Executives at the Philadelphia Inquirer have issued a second memo clarifying plans to restrict online publication of some expensive or exclusive stories, apparently in response to a barrage of often ill-informed criticism.
Yesterday, I argued the paper's plan to delay online publication of some stories makes economic sense because revenue per reader is still very small online. The paper did not say it would never publish the stories on its website, just wait until the stories had a chance to circulate in print.
The new memo says these stories will instead "appear online concurrent with print publication." The memo also clarifies the kinds of stories that will be published immediately on the web, such as breaking news or time-sensitive stories that help readers plan for a night out.
The original plan made sense because it tried to separate readers into groups based on the amount of revenue the paper earns. Print readers are far more valuable than readers on the web. Publishing a story in print first might therefore limit the number of readers who abandon print to read the story on the web.
The new plan to publish stories "concurrently' may have a similar effect if some stories don't appear on the web until the paper's print deadlines. Print deadlines are often very late at night, when many readers are either watching television or getting ready for bed.
Meanwhile, columnist Will Bunch at the rival Philadelphia Daily News has a good suggestion for using web videos to promote stories the Inquirer wants to delay publishing online, building anticipation to increase readership once the article finally appears.
Bunch, unlike many others who responded to the original memo without much thought, gets this one. It's all about the revenue, ...
Tuesday, August 12, 2008
Monday, August 11, 2008
Information may be free, but that doesn't make it cheap
Monday's New York Times took an unjustified swipe at a sister paper for plans to delay web publication of expensive to report or popular to read stories until after those stories appear in print.
Times media columnist David Carr sought out an entirely predictable quote from a former newspaperman turned "Web evangelist" denouncing the Philadelphia Inquirer for delaying online publication.
But the Philadelphia Inquirer's new policy to publish "signature investigative reporting, enterprise, trend stories, news features, and reviews" in print first, and then online, makes good economic sense.
Many newspapers still make startlingly small amounts of revenue on the web. I suspect that is the case at the Inquirer, so delaying publication of their best material is a smart move entirely consistent with the economics of new media.
It's the revenue, ...
A bit of arithmetic using statistics from an industry survey shows some newspaper web sites were earning only $0.33 to $0.83 per visitor for the entire year in 2006.1
Times media columnist David Carr sought out an entirely predictable quote from a former newspaperman turned "Web evangelist" denouncing the Philadelphia Inquirer for delaying online publication.
But the Philadelphia Inquirer's new policy to publish "signature investigative reporting, enterprise, trend stories, news features, and reviews" in print first, and then online, makes good economic sense.
Many newspapers still make startlingly small amounts of revenue on the web. I suspect that is the case at the Inquirer, so delaying publication of their best material is a smart move entirely consistent with the economics of new media.
It's the revenue, ...
A bit of arithmetic using statistics from an industry survey shows some newspaper web sites were earning only $0.33 to $0.83 per visitor for the entire year in 2006.1
I presented these calculations last week at a conference, and the next day heard an executive at a major metropolitan newspaper cite figures for their current web operations. The paper earns less than $4.00 per visitor each year. Revenue per reader in print is probably much higher at all of these papers.
Publishing a story online probably increases the number of readers compared to a story published only in print. But some print readers will also move online to read the story, reducing the revenues earned in print.2
This means any online gains in readers and revenue have to be large enough to offset losses of print readers and revenue. And the very small online revenue numbers suggest this is unlikely to happen if the story is published both places at the same time.
So the Inquirer is probably doing the right thing economically. Withholding publication of expensive to produce investigative and enterprise stories will limit the immediate loss of print readership. Meanwhile, the paper plans to keep publishing breaking news on its website, which is probably what most online readers are looking for in the first place.
Several newspaper and television employees responsible for publishing online and in mobile media spoke at the conference, and all complained about having small staffs. The majority of journalists at these organizations still work in the print or broadcast part of the operation.
But this is also sensible so long as revenue per reader or viewer is much higher for distribution in print or over the airwaves. Keeping web operations small when online revenues are also small shows these companies are economically rational.
