COLUMBUS, Ohio (AdAge.com) -- The chief marketing officer dreads opening the survey request from the National Association for the Advancement of Colored People each fall.
The request is always the same: Detailed data on where the brand this CMO manages spends its sizeable advertising budget -- including black-owned media. And each year, the request for a breakdown of ad budget is politely declined by the marketing chief, who cites its proprietary nature.
And so each year, the brand winds up with an F in the area of marketing and communications -- along with 16 others -- in the NAACP annual Consumer Spending Guide. The stated goal is to measure corporate America's relationship with the African-American community -- a consumer segment that represents 13% of the U.S. population with spending power of $845 billion in 2007 -- a figure expected to leap to more than $1.1 trillion by 2012, according to the University of Georgia's Selig Center for Economic Growth.
What's the Solution?
Industry Leaders Weigh in on the Dismal Rate of Media Ownership by Blacks
Related Chart:Top African-American-owned Companies
"All things being equal, we'd have no problem supporting" black-owned media, said the CMO, but "a lot of the true African-American owned media companies are small and very decentralized. That doesn't fit our strategy of needing to have a national reach. We have looked at some of the options, but the delivery is so small in relation to cost it doesn't fit our strategy."
The survey's goal is to urge the black community to buy from marketers that support black media and to boost media ownership within the community, according to Richard McIntire, a spokesman for the organization. "Brands have these huge budgets, and less than 1% is reinvested back into African-American media," Mr. McIntire said. "The black press does not see the advertising dollars coming from major corporations who will advertise in a market with two dailies but won't in the smaller community papers."
Scale affects pricing
But some marketers argue that in an ever-more-complex media environment, it's not that simple. In a world of scale -- and the benefits of lower ad pricing that come with it -- there are few independent, black-owned media outlets left to support, and those that exist don't have the reach to offer competitive rates.
Some of the biggest names in black media today actually are owned by corporate titans. The most notable example is BET, which founder Bob Johnson sold to Viacom for $3 billion in 2000. Then there's Essence: Time Warner's publishing arm took full ownership of the legacy brand in January 2005.
But the most dismal rate of media ownership among African-Americans is in TV. Only five African-Americans own full-power commercial TV stations; they collectively own eight out of 1,379 commercials stations nationwide.
"It's not an impossible environment, but it's tough," said Lyle Banks, founder and CEO of Banks Broadcasting in Chicago, which owned two TV stations before selling KSCW-TV, Wichita, Kan., to Schurz Communications in August 2007. "It's not just minorities. For anyone coming in the last two years, it's difficult to raise enough money to buy into TV stations that are being sought by those who have scale and lower costs. You might have enough money to buy one TV station in a medium or a small market, but unless you plan to hold on to that station and grow it, it's going to be very difficult to buy more stations to survive in this competitive business."
Minority ownership in decline
The minority-ownership rate in TV has plummeted in recent years, falling nearly 70% in the past decade, according to a 2007 Free Press study.
Recent declines in TV ownership are attributed to the bankruptcy in May 2007 of a single company: New York-based Granite Broadcasting, which operated nine stations in seven states. That's not to say that TV ownership among African-Americans was ever strong.
In fact, it wasn't until 1975 that an African-American even owned a TV station. In 1978, among other new policies, the Federal Communications Commission tried to encourage minority ownership by giving tax deferrals on capital gains to radio or TV owners when they sold stations to minorities. Additionally, tax certificates were awarded to investors for giving start-up capital to minorities to buy radio or TV stations. Ownership rates peaked in the mid-1990s, according to the National Association of Black Owned Broadcasters, when African-Americans owned 23 TV stations and 240 radio stations. But after the Republican takeover of Congress in January 1995, Congress voted to eliminate the tax programs.
A year later, the 1996 Telecommunications Act relaxed ownership rules -- prompting some of the most successful African-American TV owners to sell out to bigger players. "Some of them did very well, and most of them who cashed out did so because they figured they couldn't compete anymore," said Jim Winston, executive director of NABOB.
