On February 11, 2004, the U.S. Court of Appeals for the Third Circuit convened in Philadelphia to hear oral arguments from Prometheus Radio Project and its fellow citizen petitioners in their challenge to the FCC’s order of June 2003, which recommended eliminating the cross-ownership ban and raising the television ownership caps. The Big Media companies that had invested so much to lobby for the relaxed regulations that the FCC had historically delivered were well represented: Clear Channel, Sinclair, Tribune Company, the National Association of Broadcasters, and the major television networks had all sent attorneys to defend the new ownership rules. “It was quite a spectacle,” Pete Tridish, the Prometheus organizer, recalled. “They said that normally these cases last less than an hour in court. But there were so many interested parties there, and so much at stake, that it lasted a full day.”
The lawyers for Prometheus, who included Andrew Jay Schwartzman from the Media Access Project, Glenn Manishin for the Consumers Union and Consumer Federation of America, and the Georgetown University law professor Angela Campbell, were first to argue before the panel of three judges, Thomas Ambro, Julio Fuentes, and Anthony Scirica. The stakes were high, Manishin explained, because under the terms of the new order, “We go from a system in which cross-ownership prohibitions, with the exception of a few waivers, are prohibited almost nationwide, to a rule that allows broadcast-newspaper combinations in markets serving up to 98 percent of the American public.”
“Not only are the number of television station owners going to be reduced dramatically” with the proposed rules, argued Campbell, “but one company can also own the only daily newspaper in a community, or all of the daily newspapers in the community. They can also own a large number of radio stations, up to eight stations in larger markets. And they can of course have unlimited websites, they can own the cable system. So there’s truly potential here for one company to have a very significant dominance of public discourse within their community.” The FCC, she continued, counted print and broadcast media owned by the same company as if they were separate outlets: “It’s like giving one person two megaphones and saying that’s diversity,” even though “they’re now providing the same news and it’s the same editorial viewpoint … The public is hurt by that, even if the stations can make more money as a result of these efficiencies.”1
In its order, the FCC had justified relaxing the ownership caps through a quasiscientific analysis purporting to show that, despite the recent wave of consolidation, local media markets remained diverse and competitive. According to Manishin, however, the evidence that the commission used “is so fraught with internal inconsistencies and is so beyond the pale of reasonable exposition and empirical support that it fails under any standard.” Manishin attacked the foundations of the FCC’s decision, the new diversity index (DI), which the FCC—ignoring complaints from Commissioners Michael Copps and Jonathan Adelstein—“created and promulgated in secret without any public notice,” to prove that many “voices” competed in local markets. “The diversity index,” Manishin explained, “says nothing directly about the quality, quantity, or vibrancy of local information,” and so it is a useless tool for assessing the state of local media. “We believe the Commission acted arbitrarily and capriciously,” added Campbell, who asked that the court remand the FCC’s decision. “The record does not support their conclusion.”
Jacob Lewis, an FCC attorney, struggled to defend the agency’s decision during his presentation. As for the Duchess Community College station, which the FCC weighted as more important than the New York Times, he allowed that “it turns out that that was improperly included in the database.” But, he continued, “for present purposes I’ll concede there are stations that are not as significant, as a matter of audience share, [as] other stations.” Judge Ambro pushed the matter. “The New York Times under your diversity index goes less far than Duchess Community College. We all know that’s not the case.” Lewis’s response hardly clarified the matter. “The diversity index is an explanation about how the Commission came to the judgments it made that are embodied in the rule,” he stated. “The Commission needed information, got information in the record about how people used media, then it needed information and it looked at information about the average DI.”
“At about that point,” Pete Tridish told me, “everyone on our side was trying hard not to bust out laughing. And we knew we had a chance to win.”
Surprisingly, some of the attorneys representing Big Media companies seized the opportunity to discredit the FCC’s rule-making process, though in their view the “arbitrary” and “capricious” decisions came from the commission’s efforts to defend the remaining ownership caps. Clear Channel’s lawyer, Miguel Estrada, made by far the most brazen claim of the hearing, arguing that the FCC’s “avowedly deregulatory statute, the 1996 [Telecom] Act,” legally prohibited the commission from “impos[ing] additional regulatory burdens.” The 1996 act required the FCC to review ownership rules every two years and to “modify” or “repeal” laws that did not promote the public interest. “I think ‘repeal’ or ‘modify’ in the context of this statute is more naturally read to say either get rid of it or get rid of part of it,” Estrada contended, “but it’s not repeal and reregulate. That would make no sense in the context of this statute.” The judges, skeptical to the point of bemusement, pressed Clear Channel’s attorney to clarify this position. “You’re saying … that it’s a one way street, that you can only go down the street called deregulation,” prodded Judge Ambro. “Even if things change, you cannot elect to go down the street of some increased regulation in a particular area?”
Judge Fuentes posed the question directly: “So ‘modify’ to you means in a sense eliminate?” Estrada massaged out an answer. “It means—no, it means ‘change to make less regulatory’ … I think the Commission could not modify by saying that the highest [radio] cap, instead of being eight will be seven.” Fuentes probed deeper. “So [in] your definition of ‘modify,’ the FCC cannot modify simply to, let’s say, fix an irrational policy. Modify is only appropriate so long as there is further deregulation?” Estrada confirmed this interpretation. According to Clear Channel, from now on changes to media ownership policy can only be legal if they relax or eliminate the caps.