That may not satisfy the naive view that Carr promotes in his column, but it should make everyone at the Inquirer and elsewhere feel a little better about what their bosses are trying to do.
1 Newspaper Association of America: Newspapers Online Operations – Performance Report 2006.
2 Wildman, S.S. (in press). "Interactive channels and the challenge of content budgeting." The International Journal on Media Management.
Wednesday, March 26, 2008
Mortgage crisis threatens media companies too
The $20 billion deal to sell Clear Channel Communications, which owns hundreds of radio stations across the country, is fading, another potential victim of the mortgage crisis.
The Clear Channel sale was announced months ago, but six banks that agreed to finance the deal are getting cold feet. The banks contend the original terms of the deal would place them in the ranks of lenders who've been bitten in all kinds of unexpected ways by cascading effects from the collapse of the market for subprime mortgages. Bain Capital and THL Partners, the private equity firms buying Clear Channel, are suing to get the financing restored, according to The New York Times.
Newspaper companies are vulnerable
This development also reinforces questions about the sale of several large newspaper companies that left the buyers with large amounts of debt. Ordinarily, these companies might not be affected by the shaky credit markets because their loans would have been for very long periods, with the actual newspapers providing collateral. Advertising revenues shrink whenever the economy turns down, but historically that was a short-term problem for newspapers. Many companies responded by cutting variable costs, like wages and benefits until advertising began to expand again.
But it's likely that long-term declines in newspaper advertising revenues will accelerate in the current slowdown and may not recover. This is not a helpful development given extraordinary levels of concern about the true state of financial markets. The Tribune Co., which was sold in December, has been put on a watch list, meaning its credit rating is under review. The $8.2 billion sale put the company deeply in debt.
Alan Mutter's Newsosaur blog argues credit problems could potentially cause severe damage to newspaper companies already weary from repeated rounds of cost cutting. There is a lot to like about the new technologies and media that are siphoning audiences and advertising from old media like newspapers. But the plight of these once proud companies, the people who work for them, and their readers, is nothing to celebrate.
The Clear Channel sale was announced months ago, but six banks that agreed to finance the deal are getting cold feet. The banks contend the original terms of the deal would place them in the ranks of lenders who've been bitten in all kinds of unexpected ways by cascading effects from the collapse of the market for subprime mortgages. Bain Capital and THL Partners, the private equity firms buying Clear Channel, are suing to get the financing restored, according to The New York Times.
Newspaper companies are vulnerable
This development also reinforces questions about the sale of several large newspaper companies that left the buyers with large amounts of debt. Ordinarily, these companies might not be affected by the shaky credit markets because their loans would have been for very long periods, with the actual newspapers providing collateral. Advertising revenues shrink whenever the economy turns down, but historically that was a short-term problem for newspapers. Many companies responded by cutting variable costs, like wages and benefits until advertising began to expand again.
But it's likely that long-term declines in newspaper advertising revenues will accelerate in the current slowdown and may not recover. This is not a helpful development given extraordinary levels of concern about the true state of financial markets. The Tribune Co., which was sold in December, has been put on a watch list, meaning its credit rating is under review. The $8.2 billion sale put the company deeply in debt.
Alan Mutter's Newsosaur blog argues credit problems could potentially cause severe damage to newspaper companies already weary from repeated rounds of cost cutting. There is a lot to like about the new technologies and media that are siphoning audiences and advertising from old media like newspapers. But the plight of these once proud companies, the people who work for them, and their readers, is nothing to celebrate.
Monday, March 24, 2008
Department of Justice OKs satellite radio merger, but isn't real clear about why
The justice department has concluded consumers won't be hurt by the controversial proposal to merge both satellite radio companies, saying competition from other sources ensures consumers won't face higher prices if the deal goes through.
The decision, announced today, states competition between XM and Sirius is already limited because both companies rely on exclusive contracts to put radios in new cars and trucks, which attracts substantial numbers of new subscribers. Even if consumers find satellite radio attractive, the company offering the service probably doesn't influence the decision to buy an automobile.
