Regulating Diversity: The Effect of Retransmission Consent on the Consolidation of the Television Industry

Abstract

Diversity has been a guiding principle for communications policymakers since the Communications Act of 1934. However, neither the Federal Communications Commission (FCC) nor the Congress has ever defined the term as it relates to program content diversity. In part this is due to the FCC being limited in its ability to regulate content diversity due to the First Amendment. Rather, regulators look at structural diversity – source diversity and outlet diversity – as a proxy for content diversity (Kleiman, 1991, Le Duc, 1982). This indirect means of regulating content has been ineffective in improving diversity (Einstein, 2004, Biebly & Biebly, 2003). Yet, this means of regulation continues while there is no proof of a causal relationship between structure and content (Napoli, 1999). Even so, defining diversity becomes academic in an environment that depends primarily on advertising dollars for support. As Owen, Beebe, and Manning (1974) have said “competition under advertiser support tends to produce less diversity and more ‘wasteful duplication’ than is socially optimal.” This economic condition drives a sense of competition among program providers, thus serving their shareholders rather than the general public. Yet this does not have to be so. From a diversity perspective, “what would be in the public interest is presentation of all the programs that could command payments in excess of their costs of production and distribution” (Cass, 1981, p. 61), which one would expect would achieve optimization of diversity. This means, therefore, that programs do not have to generate a huge audience, just one that will sustain it. In the current media environment, however, it is becoming harder and harder for anyone other than the largest media institutions to cover their cost of business due to vertical integration. These large institutions make it impossible for small companies to compete because they would have to enter the business as a multi-level organization (Litman, 1998, see also Owen & Wildman, 1992, and Vogel, 2001). A number of media scholars have decried the limitations of marketplace (source) diversity brought about by this vertical integration (Bagdikian, 1992; McChesney, 1997; Miller, 1996), and it is structural regulation that is bringing this to pass. The most recent regulation to contribute to the consolidation of the television industry is retransmission consent. Originally created to provide an equitable marketplace between broadcasting and cable by creating parity in revenue streams (and thus maintaining source diversity), instead it has led to increased consolidation among broadcast and cable program providers. This study is a historical analysis of the rules and their impact on consolidation within the television industry.