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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
March 2010:
Media Programming:
Factors Influencing the Availability of Independent Programming in
Television and Programming Decisions in Radio:
GAO-10-369:
GAO Highlights:
Highlights of GAO-10-369, a report to congressional requesters.
Why GAO Did This Study:
The media industry plays a vital role in informing and entertaining
the public. Media ownership and the availability of diverse
programming have been a long-standing concern of Congress. Despite
numerous programming choices in television and radio available to the
public, some studies have reported that independently produced
programming-—that is, programming not affiliated with broadcast
networks or cable operators—has decreased through the years. This
requested report discusses (1) the extent to which the sources of
television programming have changed over the last decade, (2) the
factors industry stakeholders identified as affecting the availability
of independent television programming, and (3) the factors industry
stakeholders identified as influencing programming decisions in radio.
To address these issues, GAO analyzed data from the Federal
Communications Commission (FCC) and industry on sources of broadcast
television programming in prime time (weeknights generally from 8:00
p.m. to 11:00 p.m.) and companies owning cable networks, as well as
radio format data to determine programming variety. GAO also reviewed
legal, agency, and industry documents and interviewed industry
stakeholders, public interest groups, and others.
GAO provided FCC with a draft of this report for comment. In response,
FCC provided technical comments that we incorporated where appropriate.
What GAO Found:
The sources of broadcast and basic cable television programming have
changed little in recent years. As a source of programming for prime
time television, major broadcasters (ABC, CBS, Fox, and NBC) and their
affiliated studios produced the majority of programming in each of the
selected years that GAO analyzed. In particular, GAO found major
broadcasters produced about 76 to 84 percent of prime time programming
hours. The remaining programming came from independent producers,
which are not affiliated with the major broadcasters. Since basic
cable networks are also a source of television programming, GAO
analyzed the ownership of those networks as an indicator of which
entities control the television programming. On the basis of GAO
analysis of ownership in the 20 most widely distributed basic cable
networks, major broadcasters and companies affiliated with both major
broadcasters and cable operators have owned half or more of the top 20
cable networks for each year reviewed. Combining ownership in both
prime time programming and basic cable networks, the major
broadcasters have controlled a significant share of television
programming over the last decade.
Stakeholders primarily cited economic factors as influencing the
availability of independent television programming. In this regard,
producers GAO contacted stated that developing and producing broadcast
television programs is costly and financially risky. And while funds
need to be secured early on in the development and production process
to finance these costs, independent producers stressed that it is
difficult to obtain financing for production costs. For cable
television (viewed through a subscription video service),
representatives of independent cable networks said a new network faces
considerable uncertainty as to whether it will be distributed by a
sufficient number of video providers (such as Comcast and DirecTV) to
make its operations viable. By contrast, cable networks developed by
cable operators or major broadcasters are able to negotiate
distribution of the network with video providers as part of an
agreement for distribution of an established affiliated network.
For radio, stakeholders cited economic factors, local community
interests, and consolidation in the radio industry as influences on
programming decisions. Among both commercial and public radio
stations, stakeholders said that programming decisions are based on
listeners’ interests in a given market. GAO found that within two of
the three largest local markets nationwide, many of the most common
local radio formats differ from the most common radio formats
nationally, indicating that programming decisions are affected by
local community interests. Over the last 10 years there has been
consolidation in the radio industry; however, stakeholders’ opinions
varied about the extent to which consolidation has affected
programming decisions. While some studies show that consolidation has
led to homogenized radio playlists in different markets nationwide,
GAO’s analysis shows diverse formats and preferences are reflected
within individual local markets.
View [hyperlink, http://www.gao.gov/products/GAO-10-369] or key
components. For more information, contact David J. Wise at (202) 512-
2834 or wised@gao.gov.