The U.S. Department of Justice press release acknowledges XM and Sirius compete for retail sales to customers who install their own radios, but retail sales have "dropped significantly since 2005, and the parties contended that the decline was accelerating."
The companies must now get approval from the Federal Communications Commission to complete the merger, but today's action is certain to rekindle controversy about the proposal.
A Confusing Analysis
Last year I wrote about some of the problems for regulators trying to determine how a merger might affect competition. The justice department statement is uncomfortably vague about how such problems were resolved.
A key question under antitrust guidelines asks if a merger would "substantially lessen competition," allowing the merged firms to "impose at least a 'small but significant and nontransitory' increase in (the) price" of their products. This is usually interpreted to mean a merger should not reduce competition enough to allow sustained prices increases of 5 percent or more.
The guidelines require that the department consider what substitute products are available, potential cost reductions from a merger, and the possibility the firms might otherwise fail, leaving consumers without access to their products. The justice department's actual analysis isn't available, so my comments cautiously rely on the press release.
The press release states "there has never been" significant competition between XM and Sirius for existing customers, and competition for new customers is expected to decrease. Each company sells radios that only receive its broadcasts. Technology that would allow a customer to subscribe to both companies "likely would not be introduced in the near term."
This suggests the companies may be limiting the development of such technology, even though it would increase their subscriptions. For example, anyone who wants to hear broadcasts available from just one of the companies -- such as major league baseball or Howard Stern -- might be willing to subscribe to both for the right price.
My example comes from the press release, which oddly makes the opposite argument. Differences in exclusive content, the release says, make it less likely that consumers consider XM and Sirius substitutes. This would only be correct if subscribers are primarily interested in a single company's exclusive content.
But it's plausible that many baseball fans like Howard Stern. Many consumers probably want to listen to a range of programming, and make purchase decisions by comparing groups of channels offering desired programs. This makes it possible, for example, that some consumers are forced to choose either baseball or Howard Stern.
The press release seems to accept this broader argument when it describes MP3 players, terrestial radio broadcasts, and audio delivered on cell phones as competition if the satellite firms merge. It would be interesting to know what evidence shows that demand for satellite radio changes when there is a change in the price of MP3 players or cell phone music downloads, which is how economists decide if goods are substitutes. (Obviously, free radio broadcasts are a separate problem).
These alternatives probably do compete with XM and Sirius as a source of widely available programming, such as music. This is less likely to be true for content that is exclusively available from the satellite companies, such as baseball games outside the market where a consumer lives.
Reductions in cost
The justice department also says its investigation "confirmed that the parties are likely to realize significant variable and fixed cost savings through the merger." Those savings, the department says, will be passed to consumers as lower prices.
However, two conditions must be met before consumers prices are reduced. First, the promised cost savings must materialize. The history of mergers suggests such savings are easy to promise, and difficult to produce.
Second, a merged company with lower costs will not reduce prices unless it faces significant competition. This means the department's analysis of effects on competition must also be correct.
The press release ignores a larger question associated with cost -- will the satellite firms fail if they cannot merge? The firms have argued they must merge to survive, so it's troubling that the justice department did not address this issue.
What's Next
It's quite possible the analysis is better than portrayed in the press release. As my earlier post noted, a merger is not automatically a bad idea.
However, the department probably had to use a lot of information provided by the companies because reliable alternatives aren't available. Merger decisions are also influenced by the ideology of the political appointees at justice who make the final call, and politics will play an important part when the merger proposal goes to the FCC.
For all of these reasons, today's decision needs a better explanation before it becomes fodder for the coming debate. Sadly, I doubt that will happen.
The decision, announced today, states competition between XM and Sirius is already limited because both companies rely on exclusive contracts to put radios in new cars and trucks, which attracts substantial numbers of new subscribers. Even if consumers find satellite radio attractive, the company offering the service probably doesn't influence the decision to buy an automobile.
The U.S. Department of Justice press release acknowledges XM and Sirius compete for retail sales to customers who install their own radios, but retail sales have "dropped significantly since 2005, and the parties contended that the decline was accelerating."
