Since 1990 when MTDP began monitoring minority commercial broadcast ownership in the United States, African Americans, Asian Americans, Hispanic Americans, and Native Americans have consistently been underrepresented among the Nation's commercial broadcast owners. In 2000, 187 minority broadcasters owned 449 full power commercial radio and television stations, or 3.8 percent of the 11,865 such stations licensed in the United States. Ranging from a low of 2.7 percent in 1991 to a high of 3.8 percent in 2000, minorities' ownership of commercial broadcast facilities has remained far below their estimated 29 percent representation in the U.S. population according to 2000 U.S. Census figures. Even with a 13 percent increase in the number of owners from figures MTDP reported in 1998, 0.9 percentage points have been added to the minority share of stations in ten years' time.⁽¹⁾ Between 1990 and 1995, minority station ownership increased slowly, reaching 350 stations in 1995. The next year, after Congress repealed the FCC's tax certificate and distress sale programs, and relaxed station ownership limits in the Telecommunications Act of 1996, the number of minority-owned stations dropped by 28. (See Chart IV-1)

While the broadcast industry's strong performance in recent years⁽²⁾ has benefitted some minority owners, and may explain an increase in their number, consolidation still threatens the survival of most minority owners, who as primarily single-station operators⁽³⁾ find it difficult to compete against large group owners.⁽⁴⁾ (See Chart IV-2) Based on minority population growth predictions and estimates that by 2045, minorities may account for about one-third of the Nation's disposable income compared to one-fifth in the year 2000, ⁽⁵⁾ minority broadcasters who can endure consolidation will have a larger, more affluent audience in coming years.(See Appendices E-G, Current and Projected Minority Population Maps) However, large non-minority group owners are also finding certain minority audiences attractive and are competing aggressively for them.⁽⁶⁾

The following analysis is based on information from BIA's Media Access Pro database and compares minority commercial radio and full power television stations to their non-minority counterparts in the Nielsen Designated Market Areas (DMAs) in which minority and non-minority stations compete. MTDP believes this approach provides a more complete picture of minority broadcasters than comparisons solely against national benchmarks, because minority radio stations compete in only 54 percent of the Nation's 210 DMAs, and compete against only 62.3 percent of all radio stations in the country. (See Chart IV-3) Full-power minority television stations broadcast in only 10 percent of DMAs in the country and represent only about 1.9% of the television licenses issued in 2000 (See Chart IV-4). This section discusses minorities' participation in the United States radio and television markets,⁽⁷⁾ respectively, followed in the next section by analysis of the 2000 MTDP survey responses.

Radio

As of September 30, 2000, the FCC reported that 10,577 commercial AM and FM radio stations were licensed in the United States,⁽⁸⁾ compared to 10,549 stations for the same period in 1999.⁽⁹⁾ Of the commercial radio industry total for the year 2000, 175 minority broadcasters owned 426 stations, or 4.0 percent of the Nation's commercial radio stations. This compares to their ownership of 305 radio stations in 1998, which represented 2.9 percent of that year's industry total. In the two years since MTDP's last report, minority radio ownership increased by 121 stations. (See Chart IV-5) About half of this increase, however, was the result of an improved search methodology that enabled MTDP to identify more minority-owned stations.

All minority groups have increased their radio ownership since 1998. In terms of absolute growth, the number of reported Hispanic-American owned stations increased the most with the addition of 57 stations,⁽¹⁰⁾ followed by an increase of 43 African-American owned stations, 18 Asian- American owned, and three Native-American owned. Excluding the effect of the improved search methodology, however, the number of African-American owned stations increased by 15 percent, Hispanic-American owned stations 19 percent, Asian-American owned stations by 300 percent, and Native-American owned by 25 percent. The large increase in Asian-American owned stations was mostly the result of purchases by one owner. ( See Chart IV-5)

African Americans' ownership of 211 stations in 2000 continues to lead that of other minorities and represents almost half of all minority-owned radio stations. Hispanic-American broadcasters own the next largest number of stations (187), giving them 44.0% of all minority radio stations. (See Chart IV-5)

As reported in past years, minority owners continue to own more AM than FM stations.⁽¹¹⁾ In 2000, minorities owned 248 AM stations and 178 FM facilities. (See Charts IV-6andIV-7). Declining AM listenership over the past 15 years and the technical limitations of these stations make AM facilities generally less profitable than FM stations, however.⁽¹²⁾ Using class of license as a proxy for station power and thus potential audience reach, MTDP found that minorities accounted for none of the 48 strongest class A AM licenses. Minority broadcasters were among the next most powerful class B AM license holders, with 207 stations representing 8.3 percent of the 2,503 such licenses in the DMAs in which minority-owned stations competed. (See Chart IV-6) Of FM licenses, minorities accounted for only 16 out of 530 or 3.0 percent of the strongest class B licenses for urban areas, and only 9 out of 542 or 1.7 percent of the strongest class C licenses for rural areas. Minority owners were most predominant among Class A licensees, which are the least powerful FM stations, with 103 stations or 7.1 percent of the 1,450 stations in that class in the relevant DMAs.⁽¹³⁾ (See Chart IV-7)

Relative to non-minorities, minorities tended to operate stand-alone stations in a market. In 2000, 131 or 31 percent of minority-owned stations were part of a duopoly (two or more stations of the same type in the same market), compared to 36 percent for non-minorities in the relevant DMAs. In addition, 19 minority stations were part of a "combo" in which the owner possessed another station of a different service, either AM or FM, within the same market. Of a total 241 local marketing agreements within the DMAs where minority stations broadcast, 17 involved minority-owned properties, or 4.0 percent of minority stations versus 8.0 percent of non-minority stations.