But TV is certainly not the only place where black-owned media outlets are in decline. Newspapers historically have been an area of strength for black ownership. Blacks published newspapers as early as the 1820s, and there were 250 newspapers operated by African-Americans by 1950, according to a report by the Minority Media and Telecommunications Council.
No black dailies left
Yet today, there is no longer a daily black-owned newspaper. The last daily black newspaper, the Chicago Defender, cut back to a weekly schedule in February.
And since 2000, the industry's trade group, the Black Press of America, has seen its membership decline to 189 weekly newspapers from 300. National weekly circulation for its members has dropped to 250,000 from a high of 500,000 in 2000, according to John Smith Sr., chairman of the trade group. Mr. Smith, publisher of The Atlanta Inquirer, a weekly newspaper with a circulation of 42,000 (down from 60,000 two years ago), blames the internet for the circulation declines.
Indeed, with advertisers stampeding toward digital marketing, it's hard to overlook the fact that not a single legacy black media brand has made a successful transition to the online world. Consider EbonyJet.com: Its traffic is so small it doesn't register with ComScore or Nielsen. The website aggregating the biggest black audience online is Time Warner's Black Voices. The second-most popular is BlackPlanet.com -- owned by five Asians.
But Eric Blankfein, senior VP-channel insights director at Horizon Media, New York, said advertisers should not just look at traffic figures, noting that there are opportunities to gain more credibility with the audience by buying in outlets owned by African-Americans.
"Our research shows that web environments, even those below the radar, so-called grass-roots websites that may not see a whole lot of ad support but have a high contextual relevance among consumers, can give marketers instant credibility," he said. "From an advertising standpoint, you need to be in media that is credible to your market. If it is credible and minority-owned, that's valuable to the advertiser."
In 2001, Black Press launched a national network and news portal, BlackPressUSA.com, "to bridge the gap as far as technology is concerned for member newspapers," Mr. Smith said. Despite the efforts, the site has garnered little traffic and has yet to register with ComScore and Nielsen/NetRatings. Mr. Smith said the site gets about 10,000 hits a week.
Site draws major advertisers
Yet prominent advertisers have bought ads on BlackPressUSA.com, including Home Depot, Microsoft, Sprint, Coca-Cola, General Motors and Comcast.
"All of us, in time, must find a way to have a combination of the two forms -- both print and online," Mr. Smith said. "We must be able to face up to the challenge of new technology or we, too, will go by the wayside."
It's not limited to newspapers. The legacy magazine brands -- Ebony, Jet, Essence and Black Enterprise, all black-owned except Essence -- are struggling to gain new readers. Average circulation was essentially flat from 2006 to 2007 for all four, according to the Magazine Publishers of America.
The low rate of media ownership in broadcast has been blamed by some on the policies of the FCC, including David Honig, executive director of the Minority Media and Telecommunications Council. "The relative success of minorities in the weekly-newspaper industry was possible because no federal agency acted as the gatekeeper of newsprint and ink," Mr. Honig wrote in a recent report. "In broadcasting ... the FCC's regulatory policies ensured that media companies could not cross the line from print to broadcasting."
Indeed, it wasn't until 1949 that an African-American even owned a radio station, and by 1971, there were only six minority-owned stations.
That's not to say ownership rates in radio are stellar today, even if they do surpass that of TV; African-Americans own just 3.4% of the full-power commercial broadcast radio stations nationwide.
The largest black-owned radio company is Radio One, based in Lanham, Md. The company operates 53 radio stations in 17 urban markets but has been struggling of late. On March 23, it announced plans to sell KRBV-FM in Los Angeles for $137.5 million, using some of the proceeds to invest in its internet strategy, according to Chief Content Officer-Interactive Smokey Fontaine. "If we can reach more African-Americans than our competitors at the other big media companies online, we can then offer more reach to advertisers."
But to some, it's more than a question of reach. "Media targeted to African-Americans is not valued to the degree that other media is," said Earl Graves Jr., president-CEO of Black Enterprise, publisher of Black Enterprise magazine, which has a subscription base of 525,000 and an estimated 4 million readers.