The companies must now get approval from the Federal Communications Commission to complete the merger, but today's action is certain to rekindle controversy about the proposal.
A Confusing Analysis
Last year I wrote about some of the problems for regulators trying to determine how a merger might affect competition. The justice department statement is uncomfortably vague about how such problems were resolved.
A key question under antitrust guidelines asks if a merger would "substantially lessen competition," allowing the merged firms to "impose at least a 'small but significant and nontransitory' increase in (the) price" of their products. This is usually interpreted to mean a merger should not reduce competition enough to allow sustained prices increases of 5 percent or more.
The guidelines require that the department consider what substitute products are available, potential cost reductions from a merger, and the possibility the firms might otherwise fail, leaving consumers without access to their products. The justice department's actual analysis isn't available, so my comments cautiously rely on the press release.
The press release states "there has never been" significant competition between XM and Sirius for existing customers, and competition for new customers is expected to decrease. Each company sells radios that only receive its broadcasts. Technology that would allow a customer to subscribe to both companies "likely would not be introduced in the near term."
This suggests the companies may be limiting the development of such technology, even though it would increase their subscriptions. For example, anyone who wants to hear broadcasts available from just one of the companies -- such as major league baseball or Howard Stern -- might be willing to subscribe to both for the right price.
My example comes from the press release, which oddly makes the opposite argument. Differences in exclusive content, the release says, make it less likely that consumers consider XM and Sirius substitutes. This would only be correct if subscribers are primarily interested in a single company's exclusive content.
But it's plausible that many baseball fans like Howard Stern. Many consumers probably want to listen to a range of programming, and make purchase decisions by comparing groups of channels offering desired programs. This makes it possible, for example, that some consumers are forced to choose either baseball or Howard Stern.
The press release seems to accept this broader argument when it describes MP3 players, terrestial radio broadcasts, and audio delivered on cell phones as competition if the satellite firms merge. It would be interesting to know what evidence shows that demand for satellite radio changes when there is a change in the price of MP3 players or cell phone music downloads, which is how economists decide if goods are substitutes. (Obviously, free radio broadcasts are a separate problem).
These alternatives probably do compete with XM and Sirius as a source of widely available programming, such as music. This is less likely to be true for content that is exclusively available from the satellite companies, such as baseball games outside the market where a consumer lives.
Reductions in cost
The justice department also says its investigation "confirmed that the parties are likely to realize significant variable and fixed cost savings through the merger." Those savings, the department says, will be passed to consumers as lower prices.
However, two conditions must be met before consumers prices are reduced. First, the promised cost savings must materialize. The history of mergers suggests such savings are easy to promise, and difficult to produce.
Second, a merged company with lower costs will not reduce prices unless it faces significant competition. This means the department's analysis of effects on competition must also be correct.
The press release ignores a larger question associated with cost -- will the satellite firms fail if they cannot merge? The firms have argued they must merge to survive, so it's troubling that the justice department did not address this issue.
What's Next
It's quite possible the analysis is better than portrayed in the press release. As my earlier post noted, a merger is not automatically a bad idea.
However, the department probably had to use a lot of information provided by the companies because reliable alternatives aren't available. Merger decisions are also influenced by the ideology of the political appointees at justice who make the final call, and politics will play an important part when the merger proposal goes to the FCC.
For all of these reasons, today's decision needs a better explanation before it becomes fodder for the coming debate. Sadly, I doubt that will happen.
Tuesday, December 18, 2007
FCC Chairman Makes Lemonade from Lemon (at least for now)
The Federal Communications Commission today voted to tighten regulation of cable companies, and ease regulation of newspaper and broadcast companies. The votes are a triumph for FCC Chairman Kevin J. Martin, who last month suffered a temporary defeat when he brought the cable proposal up for a vote.
Today's victory on the cable issue may also be temporary given strong and continuing industry resistance. But for now Martin appears to have reconciled the complex array of competing interests at stake in both of these votes.