Not surprisingly, minority owners seem inclined to locate stations in areas more heavily populated with members of their respective racial or minority group. This has meant that a larger share of minority-owned stations (except for Native American) are located in urban areas. Asian- American stations are particularly concentrated in the largest urban markets, with almost half located in the New York and Los Angeles areas. (See Appendix C - National DMA map of minority and non-minority radio station locations and compare Appendices E-G Maps of actual and projected minority populations). Tables IV-2 and IV-2(a) present the demographics of the average market in which each minority group's stations competed.⁽¹⁴⁾

Table IV-2 Racial Composition of Owner's Average Radio Market

by Racial or Ethnic Group, 1999

Owner's Race or Ethnicity	African-American Population	Asian-American Population	Hispanic-American Population (May be of any race)	Non-Minority Population
African American	19%	3%	6%	72%
Asian American	11%	12%	18%	59%
Hispanic American	9%	5%	30%	56%
Non-Minority	12%	3%	9%	76%

Source: BIA Research Inc. Media Access Pro

Table IV-2(a) Owner's Average Radio Market Demographics

by Racial or Ethnic Group, 1999

Source: BIA Research Inc. Media Access Pro

In the year 2000, minority stations were primarily situated in the South with 163 stations, in the Southwest with 93 stations, and in the West with 86 stations. African-American stations were found most frequently in the South (129 of 211 or 61 percent), with the highest concentration of stations in Mississippi (21), North Carolina (20), and Alabama (16). Hispanic-American owners operated the majority of their stations in Texas (61), California (57), and Florida (19). All but one Asian-American owned stations were located on the West (12) or East (10) coasts. Native- American stations broadcasted in Oklahoma (3) and Arizona (2). About 81 or 18 percent of minority-owned stations were among the top ten DMAs. Seventy-one percent of minority-owned stations were in the top half of all DMAs. (See Appendix B for a list of Nielsen DMAs by ranking).

In 1999, minority-owned radio stations received lower ratings than their non-minority counterparts, which received an average 3.6 percent listening share compared to 2.6 percent for African-American stations, 1.6 percent for Hispanic-American owned properties, and 0.8 percent for stations owned by Asian-Americans. When comparing changes over time in Arbitron local commercial shares, since 1994 non-minority and Hispanic-American stations have lost on average 0.4 percentage point share. Asian-American stations have decreased their share by 0.1 percentage point, while African-American stations have gained a 0.6 percentage point share. In 1999, average station revenues as a percentage of total radio revenues in each market was highest for non-minority stations, at about 5.9 percent of revenues, compared to 3.1 percent for Hispanic-Americans, 2.6 percent for African-Americans and 1.2 percent for Asian-Americans. (See Table IV-3) Between 1993 and 1999, however, minority revenues as a percentage of radio industry revenues increased from 3.4 percent to 3.8 percent.⁽¹⁵⁾ (See Chart IV-8)

BIA estimates a station's ability to convert listeners into revenue using a power ratio it derives by dividing the station's share of market revenues by the station's local commercial share. Asian-American stations, with an average power ratio of 1.41, had the highest rating of all groups, followed by non-minorities with an average power ratio of 1.06, Hispanic Americans with an average power ratio of 1.03, and African Americans with the lowest average power ratio of 0.68. (See Table IV-3) The concentration of many affluent Asian Americans in a few urban markets may explain the strength of the power ratio of Asian-American-owned stations in these markets. If African-American stations had had an average power ratio equal to that of non-minority stations, they would have reaped and additional 1.6 percentage points of market revenue. The lower power ratio for African Americans may reflect several factors such as lingering effects of "no urban, no Spanish" dictates that discourage advertisers from selling their products on Black and Hispanic American stations, ⁽¹⁶⁾ the historic complaint of some Black station owners that ratings services undercount their audiences,⁽¹⁷⁾ or the large number of African-American stations with religious formats. Stations with religious formats tend to generate the lowest revenue levels, both for minority and non-minority owners. (See Table IV-4)

Table IV-3 Average Station Ratings and Revenue Performance for Owners

by Racial or Ethnic Group, 1999

Source: BIA Research Inc. Media Access Pro

Finally, MTDP's review of BIA data for 2000 suggests that minority station owners provide programming formats of interest to their listeners, which is consistent with findings of a recent FCC study.⁽¹⁸⁾ In the relevant DMAs, 69 percent of African-American stations delivered urban or religious (mostly gospel) formats, 70 percent of Hispanic-American-owned stations offered Spanish or Mexican programming, and 43 percent of radio stations owned by Asian Americans provided Korean or Asian formats. Three out of five of Native-American stations played country music. (See Table IV-4)

