Ad Group Mulls Whether to Join Consumer Groups Against Consolidation

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WASHINGTON (AdAge.com) -- The American Association of Advertising Agencies is second-guessing whether it should get involved in the Federal Communications Commission battle over media ownership rules, a prospect that would leave marketers and agencies out of a battle in which media companies and consumer groups are arguing over advertising competition.

Richard O'Brien, 4A's executive vice president, said the group, which after first suggesting it would file comments with the FCC and might join consumer groups in fighting the proposed weakening of the rules, is now debating whether to get involved at all and wants to review more information.

Last month, Consumers Federation of America, Consumers Union and some minority-owned media companies were said to be working with the Information Policy Institute, which was enlisted by the 4A's to provide an economic analysis of media consolidation. The groups planned to share data, information and terminology on consolidation's effects and were thought to file joint comments with the FCC opposing consolidation.

Comments filed with FCC
Meanwhile, the consumer groups,

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as did several major media companies, filed comments with the FCC last week. Media companies, as expected, argued that cross-ownership by one company of various media in the same market will neither limit diversity of programming nor sacrifice local news coverage.

"The commission can safely rely on the antitrust laws [administered by the Justice Department] to ensure its policy goals," General Electric Co., Viacom and News Corp. said in jointly filed comments to the FCC. General Electric owns NBC; Viacom is parent of CBS; and New Corp. owns Fox.

The companies said that if the FCC feels it needs to assure diversity, the rule "should be technology-neutral and take into account not only broadcast stations and daily newspapers, but all modern media including the Internet, cable television, weekly newspapers and regional magazines, each of which should receive equal weight as sources of outlet diversity."

Sinclair wants equal footing
Sinclair Broadcast Group wants the same freedom to own two TV stations that broadcasters in larger markets have for their smaller market stations. Sinclair in its brief said size shouldn't matter because the relevant competition isn't local TV but the overall broadcast market.

Citing a study Sinclair did in 1996, the company said that "local advertising on broadcast television was not a relevant market for antitrust purposes," and ownership of two stations creates cost efficiencies that could expand Sinclair's ability to provide local news.

Ad dollar competition
"There is no competition-based justification for retaining the local television ownership rule," the company told the FCC. "Consumers and advertisers view programming provided over the multitude of non-broadcast network channels and broadcast stations as substitutes. Television broadcast stations also compete with a significant number of other outlets for advertising dollars such as radio stations, newspapers, outdoor, direct mail and even the Internet."

Media buyers this summer told the FCC that marketers can't easily substitute TV for radio or print for TV, as media companies claim. The media buyers said the "homogenization" of local radio, taken together with cable consolidation, has made it difficult for retailers with just a few stores to compete or to market regional products.

Gannett Corp., which owns USA Today, local newspapers and TV stations, claimed common media ownership was good and expands "the volume of news and information communicated to the public, improves the quality of news. ... The commission has abundant empirical evidence that newspaper/broadcast combinations neither threaten the highly competitive media marketplace nor diminish viewpoint diversity," the company said.

Not all media the same
As for warnings by media buyers that media mergers will lead to higher advertising rates, Gannet said that the inability by marketers to substitute print or radio for TV means the media are not true competitors and that newspaper/broadcast mergers should not be seen as a threat to advertisers.

"The newspaper/broadcast cross-ownership rule was adopted without any record evidence that common ownership had any adverse impact on advertising rates or raised any other material competition concerns," the company said.

Consumer groups, meanwhile, decried those ideas.

Threat to diversity
"Concentration has a negative effect on diversity of advertising, programming choices and presentation of political outlets," the Consumer Federation of America, Consumers Union, the Center for Digital Democracy and the Media Access Project said in their filing. "Television, radio, newspapers and the Internet serve different purposes for the public. There is little substitutability between the media for viewers or for advertisers. There is no effective competition between media types. ... Consolidation of ownership of news outlets poses a significant threat to democratic discourse."

The groups also contended that the purpose of the FCC's rules should be "to protect robust public debate" and "diversity of news and information," warning that concentration could lessen the media's willingness to act as a watchdog of democracy.

The consumer groups, however, also raised some of their own advertising issues, contending that marketers' desire to reach the widest number of people limits media companies willingness to produce controversial programs or programs aimed at minorities.

"The market produces what advertisers want as much as, if not more than, what consumers want. ... The tendency to avoid controversy and seek a lowest common denominator is augmented by the presence of advertisers, expressing their preferences in the market."

Internet is 'wishful thinking'
The groups also contended that the view that the Internet would provide significant alternative sources of information "given the current state of the dot.bomb revolution ... is wishful thinking at best."

A Columbia University forum on media consolidation is set for Jan. 16 and the FCC is asking for further comments on changes to its media ownership rules be filed by month's end.

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