Commentary: Media Ownership: Why Bigger Is a Big Mistake

By Catherine Yang

Suddenly, media companies that have lived for years under rules restricting their reach see freedom just over the horizon. Regulators and the courts are now considering loosening rules that have limited cross-ownership among newspapers, broadcasters, and cable companies. In this new world, a cable operator would be able to serve over 30% of pay-TV viewers. A broadcaster may be able to beam to over 35% of the nation's viewers. Newspapers could own TV stations in their same markets. Cable companies would even be able to buy broadcasters and vice versa. The result would be an industry swamped by merger mania.

It's not a far-fetched vision. On Sept. 13, the Federal Communications Commission voted to reexamine currents caps on cable ownership as well as the ban on newspapers merging with broadcasters in the same market. A week earlier, the D.C. Court of Appeals heard challenges to the cap on national broadcast ownership and the ban on cable-and-broadcasting mergers. The rationale? Some regulators think the rise of new media outlets such as the Web make the limits obsolete. "Nobody can intellectually defend the proposition that the marketplace has not changed dramatically," says FCC Chairman Michael K. Powell.

But regulators still need to ensure the original objective of the old rules: a broad spectrum of viewpoints--made possible, in part, by diverse ownership of the media. If they think the rise of the Net guarantees a multitude of independent voices to counter a fast-consolidating Old Media, they're wrong. The Web is no longer the pristinely entrepreneurial phenomenon many people still like to imagine. Big media, such as AOL Time Warner Inc. (AOL ), already control the content many online users get. Without these rules, "a handful of Old Media giants become tomorrow's New Media powerhouses," says Jeff Chester, executive director of the Center for Digital Media, which advocates competition in online media.

If the feds are adamant about dismantling existing rules, they should weigh the impact of such a move not just on traditional media markets but on the development of future digital markets. Consider that most of the news people get on the Net comes from existing media giants. The top news Web sites--msnbc.com, cnn.com, nytimes.com, abcnews.com, usatoday.com--command from 3 million to 10 million visitors per month, according to Jupiter Media Metrix. Contrast that with New York-based OnlineTV Inc., one of the few independent sites that provided Webcast footage of the World Trade Center attack rather than TV news clips. OnlineTV, which usually offers entertainment fare, got only 334,000 hits that day, says CEO Rick Siegel. His company is barely making it on the $4.95 monthly fee its 31,000 registered users pay. Big media companies "will dominatethrough their ability to fund," says Siegel. "It's impossible to compete with them."

SAME STUFF. The proverbial low barriers to entry on the Net don't help much. It may cost only $100 to buy a Webcam to hook up to the Web, vs. big bucks for printing plants or TV gear. But independents typically can't deploy the network of correspondents needed to compete with the biggies. Moreover, financial success in mass media depends on reaching the biggest audience possible, and few little guys have the ready-made audience of say, AOL Time Warner. That merger in January gave familiar Time Warner brands, such as Time and CNN, access to AOL's 31 million subscribers--about half of all U.S. Internet users. The result: "The Internet basically offers the same content as a newsstand or TV set," says Vin Crosbie, president of Digital Deliverance LLC, a media consulting firm in Greenwich, Conn.

The time has passed to think the Web will democratize media. Policymakers need to preserve some limits on corporate ownership to ensure a spectrum of views not only in traditional media but in New Media, too.

Yang covers the FCC from Washington.

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