Since 1970, the magazine has published an annual list of the top 100 black-owned businesses, including media companies. After the takeover of Essence by Time, Mr. Graves removed the legacy media brand from the list. Despite the magazine's tough stance on what constitutes a black-media property, Mr. Graves questioned whether efforts such as the NAACP's survey does black-owned media any favors, especially in reshaping marketer misconceptions of the value of targeting black consumers.
"It's counterproductive when people feel they are filling it out under duress," he said, suggesting instead the argument for spending more on black media should be made on economic grounds. "Tell me how this makes sense: 15% to 20% of your business is coming from this market but you spend less than half to one-half percent of your marketing budget on it."
Linda Jefferson, senior VP-media at Burrell Communications, said for advertisers to capitalize on demographic trends, there needs to be not only better media-ownership rates in the black community but more content-creation opportunities as well. "It's not an either/or; they are both important," she said, adding: "When will there be a black Rupert Murdoch?"
"Given our contribution to the overall economy," she said, "it is absolutely an abysmal statement that we don't own more and aren't in control of our story and of where it's told and when it's told."
Business is business
Michelle Ebanks, president and publisher of Essence since 2005, when Time Inc. acquired full ownership of the magazine from its founders, said the focus on ownership often overshadows the rights of African-American business owners. "I respect the pride of black ownership and the critical importance it is to our community. I also respect the right of individuals to then sell their business to a public entity if they believe that is in their best interests," Ms. Ebanks said.
For marketers, she said, the question of ownership also fails to address the lack of content created for the market. "The audience is underserved by content across all the media platforms, and the audience is under-targeted by marketers. As such, there is an opportunity to create more content that is speaking directly to African-Americans," she said.
Henry Louis Gates Jr., director of the W.E.B. Du Bois Institute for African and African-American Research at Harvard University and editor in chief of the Washington Post Co.'s The Root, a site intended to be a "black version of Slate," dismisses the notion that ownership is the crucial factor. "There's a romantic, black-nationalist ideal that it's great if everything is all-black-owned. But what's all-black-owned? We are living in an era of a multinational, multicultural environment. Diversity is the rule. Interrelationships are the rule."
Not so, said Leonard M. Baynes, professor of law and director of the Ronald H. Brown Center for Civil Rights and Economic Development. "Owning the media channel is the only way to be assured you can have a voice."
Said Black Enterprise's Mr. Graves: "If all ethnically owned media goes away and the people who control the channels say, 'That African-American voice is too angry or too controversial; I'm just not going to have you on the air anymore,' it would be a disaster for people of color in this country."
Tough Road: Darnell Washington's StoryEight miles outside Great Falls, Mont., in an empty field, there's an 800-foot tall TV tower perched on a small hill.
There is nothing particularly special about this tower. At any time during the day, it may be transmitting an episode of "Family Feud" or a rerun of "Law & Order." If you were to drive into town, though, you'd find the headquarters of KTGF-TV, a modest, nondescript office building. And there you'd find the tower's owner, Darnell Washington.
Mr. Washington is one of 783 black residents out of 56,690 in Great Falls and, as CEO of KTGF-TV, head of the only black-owned TV station in all of Montana.
Those are not the only statistical anomalies about Mr. Washington; he is one of five African-Americans who own any of the 1,379 commercial TV stations in the U.S.
His struggle as a media owner serves as a window into the broader story of black media ownership in America. "Trying to get into this business, to break into this old-boy's network is not for the faint of heart," said Mr. Washington, 53.
His path to ownership began 20 years ago with an entry-level production job at a TV station in Tulsa, Okla. He steadily climbed the ranks and entered management when Clear Channel bought KOKI-TV in Tulsa in 1990 and he was promoted to national sales manager. He worked for other TV stations in Tulsa in the '90s, but in 2000, he decided to strike out on his own. "I just got tired of building other people's companies. I decided I'd rather toil and work hard for myself."
But Mr. Washington could not find a station or raise enough capital to pursue a deal, so he went back to work at a TV station. In 2004, he decided to get serious again and set up shop in a one-bedroom apartment with a phone, a fax and a computer.