ON JUNE 24, 2004, THE U.S. COURT OF APPEALS ISSUED ITS OPINION. IN A two-to-one decision, the Third Circuit judges upheld the elevated national television ownership cap of 39 percent passed by Congress, because the petitioners, who were entitled to contest the FCC’s order, had no legal standing to challenge a congressional decision. But the court forcefully dismissed Big Media’s arguments that ownership caps were unconstitutional, as well as Clear Channel’s claim that media policy making had become a “one-way deregulatory ratchet.” The court also rejected the commission’s proposal to eliminate the cross-ownership ban, because the arbitrary diversity index used to justify the change “requires us to accept that a community college television station makes a greater contribution to viewpoint diversity than a conglomerate that includes the third-largest newspaper in America,” and therefore “requires us to abandon both logic and reality.” Echoing the language of the public-interest attorneys, the court ruled further that “the Commission gave too much weight to the Internet as a media outlet … There is a critical distinction between websites that are independent sources of local news and websites of local newspapers and broadcast stations that merely republish the information already being reported by the newspaper or broadcast station’s counterpart. The latter do not present an ‘independent’ viewpoint and thus should not be considered as contributing diversity to local markets.” According to the opinion, the FCC’s diversity measure should be based on media outlets that promote democratic and civic engagement, not on Internet sites that “may be useful for finding restaurant reviews and concert schedules,” but fail to offer “the type of ‘news and public affairs programming’” that public policies are supposed to promote.2
The decision was a devastating blow to FCC chairman Michael Powell and a setback for the Bush administration, which had pushed hard to eliminate ownership caps. Powell, who had consistently dismissed public concerns over media concentration, nonetheless issued a warning that the Third Circuit’s ruling “perversely may make it dramatically more difficult for the Commission to protect against greater media consolidation,” because it forced the FCC to establish sound guidelines for regulating local broadcasters. The defeated chairman complained that the court’s intervention “is deeply troubling and hampers the flexibility of the agency to protect the American public, as this agency is charged to do.” Yet Powell’s record on protecting the interests of the American public, whose millions of letters he had ignored outright during the policy-making process, undermined his credibility. The commission’s reputation suffered, too, since the court’s decision helped publicize the sad fact that the FCC would go to great lengths to satisfy the industry it was supposed to regulate, but would refuse to serve citizens and communities unless the judiciary compelled it to do so.
Seven months later Powell announced his resignation from the commission. He exited via the FCC’s revolving door and walked into a senior position at Providence Equity Partners, an investment firm that manages $9 billion in equity commitments from media and telecommunications companies. “Mr. Powell is not worried about now doing business with some of the same people he once regulated and perhaps frustrated,” the New York Times reported. Business Week, however, speculated that “Providence wants Michael Powell to ensure approval of some gigantic future purchase that will need to be reviewed by the FCC,” and consumer groups feared that the former chairman would capitalize on his political influence at the public’s expense. Powell “didn’t make it easy for his successor,” the Los Angeles Times asserted, because “he pushed more hot-button issues to the forefront at the FCC than he was able to resolve.”3 Kevin Martin, the ambitious young Republican who replaced Powell as chairman in 2005, would have to direct the FCC with caution.
Powell’s main adversaries on the commission, Michael Copps and Jonathan Adelstein, were emboldened by both the court ruling and the uproar of public criticism for the chairman’s agenda. “We have now heard from the American people, Congress, and the courts,” Copps announced on the day of the Third Circuit Court’s decision. “The rush to media consolidation approved by the FCC last June was wrong as a matter of law and policy. The Commission has a second chance to do the right thing. We must immediately move forward and redesign our media policy. This time we must include the American people in the process instead of shutting them out. We must rediscover our respect for core values of localism, diversity, and competition. We must protect and work to expand the multiplicity of voices and choices that support our marketplace of ideas and that sustain American democracy and creativity.”
THE COMMISSIONERS HAD ALREADY ESTABLISHED A FORUM FOR ENCOUR aging public participation in media policy debates, one that appeared strikingly similar to the town hall meetings that Copps and Adelstein had been conducting on their own. In August 2003, just two months after releasing its ill-fated order on the ownership rules, the FCC announced that it would set up a “localism task force” and hold a series of open “localism hearings” in cities across the country. “Powell explicitly stated that the localism task force and the hearings were not going to address the ownership issue,” said Josh Silver, the executive director of Free Press. “He thought the commission could appease its critics without actually addressing their core concerns.”
Powell soon learned that neither citizens nor policy makers would accept the false separation between the ownership and localism debates, and that the FCC could not plausibly deny that the issues were inextricably linked. At the first public hearing, held on October 22 in Charlotte, North Carolina, a capacity crowd of citizens embraced the rare opportunity to tell the commissioners about the hazards of consolidation in their hometowns. “To try to talk about localism without discussing media ownership is avoiding the issue,” said Tift Merritt, a musician from Raleigh who had appeared on Late Night with David Letterman and been designated “a major new artist” by Billboard, but had been shut out of the playlists from local radio stations owned by consolidators. Mary Klenz, copresident of the League of Women Voters of North Carolina, claimed that only one commercial TV station in Charlotte broadcasts a local public affairs program. “We are concerned that business concerns have taken precedence over the public interest.”4
“The hearing was humiliating for Powell,” Josh Silver explained to me. “He had just forced the deregulatory order on the public, and now he was seeing how democracy works.” The next hearing was scheduled for January 2004, in San Antonio, Texas, where Clear Channel is headquartered, and Big Media companies that had lobbied for raising or eliminating the ownership limits asked their own representatives to participate so that the public complaints would not dominate the event.
“A standing-room-only and often intense crowd packed into the City Council Chambers to testify,” the San Antonio Express-News reported. Approximately five hundred people packed the hearing, some waiting in line for more than twelve hours to ensure a spot in the audience. More than one hundred people waited through the five-and-a-half hour event for a chance to make a two-minute statement before the commissioners. Almost everyone spoke out against consolidation and the proposed rule changes. “Many spoke out against profane, violent and sexually explicit information being broadcast on the TV and radio,” the Express-News explained, “and others blasted corporate ownership of local media.”5
I traveled to Rapid City, South Dakota, for the next hearing, in May 2004, for which there was so much advance interest that organizers issued tickets on the morning of the event, giving those who could not skip a day of work to wait in line a chance to participate. Both citizen groups and local media owners sent troops to the South Dakota School of Mines and Technology, which hosted the hearing, and Native American tribes from the long-standing reservations and sacred sites surrounding Rapid City brought members, too. An enormous crowd arrived that evening, and to accommodate the public the commission had to set up an overflow area where more than one hundred people could watch the proceedings on closed-circuit television. The meeting was full of conflict, as Native American leaders accused the FCC of disrespecting their communities by excluding them from the introductory panel, and citizens complained that Powell, who had been in town for other meetings, decided to return to Washington and skip the public hearing. Free Press, which had learned of Powell’s intentions before he left town, released a public statement declaring that the chairman, who had attended several events organized by lobbyists in the previous months, “doesn’t have time for his own ‘localism and diversity’ public hearing to listen to the American people.” “This is an insult to every American and to democracy itself,” Silver said.