The importance of competition
Competition is at the heart of all the arguments voted on today. Newspaper companies argued increasing competition for advertising revenue makes obsolete a rule against owning a broadcast station in the same market. Huge numbers of readers disagreed, arguing the restriction preserved competition covering local news, increasing the range of information and ideas available in those markets.
The FCC voted to ease the cross-ownership restriction in the 20 largest markets.
Cable companies argued they need to get larger because subscribers have more and more alternatives in the new media world. Consumer groups and Chairman Martin disagreed, arguing cable rates keep rising and subscribers don't have access to the full range of possible program choices.
The FCC voted to keep individual cable companies from reaching more than 30 percent of the national market. This is expected to have an immediate effect on Comcast.
Reasons to be skeptical on cross-ownership
My immediate reaction is mostly to the cross-ownership vote. The competitive problem for newspapers is not local radio or television stations, but new forms of media such as the Internet and cell phones. Putting resources into broadcast stations is an odd response, especially when you consider some newspaper companies such as The New York Times and Belo recently divested their television stations.
The expense of acquiring radio and television stations will also force newspaper companies to cut operating costs, so be skeptical of claims that these companies will increase news coverage in these markets.
More broadly, the competition arguments rely on differing definitions and models. Newspaper companies, and both sides in the cable argument, are using economic models concerned with efficient use of limited resources, and providing goods and services at the lowest possible cost.
Supporters of cross-ownership restrictions are using a First Amendment model concerned with expanding the range of ideas, and the emergence of a workable consensus on matters of public concern.
Today's victory on the cable issue may also be temporary given strong and continuing industry resistance. But for now Martin appears to have reconciled the complex array of competing interests at stake in both of these votes.
The importance of competition
Competition is at the heart of all the arguments voted on today. Newspaper companies argued increasing competition for advertising revenue makes obsolete a rule against owning a broadcast station in the same market. Huge numbers of readers disagreed, arguing the restriction preserved competition covering local news, increasing the range of information and ideas available in those markets.
The FCC voted to ease the cross-ownership restriction in the 20 largest markets.
Cable companies argued they need to get larger because subscribers have more and more alternatives in the new media world. Consumer groups and Chairman Martin disagreed, arguing cable rates keep rising and subscribers don't have access to the full range of possible program choices.
The FCC voted to keep individual cable companies from reaching more than 30 percent of the national market. This is expected to have an immediate effect on Comcast.
Reasons to be skeptical on cross-ownership
My immediate reaction is mostly to the cross-ownership vote. The competitive problem for newspapers is not local radio or television stations, but new forms of media such as the Internet and cell phones. Putting resources into broadcast stations is an odd response, especially when you consider some newspaper companies such as The New York Times and Belo recently divested their television stations.
The expense of acquiring radio and television stations will also force newspaper companies to cut operating costs, so be skeptical of claims that these companies will increase news coverage in these markets.
More broadly, the competition arguments rely on differing definitions and models. Newspaper companies, and both sides in the cable argument, are using economic models concerned with efficient use of limited resources, and providing goods and services at the lowest possible cost.
Supporters of cross-ownership restrictions are using a First Amendment model concerned with expanding the range of ideas, and the emergence of a workable consensus on matters of public concern.
Thursday, December 13, 2007
Exchanging Information in Newsgroups
The economics of information are particularly important on the web where reproduction and distribution costs are remarkably small. This guest post describes new research on information distribution in newsgroups. The post was generously provided by one of the study's authors.
Identifying Discussion Leaders and Information Sources
by Itai Himmelboim1
by Itai Himmelboim1
Here’s some old news: one of the greatest promises of the Internet is the ability for anyone with a PC and Internet connection to join forums on any topic imaginable and contribute, consume and exchange information and opinions. Information is available via a wide range of old sources (news websites) and new sources (blogs, forums, personal websites and news aggregators such as Google News).
Robert Nye said once that a richness of information leads to a poverty of attention. In a study I conducted with Marc Smith and Eric Gleave from Microsoft Research, the Netscan dataset was used to follow patterns of replies – indicators of attention – in 20 political newsgroups between July and December 2006.
