V. CHARTING NEW COURSES: Broadcasters Moving Beyond Single Station Ownership and Conventional Technologies

The broadcast industry is undergoing rapid change, not only as a result of industry restructuring following the Telecommunications Act of 1996, but also as a consequence of a technological revolution that is changing the way audiences obtain information and enjoy entertainment. The new environment requires broadcasters, including minority owners, to adapt swiftly by improving their operations, and embracing new technologies to deliver their services. According to the results of MTDP's survey, minority broadcasters are already charting such new courses to enhance their competitiveness. The following discussion illustrates how multiple station ownership, public equity financing, and new technologies have contributed to minorities' increased ownership and control of viable commercial broadcast enterprises.

Multiple Station Ownership

De-regulatory changes over the past several years have motivated broadcasters to maximize station-operating efficiencies by strategically clustering stations. Although minority broadcasters remain predominantly single-station operators, some are long-standing multiple station owners. Stand-alone station operators may find instructive some group owners' experiences for expanding their businesses. The African-American owned Willis Broadcasting Company, for example, which now owns about 40 stations broadcasting religious programs and gospel music,⁽¹⁾ has almost doubled its station holdings since 1998.⁽²⁾ Last year, BIA ranked African-American owned Inner City Broadcasting, and Blue Chip Broadcasting, among the top ten radio groups at 33 and 42 stations, respectively.⁽³⁾ Multicultural Broadcasting, Inc. is another privately held, minority-owned station group that has grown significantly in two years. In 1998, MTDP's report listed the Asian-American company with three stations, compared to a total of 23 stations in 2000.⁽⁴⁾

Public Equity Financing

The need for large amounts of expansion capital has motivated many broadcasters to seek funds from the public markets. Spanish Broadcasting System, Inc. (SBS) is the only company MTDP has identified under its definition of minority ownership to move from private to public ownership. An initial public offering, reportedly the second largest in radio history,⁽⁵⁾ raised $500 million for the company, which then bought another eight stations in Puerto Rico.⁽⁶⁾

Until this year, MTDP's past minority ownership reports included Radio One, and its founder Cathy Hughes, among minority broadcasters who owned more than 50 percent of their company's equity. In May, 1999, the company raised $172 million in a public offering representing 29 percent of its shares.⁽⁷⁾ The consequent dilution of Radio One's minority ownership resulted in its exclusion from this report's analysis of data about minority owners. NTIA recognizes that its majority equity ownership definition may affect other minority broadcasters similarly unless it incorporates evidence of minority control of an entity into a revised ownership definition. NTIA strongly endorses opportunities for minority broadcasters to access capital in sufficient amounts to support their growth and competitiveness. Accordingly, as discussed previously, NTIA will reexamine its definition and revise it to ensure that all minority companies are eligible to receive the benefits of any programs or policies the government or others may adopt to promote minority ownership of broadcast and telecommunications enterprises.

New Technologies

As conventional broadcast technologies converge with new media, broadcasters are confronting the challenges of adapting to new technical standards and developing effective uses for the new technologies to serve existing audiences and attract new audience members. In the midst of the challenges, some minority owners have found opportunities to chart new courses for their enterprises and impact the broadcasting industry.

The growing consumer demand for high-speed high capacity networks to transmit large amounts of data motivated some broadcasters to organize the Broadcasters Digital Cooperative (BDC). The group is a coalition of stations that have agreed to dedicate a portion of their digital television spectrum for high-speed broadband data transmission.⁽⁸⁾ Granite Broadcasting and other cooperative members, Benedek Broadcasting, Capitol Broadcasting, Citadel Communications, Clear Channel Television, Cosmos Broadcasting, Morgan Murphy Stations, Gray Communications, Nextstar Broadcasting, Pappas Telecasting, Paxson Communications, and Sunbelt Communications, intend for the effort to generate new revenue streams. The expense of digital conversion at a time of declining network compensation has increased the need for such new revenue sources. ⁽⁹⁾