During the open-comment session, radio listeners complained, “There used to be local talk shows, now there is none,” and echoed the criticisms of media consolidation that citizens voiced whenever they were asked. Commissioner Adelstein, a Rapid City native, said, “We sensed a real frustration about the state of the airwaves,” and he vowed to challenge the FCC’s rush to relax the ownership caps.6
The public events were going so badly for Powell that the commission, which had already announced that it would hold hearings in Portland, Maine, and Washington, D.C., stopped organizing them, leaving the dates “To Be Announced” for years. Rather than wait for the commission to act, Copps and Adelstein repeated the process they had initiated in the run-up to the FCC’s 2003 order, setting up their own hearings on the future of media in cities and towns throughout the country. Copps routinely thanked the citizens who participated in the forums for airing an issue that needed a public hearing. “What a difference you have made,” he told a gathering of media reformers in Wisconsin that I attended. “Because of your efforts, Americans know that having media giants is inimical to the interests of Americans and is just plain bad for America. You built an unprecedented army of Left and Right, Democrats and Republicans, who know that our policy was wrong and want to do something about it. The coalition didn’t splinter. It went to court together, went to Congress together, and it is getting results.”
Adelstein, growing into his role as a populist regulator, solicited public input on media ownership rules from everyone he addressed. “I want your perspective on how well broadcasters are meeting the needs of your community,” he said to an overflowing audience in Iowa. “Are they providing sufficient coverage of issues of local concern, including local elections? Do you have enough choice in news sources? Are broadcasters providing sufficient family friendly programming? Are you hearing local artists played on the radio? We need your input on these vital issues. This is an opportunity for all members of the community to give their perspective on how issues of concern to them are treated. I encourage you to speak out and become part of the solution in this new media landscape.”7 Although they received little support from the FCC, Copps and Adelstein continued to hold public hearings wherever possible, and capacity crowds greeted them everywhere they went.
Powell, who had turned his back on the public once it expressed strong opposition to his policy proposals, now began to suppress his own agency’s research findings when they contradicted his personal beliefs. The chairman, searching for scientific verification of his belief that relaxing ownership caps would not adversly affect news coverage, commissioned an FCC study to determine whether locally owned television stations broadcast more local news than chains that controlled stations in multiple markets or companies that owned newspapers and television stations. Keith Brown and Peter Alexander, economists from the FCC Media Bureau, studied 4,078 individual news stories from five different days and sixty stations across twenty designated market areas. Their findings, reported in the working paper “Do Local Owners Do More Localism? Some Evidence from Local Broadcast News,” challenged the core of Powell’s case for loosening the caps. “Our study suggests that locally owned television broadcast stations air more local news than network owned-and-operated stations and non-locally owned stations,” the authors wrote, noting that the difference in local coverage was dramatic. “We find that local ownership of television stations adds almost five and one-half minutes of local news and over three minutes of local on-location news. … [T]his finding may have implications for broadcast ownership rules.”8
According to Adam Candeub, who was an attorney at the FCC’s Media Bureau in 2004, once the paper began circulating to high levels of the agency the FCC ordered the authors to stop their research and destroy “every last piece” of the report. “The whole project was just stopped—end of discussion,” Candeub told John Dunbar, of the Associated Press. The report was never released to the public, and the FCC commissioners, including Copps and Adelstein, were unaware of its existence. The study did not surface until September 2006, when, as a Congressional staffer explained, “someone within the FCC who believed the information should be made public” gave it to Senator Barbara Boxer and she produced it during Kevin Martin’s reconfirmation hearing. Boxer questioned whether the report was “shelved because the outcome was not to the liking of some of the commissioners and/or any outside powerful interests,” and called for an investigation into the process. “This is not a matter of national security, for God’s sake. This is important information about issues that are key to the people. So I don’t understand who deep-sixed this thing.” Dunbar phoned Powell to ask what happened with the study, but Powell did not return his call.9
ENCOURAGED BY COPPS, ADELSTEIN, AND CIVIC ORGANIZATIONS INCLUDing Free Press, the National Rifle Association, MoveOn, and Common Cause, American citizens continued to write e-mails, letters, and faxes reiterating their demands to Congress and the FCC that the federal government do something to curb media consolidation. As the 2004 election campaigns intensified, members of both major political parties reported that, after the war in Iraq, media reform was the issue that their constituents cared about most. Congressional leaders who were not up for reelection called for making media consolidation part of the nation’s political agenda. House Democrats, led by Maurice Hinchey (New York), Louise Slaughter (New York), David Price (North Carolina), Jay Inslee (Washington), and Sherrod Brown (Ohio), began planning to organize a Future of American Media Caucus, so that, Hinchey told me, they can “make sure media policy issues are front and center in the minds of Members.”