[End of section]
Contents:
Letter:
Background:
Sources of Broadcast and Cable Television Programming Have Changed
Little in the Last Decade:
Stakeholders Cited Economic Factors, Technical Issues, and Legal
Conditions as Affecting the Availability of Independent Television
Programming:
Stakeholders Cited Various Factors as Influencing Programming
Decisions, Including Format and Playlist Selection, in Commercial and
Public Radio:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Registered Marks Used in the Report:
Appendix III: Comments from the Federal Communications Commission:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Glossary of Terms:
Table 2: Top 10 Radio Station Owners in 2009 and Number of Stations
Owned in 2007-2009:
Table 3: Percentage of Format Overlap among Top 10 Radio Station
Owners in 2009:
Table 4: Experts and Industry Stakeholders We Contacted:
Figures:
Figure 1: Television Programming in Broadcast and Subscription Video
Service:
Figure 2: Annual Broadcasting Program Development Process for Scripted
Programming:
Figure 3: Percentage of Broadcast Prime Time Program Hours Provided by
Major Broadcaster-Affiliated Studios and Independent Producers for
2002, 2005, 2008, and 2009:
Figure 4: Top Five Owners of Basic Cable Networks and the Number of
Cable Networks They Have Owned from 1998 to 2008:
Figure 5: Number of Networks by Ownership Interest in the Top 20 Most
Widely Distributed Basic Cable Networks:
Figure 6: Most Popular Formats Nationwide in 2009:
Figure 7: Most Popular Formats in Arbitron Market 1 (New York) and
Arbitron Market 3 (Chicago) in 2009:
Figure 8: Top 10 Formats among Commercial and Public Radio Stations:
Figure 9: Share of Commercial Radio Stations Owned by Top 10 Radio
Station Owners for Selected Years:
Abbreviations:
BIAfn: Broadcast Investment Analyst Financial Network:
FCC: Federal Communications Commission:
MSA: Metropolitan Statistical Area:
NPR: National Public Radio:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
March 17, 2010:
The Honorable Patrick J. Leahy:
Chairman:
Committee on the Judiciary:
United States Senate:
The Honorable Herbert Kohl:
Chairman:
Subcommittee on Antitrust, Competition Policy, and Consumer Rights:
Committee on the Judiciary:
United States Senate:
The Honorable Byron L. Dorgan:
United States Senate:
The media industry plays an important role in educating and
entertaining the public. Given this vital role, the ownership of media
outlets and the availability of diverse programming in the media have
been a long-standing concern of Congress. One such concern, in
particular, is that with consolidation in the media industry, the
percentage of independently produced programming content on media
outlets has decreased, thus limiting the number of distinct media
voices and selection choices for the public. [Footnote 1] In 1995, the
Federal Communications Commission (FCC) repealed the Financial-
Syndication Rules, thereby allowing broadcast networks to have
ownership interests in television programs during prime time.[Footnote
2] In addition, the Telecommunications Act of 1996, among other
things, directed FCC to conduct a rulemaking to evaluate local limits
of ownership in television and relaxed the ownership limits in local
radio stations, leading to consolidation in some segments of the media
industry.[Footnote 3] For example, prior to the act, the largest radio
station owner owned fewer than 65 radio stations, whereas in 2009, the
largest radio station owner owned over 800 stations, raising concerns
about the variety of programming available on the radio. Although the
current media environment provides the public with numerous
programming choices in television and radio, and over the Internet,
some media industry stakeholders and studies have reported that
independently produced programming has decreased through the years as
a result of media consolidation.
You requested that we study the state of programming for television
and radio and the factors influencing programming decisions. As such,
we reviewed (1) the extent to which the sources of programming in
television have changed over the last decade, (2) the factors and
conditions industry stakeholders identified as affecting the
availability of independent programming in television, and (3) the
factors industry stakeholders identified as influencing programming
decisions in radio.