Many of MTDP's survey respondents indicated future plans to begin Internet radio broadcasting if they have not already done so. Webcasting their on-air programming may represent a relatively low cost way for stations to reach broader audiences without the expense of acquiring additional stations. In a study conducted by Arbitron and Edison Media Research, "side channels or subchannels" offer Internet delivery, usually through a station's main webpage, of its over-the-air programming, which can extend the station's brand.⁽¹⁰⁾ The study found that 73 percent of those surveyed were somewhat or very interested in side channels, and 74 percent of listeners like or love the experience of listening to programs on the Internet.⁽¹¹⁾ In addition to the survey respondents, other minority owners are pursuing Internet broadcasting. As an example of an arrangement that could reach millions of new listeners, SBS has teamed up with AOL to provide live audio streaming of SBS broadcasts, as well as editorial content through SBS's LaMusica.com.⁽¹²⁾

The possibilities abound for new technologies to lead minority broadcast owners to new audiences and to greater competitive strength. Strategic station clustering and public market capital offer possibilities for minority owners to consider. However, even as NTIA urges minority owners to explore them and chart new courses for their futures, we recognize that serious challenges persist.

CONCLUSION

Promoting diversity of viewpoints in mass media remains an important national goal. Broadcasting has been and continues to be an effective means of disseminating information and entertainment to wide audiences. Concerns about the domination of the airwaves by a few powerful national voices at the expense of weaker local ones and equitable distribution of the Nation's scarce spectrum resources among many groups have guided national policy. NTIA is encouraged by the report's findings of a modest increase in minority commercial broadcast ownership, and of the growth of some minority station group owners who have acquired more broadcast properties in the past two years.

It is too soon to know whether the report presents evidence of a promising trend toward increasing minority commercial broadcast ownership or merely a fortuitous time in the industry's history during which some minority owners also benefitted. The report shows that the vast majority of minority broadcast owners operate a single commercial radio or television station. These owners continue to face obstacles in a competitive broadcast marketplace, despite their willingness to seek new revenue streams and adopt new management and ownership arrangements. They contend that industry consolidation has exacerbated some of the barriers that have long plagued them, including equitable access to capital, deal flow, advertising, and broadcast employment opportunities.

Government and industry should work together to eliminate these barriers. NTIA strongly encourages reexamination of successful policies such as tax certificates, and further development of private sector initiatives aimed at providing greater resources, training, and other opportunities. In all these undertakings, it will become increasingly critical that policies seeking to help minority owners use a definition of "minority ownership" that not only includes important minority players, but also ensures that the policies serve their intended beneficiaries.

By looking at the changes in the broadcast industry, we hope to help African-American, Asian-American, Hispanic-American, and Native-American broadcast owners overcome past challenges and chart new courses for sustained and successful service to their communities. Ultimately, promoting ownership opportunities for minority broadcasters in a consolidating, converging media industry fosters the diverse opinions and cultural expressions that enrich our entire Nation.

1. BIA Media Access Pro.

2. See 1998 MTDP Report, supra n. 19, at 5, which then identified Willis Broadcasting as the largest minority-owned broadcasting entity.

3. Katy Bachman, We are Family, Mediaweek, at 16, Aug. 23, 1999.

4. BIA Media Access Pro.

5. Multi-Cultural Marketing Company, LLC , "MC2 "is Formed with Interep's Participation, Business Wire, Oct. 16, 2000. [MC2 Announcement].

6. Id.

7. Keith L. Alexander, Radio One's Mom-and-Son Team Deliver Urban Appeal, USA Today, at 1B-2B, Oct. 3, 2000.

8. Glen Dickson, Getting together over the data, station groups pool digital spectrum to rent out for broadband distribution, Broadcasting & Cable, at 6, March 27, 2000.

9. Id. Other broadcasters, although none are minority, have created a similar alliance, known as iBlast.

10. Arbitron and Edison Media Research, The Side Channel Study: Extending Your Brand on the Internet, Dec. 1, 2000 <http://www.arbitron.com/article2.htm>.

11. Id.

12. SBS News Release, Spanish Broadcasting System and America Online Announce Strategic Promotional Alliance with LaMusica.com, Aug. 2, 2000 <http://www.spanishbroadcasting.cm/pages/11main_e.html>.