In January 2004 Democratic presidential candidate John Kerry told the Hollywood Reporter: “I think [media consolidation] is a serious problem in the country, and I was against the FCC decision and efforts to narrow the ownership of media outlets in America. I think the consolidation of information is a dangerous trend in America because it has the ability to shape our Democracy and shape the flow of information. I believe you need real competition, and you need limitations on that ownership … I serve on the (Commerce) committee, I have actually voted on these issues, and my record is very clear about favoring real competition, being smart about transitions in the industry that you have to take into account. But I am not going to be hoodwinked into believing that we are in a place today where there is sufficient competition in some of these areas, where we should lift the rules and consolidate, and I am against it.”10
Kerry’s statement generated considerable buzz among activists and policy analysts, and the Internet hummed with speculation that the Massachussetts senator would make a populist appeal for media reform. But Kerry, like Franklin Delano Roosevelt in the 1930s and virtually every major political figure since then, was all too aware of the influence and power that Big Media companies exert during national electoral campaigns, and he stayed mostly silent on the issue for the rest of the campaign. Bob Shrum, his campaign manager, told me: “We didn’t really talk about avoiding the media concentration debate. Presidential candidates just know that they can’t talk about it in a campaign, because everyone in politics knows that if you upset the networks they can hurt you—not just in coverage and framing, but in contributions too.” A senior adviser to the Gore campaign, who requested anonymity because he feared media repercussions for his ongoing work (nicely illustrating his own point), offered another reason that contemporary candidates avoid discussing consolidation. “There’s a story that people tell in Washington,” he reported. “I don’t know if it’s true [and a network executive denied it], but the fact that people say it helps you understand why candidates are reluctant to go after the media companies. Jack Welch, the former CEO of General Electric [which owns NBC], was in the NBC news studio on the night of the 2000 election. People say that Welch was actually screaming at the numbers guys, telling them to call the race for Bush as soon as Fox News did, so that they could settle it. That’s the kind of thing that no political candidate can afford in a close race.”11
IF HISTORY REPEATS ITSELF, AND MEDIA ISSUES DISAPPEAR FROM THE political agenda during future presidential campaigns because neither candidates nor conglomerates have any interest in raising them, Americans will be deprived of a major opportunity to issue their democratic wish for a communications system that serves their needs and interests. That would be especially unfortunate, because today—after the Third Circuit Court decision, the public outcry over consolidation before the FCC’s 2003 order, and the beginning of a new presidential election campaign—Big Media companies, federal regulators, and citizen groups are battling to shape a digital frontier that may not remain open for long. The media ecosystem is at a decisive turning point, and political decisions—about ownership, openness, access, and local control—will continue to determine its future composition, diversity, and vitality. The future of our democracy and culture lies in the balance.
Not that Big Media companies are waiting patiently for their moment to further claim and develop the digital frontier. In the radio industry, Clear Channel continues to press the case its attorney Miguel Estrada made before the Third Circuit, demanding that Congress and the FCC raise the local ownership caps to ten or twelve stations, if not eliminate them altogether. In 2005 Clear Channel accelerated its rollout of digital radio stations that will ultimately allow it to multiply its broadcast fleet. On the satellite side, Clear Channel’s investment in XM Satellite Radio gives it the right to operate big-brand, commercialladen formats—such as KISS, MIX, Nashville, and Sunny—on five XM channels (XM is otherwise commercial-free, but its managers failed in their efforts to block Clear Channel’s paid advertisements), as well as to provide content on several of its talk channels, allowing Clear Channel to maintain a strong presence on the service against which it competes.12
Clear Channel is hardly the only broadcaster plotting out terrain for the future of radio. When satellite providers such as XM and Sirius Satellite Radio announced plans to offer local news, traffic, and weather services in select locations, the National Association of Broadcasters objected, citing the fact that when satellite companies initially requested a share of the spectrum they had promised not to run local programming that would compete with traditional radio stations. “It’s an absurd case on its face,” wrote Radley Balko, who publishes the Agitator blog. “Satellite radio has taken off because traditional broadcast radio is so darned dreadful. That means the NAB is forced to argue that the government must prevent satellite providers from offering localized programming because allowing them to do so might drive local broadcasters out of business. But at the same time, NAB must argue that the service local broadcasters currently provide is of high enough quality to merit that kind of protection in the first place … If FM and AM radio broadcasters were really giving consumers worthwhile local content, they wouldn’t need government protection from XM and Sirius.”13
In 2004 American radio stations began using digital technology to promote a station format that sheds both local content and the pretense of live broadcasting. “JACK,” which Big Sticks Broadcasting developed (selling exclusive U.S. licensing rights for the format to SparkNet Communications in 2005) after witnessing the success of a similar format in Canada, has no DJs, no call-in segments, no request lines, no local news, and no weather. Instead, market programmers reproduce the iPod “shuffle” effect by playing songs from a large list of some 1,200 pop hits recorded over the past forty years. From a studio in Toronto, Howard Cogan does the voice-overs for all JACK stations, and his signature tagline is “playing what we want.” JACK clones, including a country version called HANK, popped onto the dial as other broadcasters adapted the low-cost production style for their own market niches. Yet Tom Carpenter, from the American Federation of Television and Radio Artists, told me that the stations have trouble retaining listeners, and saw the radio industry’s interest in JACK as “a sign of desperation.” CBS Radio has converted more stations to the JACK format than any other company, including outlets in major markets such as Los Angeles, Chicago, and New York City, where it cut costs—and quickly lost listeners—by using JACK to replace veteran DJs and programmers at famous stations like WCBS-FM. “When they did that,” Carpenter told me, “listeners called us at AFTRA and wanted to know what the union was going to do to bring back the live announcers. It’s unheard of that audiences would call the union to find out what’s happening with talent.” But with digital programming, JACK style, citizens have no other place to communicate their concerns.
TELEVISION BROADCASTERS DID HEAR FROM CONSUMERS AND OFFICIALS in 2006, when they slowly began to acknowledge that their prepackaged programming was pushing away the audiences that they needed to attract, and that the VNRs they were airing violated journalistic standards, if not the law. The most dramatic reversal came from the Sinclair Broadcast Group, whose executives had boasted that NewsCentral—the high-tech project through which affiliates would broadcast canned segments in a central Maryland studio—would establish a new model for television journalism. In March, Sinclair announced that it would scale back the NewsCentral system, killing the live newscasts that featured “must carry” editorials, partisan political packages, and weather reports, by converting it into a feed service that would supply specials, packages, and live shots from Washington, D.C., to its stations and any partners interested in “news shares.”
I spoke with a Sinclair staff member on the day of its last live News-Central broadcast, and he reported that because of low ratings the company was shutting down the news operations and laying off the entire news staff at several of its stations, including those in Las Vegas, Tampa, Milwaukee, Buffalo, and Raleigh/Durham. “Once Mark Hyman [the vice president whose nightly editorial segments proved so controversial] took off like a crazy man with his right-wing views and made them must-runs, it put off the management. They were getting complaints about diversity, balance, and fairness. And that hurt their ratings.” Sinclair planned to replace NewsCentral with other, even less expensive standard programming, and to open new channels as it converted to digital broadcasting. “They’re going to roll out a second digital channel in Baltimore,” the Sinclair staffer told me, “and then they’re going to do it in Columbus. It’ll be reruns, financed by paid programming from Sunday-morning religious shows. It’s going to look like Airport Television, with no there there.”
