The Federal Communications Commission is planning to lift ownership restrictions on local media. This would allow, for example, ownership of multiple major TV stations in the same market by the same company:
In recent years, the local TV station business has consolidated rapidly, driven by both the growing fees that cable and satellite companies pay for the right to retransmit broadcast signals—bigger station groups can extract higher fees—and increasing competition from the internet. That has led to the emergence of a handful of “super groups” like Sinclair Broadcast Group , which today reaches 45.6% of television households, according to Kagan, a media research group within S&P Global Market Intelligence.
Relaxing regulations on local TV station ownership likely would spark a “bonanza” of dealmaking among station owners, according to station broker Larry Patrick, particularly among the independent station groups that don’t share ownership with broadcast networks like ABC or Fox.
The FCC has also repealed the “main studio rule.” This rule required radio and TV stations to maintain a staffed local physical studio capable of originating programming. Regarding that republican FCC chairman Aji Pai wrote:
At our October meeting, we’ll also take another step toward the long-overdue modernization of rules governing the media industry. Following up on our Notice of Proposed Rulemaking in May, we’ll vote on an order that would eliminate the “main studio rule.” This rule requires each AM, FM and TV broadcast station to maintain a main studio in or near its community of license. This requirement dates to 1939, and was enacted in part to ensure that stations would stay accessible and responsive to the public. But today, this rule is unnecessary; most consumers get in touch with stations over the phone or through electronic means, stations’ public inspection files are mostly online, and technology enables stations to produce local news without a nearby studio. Additionally, the rule can impose major costs on broadcasters. Eliminating it would make it easier for new broadcast stations to operate in small towns and rural communities. It would also allow broadcasters to spend money currently used to comply with the rule on local programming, newsgathering, and other activities to better serve the public.
If you believe permitting further media consolidation and eliminating local studios is going to result in more local newsgathering and programming, I’ve got a bridge to sell you.
If we take a step back for a minute, we see that in community after community across America, the local institutions that once sustained them as viable places have been gutted or disappeared entirely: local banks, local stores, the local newspaper, manufacturing plants, etc. Some of these were lost due to technology and productivity improvements. In others, some people blame globalization.
But while globalization is well known and well-discussed as a force, there’s another one that’s less talked about. It overlapped with globalization, though started earlier. It was accelerated by globalization, but it is something that was happening anyway. That trend is the centralization of a number of American industries. I explained this in 2010 in a section of a post called “The Nationalization Age”, which I’ll quote in full:
Everyone knows about the [1990s era] tech revolution, but there was a concurrent development that was in many ways equally important. This was the nationalization of business.
Think again back to the 1980’s in a mid-sized or small city. Your hometown probably had three or so major locally based, publicly traded banks. Your state probably severely limited their ability to open branches, so the market was highly fragmented. Your town probably had a couple department stores that were either part of local or regional chains. This might have been true of discounters or even fast food restaurants. The local gas and electric companies were locally based. Only Ma Bell pre-1984 was a national utility, and a heavily regulated one. In short, while may industrial businesses were national in scope, there were still a huge number of industries that were incredibly fragmented into local or regional markets.
The deregulation of the 80’s and 90’s ended that. The end of restrictive banking laws put us where we are today, with a handful of major nationwide banks like JP Morgan Chase, along with a few odd surviving “super-regionals”. Utilities have been sold off. Department stores merged out of existence, perhaps most poignantly illustrated by the rebranding of Marshall Field’s flagship store in Chicago as Macy’s. Macy’s is truly America’s department store now. Wal-Mart and Target, once regional chains, are now ubiquitous. So too Walgreens, CVS, Home Depot, etc.
In short, the business landscape of your city likely changed radically during the 1990’s, as large numbers of locally based businesses, businesses whose executives formed the leadership class of the community, were bought out. (I wrote about one implication of this in my piece “The Decline of Civic Leadership Culture.”)
This also, incidentally, transformed the professional services industry. In 1990 virtually all of these industries were city office based. To be the office managing partner of the biggest office or headquarters city was a huge deal. But in the 90’s, as business changed, and as the level business domain expertise required to integrate technology into business strategies, processes, and organizations became much, much higher, all of these industries restructured into national practices based around industries, with P&L responsibility resting with the industry sector leads. That’s one reason I spent so much time on airplanes in my career.
Of course, this disproportionately benefited large cities in the middle of the country with big airports, where you could base lots of people and fly them conveniently around. Two big winners: Chicago and Dallas.
With so many businesses now large scale, deregulation continuing in vogue, and a post-Cold War end of history euphoria in the air, the stage was set for future liberalization of international trade regimes. Your local bank or store probably didn’t care much about international markets, but Citigroup and Wal-Mart sure did.
There were multiple factors prompting the roll-ups of one sector after another, but one of them was undoubtedly deliberate government policy. In many of these sectors, state and federal regulations were specifically designed to create a fragmented market and keep institutions locally based. The idea that all the banks in your town would be owned by companies in your state capital, much less New York, was anathema.
These rollups did coincide with a nice boom in the 1990s, but since 2000 results have just plain been bad. Barack Obama was the first president since Herbert Hoover to never once hit 3 percent annual GDP growth. President Bush’s economic record was likewise dismal. Job growth in the U.S. since 2000 has averaged 0.5 percent per year, compared to 1.9 percent during the 1980s and 1.9 percent during the 1990s. (Recent years have seen better growth rates than this anemic average.) And real median incomes are lower today than in 2000. Maybe these policies, globalization, etc. didn’t cause these bad results, but results subsequent to these rollups certainly don’t give a ringing endorsement.
When we think about the rise of the coastal and global city economies, we always hear about density, talent concentrations, collisions, and many other things. What we don’t hear about is the way that we specifically eliminated government policies that were designed to keep a handful of coastal cities like New York from dominating the economic life of the country. The centralization of industries in these cities, along with the rise of global city services, etc. is a big part of what made them so prosperous today. They may not have the lion’s hard of employment, but they extracting an outsize share of the value.
While the President doesn’t directly control the FCC, I find it amazing that the administration of the guy who was elected president in large part because of the hollowing out of communities across the interior in part driven by this centralization would be promoting even more of it. Especially in media, where the collapse of newspapers and such has already had a profoundly negative effect on civic life.
All of this may lead to great economy efficiency in some macro sense. But we’ve already seen the price paid by the loss of these local institutions. Too many cities went from being branch plant towns to being branch everything towns – with no plant anymore.
The coastal folks who are appalled at populism might do well to consider their own role in creating the conditions that brought it about. And the Trump administration should seriously reconsider any regulatory moves designed to actively facilitate further economic concentration in the country.