4A's to dispute FCC findings on media industry mergers

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The american Association of Advertising Agencies plans to challenge the findings of recently released Federal Communications Commission studies suggesting media consolidation has caused little harm to advertisers.

One of the studies found that as the radio market consolidated from 1996 to 2001, the cost of advertising on radio rose 68%, but that only 3% to 4% of the hike could be attributed to media consolidation.

The studies are the first steps in the FCC's deliberation over media ownership, and such a conclusion-suggesting that M&A activity does not have a major impact on the advertiser-could be seen as helping to pave the way for further consolidation, not only in radio but also in TV.

This point was not lost on Jon Mandel, co-CEO, chief negotiating officer, Grey Global Group's MediaCom, New York, and a member of 4A's media-policy committee. "If you were to take those same percentages in the TV industry, you are talking about several billion dollars" of additional costs, he said. "Advertisers and agencies should be all over this."

Allen Banks, exec VP-executive media director, North America, Publicis Groupe's Saatchi & Saatchi, New York, another member of the media-policy committee, also questioned the methodology of the report, calling it "squirrely."


Though radio revenue-tracking data is notoriously hard to obtain and determining the reason behind cost increases is also difficult, Mr. Banks said the report used Service Quality Analytics Data to make broad claims that consolidation had a minimal effect.

"It looks like it was manufactured to sound like they knew what they were talking about," he said. "I was amazed that they were able to come out with the numbers they came out with." Mr. Banks said he doesn't understand how the report determined that just 3% or 4% of the 68% increase in prices was due to consolidation.

The FCC said courts have said it needs some data on which to base its consolidation rules and its studies are its best effort to provide that data. "We encourage parties to submit criticism and their own, better data," an FCC spokeswoman said.

Both the 4A's and the Association of National Advertisers are reviewing a series of reports the FCC released Sept. 30 in order to offer critical comments. The rules the FCC has under consideration for change are those that limit media companies from owning TV stations reaching more than 35% of households nationally; bar newspapers and broadcasters in a particular market from buying each other; and impose limits on the number of radio and TV stations that can be owned in a single market. Three of the studies relate specifically to advertising. One looks at radio ad price changes, a second examines how easily one form of media can substitute for another and a third proposes a theory for determining how advertising revenues impact a station's ability to produce programming.

The studies generally support FCC Chairman Michael Powell's push to ease current curbs, though the media-substitution study suggests the ability for consumers to easily substitute one media for another is limited.

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