BOTTOM-LINE PRESSURES COMBINED WITH THE EMERGING POPULARITY of digital publishing technologies to make 2006 a tumultuous year in the newspaper industry, where anxieties about the sustainability of quality local journalism made editors and reporters tremble. Their concerns spiked in 2005, when Bruce Sherman, a Florida money manager who is the chairman, CEO, and chief investment officer of Private Capital Management, publicly urged the board of directors at Knight Ridder, the nation’s second-largest newspaper chain, to “aggressively pursue the competitive sale of the company.” Along with other newspaper companies, Knight Ridder stock had been slumping since 2004. Despite the industry’s extraordinarily high average profit margins and steady cash flows, investment bankers worried that Internet publishing and the decline of print circulation made newspaper companies a bad long-term bet, and they tried leveraging their investments to demand operating strategies, such as eliminating expensive editorial staffers, that maximized short-term profits. Private Capital Management owned 12.8 million shares of Knight Ridder (19 percent of the company), and although during 2005 the chain’s thirty-two papers generated $3 billion in revenues and $471 million in net income (up 44 percent from 2004), Sherman was dissatisfied with its 16 percent profit margin, which lagged behind chains such as Gannett and E. W. Scripps. Industry insiders looked to the battle for control of Knight Ridder to learn about their own collective fate. “The outcome,” said the Los Angeles Times, “could write the future of print journalism.”14
The pressure from Private Capital Management was particularly troubling to advocates of print journalism, because Knight Ridder had already made aggressive moves to downsize its local editorial divisions, centralize its national and international bureaus, and invest in online content and advertising services. Yet the shareholder demands were in fact predictable, and they will soon be repeated by investors in other media companies, because they express the inevitable logic of a market-based media system in which the primary responsibility of publicly traded firms is to maximize returns, and supporting quality news reporting is wasteful unless it directly generates revenues.15
Ironically, Knight fall—a book about the company’s aborted journalistic mission by David Merritt, a former editor for a Knight Ridder paper—was published just months before Sherman pushed for the company’s sale.16 Knight Ridder’s margins were lower than chains like Gannett partly because it maintained its investments in local journalism in places with sluggish adversing markets, including Philadelphia, where it owned and operated the Inquirer and the Daily News. Increasing profit margins in Philadelphia would mean even further downsizing, and as news about the possible sale circulated, citizens expressed fears about what would happen to the TV stations, radio stations, and local Web sites—let alone to their city—that depended on newspaper reporters, if their best-trained watchdogs were kicked out of town.
As journalism professionals rallied to defend Knight Ridder’s newspapers, Sherman organized other institutional investors into an unbeatable coalition, and in December 2005 the board began considering expressions of interest. In March 2006, Knight Ridder announced that the McClatchy Company, a Sacramento, California, corporation that owned twelve major dailies and seventeen community newspapers, had made a successful $4.5-billion acquisition bid. “McClatchy is a dolphin swallowing a small whale,” quipped one financial analyst, whose colleagues believed that a proven consolidator such as Gannett would have made a more reliable owner.17 Yet Knight Ridder’s papers expressed relief because McClatchy, which had achieved profit margins around 23 percent by publishing in growing towns and cities, was a family-run company with a strong record of supporting local journalism, and Gary Pruitt, its president and CEO, pledged that he would be committed to “good journalism being good business” in his new publications. “We plan to maintain, sustain, and further the journalism at these papers with no across the board layoffs,” Pruitt told a CNBC anchor who questioned the future of the newspaper business. “Ultimately, we’re competing locally, and when you look locally, our lead has actually never been larger … In each of these markets we have the leading local website, and the last mass medium with newspapers … That combination can’t be matched locally. When you look at the audience of our newspaper and our website on an unduplicated basis, our audience is actually growing, which is hardly the profile of a dying industry.”18
Not every Knight Ridder paper would be part of McClatchy’s new empire, however. Upon announcing the deal, Pruitt declared that McClatchy would immediately put up for sale the twelve Knight Ridder papers located in less lucrative markets, including the Philadelphia Inquirer and Daily News, the San Jose Mercury-News, and dailies in Akron, Aberdeen, Grand Forks, Fort Wayne, Monterey, Contra Costa County, and Duluth. “Today is a sad day in the life of the Akron Beacon Journal because the Akron Beacon is the original Knight newspaper,” said Debra Adams Simmons, its editor.19 The mood was darker in Philadelphia, where residents worried that they would lose the Daily News altogether and journalists at both papers feared for their jobs. Yet the Inquirer staff had grounds for hope. The Newspaper Guild-Communications Workers of America, which had been actively seeking a way to manage its own dailies, and the Yucaipa Companies, the private equity firm cofounded by the California billionaire Ron Burkle and known for its socially conscious investments, partnered to make a competitive bid for all twelve of the orphaned newspapers.20 According to Henry Holcomb, an Inquirer reporter and the head of the local Guild, the union was “in an even stronger position to create a new privately held company,” and its proposal “would prove best for [its] members, advertisers, readers, and the regions that these newspapers serve.”21 If successful, the venture would result in the first major chain of employee-owned newspapers, giving Guild members the chance to wager their futures on their own journalism.