That same year, Max Media put KTGF-TV up for sale in Great Falls. Mr. Washington had never visited Montana before, but he moved quickly to put together a deal to take over KTGF, which has assets worth $4 million, Mr. Washington said.
"I begged family members, used retirement and savings, and even lost my home in trying to make this thing go," he said. Private investors and Max Media eventually helped finance the deal. Nearly four years later, "we are struggling to stay in business," Mr. Washington said.
He had originally hoped to buy additional stations and run a group of 10 to 15 stations, enough to become attractive to advertisers and gain efficiencies with a sales staff since, as the only independent in town, it's tough to compete for advertisers.
But he hasn't been able to raise additional capital. "We just can't sit here as one small independent in a small market and expect to make it."
How the Joyners Extended Their ReachOscar Joyner knows a thing or two about the radio business. His father is Tom Joyner, host of the Tom Joyner Morning Show, arguably the most influential radio show in the black community today, reaching 8 million listeners on 115 stations.
But in today's digital world, media ownership was never an attractive option for the younger Mr. Joyner, 33. "In owning a distribution channel, you are just so susceptible to economic trends at the macro level," he said. "There is just as much opportunity in content as there is in owning a media network."
The Joyners' company, formed in 2003, is named Reach Media and aims to "develop, acquire and partner in quality media and marketing opportunities targeting the African-American community."
When Tom Joyner bought the rights to his show from ABC in 2004, he sold a 51% stake for $56.1 million in cash and stock to the largest black-owned media company in the U.S., Radio One.
Selling to Radio One instead of, say Clear Channel, was purposeful. "Black ownership does matter," said the president-chief operating officer of Reach Media. "When we put our company up for sale, Radio One was an attractive partner because, like us, they are a minority-owned business. We have nobody to answer to but black people."
Although it's technically not independent, that allows Reach Media to create a media brand that stands out among others targeting a black audience that are no longer owned and operated by African-Americans, such as Essence and BET.
"We couldn't compete with the big media companies when it comes to access to capital. But we could give an unfettered message to African-Americans," Mr. Joyner said. "We don't have to worry about how our board of directors might feel or how the parent company might feel because they are African-American."
Reach employs more than 60 and has revenue of $50 million.
Overcoming the Capital ConundrumWhen it comes to solving the riddle of media ownership in the black community, access to capital is invariably raised as the answer.
Yet as the media-consolidation trend continues, the capital challenge will only get that much harder, according to Kelvin Walker, principal of 21st Century Group, a Dallas-based private-equity fund of $160 million that has invested in black-owned media companies.
"As the market has matured with media, there is a desire by institutions, capital providers and the big banks to have scale, so if you are a guy who wants to get into radio or TV and buy one radio or two stations, that is a small deal for a lot of the institutions. They'd rather have the safety or infrastructure of 20."
Even though the private-equity market can be a "great catalyst" for African-American entrepreneurs, ultimately the institutional investors behind those markets want a return on the money they've invested, he said -- and the quickest payback comes with scale.
"As much as John Doe and John Q or Jane Q would love to own their five radio stations, if they do well and drive market share and drive value, it's likely they have a chance to make wealth for themselves by selling," he said.
That's exactly what happened in the late '90s, when many black media entrepreneurs sold following the 1996 Telecommunications Act, which relaxed media-ownership rules.
It's one of the reasons Mr. Walker dismisses the notion that racism keeps minorities out of media today, pointing instead to media consolidation as the root of the problem. "The lending environment simply favors the larger owners," he said. "Do people want to start down the path of blaming it on racism? I'm not going to go there."
That's not to say there aren't big success stories. 21st Century Group, along with Goldman Sachs Urban Investment Group, put up $17 million for Urban Radio Communications in July 2005 to buy 10 radio stations in the southeastern U.S. Since then, the company has been on a tear, profiting from "the strong growth trends in media and advertising targeting African-Americans," according to a press release. In 2007, the company doubled its size, growing to 24 stations from 12.