Minority ownership in media shrinks

By Tim Jones

Tribune Media Writer The economic model was established more than 30 years ago, when chain stores and shopping malls sprouted from cheap land on the outskirts of small towns and methodically squeezed the commercial life out of many of the little storefronts downtown.

Now the Wal-Martizing of radio and television means one of the original mom-and-pop businesses--owning a commercial radio or TV station--is falling victim to that corporate ethos, too. But the stunning pace of consolidation in broadcasting raises troubling philosophical questions because of its particular impact on individual and minority ownership.

Although minority ownership has always been low, it now stands at 2.8 percent of the nation's 11,475 commercial radio and TV stations, according to the Commerce Department. That's down from 3.1 percent in 1996.

``The decline is troubling because historically there has been bipartisan support in this country for the notion that it is important to have a diversity of ownership in our broadcast stations because it is good for the public and good for democracy,'' Federal Communications Commission Chairman William Kennard said in an interview.

But Kennard, the first black person to chair the government's chief communications regulatory panel, asserts that, at heart, the changes in minority ownership transcend race and paint a much wider picture of what is going on in all of broadcasting.

``This is as much an issue about small business as it is about minorities. There is a whole echelon of small businesses that don't have opportunities in this business like they used to,'' he said.

It is not at all clear what, if anything, can be done to reverse the trend that is dramatically altering the industry founded by local entrepreneurs and built on community service. The diversity of voices is eroding, especially in black-owned radio, where the biggest ownership drops have occurred.

And usually cash-strapped small owners--regardless of race--face enormous obstacles to not only enter but to stay in a business increasingly being taken over by deep-pocketed conglomerates. In short, the small operators are being priced out.

``In all candor, it would be virtually impossible to get in today. I know we could not re-create our company today,'' said Don Cornwell, chairman and chief executive officer of New York-based Granite Broadcasting Corp., which owns and operates 11 network affiliated television stations in nine states, including Illinois.

Cornwell is black and is the dominant player among the nation's 12 black television station owners. Last month, Granite announced it will buy KOFY-TV in San Francisco for $174 million.

``We've been fortunate,'' said Cornwell, noting that Granite had established itself in the TV business before Congress deregulated much of the broadcasting industry last year. The Telecommunications Reform Act of 1996 sent prices for broadcast properties skyrocketing, because most ownership limits were removed.

That spurred a buying binge--what John Douglas, president of Douglas Broadcasting, of Palo Alto, Calif., calls ``a stampede.''

``It's like barbarians at the gate. The fuel that is the catalyst is money. If you have money you can participate, but money is something that minorities typically do not have access to in large amounts,'' said Douglas, a black man whose company owns 19 major market radio stations in six states and the District of Columbia.

``The possibilities are getting smaller and smaller,'' Douglas said. Since March 1996, nearly 3,900 radio stations--roughly 40 percent of the total--have changed hands in deals totaling more than $30.1 billion. The percentage of television station transactions is similar--384 deals, exceeding $16.5 billion.

Before and after comparisons are revealing. In 1995, prior to last year's broadcast deregulation, CBS bought a black-owned UHF television station in Detroit, WGPR-TV, for $24 million. Last December, 10 months after deregulation, Granite bought WXON-TV, another UHF station in the Detroit market, for $175 million.

In radio, the multibillion-dollar consolidation spree has created radio giants--Capstar Broadcasting, Clear Channel Communications, Chancellor Broadcasting, Jacor Communications and Westinghouse--owning more than 100 and, in some cases, many hundreds of radio stations. Government regulations allow a single owner to control as many as eight radio stations in a market.

That has given the big operators some major competitive advantages: They can consolidate business operations of stations they own; they can control certain listening formats in a market, such as urban contemporary or country, and--most important--they can control 50 percent or more of the radio advertising in the market. This means they can operate more efficiently and profitably than a single radio station operator.

Since overall national ownership limits in radio have been lifted, it is conceivable that a single owner could own, say, 2,000 stations. Also possible is the vision weaved by some analysts, that four or five big corporate owners will control the overwhelming majority of the nation's radio stations.

The message from all this to many individual operators is simple: Take the money and run, or be crushed. ``A lot of times the economics dictate that you sell out,'' said Larry Irving, assistant secretary of the Commerce Department.

``Group owners are the name of the game now. Radio has historically been diverse and local, and increasingly it is becoming neither,'' Irving said.

Irving said he sees no hope for making significant changes in radio ownership rules, ``but what we have to work against is the radio-ization of television,'' he said. Television companies, including Tribune Co., owner of the Chicago Tribune, have been lobbying for a relaxation of TV ownership rules. The broadcast lobby is pushing for the right to own more than one TV station in a single market.

The government has sponsored an effort to make seed money available for small businesses to enter radio. But the treasury is a pittance, only $25 million.

The FCC's Kennard said the commission will study the fallout from radio deregulation, which he said was much greater than anyone anticipated. ``It's easy to say that consolidation is the problem, and I suspect that is the case, but it would be irresponsible not to look deeper and try to understand a little bit better why financing sources are drying up for smaller new entrants,'' Kennard said.

``I think that many people in this country will wake up to the fact that the broadcast industry is fundamentally changing,'' he said, adding that it is ``imperative'' for the government to try to reverse the trend of shrinking broadcast opportunities.

Douglas is not optimistic. ``I'm a former securities analyst, and I could see the handwriting on the wall. `He who can collect the most marbles will win, especially the pretty ones,' '' Douglas said.