They never had a chance to put their money down. In April, McClatchy announced that it would sell four newspapers—the San Jose Mercury News, the Monterey County Herald, the Contra Costa Times (all in Northern California), and the St. Paul Pioneer Press—to MediaNews Group, which already owned nine newspapers in the San Francisco Bay Area, for $1 billion. The deal, which MediaNews made with two other investors, Gannett and the Stephens Media Group, was financed by exchanging assets with the Hearst Corporation, giving MediaNews the fourth-highest circulation of all U.S. newspaper companies, with fifty-three dailies reaching 2.7 million readers on weekdays and 3 million on Sundays. The news did not go over well at the four newspapers, where staff favored either prospective local bidders or Yucaipa. MediaNews CEO William Dean Singleton was known as a “merciless cost-cutter,” wrote one of his new employees, the Mercury News reporter Mike Cassidy. “[He is] a man who strangles quality journalism by cutting staff and salaries and by closing news operations,” but who can also save papers by making them more profitable. The Newspaper Guild denounced the deal as “bad news for newspaper workers, readers, advertisers, and for our communities,” and called for the U.S. Department of Justice to investigate whether it met legal standards of fairness, transparency, and fiduciary responsibility to shareholders. “The newspaper industry is dominated by a small circle of ownership groups,” explained Newspaper Guild president Linda Foley on the day after the sale was reported. “Yesterday’s news drew that circle even smaller.”22
Industry analysts believed that Singleton’s interest in the Bay Area properties stemmed from the opportunities it presented to consolidate operations. The Los Angeles Times reported that the acquisition bore two “hallmarks” of Singleton’s investment strategy: “It allows him to save money by combining resources at newspapers that are close to each other, and it has the potential to soften the competition from a well-financed neighbor.” Had it not been part of the deal, Hearst, which owns the San Francisco Chronicle, would have been the prime candidate to charge MediaNews with antitrust violations in the Bay Area market, where, the Chronicle wrote, it now holds “a commanding position.”23
The bidding for Philadelphia’s two newspapers lasted until the last week of May 2006. Early in the month, the city’s journalists and civic groups expressed outrage at a proposal from Onex, a Toronto investment firm that asked local Teamsters to promise that its drivers, pressmen, and mailers would accept massive layoffs in the Inquirer and Daily News newsrooms in exchange for preserving their own jobs. The Teamsters not only refused but publicly denounced the offer, and Onex backed off. On May 23, McClatchy announced that it would sell the papers for $515 million to Philadelphia Media Holdings, a group of local investors led by the public relations enterpreneur Brian Tierney, restoring locally owned and operated newspapers to the city. Joe Natoli, the publisher of the Inquirer, immediately e-mailed an enthusiastic message to his staff. “Now, we know who our new owners will be. They are local people who care about our city and region. They believe in our future and in the future of quality journalism … They also know full well that we are about to become a laboratory for newspaper local ownership that will be watched intently by others. It’s a terrific opportunity for us to show what we can do.”
IN THE ALT WEEKLIES MARKET, NO LONGER “THE LAST UNCONSOLI-dated niche” in American media, a new giant has already emerged, and the Village Voice was its first major conquest. Between November 2005, when Michael Lacey and the former New Times management announced that they would take over the Village Voice Media chain, and April 2006, seventeen Voice employees (out of sixty editorial workers listed on the masthead) either resigned or were fired in what some staffers called a purge. The list of the departed includes some of the Voice’s most celebrated journalists, including Editor in Chief Don Forst, the media critic-columnist Sydney Schanberg, and the Washington correspondent James Ridgeway, who had worked more than thirty years at the paper before being fired in April. Twenty staff members protested Ridgeway’s dismissal with an open letter calling for his reinstatement, and others charged that Lacey was clearing out the political progressives whose commentary and reporting, which had long defined the Voice, was out of sync with the libertarian, antiactivist philosophy that had defined the New Times. Lacey publicly insisted that the changes were designed to increase the amount of local reporting in the Voice—an admirable goal that won him praise from some media critics, even though they noted, ironically, that the publication that helped pioneer media criticism and political commentary might soon lose both. Yet Voice staffers questioned whether Lacey would back up this rhetoric, since New Times had a reputation for maintaining small, overworked editorial staffs and Lacey showed no signs of hiring a wave of new journalists to replace the departed writers. “I hate to be blunt about it,” said former Voice editor in chief Karen Durbin. “[Lacey] wants to cut the budget and fatten profits.” When he fired the Voice’s three fact-checkers and two of the five copy editors, Lacey’s commitment to local journalism looked all the more suspect.24
As he did in San Francisco, Lacey entered the New York alt weekly scene prepared to do battle—only this time he would be fighting his own employees. Speaking on the independent radio news program Demcoracy Now! Schanberg described how the conflict with Lacey unfolded once he took control. “Mr. Lacey came in and very quickly told the staff that he was disappointed and appalled by the fact that the front of the book was all commentary and that he wanted hard news … He was insulting to the staff. He figuratively or in effect called them stenographers. He said they had to stop being stenographers … I objected to that, because that was so insulting, and I said that you can criticize any news staff in some ways, but the one thing that you couldn’t call the Village Voice staff was a staff of stenographers … And he said, ‘So, I’m unfair.’ And then he added, he said, ‘Look, I don’t care what rouses you, even if it’s getting pissed off at me.’ And I said, ‘I’m not pissed off at you. I don’t even know you.’ And he really had this huge one-ton or two-ton chip on his shoulder … he was totally insecure. And he gave the impression that he didn’t understand the Voice and he didn’t understand New York, and he didn’t want to … And he said a lot of other things. He told the staff that they better prepare themselves to say goodbye to some of their friends.”25 Sure enough, on August 31 the Voice fired eight more poeple, including senior editor and veteran music writer Robert Christgau, who began working at the paper in 1969; theater editor Jorge Morales; dance editor Elizabeth Zimmer; book editor Ed Park; and art director Minh Uong. Tom Robbins, the Voice’s union steward, said that the spate of terminations “cuts the heart right out of the paper,” and media critics declared that the wave of downsizing left the paper “gutted.” The Voice’s iconoclasts had survived Clay Felker, Rupert Murdoch, and a revolving group of investment bankers, but the new chain management appears to have succeeded in crushing their spirits.