Table IV-4 Top Radio Formats, 1999

Race or Ethnicity	Format	Number of Stations	Gross Revenue (thousands)	Revenue Per Station (thousands)
Non-Minority	Country	1379	$1,073,362	$778
	Religious	824	$120,323	$146
	Adult Contemporary	759	$1,182,595	$1,558
	Rock	654	$1,638,268	$2,505
	News	583	$1,157,463	$1,985
African American	Religious	81	$13,977	$173
	Urban	81	$97,425	$1,203
	Talk	8	$8,550	$1,069
Hispanic American	Spanish	81	$113,725	$1,404
	Mexican	31	$50,500	$1,629
	Tejano	8	$7,325	$916
Asian American	Korean	6	$1,200	$200
	Asian	4	$900	$225
	Variety	2	$600	$300
Native American	Country	3	$1,700	$567
	Adult Contemporary	1	$50	$50
	Oldies	1	n/a	n/a

Source: BIA Research Inc. Media Access Pro

Television

The 23 full power commercial television stations owned by minorities in 2000 represented 1.9 percent of the country's 1,288 such licensed stations. Of these 23, African Americans owned 20; Asian Americans, two; and Hispanic Americans, one. This is the lowest level of minority full power television ownership since MTDP began issuing reports in 1990. In 1990, minorities owned 29 full power television stations, which had risen to as many as 38 during 1995 and 1996. (See Chart IV-5) Between 1998 and 2000, minority owners decreased from 16 to 12. There was a loss of five Hispanic-American and four African-American owned stations, and a new identification of two previously Asian-American owned stations for a net decrease of seven stations. Industry-wide, full power commercial UHF and VHF station licenses rose from 1,209 in 1998 to 1,243 in 1999 and to 1,288 in 2000, for a 79-station increase of 6.5 percent over 1998 levels.

Expensive conversions to digital television, which can include transmitter costs, tower upgrades, and new studio construction added to the cost of duplicative analog broadcasting during the transition, may have motivated some minority owners to exit the industry before the FCC's May 1, 2002 conversion deadline.⁽¹⁹⁾ In addition, some banks' reluctance to finance the conversions⁽²⁰⁾ may have been particularly compelling reasons to sell for minority broadcasters who have historically faced difficulties obtaining access to capital. At least one minority-owned television group, Granite Broadcasting, has begun digital broadcasting at its WB affiliate KBWB in San Francisco and its ABC affiliate, KNTV in Monterey, California, however.⁽²¹⁾

Compared to 85 percent of their non-minority competitors, 74 percent of minority-owned television stations had network affiliations. Of the top ten DMAs, minority-owned full power television stations broadcast in four, with the remaining stations serving DMAs ranked between 18 and 133. Local commercial share information is available only for African-American and non-minority television stations in the DMAs of interest. Unlike African-American radio station owners whose ratings share and power ratios trailed non-minorities, African-American television owners' average local commercial share of 14.3 exceeded the non-minority broadcasters' average share of 11.5. Similarly, their average power ratio of 0.68 compared favorably to non-minorities' average power ratio of 0.64. Although revenues for the average minority television station between 1993 and 1999 grew 47.8 percent compared to the 42.3 percent revenue growth of their average non-minority competitor, the latter's average revenues were almost 3 times as high during the period. (See ChartIV-10)

For the first time, MTDP is including minority-owned low power television (LPTV) stations in its ownership report. MTDP is attempting to monitor LPTV ownership because the FCC created the service to help diversify broadcast ownership. The Commission recently found that LPTV has contributed significantly to that goal in part by providing first time ownership opportunities for minorities and women.⁽²²⁾ In April 2000, the Commission announced rules under the Community Broadcasters Protection Act of 1999⁽²³⁾ to accord primary class A status to qualifying LPTV licensees.⁽²⁴⁾ The new status will improve the commercial viability of LPTV stations by protecting them from displacement by full power stations converting to digital transmission. Consequently, LPTV stations can better attract financing for their free over-the-air niche programming to urban and rural residents with specific ethnic, racial, and other special interests. ⁽²⁵⁾ As of September 30, 2000, the Commission had licensed 2,366 low power UHF and VHF television stations in the United States, almost twice the number of full power stations.⁽²⁶⁾ LPTV licenses increased from 2,194 the preceding year.⁽²⁷⁾ MTDP was able to identify 82 minority-owned LPTV stations or 3.5 percent of all such licenses in 2000. See Appendix D- Map of minority-owned full power television stations and the LPTV stations identified in response to MTDP's survey.

2000 MTDP Survey Results

The following discussion provides a more detailed look at 115 minority broadcast owners of commercial AM and FM radio stations, and full and low power television stations during the survey period from July 1, 1999 through June 30, 2000. For some topics, after the quantitative data, MTDP presents relevant qualitative information excerpted from the surveys but without revealing any respondent's identity.

The report analyzes data from respondents to the survey who owned at least 50.1 percent of their firms. About 58 percent of the respondents identified themselves as African American; 30 percent as Spanish, Hispanic American, or of Latino origin; 3 percent as American Indian or Native Alaskan; and 7 percent as Asian American. Respondents identifying themselves as White (11 percent) or Other (19 percent) in all but two cases had also classified themselves as having Hispanic- American heritage.