It wasn’t a surprise to find that in all newsgroups, relatively few participants attracted a relatively large portion of the discussion to threads they started. After all, literature illustrates that large networks – be they of people, websites or even genes – tend to show a power-law distribution in which few participants receive a large and disproportional number of links – in our case, replies – from other participants. With that in mind, we began to explore the role that this small number of highly connected participants play in their groups.
We identified these highly replied participants using a range of statistical measures including: success in starting new threads, the percentage of all messages in a group that appeared in threads they started, as well as the percentage of individuals in the group that participated in these threads. We found only a handful of such highly connected participants in each group, making them less than one percent of the population in their newsgroups. Many of these participants attracted more than one-half of the discussion to threads they started. We decided to name them Discussion Catalysts, or DCs.
Deciding what to talk about
Discussion catalysts may not tell fellow group members what to say, but according to their attention grabbing records, they do tell groups what to talk about. Our next step was to determine what information they brought to the table.
Content analysis of messages that discussion catalysts used to start threads revealed an interesting phenomenon. If you thought, like I did, that political discussions in newsgroups start with an individual’s opinion, you may be surprised to find that this study shows otherwise. DCs play the role of content importers. They go outside their groups to the World Wide Web – news sites, blogs and other websites – search for interesting articles, and bring them to groups to discuss.
Another interesting finding was that although DCs import content from a range of sources, most of the articles came from traditional news sites such as the Washington Post and Associated Press. Less than one tenth of the entries came from blogs.
So what does all this tell us? First, although the Internet is free and open by its nature, when we interact freely, we tend to create a structure in which few of us get a lot and most of us get very little. Second, even when we use relatively new platforms for political discussions, the information comes from good (?), old news organizations. Why? Well, I’ll leave that for you to discuss.
1 Itai Himmelboim is a doctoral student at the University of Minnesota's School of Journalism and Mass Communication.
Wednesday, November 28, 2007
FCC Chairman Caves, Economics of Lobbying Prevail (sort of)
The effort to impose new cable television regulations that renewed discussion of selling subscriptions to individual channels has apparently collapsed under strong pressure from cable companies.
However, potential changes in ownership restrictions and other regulations, not the sale of individual channels, were behind the collapse. Reports this morning say a Nov. 27 meeting of the Federal Communications Commission delayed a decision on the new rules because of a dispute over data showing how many people actually subscribe to cable.
If more than 70 percent of consumers have access to cable -- a number that is not in dispute -- and more than 70 percent of them subscribe, the FCC will have legal authority to limit ownership of cable companies. FCC Chairman Kevin J. Martin argues the 70 percent subscriber threshold has been met, but the industry and other members of the commission disagree. (Chloe Albanesius at PCMag.com does a good job explaining details of this argument about subscriber data.)
Clearly, if you own a cable company, you don't favor regulations that restrict which systems you can buy. Cable companies are also a relatively small group compared to millions of subscribers and advertisers also affected by ownership rules.
That means there are relatively low costs of organizing cable companies to talk to each other, negotiate a common position on the proposed regulations, and then hire people to contact government officials and argue their case. What I've just described, of course, is an industry association. Cable is represented by the National Cable & Telecommunications Association.
It costs far more for consumers or advertisers to create similar organizations. Advertisers tend to consider themselves part of an industry represented by an industry association, and not the larger group of all businesses that advertise on cable.
There are too many consumers to organize into a single group, even with instant communication. Some Washington groups, like the Consumers Union, do represent consumers and have been active on this issue. But these groups don't represent cable subscribers and their interests in the exclusive way that the industry association represents cable owners.
The difference means the industry probably has more focus, and resources, available to lobby the FCC. The effort to block new regulations included a meeting with top White House officials.
Groups representing another powerful industry are also in this fight. Chairman Martin says the new cable regulations will increase competition, lowering prices and increasing the range of voices on cable television.