BY 2006 THE NATION’S LARGEST TELEPHONE AND CABLE COMPANIES WERE using all their political muscle to crush “Internet freedom,” lobbying to pass federal legislation that would allow Internet providers to block, slow down, or charge extra for access to goods, services, and content from their competitors and critics. In most democratic societies, Internet service providers maintain the “pipes” but do not control what goes into or out of them. “The superabundance of content in the Internet’s ecosystem is best explained by its organizing principle,” writes the historian of technology Randall Stross, in which “rather than having network operators select content providers on our behalf—the philosophy of the local cable company—the Internet allows all of us to act as our own network programmers, serving a demographic of just one person.”26 In 2006, however, major cable and telecommunications companies such as Verizon Communications, Comcast, BellSouth, and AT&T (the latter two companies proposed a $67-billion “megamerger” in March 2006) lobbied Congress to pass legislation allowing them to offer customers faster access to their own sites as well as to those from companies willing to pay for high-speed delivery. In such a system, commercial companies, nonprofits, political organizations, bloggers, and civic groups that are unwilling or unable to pay providers a premium fee would have no choice but to offer a degraded, slower service. Moreover, they would face the threat that any given provider could block access to their sites altogether, without cause.
“The phone and cable lobbies have deliberately gone to the FCC to remove the fundamental regulations, which were the foundation of the Internet,” said Jeff Chester, the executive director of the Center for Digital Democracy. “The Internet was required to operate as a nondiscriminatory medium. The Internet, as we knew it, grew up over telephone lines. Those lines were regulated by the FCC. Phone companies had to treat all content equitably. That’s why you could have start-ups like Google or Amazon. Anybody could create a website, create a service, put their content out there. The fact that you would have to treat all content equitably was a serious threat to the plans of cable and telephone companies, because their business is based on a monopoly … So they went to the Bush FCC, first under Michael Powell, now under current chair Kevin Martin, and they eliminated the prohibition … so they can discriminate.”27
“Let’s say Comcast develops its own music downloading service to compete with Apple’s iTunes,” said Tim Karr, the campaign director for Free Press, when we met in Manhattan. “Without network neutrality they could effectively make their service so much faster than iTunes that no one on Comcast would buy Apple’s product again. They could do the same thing with video-on-demand services. It’s not just media. A cable or telecommunications giant could use its position to partner with other companies or expand its business by providing its own Internet services—for travel, shopping, books, you name it. It would make competition a joke.”
The end of network neutrality could also slow innovation on the Internet, where many of the most powerful business, educational, and social applications—including sites such as eBay, MySpace, Friendster, and Skype—were developed by amateur inventers and independent entrepreneurs who tested their experiments in the open digital network. “Think about something like video-blogging,” said Karr. “It’s a new, exciting source of independent media, a way to make local news and original entertainment. We’re just starting to see the best of them circulate to millions of people through the Net. It could develop into something big. But if Internet providers charge content producers extra for posting videos, that would likely kill independent v-blogging before it has a chance. We’d never know what it could do.” In the near future more consumers will use broadband Internet services to access programs they used to watch only on television, blurring the lines between the media. Whether the World Wide Web of the future operates more like current cable television systems, in which the provider chooses the menu of consumer choices, or the current Internet, in which the consumer is free to choose whatever content she can find, will be determined by the outcome of the debate on Internet freedom.
Community organizations and political action committees across the spectrum are even more concerned about discrimination by Internet services. “Our ability to be effective depends on our grassroots organizing,” said Craig Fields, the director of Internet operations for Gun Owners of America, the nation’s second-largest gun rights advocacy group. During a news conference call in February 2006, Fields explained: “The Internet has been a boon for us. There used to be issues we couldn’t get into because we didn’t have time to do a mail campaign. Now we can organize huge campaigns online.” Fields worried, however, that there are only “a handful of telecommunications companies, all of which have antigun policies,” and therefore might “shut out people and organizations” whose projects they oppose. “We’re on the far right,” Fields reported, “but we need government intervention to ensure the freedom of ideas. What Congress is getting ready to do [by legalizing discrimination among Internet providers] is basically un-American.” Gun Owners of America has little in common with MoveOn.org Civic Action, yet its members are happy to work with the gun owners if it helps keep the Internet free. “People who have never been politically involved before are signing up for this fight because the free and open Internet as we know it is under attack,” said its executive director, Eli Pariser.28
Fears of political censorship on the Internet are not hypothetical, and China is not the only place where Internet providers seal off sites that challenge their interests. In Canada, where there are no network neutrality protections, the telecommunications giant Telus blocked its subscribers’ access to a Web site maintained by the Telecommunications Workers Union when its workers went on strike in July 2005. The British Columbia Civil Liberties Assocation issued a public statement calling for Telus to stop the heavy-handed practice: “The merits of the labour dispute are not our issue. We are concerned about freedom of expression. The media report that there is acrimony on both sides of the fence on this issue. But as always, we advocate fighting speech with speech.”29 Yet Telus was under no legal obligation to do so, and if U.S. cable and telecommunications giants have their way, American service providers will be able to discriminate as they choose, too.
In April 2006 civic organizations including the Gun Owners of America, Free Press, the Parents Television Council, MoveOn.org Civic Action, National Religious Broadcasters, Consumers Union, Afro-Netizen, the American Library Association, and the Center for Digital Democracy formed the Savethelnternet.com Coalition to mount a campaign for legislation ensuring Internet freedom. During its first week, more than 250,000 people signed a petition calling for the House of Representatives Committee on Energy and Commerce to pass an amendment sponsored by the Massachussetts Democrat Ed Markey, which would add network neutrality protections to a proposed communications bill. The committee, voting largely along party lines, rejected the proposal. “The major telephone and cable companies are too powerful in the House,” wrote Josh Silver, of Free Press, in an e-mail announcing that the group would soon mount a larger campaign in the Senate. “They have spent hundreds of millions of dollars in lobbying, campaign contributions, and advertising to pass this legislation.”
“It’s shocking that the House continues to deny the will of the people on an issue that affects everyone so directly—protecting the free and open Internet,” added Pariser, from MoveOn, who was already preparing for the next round. “Our bipartisan coalition will rally the online community like it’s never been rallied before, and together the public will overturn today’s enormous blow to the freedom principle that’s made the Internet great.”