To determine the extent to which the sources of programming in
television have changed during the last decade, we analyzed available
data on two key sources of television programming--companies producing
prime time television programs for major broadcast networks[Footnote
4] and companies with basic cable network[Footnote 5] ownership
interests over the last decade. We focused on programs broadcasted on
prime time because that is the block of time on television with
generally the most viewers, and in turn these programs generate the
most advertisement revenue for networks.[Footnote 6] To determine
which companies produced prime time broadcast television programming,
we classified prime time programs into two categories: (1) programs
produced by major broadcasters, and (2) programs produced by
independent production companies not affiliated with a major
broadcaster (independent producers). Because annual data that track
program production in these categories are limited, we analyzed the
fall prime time schedules in 2002, 2005, 2008, and 2009 and classified
them in the two categories. We selected these years based on available
data from FCC's previous study that contained data in the two
categories for 2002. We then conducted our analysis for every third
year and classified the programs into the two categories. We also
analyzed the 2009 fall prime time schedule to provide the most current
data available. Since basic cable networks are also a source of
television programming, we analyzed the ownership of those networks as
an indicator of which entities control the television programming on
the networks. Specifically, we used data from SNL Kagan to determine
the types and the number of companies with ownership interests in
basic cable networks that were available from 1998 to 2008, and the
companies that owned the largest number of basic cable networks during
this period.[Footnote 7] Of the 20 most widely distributed basic cable
networks, as measured by the number of subscribers for each year from
1998 to 2008, we determined how many were affiliated with major
broadcasters, cable operators, and other media companies and how many
were unaffiliated independent cable networks.
To determine the factors industry stakeholders identified as affecting
the availability of independent programming in television, and as
influencing programming decisions in radio, we met with FCC officials
and interviewed or obtained written comments from selected academic
experts and industry stakeholders and associations, including
representatives from broadcasting (such as ABC and Fox), cable and
satellite (such as Comcast and DirecTV), commercial and public radio
(such as Clear Channel Communications and National Public Radio),
independent programming groups (such as Future of Music Coalition and
Independent Film and Television Alliance), and public interest groups
(such as Consumers Union and Free Press). See appendix I for a
complete list of academic experts and industry stakeholders we
contacted. We selected experts and industry stakeholders based on
published studies, representation of the different segments of the
media (i.e., broadcast and cable televisions and radio), and
recommendations from other industry stakeholders; we intended to
obtain diverse views and did not weight views of the experts and
stakeholders but grouped similar stakeholders that represent a segment
of the media industry. We also reviewed the relevant laws,
regulations, and literature, including comments filed by stakeholders
in various FCC proceedings. Additionally, for radio, we focused on
radio station formats indicating the types of programming a station
might play.[Footnote 8] To conduct this analysis, we obtained
historical data on the distribution of radio stations by their primary
formats nationwide and in local markets from 1999 to 2003 and station-
level format data from the Broadcast Investment Analyst Financial
Network's (BIAfn) Media Access Pro Database for commercial and public
radio stations from 2004 to 2009. Although the BIAfn format data
provide a general overview of the type of programming aired on a given
radio station, they do not identify specific programming content that
is played on the station. We did not assess independently produced
programming on radio because a national playlist database identifying
record label affiliation is not available. We analyzed the format data
to determine programming variety and distribution of radio stations by
their format nationwide and in two selected local markets in 2009.
[Footnote 9] For local markets, we selected New York and Chicago
because they are similar in size with different demographic
populations. We also examined 2009 format data for commercial and
public radio stations and identified the top 10 most popular formats
(based on the number of stations with the particular formats
available) for each group nationwide.[Footnote 10] To examine the
extent of programming variety among radio stations, we selected the
top 10 radio station owners--that is, owners who own the most radio
stations nationwide--and examined similarities and differences in
formats for each owner's radio stations in the same market. To
identify the top 10 radio station owners in 1996-1998, 2000-2002,
2007, and 2009 we used data from FCC reports and the BIAfn database.
The top 10 radio station ownership data were not available in 2003-
2006 and 2008. We also reviewed studies on radio programming for
information on radio station playlists and the extent to which
playlists for each owner's radio stations overlap in the same market.
We determined that the television and radio data we obtained were
sufficiently reliable for the purposes of this report.