Like minority owners generally, the majority of respondent owners were singl-station owners, representing 55 percent of respondents. Survey respondents owned 75 AMs, 66 FMs, 22 full power television stations, and 77 low power television stations. (See Chart IV-11) Ten radio owners stated that their stations are party to a local marketing agreement. Sixty-three percent of minority owners operated their stations through corporations, with sole proprietorships the next most widely reported structure at 6 percent. Twenty-two percent of respondents, however, did not identify their firm's ownership structure. (See Chart IV-12)

Broadcast Industry Experience

Most respondents (62 percent) were either themselves experienced broadcasters before becoming station owners, or were in business with at least one other person who possessed such experience. They often gained their experience as general managers, marketing or sales representatives, or program directors (See Chart IV-13), and all owners' combined years of work in the industry exceeded 16 years for 67 percent of respondents. Just over 61 percent of African- American respondents reported that owners in their firms had worked in broadcasting before acquiring a station. (See Chart IV-13(a))

Impact of Telecommunications Act of 1996

Overwhelmingly, minority broadcasters were convinced that the Telecommunications Act of 1996 hurt opportunities for minority broadcast ownership. Seventy-three broadcasters, about 63 percent of survey respondents, stated that view while only about six percent of responding broadcasters expressed the opposite view. Almost 14 percent of minority owners who replied to the survey or 16 respondents, were undecided about the Act's impact on minority ownership, while about an equal number (17) expressed no opinion on the matter. (See Chart IV-14)

Narrative responses from owners reflected their concern about the adverse effects of consolidation on their businesses. One African-American owner commented that "[c]ritical mass by major Wall Street financed ownerships have [created] major obstacles for [the] minority owner. [It] is very difficult to compete against big ownership with 7-8 stations in the same market." Another owner wrote "[t]he 1996 Act is a disaster for small and minority broadcasters and operates against the principle of diversity of media ownership." An Hispanic-American broadcaster in Florida decried the deregulation prompted by the 1996 Act. He said "[u]nder present station pricing, expansion is impossible. [The] Telecommunications Act of 1996 eliminated the participation and expansion of small entrepreneurs." An exiting Native-American woman radio owner bluntly summarized a common sentiment among some broadcasters:

If the FCC and the federal government would have let the previous ownership cap prevail, I cannot help but feel it would have been beneficial to minority broadcasters. We were proving that we could be a formidable broadcaster - serving the needs of our license communities and making money.

Two low power television owners noted the 1996 Act's failure to include LPTV in the cable "must carry" provisions, as it did for full power television, was detrimental to their operations. Said one African-American owner "this [failure] is grossly unfair and has created the greatest harm for minorities that were actually encouraged by the FCC to own low power TV stations." "Without must-carry, 72 percent of my market that are on cable cannot see my station, so I cannot compete for their viewership," reported an Hispanic-American station owner with several low power TV facilities.

Competitiveness of Minority Owners

Almost 58 percent of respondents expressed their personal belief that being a minority has affected their competitiveness in the broadcasting industry. Of the owners who offered written explanations for their answers, 18 owned radio, five owned LPTV, and two operated full power television stations. Their comments described the difficulty they have faced in generating adequate advertising revenues, or raising capital for station acquisitions or upgrades. These responses seem consistent with their reports of the business difficulties they confronted. Others believed the consolidation resulting from the 1996 Act exacerbated their competitive problems.

Business Difficulties

MTDP's survey sought information about the problems minority broadcast owners experienced during the 12-month survey period from July 1, 1999 to June 30, 2000 and during the three years immediately following passage of the Telecommunications Act of 1996. With little variation, they reported virtually the same challenges, with obstacles to obtaining advertising listed as the most common complaint, 27 percent in the earlier period compared to 26 percent in 2000. (Charts IV-15 presents business difficulties owners experienced during the 1999-2000 survey period and IV-15(A) presents business difficulties owners faced during the period 1996-1999). Accessing capital was the next most frequently cited problem among minority broadcasters, 21 percent in 2000 and 22 percent in the period from 1996 to 1999, followed by loss of key personnel to competitors, lack of awareness about stations for sale, and regulatory barriers.

An Hispanic-American broadcaster contended that:

[t]he lack of access to capital is much more prevalent amongst minorities in my opinion, because the lender institutions do not have enough people (minorities) who understand our disabilities with enough authority to decide in our favor.

A minority television owner serving several major markets said that being a minority has affected his competitiveness in the industry because of the "reduced availability of financial and investment capital." An African-American radio owner observed, [w]ith the exception of a select few, minority ownership is more difficult today. . . .[because the] principal problem. . . [is] lack of capital!"

Advertising Revenues

When asked whether advertising revenue for the owners' business had changed for the 12 months ending June 30, 2000 compared with the previous 12 months, 56 owners reported their revenues increased, 27 reported a decrease, and 30 stated their advertising revenues remained unchanged. More African-American owners (38) than members of other minority groups enjoyed increased ad revenues; although 22 such owners reported a decline in revenues. Fourteen Hispanic-American owners experienced revenue growth, while 18 other Hispanic-American owners reported no change in their revenues. Asian-American owners were about twice as likely to have no change in revenue, and two of three Native-American owners experienced increased advertising revenues. (Chart IV-16)

An African-American radio owner responding to the survey stated:

I offered a competitive programming service that was excluded from many ad buys when my ratings were good and in some cases better than my competitors. In many cases, our station was never asked to submit bids, and advertisers discounted the spot rates for no rational reason. Because of the fact, I was denied access to capital; because of discrimination in the advertising arena I was forced to sell my station.

A Hispanic-American woman owner and general manager expressed a similar sentiment, saying "I feel that being a minority-owned station. . . certain agencies feel that they do not need to pay top dollar for our station."

