MEDIA OWNERSHIP and DEMOCRACY in the DIGITAL INFORMATION AGE Promoting Diversity with First Amendment Principles and Market Structure Analysis MARK COOPER Director of Research, Consumer Federation of America Center for the Internet & Society, Stanford Law School Associated Fellow, Columbia Institute for Tele-information Center for Internet & Society Stanford Law School Acknowledgments Many of the concepts in this book are the result of a twenty-year Vulcan mind-meld with Gene Kimmelman of Consumers Union. Steve Cooper provided the initial drafts of most of the material in Chapters 3 and 4 and reviewed numerous drafts of the entire document. Dean Alger provided materials for Chapters 2 and 3 as part of comments filed by the Consumer Federation (et al.) at the Federal Communications Commission. Bob Brandon and Melanie Wyne relentlessly demanded simple En- glish in a series of documents which make up most of the chapters of this book. Susan Punnett tirelessly edited the manuscript. The Ford Foundation provided sig- nificant support for the research through its funding of the Consumer Federation of America’s Digital Society Project. Cover design by Jeff Middour. Licensed under the Creative Commons Attribution-NonCommercial-ShareAlike License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/1.0/ or send a letter to Creative Commons, 559 Nathan Abbott Way, Stanford, California 94305, USA. ISBN 0-9727460-9-9 Mark Cooper 1424 16th Street, N.W. Washingtion, D.C. 20036 [email protected] Contents P I: L P A F ......1 ART EGAL RINCIPLES AND NALYTIC RAMEWORK I. A B A F A ...........3 OLD SPIRATION FOR THE IRST MENDMENT O E M T F S ................3 WNERSHIP OF LECTRONIC EDIA AND HE REEDOM OF PEECH The Current Debate Over Media Ownership Limits.......................................3 The Expanding Debate Over Media Reform and Justice.................................7 O ............................................................................................................8 UTLINE N T P P P .......................11 OT A OASTER WITH ICTURES OR EANUTS AND OTATOES Democratic Debate v. Commercial Media Markets .......................................11 Participation in Democratic Debate...............................................................14 Information Dissemination, not Entertainment............................................17 Limits on Ownership to Promote Diversity ..................................................18 T N I D D .........................................22 HE EED TO MPROVE EMOCRATIC ISCOURSE Demographic Changes....................................................................................22 Technological Change.....................................................................................25 S F A P I P S ................26 ELLING IRST MENDMENT UBLIC NTEREST RINCIPLES HORT P O M ...............................................................29 UBLIC PINION ABOUT THE EDIA II. M E D D .....33 EDIA CONOMICS AND EMOCRATIC ISCOURSE T T M M M ..................................33 HE YRANNY OF THE AJORITY IN THE ASS EDIA Competition, Democracy and the Shortcomings of Mass Media...................33 An Economic Theory of Discrimination ........................................................35 The Impact of Market Failure on Civic Discourse.........................................39 O M .....................................................................................44 WNERSHIP ATTERS Bias-Bashing Among the Most Prominent American Journalistic Icons......45 Systematic Evidence on Systematic Bias .......................................................47 Direct Financial Interests Affects Coverage ..................................................48 T B C C D C .........50 ENSION ETWEEN OMMERCIALISM AND IVIC ISCOURSE IS LEAR Happy News at the Lowest Cost ....................................................................50 Minority Communities and Unpopular Points of View are Under served...52 iii Concentration and Consolidation of the Media Undermines Localism.........53 T M M C P P ...........................55 HE ASS EDIA ARE RITICAL TO OLITICAL ROCESSES Agenda Setting and Influencing Public Opinion..........................................55 Diversity Is Critical to Supporting Democratic Discourse...........................56 D R D M ........................................................57 IFFERENT OLES OF IFFERENT EDIA Identifying Media Functions .........................................................................57 Television Plays the Central Media Role in Civic Discourse........................58 C ...................................................................................................60 ONCLUSION Old Theories that No Longer Apply ..............................................................60 Empirical Concepts of Media Diversity.........................................................61 P II: Q S M T ...........65 ART UALITATIVE TUDIES OF EDIA RENDS III. P J ......................................................67 RINT OURNALISM T U I N -T M .........................67 HE NIQUE MPACT OF EWSPAPER ELEVISION ERGERS Pressure From Concentration, Vertical Integration and Conglomeration on Journalistic Values....................................................................................68 Reducing Antagonism and the Watchdog Role .............................................71 Consolidating News Production ....................................................................73 T W P J ..............................................................75 RENDS ITHIN RINT OURNALISM Concentration Eliminates Diversity..............................................................76 Profit at the Expense of Journalism................................................................77 Happy News ...................................................................................................81 Under Serving Commercially Unattractive Audiences.................................82 IV. T E M M .................................85 HE LECTRONIC ASS EDIA T C T ’ I P D ...............85 HE RITIQUE OF ELEVISION S MPACT ON OLITICAL ISCOURSE Commercialism...............................................................................................85 Technology Influencing Social Processes.......................................................86 Demobilizing Voters.......................................................................................90 H & H . R : T R I ................................92 OPE YPE V EALITY HE OLE OF THE NTERNET Commercialism...............................................................................................95 Technology Influencing Social Processes.......................................................96 iv Social Alienation ............................................................................................98 Demobilizing Citizens..................................................................................100 E : W C ..........................................................................102 PILOGUE AR OVERAGE News American Style...................................................................................103 Covering-All-Sides In Britain......................................................................105 Conclusion....................................................................................................107 P III: Q S ART UANTITATIVE TUDIES OF M M M ................................................109 ASS EDIA ARKETS V. D M M I M .....111 EFINING ASS EDIA NFORMATION ARKETS D P U ........................................................111 EFINING THE RODUCT AND ITS SES E M M S ............................................112 