We conducted our work from May 2009 to March 2010 in accordance with
all sections of GAO's Quality Assurance Framework that are relevant to
our objectives. The framework requires that we plan and perform the
engagement to obtain sufficient and appropriate evidence to meet our
stated objectives and discuss any limitations in our work. We believe
that the information and data obtained, and the analysis conducted,
provide a reasonable basis for any findings and conclusions in this
product. Appendix I contains a more detailed discussion of our
objectives, scope, and methodology.
Background:
The media industry has its own terminology, and the following glossary
provides the definition of terms used throughout this report:
Table 1: Glossary of Terms:
Term: Basic cable network;
Definition: An organization that may produce television programs,
which are distributed to the public through a subscription video
service.
Term: Independent cable network;
Definition: An organization that is not affiliated with major
broadcasters, cable operators, or satellite providers.
Term: Radio station format;
Definition: Type of programming content on a radio station, such as
Adult Contemporary, Country, Jazz, News and Information, Sports, Talk,
and so forth.
Term: Public radio stations;
Definition: Locally owned and operated stations that receive some or
all of their funding from listener contributions, the federal
government, or other sources. Some public radio stations are
affiliated with National Public Radio, which is a national radio
service that provides station programming content.
Term: Multichannel video programming distributors (referred to as
video providers in this report);
Definition: Entities such as a cable operator, a direct broadcast
satellite service, or telecommunications company that distributes
video programming to subscribers for a subscription fee.
Term: Scripted programming;
Definition: Programs that are developed based on written scripts by
writers and producers and include different program genres, including
comedy and drama.
Term: Nonscripted programming;
Definition: Programs that are not based on written scripts, such as
reality programs, game shows, and sports.
Term: Arbitron radio market;
Definition: A geographically contiguous area in which the listenership
of radio stations is surveyed for ratings by Arbitron Inc.
Source: GAO based on FCC and industry information.
[End of table]
Typically, the general public views television programming through
broadcast or subscription video service. Broadcast television provides
free over-the-air programming to the public through local television
stations. By contrast, consumers pay fees for subscription video
service to video providers, including cable operators, satellite
providers, or telecommunications companies. Programming for broadcast
and subscription video service differs, as illustrated in figure 1.
Figure 1: Television Programming in Broadcast and Subscription Video
Service:
[Refer to PDF for image: illustration]
Broadcast television:
* Program producers: Studios, producers, writers, and actors;
* Major broadcast networks: ABC, CBS, FOX, and NBC;
* Local television stations:
- Network-affiliated stations;
- Unaffiliated stations;
* Consumers.
Subscription video service:
* Program producers: Studios, producers, writers, and actors;
* Cable networks: Includes basic networks such as ESPN, MTV,
Discovery, and other networks;
* Multichannel video programming distributors (includes Major
broadcast networks and local television stations):
- Cable operators, such as Comcast, Time Warner;
- Satellite providers: DirecTV and DISH Network;
- Telecommunications companies, such as AT&T U-verse and Verizon FiOS;
* Consumers.
Source: FCC and GAO.
[End of figure]
Broadcast television consists mainly of four major broadcast networks
(ABC, CBS, Fox, and NBC) and several smaller networks, such as the CW
Television Network, MyNetworkTV, and ION Television. Each of the four
major broadcasters owns and operates some local television stations;
other stations can be affiliated with one of the major broadcasters
or, as is the case with public television, unaffiliated with the major
broadcasters.[Footnote 11] The four major broadcasters provide
scripted and nonscripted programming to the local television stations
that is produced either by the major broadcasters' affiliated
production companies or by independent producers. The development
process of scripted programs (i.e., drama and comedy series) for prime
time programming involves steps that allow major broadcasters to
periodically assess the program as it develops, as described in figure
2.
Figure 2: Annual Broadcasting Program Development Process for Scripted
Programming:
[Refer to PDF for image: illustration]
Producers, writers, and actors pitch ideas to major broadcasters:
* Approximately from June through November, each broadcaster gets
"pitched" with about 250-400 drama and 250-400 comedy program ideas.
In total, about 2,000 programming ideas are pitched to the
broadcasters.