Finally, an African-American group owner summarized his concerns:

Our 28 years of experience in broadcasting a format designed to appeal to urban audiences leads us to conclude that: (1) the urban format is not accorded sufficient respect by the advertising community in terms of who listens to our stations and their buying habits; (2) the methods used to measure the numbers of listeners to our stations are flawed and fail to account for a substantial portion of our actual audience (i.e., non-minority listeners); and (3) the listeners to the urban format and their purchasing power are both severely discounted by the advertising community.

Station Purchases and Sales

Nine owners disclosed that they had bought stations and had purchased them from other minority owners, while 106 owners responded they had not acquired properties during the survey period. Nine broadcasters reported they had sold stations, five of whom sold a single station, three sold two facilities, and one owner disposed of three stations. Two of the sellers sold to other minority owners, six did not, and one owner was unsure of the buyer's race or ethnicity. By contrast, 20 other owners answering the question had not sold any stations. African-American owners sold most often, but purchased a number equal to that of Hispanic-Americans. (Chart IV-17) Interestingly, an identical number of station owners who either bought stations (6) or sold them (6), also experienced increased advertising revenues, while two owners whose revenues dropped bought stations nonetheless. (Chart IV-18).

When asked about their use of federal government policies to facilitate acquisition of current facilities, most minority owners, 52 percent (60) had used none. About 17 percent (20) had used "other" unspecified policies to obtain their stations. Of the better known tax certificate and distress sale policies, 12 percent (14) had used tax certificates, while only four station owners had gained their stations through a distress sale. African-American respondents employed government policies in the past more frequently than other survey subjects. (See Chart IV-19)

The number of owners who used government policies in the past contrasted sharply with those who believed that specified policies might aid future station purchases. Just over 50 percent or 58 respondents expressed a positive belief about the usefulness of a tax certificate policy. Twenty-eight percent or 32 survey participants expressed confidence in the utility of distress sales, and 17 percent (20 owners) believed that "other" policies could help improve future acquisitions. (See ChartIV-19(a))

Internet Broadcasting

MTDP was interested in knowing whether minority broadcast owners were expanding or planned to expand their audience reach by maximizing existing Internet technology. To gauge their level of participation or interest, the survey asked about their current or planned programming on the web. About 20 percent, or 24 respondents, answered that at least one of their stations offered webcasting between July 1, 1999 and June 30, 2000. Sixty percent or 70 minority station owners replied that their stations did not use the Internet to deliver programming. When asked about plans to begin Internet broadcasting during the subsequent 12-month period from July 1, 2000 to June 30, 2001, 40 percent of respondents (46) stated their intentions to do so. The reason given most often for not planning to webcast was "plan to in the future." MTDP interprets these 16 responses as an indication of owners' intentions of starting such operations beyond the June 30, 2001 timeframe defined in the question. Slightly fewer, 14 respondents, identified access to capital as a reason for not planning to webcast. Although six station owners reported having station websites, they are not contemplating using them to offer radio programming.

Continuing Challenges

Advertising

Advertising revenue commensurate with station performance continues to elude many minority broadcasters. African Americans and Hispanic Americans comprise a large and enthusiastic radio audience. According to the Radio Advertising Bureau (RAB), 96 percent of African Americans 12 and older listen to radio an average 24 hours and a half each week, with some select age groups listening as much as 26 hours per week.

The situation is about the same for 96 percent of Hispanic-American listeners, whom RAB said listen to the radio an average of 24 hours per week. In contrast, RAB reported 95 percent of all Americans listen to the radio an average of 20 hours weekly. RAB, which is a trade group that exists to sell advertisers on the radio medium, concludes that radio is "a valuable channel for conveying a marketing message" to African-American audiences, and to Hispanic-American listeners as well.

In January, 1999, the FCC released a study it sponsored on advertising practices, titled When Being No.1 Is Not Enough: The Impact of Advertising Practices on Minority-Owned and Minority-Formatted Broadcast Stations. The report found that "stations that target programming to minority listeners are unable to earn as much revenue per listener as stations that air general market programming. The quantitative analysis also suggests that minority-owned radio stations earn less revenues per listener than majority broadcasters that own a comparable number of stations nationwide."

The study also reported that, "Anecdotal data collected by the study suggest that in certain instances, the media buying process is guided by ethnic/racial stereotyping, underestimations of disposable income, the desire to control product image, unfounded fears of pilferage, etc. Factors such as these form part of the basis for 'no Urban/Spanish dictates' and 'minority discounts' as practiced by advertisers and/or ad agencies."

FCC Chairman William Kennard, in several speeches, strongly criticized the advertising industry, saying that discriminatory policies hurt the radio station and the community it serves. In the aftermath of the study's release, the American Advertising Federation created a new committee to try to prevent such discrimination, and Pepsi Cola agreed to increase its advertising on minority stations by as much as 15 percent.

Almost two years after the FCC issued that report, the story of one radio station in Syracuse, N.Y., shows there is at least some anecdotal evidence that the situation still exists.⁽²⁸⁾

There is also some anecdotal evidence that minority group owners that gain critical commercial mass, may be less susceptible to advertising discrimination. Radio One, a publicly traded company founded and headed by an African-American woman broadcaster, Cathy Hughes, has about nine million listeners. Its revenues make Radio One the eighth largest radio chain in the country.

Radio One noted in its SEC filing that the incomes of African Americans are increasing, and that "African-Americans' higher than average rate of consumption is a powerful reason for U.S. retailers to increase targeted advertising spending toward this consumer group." Radio One also said it is able to harness the selling power of it station clusters in urban areas to target different segments of the African-American population: "We are then able to offer advertisers multiple audiences and to bundle the radio stations for advertising sales purposes when advantageous."