MPIRICAL EASURES OF ARKET TRUCTURE T P : M U N I ..........................116 HE RODUCT EDIA SE FOR EWS AND NFORMATION GEOGRAPHIC MARKETS................................................................................127 VI. A M M ..................................131 NALYSIS OF EDIA ARKETS B T ...............................................................................132 ROADCAST ELEVISION Revenues and Output .................................................................................132 Concentration of Local Markets...................................................................135 TV After Relaxation of the Duopoly Rule ...................................................136 C TV.....................................................................................................139 ABLE Revenues and Output ..................................................................................139 Concentration of Local Markets...................................................................140 Cable TV After Deregulation.......................................................................141 P ..............................................................................................144 ROGRAMMING National Markets..........................................................................................144 Concentration of Local Markets...................................................................149 Prime Time Programming After Repeal Of The Fin-Syn Rules .....152 N ..................................................................................................154 EWSPAPERS Revenues, Output and Owners....................................................................154 Concentration of Local Markets ............................................................157 v Cross Ownership and Quality .....................................................................158 R ...........................................................................................................160 ADIO Operations ....................................................................................................160 Radio After the 1996 Act Relaxed Many Restrictions ................................161 T I ...............................................................................................165 HE NTERNET Revenues, Output and Owners....................................................................165 Concentration...............................................................................................166 The Decision to End Common Carriage of Advanced Telecommunications Services .................................................................167 C .................................................................................................169 ONCLUSION P IV: P P A ART RINCIPLES AND RACTICAL PPROACHES FOR M O P ..........................................175 EDIA WNERSHIP OLICY VII. S P M TRUCTURAL RINCIPLES FOR EDIA O L .......................................................177 WNERSHIP IMITS C C , C C .....177 HECKING ONCENTRATION ONSOLIDATION AND ONGLOMERATION A H S N S P I ............178 IGH TANDARD IS ECESSARY TO ERVE THE UBLIC NTEREST P P I T U ROMOTING THE UBLIC NTEREST HROUGH NCONCENTRATED M M .....................................................................................179 EDIA ARKETS Local Media Markets Should not be Concentrated ......................................179 Broadcast Markets should not be Highly Concentrated or the Source of Excessive Leverage across Sub-Markets .................................180 R A M M ...................................................181 IGOROUS NALYSIS OF EDIA ARKETS A R A O L ......................................182 ESPONSIBLE PPROACH TO WNERSHIP IMITS Counting Voices in a Total Media Market ..................................................184 Reasonable Adjustments to Counting of Voices..........................................186 E T M S ....................................186 STABLISHING HRESHOLDS AND ARKET CREENS VIII. H P FCC’ D I : OCUS OCUS WITH THE S IVERSITY NDEX M M P D ..........................191 AKING ARKET OWER ISAPPEAR U M W ......................................................................191 NLESHING A ERGER AVE vi I R .......................................................................................192 LLOGICAL ESULTS C A C D I .194 ONTRADICTORY SSUMPTIONS IN ONSTRUCTING THE IVERSITY NDEX T S A M G D ................................196 HE IZE OF THE UDIENCE ATTERS A REAT EAL I C O .........................................196 NCONSISTENCIES IN THE OUNTING OF UTLETS C E A ...........................................198 ONTRADICTIONS IN THE CONOMIC NALYSIS I A P A ...............................................200 NCONSISTENCIES CROSS OLICY NALYSES B L A A S M OGUS EGAL RGUMENTS GAINST ENSIBLE ARKET S A ..............................................................................203 TRUCTURE NALYSIS M W ...........................................................................................206 EDIA EIGHTS Asking the Wrong Questions Produces the Wrong Answers .....................206 Reasonable Weights for Combining Media in Market Structure Analysis..................................................................................207 M M S .........................................................................209 EDIA ARKET TRUCTURE Detailed Analysis of the FCC Examples ......................................................209 Irrational Outcomes in Other Markets........................................................210 S H S ..........................................................................216 ETTING IGH TANDARDS Allowing Concentrated Media Markets Under the Diversity Index...........216 Allowing Local Media Monopolies ..............................................................217 D I H P : A A T T IVERSITY NDEX OCUS OCUS N PPLICATION O HE P C M ...............................................................221 ERSONAL OMPUTER ARKET C .................................................................................................224 ONCLUSION E .........................................................................225 NDNOTES B ...................................................................275 IBLIOGRAPHY vii About the author Dr. Mark Cooper, Director of Research at the Consumer Federation of America and a Fellow at the Stanford Law School Center for Internet and Society and the Columbia Institute for Tele-Information, holds a Ph. D. from Yale University and is a former Yale University and Fulbright Fel- low. He is the author of numerous articles in trade and scholarly jour- nals on telecommunications and digital society issues and three books — The Transformation of Egypt (1982), Equity and Energy (1983) and Cable Mergers and Monopolies (2002). About the Center For Internet & Society The Center for Internet & Society (CIS) is a public interest technology law and policy program at Stanford Law School, part of the Law Science and Technology Program at Stanford Law School. The CIS brings to- gether scholars, academics, legislators, students, hackers, and scientists to study the interaction of new technologies and the law and to examine how the synergy between the two can either promote or harm public goods like free speech, privacy, public commons, diversity, and scien- tific inquiry. The CIS strives as well to improve both technology and law, encouraging decision makers to design both as a means to further demo- cratic values. viii L P A F EGAL RINCIPLES AND NALYTIC RAMEWORK P I: L P A F ART EGAL RINCIPLES AND NALYTIC RAMEWORK 1 A B A F A OLD SPIRATION FOR THE IRST MENDMENT 2