Major broadcasters order scripts:
Each broadcaster will order between 40 and 75 comedy and 60 to 80
drama pilot scripts. Pilot scripts are delivered from November through
January.
Major broadcasters order pilot program:
Each broadcaster will order between 10 and 15 pilot comedies and 8-12
pilot dramas. Around mid-April, pilots are delivered to the
broadcasters.
Major broadcasters select programs after screening pilots:
Each broadcaster will select about 6 or 7 comedies and 6 or 7 dramas
for series production for the fall season lineup.
Major broadcasters present fall lineup schedule to advertisers in May:
Advertisers select the programs during which they want to air
commercials and purchase time slots from the broadcasters.
Source: GAO analysis of major broadcasters’ data.
[End of figure]
In contrast, the development process for nonscripted programs, such as
reality programs and game shows, does not involve most of the steps
shown in figure 2. Scripts and pilots do not need to be developed for
nonscripted programs, making them less expensive to produce than
scripted programs.
For subscription video service, video providers obtain a variety of
programming from both broadcasters (which can include major networks
and local stations) and cable networks.[Footnote 12] Video providers
must negotiate with broadcasters and cable networks to air and
distribute their programming. Negotiations include the price, terms,
and conditions for distribution on the video providers' systems. Video
providers have the discretion to select which cable networks will be
available and, subject to negotiation, how they will be packaged and
marketed to subscribers.[Footnote 13] According to a recent FCC
report, more than 500 cable networks exist, including national cable
networks (such as CNN, Discovery Channel, ESPN, and Fox News) as well
as regional cable networks (such as the California Channel, Comcast
SportsNet Chicago, and the YES Network). Cable networks can provide
niche programming--that is, programming that targets specific
demographics. For instance, Lifetime Network offers programming that
specifically targets women, while MTV Network targets programming for
the 18-to-34 age demographic.
The general public receives radio programming through commercial and
public radio stations. Over the last 5 years, the number of full-power
radio stations has increased from 13,590 in 2005 to over 14,600 in
2009, with the vast majority of these stations being commercial (78
percent, or 11,430 stations) and the remainder being public (22
percent, or 3,198 stations).[Footnote 14] Following passage of the
Telecommunications Act of 1996, concentration in radio station
ownership increased significantly because of the act's relaxation of
national and local multiple radio ownership limits.[Footnote 15] For
example, in 1996, the two largest radio station owners held fewer than
65 radio stations each. By contrast, as of 2009, Clear Channel
Communications Inc. owned over 800 radio stations (down from 1,135 in
2007), and the second largest group owner, Cumulus Broadcasting LLC,
owned about 300 radio stations (see table 2).[Footnote 16] In 2009,
the top 10 radio station owners owned 20 percent of all commercial
radio stations. In addition, each radio station has a primary
programming format designation that describes the programming content
on that station. For example, in 2009, radio station KQSD in Lowry,
South Dakota's, primary format was Classical, its secondary format was
News, and its tertiary format was Jazz. As such, the station primarily
plays Classical music, but it also provides some news and plays some
Jazz.
Table 2: Top 10 Radio Station Owners in 2009 and Number of Stations
Owned in 2007-2009:
Radio station owners: Clear Channel Communications Inc.;
2007: 1,135;
2008: 694;
2009: 847.
Radio station owners: Cumulus Broadcasting LLC;
2007: 306;
2008: 306;
2009: 305.
Radio station owners: Educational Media Foundation;
2007: 180;
2008: 205;
2009: 253.
Radio station owners: Citadel Communications;
2007: 212;
2008: 204;
2009: 205.
Radio station owners: American Family Association Inc.;
2007: 126;
2008: 130;
2009: 137.
Radio station owners: CBS Radio;
2007: 140;
2008: 140;
2009: 134.
Radio station owners: Entercom;
2007: 120;
2008: 115;
2009: 112.
Radio station owners: Salem Communications Corporation;
2007: 98;
2008: 97;
2009: 93.