The Savethelnternet.com Coalition got its biggest boost when the Senate Commerce Committee debated network neutrality in June 2006. Ted Stevens, a Republican from Alaska, cast a decisive vote that prevented the committee from writing network neutrality provisions into its proposed telecommunications bill. Yet the explanation Stevens gave for his vote revealed such a fundamental misunderstanding of how the Internet works that it backfired, generating unprecedented publicity and support for the Internet Freedom campaign. Speaking on the Senate floor, Stevens declared: “I just the other day got, an Internet was sent by my staff at ten o’clock in the morning on Friday and I just got it yesterday. Why? Because it got tangled up with all these things going on the Internet commercially. … They want to deliver vast amounts of information over the Internet. And again, the Internet is not something you just dump something on. It’s not a truck. It’s a series of tubes.” Bloggers and late night comedians had so much fun cracking jokes about this comment—which would have been even more humorous had it not come from a man responsible for regulating the Internet—that within days millions of citizens had learned about the public benefits of network neutrality legislation, and members of Congress who had previously opposed it began changing their position.
THE FIGHT OVER INTERNET FREEDOM BROUGHT EVEN MORE CITIZENS into the media reform movement and renewed the alliance between conservative, liberal, and progressive groups. Eli Pariser said that he sees an extraordinary spike in activity in his organization, MoveOn.org, whenever it takes up a media policy issue, and members pushed the organization to launch the Media Action caucus in 2005. “We have fifty thousand core members in Media Action,” said Noah Winer, its twenty-eight-year-old director, who joined MoveOn.org when he was twenty-three and working as an environmental science teacher in East Brooklyn. “They’re the ones who always want to get involved,” he told me. “Then there’s a bigger circle of people who have taken action on one of our media projects—the ownership fight at the FCC, getting one of our political ads aired on the Super Bowl [CBS said it had a policy against accepting advocacy advertisement], our Fox Watch campaign, our Sinclair campaign—and that’s close to five hundred thousand.”
The Media Action campaign is special because its mission is to promote vigorous watchdog journalism at the local and national level, and to protest when it is threatened. “Because of the debates about media bias,” Winer explained, “grassroots media reform groups tend to come across as antijournalism—they want different coverage of their own issues and are really trying to work the refs. We believe in good journalism. We want to stand on the side of journalists, to protect them.” One of the project’s first major campaigns involved the Tribune Company, which announced plans to lay off employees in eight cities during 2005. “They kept saying that they had to fire people, that it was inevitable because of the Internet. They contend that they can cut jobs and preserve the same quality. It’s just an absurd claim; it means that the employees they were firing had no impact, none. Our frame was not job loss; it was journalism loss. Losing their jobs would undermine the quality of local reporting. We did eight petitions, one for each city. We drafted letters for each place, listing how much money the company was making. Tribune had actually increased their profits from the year before by $93 million! And we delivered the petitions at the Credit Suisse media investment meetings in New York. I asked [Tribune’s president and CEO] Dennis FitzSimons if he would meet with his customers to talk about this, and he said no. But this is not just about Tribune. We’re looking ahead.”
SO ARE THE MAJOR MEDIA CONGLOMERATES AND THE FCC. KEVIN Martin, who spent his first year as FCC chairman clamping down on indecency in broadcasting and even exploring ways to sanction cable and satellite companies for violating government standards, began to publicize his support for eliminating the cross-ownership ban and entrusting consolidators to serve the public interest on their own volition. In April 2006 Martin told publishers at the Newspapers Association of America conference in Chicago that he was committed to repealing the restrictions, but that they had to do a better job persuading the American people. “The failure to implement these rule changes is not our fault alone,” said Martin, who surprised industry leaders by lobbying for better public relations support. “The public is not convinced of the need to change these rules, and if you can’t convince the public, our chances to do that are dim.”30
On June 21, 2006, Kevin Martin announced that the FCC would begin considering rule changes to the nation’s media ownership policies. The chairman promised to hold six public hearings and commission studies of local media markets over a four-month period, pledging to “begin this dialogue in a neutral and even-handed fashion.” Copps and Adelstein, all too aware that Martin had been rallying media executives to publicize their arguments for eliminating the newspaper-broadcast cross-ownership caps, were skeptical, and they warned that, without public pressure, the FCC would issue a fast and nondemocratic decision once again.
Immediately, leaders in every major media industry stepped up their entrepreneurial political efforts to shape the cultural landscape. They were well prepared, since the previous year Eddie Fritts, who headed the National Association of Broadcasters for twenty-three years, predicted that the FCC’s new review “has the potential to re-shape every communications company on the globe. Because of the complexity and enormity of this endeavor, many predict it will take months, if not years to finalize a package. I happen to believe we have both challenges and opportunities, but make no mistake … This could be ‘the mother of all legislative battles.’”31
Citizens and civic groups will have to be more active and better organized than ever to influence the political debate over the future of media. Before the 2006 debate began, the last time that the FCC had formally invited the public to speak out on the state of local media was July 2004 in Monterey, California, and—as usual—neither then chairman Michael Powell nor the current chairman, Kevin Martin, showed up to listen.
More than three hundred people did appear, and many of them waited for hours as they assembled into a long column that extended around the block of the local convention center and then surged forward to fill the town hall. The hearing began slowly, as a large panel of invited officials issued formal statements, and a select group of media owners, scholars, and activists had their say. Then the public commentary began, each call for reform louder than the next, and the room began to buzz. The Monterey Herald—whose journalists were unaware that it would soon become part of the MediaNews chain—called the event “a bad night for Big Media … as two commissioners [Michael Copps and Jonathan Adelstein] and a crowd of hundreds excoriated broadcasters for being generally unresponsive to local issues.”32
Copps seized the moment, encouraging the boisterous crowd to redouble its efforts to demand the media they need and deserve. “I believe in my bones that few priorities our country confronts have such long-term importance to our democracy as how America communicates and converses with itself and how this process has deteriorated,” Copps declared. His voice was gravelly from years of crusading for media democracy, but his face was beaming, and his body pushed forward against the podium, as if preparing to launch. “After traveling the length and breadth of this country, I believe we have the best chance in our generation to settle the issue of who will control our media and for what purposes, and to resolve it in favor of airwaves of, by, and for the people of this great country. Let’s make it happen.”33