shell companies or take over small independent companies and arrange joint sales agreements and “shared services agreements.”

These “sidecar” and shell companies own TV broadcasting stations on paper, but under the agreements, the parent company still controls much of the broadcast content and ad sales, allowing for what advocates call “de facto consolidated ownership.”

In some markets, such arrangements can result in viewers seeing the same news on two different local TV channels as broadcasters slash newsroom jobs and consolidate news content between two or more TV stations.

“When there are fewer newsrooms, jobs are cut, normally leaving fewer opportunities for all journalists to find work,” wrote Bob Butler, president of the National Association of Black Journalists, in a recent blog post applauding the FCC’s move toward curbing consolidation. “Viewers for the different stations get the same news delivered by the same people, limiting the opportunity to hear different viewpoints. For those who work in these newly ‘shared’ newsrooms, there is more work and less time for in-depth or investigative reporting.”

Butler wrote that the agreements also cut management jobs, “leading to less diversity among those who make decisions on news coverage and hiring.”

There are more than 100 examples of joint sales agreements across the country. The FCC has approved at least 85 joint sales agreements since 2008, effectively viewing shell or sidecar firms and their parent companies as different entities even when the Securities and Exchange Commission (SEC) considers the shell or sidecar firms to be essentially owned and operated by the parent companies.

“As many large companies have disclosed in filings with the Securities and Exchange Commission, it means these larger stations selling the advertising are the de facto owners of smaller stations – owning all of the assets, retaining a significant amount of profits and programming all of the news hours,” FCC Chairman Tom Wheeler, who proposed the new rules, wrote in a blog post earlier this month. “Hence, these SEC filings make clear that, by any reasonable standard, these smaller stations in the [joint sales agreements] are not independent.”

Under the FCC’s new attribution order, a broadcasting company that sells 15 percent or more of the ad sales for a competing station will be considered to have an ownership stake in that station. The FCC will consider issuing waivers on a case-by-case basis if broadcasters can prove that a joint sales agreement serves the public interest in some way, such as keeping a college-run TV station funded and afloat, for example.

Media justice advocates have demanded for years that the FCC crack down on the deals and put an end to what activists call the “covert consolidation” that has allowed conglomerates such as Raycom and Sinclair Broadcasting to gobble up chunks of local TV markets across the country.

“For years, a small handful of powerful conglomerates [have] used outsourcing agreements to dodge the FCC’s ownership rules and grow their empires at the public’s expense,” said Craig Aaron, president of the watchdog group Free Press. “And for too long the agency has looked the other way as these companies have dominated the airwaves.”

The National Association of Broadcasters lobbied hard against the new attribution rules, arguing they would make it harder for smaller broadcasting companies to compete with larger firms.

Wheeler, however, praised the new rules as a “win for competition” and a “win for common sense.”

Free Press points to its own research as proof that media consolidation reduces diversity among broadcasters and other media owners.

Opponents of the FCC’s new rules, however, argued that joint sales agreements have helped struggling stations stay on the air and, in some instances, kept ownership in the hands of minority owners.

FCC Commissioner Ajit Pai, a Republican who opposed the new restrictions on joint sales agreements, recently estimated that 43 percent of female-owned TV stations are part of joint sales agreements, and about 75 percent of the TV stations owned by African-Americans operate under joint sales agreements. (There are only about four full-power commercial stations with African-American owners in total).

“Why is the FCC targeting pro-competitive sharing arrangements that appear to disproportionately benefit female and African-American broadcasters?” Pai said in a statement.

In response to these concerns over ownership diversity, Wheeler included the provision allowing broadcasters to receive a waiver if they can prove that their joint sales agreement serves the public interest. The FCC must respond to waiver applications within 90 days.

Despite calls from Republicans in Congress who demanded that broadcasters with existing joint sales agreements be grandfathered in under the new attribution requirements, broadcasters now have two years to receive a waiver from the FCC or unravel joint sales agreement at or above the 15 percent ad sales rate. Aaron of Free Press said that as the agreements dissolve, there would be an historic opportunity for women and minorities to take control of the local TV airwaves.

“It’s time for conglomerates to start playing by the rules,” Aaron said. “Divesting some of their stations could open the door for truly independent and diverse owners to enter a marketplace conglomerates have controlled for years.”

Advocates hope the FCC’s most recent move to curb media consolidation is a sign that Wheeler, who was appointed by President Obama last year, may be moving the agency in a new direction after years of deregulation allowed expansive media consolidation across the country.