Radio station owners: Saga Communications Inc.;
2007: 89;
2008: 91;
2009: 91.
Radio station owners: Cox Radio Inc.;
2007: 79;
2008: 79;
2009: 85.
Source: GAO analysis of BIAfn data.
[End of table]
FCC awards licenses to television and radio stations to use the
airwaves expressly on the condition that licenses serve the public
interest and licensees are responsive to the needs of its local
community. Toward this end, FCC has long identified localism,
competition, and diversity as its three core goals of media policy.
Within this framework, FCC has considered the public interest best
served by promoting free expression of diverse views and has promoted
program diversity by limiting the number of broadcast outlets any one
entity may own. As such, individual radio and television stations
generally have discretion to select programming and to determine how
best to serve the local community audience.
Since the mid-1990s, FCC has amended or repealed a number of rules and
regulations affecting the media industry. In 1995, FCC repealed the
Financial Interest and Syndication Rules (Fin-Syn rules)[Footnote 17]
so that a major broadcaster can own programming that it airs during
prime time hours, as well as own syndication rights to programs
purchased from independent producers.[Footnote 18] Following the
repeal of the Fin-Syn rules, each of the four major broadcasters
merged with, or acquired an ownership interest in, at least one major
production studio. For instance, the Walt Disney Company acquired ABC
and developed ABC Television Studio; CBS became affiliated with the
studio Paramount Television; and NBC merged with Universal Pictures.
In addition, News Corporation--which launched the Fox Broadcasting
Network in 1986--owns several production studios, including 20th
Century Fox. FCC is required to review media ownership rules every 4
years and determine whether those rules are necessary in the public
interest.[Footnote 19]
Although FCC regulates television primarily through ownership rules
and station licensing, some of its other rules also affect aspects of
television programming. Some of the key rules that affect programming
and carriage were adopted in 1992 and are summarized below.[Footnote
20]
* Retransmission consent and must carry rules.[Footnote 21] Under
these rules, every 3 years local commercial television stations
(including those owned and operated by the major broadcasters) must
decide whether to negotiate individual retransmission consent
agreements with each cable operator in its designated market area for
compensation in exchange for the cable operator's right to carry the
broadcast signal.[Footnote 22] In lieu of negotiation, stations may
elect to require each cable operator in its designated market area to
carry its signal (i.e., must carry), without receiving compensation
for such carriage.
* Program carriage rule.[Footnote 23] This rule prevents a video
provider from requiring a financial interest in programming or
coercing a programmer (i.e., cable network) to grant exclusive rights
as a condition for carriage, or from discriminating against an
independent cable network in a way that unreasonably restrains the
ability of the network to compete.
* Commercial leased access rule.[Footnote 24] Under this rule, cable
operators are required to set aside a certain number of channels,
depending on the size of the cable system, that can be leased out to
independent cable networks for access on its distribution system.
[Footnote 25] Congress has required FCC to (1) determine the maximum
reasonable rates that a cable operator may establish for commercial
use of the designated channels; (2) establish reasonable terms and
conditions for such use, including those for billing and collections;
and (3) establish procedures for the expedited resolution of disputes
concerning rates or carriage.[Footnote 26]
Sources of Broadcast and Cable Television Programming Have Changed
Little in the Last Decade:
Major Broadcasters and Their Affiliated Studios Have Produced the
Majority of Broadcast Prime Time Programming:
Major broadcasters and their affiliated studios have produced the
majority of broadcast prime time programming in each of the selected
years that we analyzed. In particular, major broadcaster-affiliated
studios produced from 76 to 84 percent of broadcast prime time
programming hours, with the remaining hours coming from independent
producers. As shown in figure 3, in most of the years that we
reviewed, the share of major broadcaster-produced prime time programs
did not change significantly. However in 2008, the prime time
programming from independent producers increased slightly compared
with such programming in 2005.
