Commentary: A Test Case for Big Media: Bueno o Malo?

By Catherine Yang

As the Federal Communications Commission tees up a major vote on June 2 to relax a half-dozen rules restricting the size of TV, radio, and newspaper companies, a key test case for media consolidation is quietly unfolding. It might be called Big media: Bueno o malo? That's because it involves the pending $3.5 billion merger of leading Hispanic-TV giant Univision Communications Inc. with leading Spanish-language radio group Hispanic Broadcasting Corp., blessed by the Justice Dept. on Mar. 26 and now under review by the FCC.

Mostly, the merger has flown under the radar of the larger debate. But as the Hispanic population swells from 35 million (13% of the U.S.), to an expected 25% of all Americans in 2020, such a combination could threaten competition in this growing market. The FCC can't afford to rubber-stamp the deal, lest it shrink the spectrum of news and entertainment available to an important audience. Says Commissioner Jonathan S. Adelstein, one of two Democrats on the five-member FCC: "We need to take extra care that we don't allow a single gatekeeper to control access to those who speak Spanish."

Some red flags are already waving. After eight Hispanic lawmakers wrote a Mar. 20 letter to the FCC expressing concern for consolidation in Spanish-language media, some have not been invited to appear on Univision even though they had been regular guests on the network previously. They suspect the TV company is freezing them out -- a blow to politicians who depend on access to Latino voters. Univision says war coverage squeezed out much of its usual news programming. And it points out that its reach is paltry compared with English-language rivals like NBC, which owns the No. 2 Spanish-language broadcaster, Telemundo.

Still, to head off potential abuses of market power, the Justice Dept. has proposed a settlement. It is requesting that Los Angeles-based Univision whittle down its 27% holding of Entravision Communications Corp., whose 55 Spanish-language radio stations compete with HBC's 63 stations. The demand would require Univision to cut its stake to 10% in nonvoting stock within six years.

That doesn't stave off the danger of the Univision-HBC linkup, though. The $1 billion Univision empire controls the No. 1 Spanish-language broadcast and cable networks and Web site. And HBC is owned in part by U.S. radio colossus Clear Channel Communications Inc. A combined Univision-HBC would reach more than 80% of Hispanic viewers and listeners and rake in about 70% of Hispanic media's ad revenues. When Univision and HBC can offer advertisers one-stop-shopping promotions across their extensive holdings, smaller, independent Hispanic media outfits will have a tough time surviving, say critics. With such a powerful media juggernaut, "this merger will leave fewer diverse viewpoints for Hispanic audiences," says Gene Kimmelman, co-director of Consumers Union.

Spanish-language advertisers are worried, too, that a Fortress Univision would drive up rates -- now about 20% to 25% below those of mainstream media, according to market researcher CMR/TNS. "There will be one well to drink from," says Liza M. Santana, president of Creativas Group Inc., a startup Spanish-language ad agency. Univision counters that its growing empire will benefit competitors, too, by attracting more mainstream ad dollars to Hispanic media.

As the FCC reviews the pending Univision-HBC merger, it may be tempting to view the deal as merely a niche in the vast U.S. media market. But the merger will make big waves in the Spanish-language market. An easy pass on the Univision-HBC combo might inadvertently stifle a healthy array of viewpoints -- and show just how much is at stake in the FCC's critical June 2 vote.

Yang covers media regulation from Washington.

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