Similarly, the Hispanic American-oriented Entravision, which owns 31 TV stations, including many Univision affiliates, and 56 radio stations has achieved success in advertising sales. When the company went public in April, 2000, it told the SEC it has been able to raise its advertising rates by as much as 20 percent for some TV stations. However, in some of its markets, Entravision said the increase was due to a shift from local advertising and an increase in the average rate charged for national advertising.

Access to Capital

Throughout their years of participation in the broadcast industry, minority entrepreneurs have fought to obtain financing for their ventures. In 1978, the Federal Communications Commission stated:

[i]t is evident that obtaining the necessary financing is a major element in increasing minority participation in broadcasting ownership. Unfortunately, experience has shown that minorities face unusually difficult problems in acquiring financing to purchase a broadcast station.⁽²⁹⁾

In 1995, MTDP noted ". . . [o]ne principal barrier to greater participation by minorities in telecommunications ownership is a persistent lack of access to the types and amounts of capital required to form and expand viable businesses."⁽³⁰⁾

The limited capital that is available to minority businesses tends to be debt capital, but "access to equity financing has been and continues to be scarce. . . . [C]ompanies that receive equity financing grow sales at a faster rate, hire more employees and have a much greater economic impact than firms that have not received such investment."⁽³¹⁾ The growth of Radio One and Entravision, two traditionally minority-owned broadcast groups that within the last two years have raised substantial capital through initial public offerings ("IPOs") seems to reflect this trend. The fact that equity funds targeting minority businesses account for only about 1 percent or about $2 billion of the private equity market ⁽³²⁾ may explain in part the difficulty minority firms confront in obtaining access to such funding. ⁽³³⁾

Improved access to both public and private markets for minority broadcasters may, however, also jeopardize their eligibility to participate in any government policies or programs to increase minority ownership depending upon the ownership definition used. As noted previously, MTDP is concerned about a definition that, if too restrictive, might inadvertently undermine efforts to promote minority broadcast ownership by denying growth capital opportunities to some of the potentially most viable minority firms.

The Telecommunications Development Fund ("TDF"), created by legislators in the Telecommunications Act of 1996, is a source of funds that many hoped would provide capital resources for minorities, women, and small business owners to start new ventures or to expand existing telecommunications firms. The privately managed fund secures its capital from the interest payments on proceeds from FCC spectrum auctions. Although TDF's portfolio includes investments in several start-ups, none are broadcast properties. According to managing director Ginger Lew, high station prices make broadcast investments infeasible at the fund's present capitalization level.⁽³⁴⁾

Some of the broadcast industries biggest players joined forces to contribute to a capital fund to finance minority and women business owners desiring to enter the telecommunications industry. Originally named the Prism Fund when the National Association of Broadcasters announced its formation in November 1999, its founders Clear Channel and then-CBS (now Viacom) renamed their $170 million commitment the Quetzal Fund. Other investors included Belo Corporation, Bonneville International, Cox Enterprises, The Walt Disney Company, Cumulus Media, Emmis Broadcasting, Fox Broadcasting, Granite Broadcasting, NBC, Radio One, Susequehanna Radio, and Tribune Broadcasting.⁽³⁵⁾ Reginald Hollinger of Chase Capital Partners is the fund's managing director, who announced the fund in its first operating quarter funded four investments totaling $42.5 million. Most of that amount funded a $30 million expansion by Blue Chip Broadcasting, an African- American broadcast company with about 19 radio stations. Quetzal's investment entitles it to representation on Blue Chip's board and an undisclosed ownership percentage in the company.⁽³⁶⁾

With TDF's limited funding level and the concern of some that Quetzal's investment criteria are unlikely to increase minority broadcast ownership, access to capital remains a concern of minority media owners despite these funds' efforts. MTDP encourages exploration of creative financing and capital investment strategies to ease the difficulty many minorities face obtaining

acquisition or expansion capital.

Broadcast Industry Employment

Although MTDP cannot measure the extent of any correlation between previous broadcast industry experience and ownership, commenters at the Minority Ownership Roundtable suggest that a positive relationship exists. An African-American television executive who is raising capital to buy stations stated:

The other thing is, as an owner, and trying to either get funding or looking at the landscape, the numbers of minority owners and women owners is so small, and I think a lot of that has to do with the fact that there isn't a huge pipeline of people that are coming through the broadcasting system to be able to take on ownership. And so, we need to do a better job in improving employment opportunities for women [and] minorities - managers and entrepreneurs coming through. And I think that's one of the responsibilities that we each have as owners and as mangers to open up the pipeline.⁽³⁷⁾

More than twenty years ago, the FCC recognized that minorities' lack of broadcasting experience can adversely affect their ability to obtain financing for station acquisitions because lenders prefer experienced broadcasters whom they believe are more likely to succeed.⁽³⁸⁾ Consequently, diminishing broadcast industry employment opportunities for minorities limit their ability to gain experience that might qualify them to own broadcast stations. In response to the D.C. Circuit Court of Appeals decision in Lutheran Church-Missouri Synod v. FCC,⁽³⁹⁾ which called into question the federal government's authority to establish any race-based programs aimed at increasing minority employment, the FCC adopted less stringent rules to address the court's objections. The rules continue to prohibit employment discrimination on the basis race, color, national origin and gender, and require station owners to advertise vacancies widely and to implement recruitment programs that would reach the entire community.⁽⁴⁰⁾ In explaining its authority to issue new EEO rules, the Commission stated:

[W]e have authority to adopt rules fostering equal employment in the broadcast industry in order to further the statutory goal of fostering minority and female ownership of commercial spectrum-based services, reflected in Section 309(j) of the Communications Act. Finally, equal employment of minorities and women furthers the public interest goal of diversity of programming, both directly and by enhancing the prospects for minority and female ownership.⁽⁴¹⁾

A radio station owner who sold his facility because of competition from large group owners, lamented that consolidation would also diminish broadcast employment opportunities for minorities. None of the African-American employees from his station or another minority station exiting the market received jobs from the new purchasers.⁽⁴²⁾ His comment reveals a danger that consolidation may cause the loss of both existing owners, and prospective owners who are unable to develop skills to own and operate broadcast stations unless government policies ensure that meaningful employment opportunities exist for minorities. Otherwise, the programming diversity that the government seeks will not occur, according to an Hispanic-American LPTV owner.⁽⁴³⁾

To help address the historical problem of lack of training to prepare people to assume leadership roles within station management, the National Association of Broadcasters Education Foundation created the Broadcast Leadership Training Program in January 2000. Following the model of weekend MBA courses, the program promotes diversity and upward mobility for women and minorities in broadcast management. NABEF also sponsors the Gateway Fund, designed to promote entry-level training opportunities for minorities and women in the broadcast industry. The two programs are intended to complement the Quetzal Fund, announced by broadcasters in November, 1999, that provides capital to minorities and women seeking to own broadcast entities.

Need for Tax Certificate

Among the most entrenched obstacles that minority owners have faced throughout their participation in commercial broadcasting is a perception that they are unattractive buyers who lack financing.⁽⁴⁴⁾ For years, stations changed hands among a closed community of broadcasters that excluded minorities.⁽⁴⁵⁾ Therefore, minorities rarely learned of stations available for purchase.⁽⁴⁶⁾ The problem of accessing "deal flow" for competitive properties persists.⁽⁴⁷⁾ The FCC's tax certificate, and to a lesser extent its distress sale policies, made minority sellers more attractive, however, and thus fostered minority ownership "by providing broadcast licensees an incentive to transfer their interests to minority-owned or controlled entities."⁽⁴⁸⁾ The Commission awarded tax certificates "to encourage both the sale of facilities to minority purchasers and the investment of start-up capital in minority entities."⁽⁴⁹⁾

In describing the effectiveness of the tax certificate, former FCC Commissioner Tyrone Brown observed:

[T]he tax certificate was a small, but very effective, way to encourage minority ownership in a number of respects. First of all, it relied on the greed of the sellers of communications properties at a time. . . when most communications properties sales were not public information. It was a club of broadcasters and a very small club of brokers who kept the information to themselves. And, typically, the only time one found out about properties being on the market was when the transaction was announced. So the tax certificate policy had the benefit of making it attractive for sellers of properties to go out and search for minorities to sell those properties to because they got a tax benefit by doing that.⁽⁵⁰⁾

The policy's success in achieving its intended ownership diversity goal in the broadcast industry motivated Congress to instruct the Commission to consider extending use of tax certificates to promote opportunities for minorities and other business owners in competitive bidding for spectrum-based services.⁽⁵¹⁾ Over the objections of minority broadcasters⁽⁵²⁾ and industry associations,⁽⁵³⁾ among others, Congress repealed the tax certificate program in 1995.⁽⁵⁴⁾

The Telecommunications Ownership Diversification Act of 2000, which Senators Mc Cain and Burns introduced at the end of the 106^th Congress to reinstitute the tax certificate program, found that:

Opportunities for new entrants to participate in the telecommunications industry have substantially decreased since the end of the Federal Communications Commission's tax certificate policy in 1995, particularly in light of the increase in tax-free like-kind exchanges and despite the most robust period in transfers of radio and television stations in history. Small businesses, and businesses owned or controlled by members of minority groups or by women, have been at a particular disadvantage, as indicated by their historic under representation as owners of telecommunications facilities.⁽⁵⁵⁾

Many minority broadcast owners and others desiring to increase minority media and telecommunications ownership agree with this finding. Accordingly, they have expressed strong support for re-establishing the tax certificate program as an incentive to incumbent owners to sell their businesses to minorities.⁽⁵⁶⁾ Given the past effectiveness of the tax certificate program and the possible increased costs to minority broadcasters resulting from loss of the policy,⁽⁵⁷⁾ MTDP urges continued exploration of proposals to restore this productive market-based incentive to promote minority media ownership.

1. There may be an encouraging trend manifesting in the 33.8 percent increase in the number of minority broadcast stations between 1998 and 2000. Although about half of the increase since 1998 is the result of MTDP's use of an improved methodology that identified more minority owners, particularly Hispanic-American broadcasters, the remaining half still marks the largest annual increase in past years. Nevertheless, many more years of rapid growth would be necessary to make up for the underrepresentation of minorities in broadcast ownership and control.

2. See, e.g. Veronis Suhler Releases Its Media Scorecard: 18^th Annual Communications Industry Report, Business Wire, November 13, 2000.

