Why Should the Government Prop Up Failing TV Companies?

Television broadcasters are doing everything they can to prevent the FCC from cracking down on the dubious “sidecar” arrangements they’ve used to circumvent ownership limits. “Sidecars” typically consist of joint sales agreements (JSAs) and/or shared services agreements (SSAs,) and allow broadcasters to skirt federal laws designed to promote competition, diversity and localism.

In February, the Department of Justice told the FCC that “such arrangements often confer influence or control of one broadcast competitor over another.” It added that “failure to account for the effects of such arrangements can create opportunities to circumvent FCC ownership limits and the goals those limits are intended to advance.”

Broadcasters are breaking the spirit of the law, if not the letter.

”Sidecars” often result in lost jobs, reduced diversity of voices, and less localism. A 2012 Pew Research Center report found that since 2005, local news coverage of government and politics is down 50%. A 2011 FCC report found that 21% of commercial TV stations don’t air any local news at all and 33% air 30 minutes or less of local news.

These arrangements punish consumers. When a company owns more than one station in a market, broadcasters have tremendous leverage to force pay-TV providers into handing over whatever retransmission fees they demand. Otherwise, consumers will be blacked out of two or more stations.

How do the broadcasters justify this collusion? They claim such arrangements “greatly foster localism and diversity.” Nevermind that during this retrans-fueled decade of consolidation, the number of minority owned TV stations has plummeted from 44 to 5. They ignore the fact that there’s no evidence such arrangements create more localism. There’s plenty of evidence to the contrary.

Let’s focus on why broadcasters claim to need such arrangements. In her March 12 testimony before House Communications and Technology Subcommittee, Marci Burdick, NAB Board Member and Senior VP of Schurz Communications, stated:

“We’re governed basically under ownership regs that were enacted in 1970…The world has changed. In 1970, most broadcast networks were being paid by their networks to distribute the product. And in small and medium markets, that was basically their profit. That has gone away. And so the world has changed, with people competing with us for advertising dollars, which supports 90% of our costs – 90% of our revenue in local broadcasting comes from advertising – as that pie is sliced even thinner, the rules have not kept up. And so, in fact, broadcasters like Schurz have entered into some of these agreements…”

By their logic, TV broadcasters are losing advertising dollars, so the government should allow them to collude in negotiations and operations. In her written testimony, Burdick admits that “to ignore the market pressures facing broadcasting would doom us to the fate of newspapers.”

If some TV broadcasters can’t make ends meet, why should the government prop them up? They don’t do the same for newspapers.

This would not mean the end of broadcast TV. The government still licenses stations. Instead, these licenses would go to companies who actually serve their community in a fiscally responsible way. Isn’t that the “free market” broadcasters claim to support?