However, Martin separately wants to change a long-standing regulation limiting newspaper company ownership of broadcast television stations. This rule prohibits a newspaper from owning a television station in the same market to ensure there are multiple media voices with diverse views.
Martin accepts newspaper industry arguments that the cross-ownership rule should be relaxed because of competition from new forms of media. The newspaper industry, of course, has its own association to lobby for its interests, the Newspaper Association of America.
Commissioners like Jonathan S. Adelstein, who might agree with Martin on cable, suspect he will use the cable changes to also push for a relaxation of the cross-ownership rule, decreasing competition in newspaper and broadcast markets.
Cross-ownership also evokes a strong response from the public. Consumer groups, such as the Media Education Foundation and Common Cause, are working to keep the cross-ownership rule. But consumer groups also support Martin's proposed changes for cable.
So, perhaps yesterday's collapse was inevitable. This is not a case where just one industry is trying to capture the FCC. Instead, multiple well-organized industries are competing against each other to capture the FCC. Meanwhile, less well-organized consumers are taking different sides depending on the issue in dispute.
However, potential changes in ownership restrictions and other regulations, not the sale of individual channels, were behind the collapse. Reports this morning say a Nov. 27 meeting of the Federal Communications Commission delayed a decision on the new rules because of a dispute over data showing how many people actually subscribe to cable.
If more than 70 percent of consumers have access to cable -- a number that is not in dispute -- and more than 70 percent of them subscribe, the FCC will have legal authority to limit ownership of cable companies. FCC Chairman Kevin J. Martin argues the 70 percent subscriber threshold has been met, but the industry and other members of the commission disagree. (Chloe Albanesius at PCMag.com does a good job explaining details of this argument about subscriber data.)
A Battle to Capture the FCC
The cable companies' effort to block new regulations at first appears to be a textbook example of why regulators often favor the interests of the industry they regulate. However, this is a case where the interests of three major media industries are at stake.Clearly, if you own a cable company, you don't favor regulations that restrict which systems you can buy. Cable companies are also a relatively small group compared to millions of subscribers and advertisers also affected by ownership rules.
That means there are relatively low costs of organizing cable companies to talk to each other, negotiate a common position on the proposed regulations, and then hire people to contact government officials and argue their case. What I've just described, of course, is an industry association. Cable is represented by the National Cable & Telecommunications Association.
It costs far more for consumers or advertisers to create similar organizations. Advertisers tend to consider themselves part of an industry represented by an industry association, and not the larger group of all businesses that advertise on cable.
There are too many consumers to organize into a single group, even with instant communication. Some Washington groups, like the Consumers Union, do represent consumers and have been active on this issue. But these groups don't represent cable subscribers and their interests in the exclusive way that the industry association represents cable owners.
The difference means the industry probably has more focus, and resources, available to lobby the FCC. The effort to block new regulations included a meeting with top White House officials.
There are More Than Two Sides in This Fight
Groups representing another powerful industry are also in this fight. Chairman Martin says the new cable regulations will increase competition, lowering prices and increasing the range of voices on cable television.
However, Martin separately wants to change a long-standing regulation limiting newspaper company ownership of broadcast television stations. This rule prohibits a newspaper from owning a television station in the same market to ensure there are multiple media voices with diverse views.
Martin accepts newspaper industry arguments that the cross-ownership rule should be relaxed because of competition from new forms of media. The newspaper industry, of course, has its own association to lobby for its interests, the Newspaper Association of America.
Commissioners like Jonathan S. Adelstein, who might agree with Martin on cable, suspect he will use the cable changes to also push for a relaxation of the cross-ownership rule, decreasing competition in newspaper and broadcast markets.
Cross-ownership also evokes a strong response from the public. Consumer groups, such as the Media Education Foundation and Common Cause, are working to keep the cross-ownership rule. But consumer groups also support Martin's proposed changes for cable.
So, perhaps yesterday's collapse was inevitable. This is not a case where just one industry is trying to capture the FCC. Instead, multiple well-organized industries are competing against each other to capture the FCC. Meanwhile, less well-organized consumers are taking different sides depending on the issue in dispute.
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