3. 1998 MTDP Report, supra n. 11. In 1998, two-thirds of minority commercial radio station owners possessed just one station. In 2000, 107 or 61% had only one station.

4. Thomas J. Bruno, State of the Radio Industry, BIA, Inc., May 1999 at 13.

5. Minority Business Development Agency, Minority Purchasing Power: The Emerging Minority Marketplace, U.S. Department of Commerce, Sept. 2000, at 5.

6. See, e.g. Steve McClellen, Room for Tres? Pappas takes on Univision and Telemundo, Broadcasting & Cable, Dec. 4, 2000 at 26-32 (Harry Pappas announced launch of third U.S. network to provide Spanish-language programming in competition with Univision and Telemundo. None of the three companies is minority-owned or controlled).

7. As stated previously, for purposes of this report, MTDP defines minority-owned stations as commercial radio facilities and commercial full and low power television stations operating in the United States of which African Americans, Asian Americans, Hispanic Americans, and Native Americans are the sole proprietors, own more than 50 percent of a corporation's stock, or have voting control of a partnership that owns such stations. MTDP believes that at least five firms it has included in previous minority ownership reports no longer meet NTIA's traditional minority ownership criterion. As discussed previously, NTIA's definition requires minorities to own at least 50 percent of a firm's equity or partnership interests. Based on conservative estimates, MTDP believes that the five enterprises collectively own about 100 radio stations, and 12 full power and five low power television stations, resulting in a difference of 117 stations between the ownership levels presented in this report and those that could derive from a definition that considered both minorities' equity ownership and their control of the firm.

8. Broadcast Station Totals as of Sept. 30, 2000, Federal Communications Commission (Nov. 29, 2000) <http://www.fcc.gov/mmb/obc/fy2000st.txt> (visited Dec. 30, 2000)(FY 2000 Broadcast Station Totals).

9. Broadcast Station Totals as of Sept. 30, 1999, Federal Communications Commission (Nov. 22, 1999) <http://www.fcc.gov/mmb/obc/fy1999st.txt> (visited Dec. 30, 2000)(FY1999 Broadcast Station Totals).

10. The improved methodology was particularly effective in identifying additional Hispanic-American owners, because it included searching the BIA database for stations with Spanish language formats whose owners had Hispanic surnames.

11. 1998 MTDP Report at 2, supra n.17, 1996 MTDP Report at 6-7; and cf. Tables 3 and 4, 1997 MTDP Report.

12. Bruno, State of the Radio Industry, supra n.195.

13. An explanation of the FCC's various AM and FM license classes is available at <www.fcc.gov/mmb/asd/amclasses.html> and <www.fcc.gov/mmb/asd/fmclasses.html>, respectively.

14. An average market was derived by weighting the relevant data for a market by the number of minority and non-minority radio stations located there. BIA includes market data only for stations located in Arbitron markets. Roughly 6,143 of commercial radio stations in the United States, including 349 minority stations, were part of such markets.

15. The 1999 total minority revenue share in Chart IV-8 is higher than the average market minority revenue share in Table IV-3 because of differences in the weighting of minority participation. The total share is obtained by summing revenues of all markets by racial or ethnic group and calculating each group's proportionate share of the total. On the other hand, the average market share is calculated by averaging the shares for all markets, giving an equal weight to each market. Minority stations tend to be located in larger revenue markets, therefore, the proportionate share method will show a larger number for these stations than will a method that gives equal weight to each market.

16. See discussion on advertising infra at 44.

17. Office of Public Affairs, Minority Ownership of Broadcast Facilities, EEO Minority Enterprise Division, Federal Communications Commission, Dec. 19, 1979 at 21.

18. The study's researchers concluded that "[m]inority-owned radio stations are delivering programming classified as Black, Ethnic, Spanish or Urban - including subcategories that emphasize national, religious and linguistic perspectives - in far greater amounts than their majority-owned counterparts." Bachen, et al., supra n.120, at 10.

19. Andrew Bowser, The DTV Waiting Game, Broadcasting & Cable, Sept 4, 2000 at 48, reporting that some industry members believe conversion costs may exceed station valuations for facilities in small markets.

20. Id.

21. See Bill McConnell, DTV Broadcasters: Stations Broadcasting Digital Signal, DTV Guide, July 2000 at 35 (insert in Broadcasting & Cable, Aug. 7, 2000).

22. Report and Order, In the Matter of Establishment of a Class A Television Service, 15 F.C.C. Rcd. 6355 (2000) [LPTV Order] at ¶ 3.

23. 106 Pub. L. 113, 113 Stat. 1501 (1999).

24. The Commission extended the December 11, 2000 filing deadline for eligible LPTV licensees to submit Class A applications. Mass Media Bureau Extends Filing Deadline for Class A License Applications, Public Notice, DA 00-2743 (2000) <http;//www.fcc.gov/Bureaus/Mass_Media/Public_Notices/LPTV_Notices/da002743.html>

25. LPTV Order at ¶¶ 1-2.

26. FY 2000 Broadcast Station Totals, supra n. 199.

27. FY 1999 Broadcast Station Totals, supra n. 200.

28. According to the Syracuse Herald-Journal of Sept. 11, 2000, the owner of nine radio stations in central New York state, Ed Levine, was forced to switch the format of one of his stations, WRDS-FM, from urban contemporary to adult contemporary. Levine bought WRDS in the summer of 2000, and considered keeping the urban format, which targeted African-American audience.