Figure 3: Percentage of Broadcast Prime Time Program Hours Provided by
Major Broadcaster-Affiliated Studios and Independent Producers for
2002, 2005, 2008, and 2009:
[Refer to PDF for image: vertical bar graph]
Selected year: 2002;
Percentage of broadcast prime time program hours, Major broadcaster-
affiliated studios: 86%;
Percentage of broadcast prime time program hours, Independent: 14%.
Selected year: 2005;
Percentage of broadcast prime time program hours, Major broadcaster-
affiliated studios: 82.2%;
Percentage of broadcast prime time program hours, Independent: 17.8%.
Selected year: 2008;
Percentage of broadcast prime time program hours, Major broadcaster-
affiliated studios: 76.3%;
Percentage of broadcast prime time program hours, Independent: 23.7%.
Selected year: 2009;
Percentage of broadcast prime time program hours, Major broadcaster-
affiliated studios: 82.5%;
Percentage of broadcast prime time program hours, Independent: 17.5%.
Source: GAO analysis of data from FCC Media Ownership Working Group
Report and International Television & Video Almanac used by permission
from Quigley Publishing Company.
Note: For each of the selected years, the independent category
includes studios, regardless of their size, that were not affiliated
with a major broadcaster. For example, Universal Television Studios
merged with NBC in 2004; therefore it was included in the independent
category in 2002 and in the broadcaster category in the other selected
years. Sony Pictures Television Studio is not affiliated with a major
broadcaster, so it is included in the independent category for shows
it produced in the selected years.
[End of figure]
For the fall 2009 broadcast prime time schedule, the top five program
producers as measured in prime time program hours were studios
affiliated with ABC, CBS, Fox, NBC, and Warner Bros.[Footnote 27]
These producers provided approximately 76 total programs, amounting to
about 82 percent, in the fall prime time schedule. We identified 11
prime time programs that fell into the independent producer category
for the fall 2009 prime time schedule. Of those, Sony Pictures
Television Studio produced 3 programs, and eight other independent
producers each supplied a program. Although most of the programs
produced during the years we reviewed were affiliated with major
broadcasters, a previous FCC-commissioned study indicated that the
number and affiliation of prime time programming producers has changed
significantly since the repeal of the Fin-Syn rules in 1995.[Footnote
28] The study found that in 1995, the top five program producers
provided about 54 percent of prime time programming, with three
producers affiliated with a major broadcaster.
Numerous Companies Own Cable Networks, but Major Broadcasters and
Their Affiliated Companies Have Continued to Own about Half of the
Most Widely Distributed Cable Networks:
Since basic cable networks are also a source of television
programming, we analyzed the ownership of those networks as an
indicator of which entities control the television programming on the
networks. On the basis of our analysis of ownership interests over the
last decade, we found that a number of companies have ownership
interests in a basic cable network (cable network), but a much smaller
group of companies have ownership interests in 5 or more such
networks.[Footnote 29] From 1998 to 2008, 94 companies on average have
owned an interest in at least 1 cable network. The number of companies
has declined somewhat over time, however, from a high of 106 companies
in 1998 to a low of 81 companies in 2008.[Footnote 30] Cable network
owners include owners of major broadcasters, such as News Corporation,
which owns Fox, and Walt Disney Company, which owns ABC; cable
operators, such as Comcast and Cablevision; owners of major
publications and television stations, such as Tribune Company and
Hearst Corporation; and other media companies, such as Liberty Media
Corporation and Scripps Networks Interactive. On the basis of our
analysis of all the companies with cable network ownership interests
from 1998 to 2008, we found a range of 11 to 13 companies that owned
an interest in 5 or more networks in at least 1 year. Of these
companies, we found a range of 5 to 7 companies that owned at least 12
cable networks over the decade. As shown in figure 4, the number of
basic cable networks owned by these top 5 companies has not changed
significantly over the last 11 years.
Figure 4: Top Five Owners of Basic Cable Networks and the Number of
Cable Networks They Have Owned from 1998 to 2008:
[Refer to PDF for image: stacked vertical bar graph]
Number of cable networks:
Year: 1998;
Walt Disney Company: 21;
Viacom Inc.: 23;
News Corporation: 17;
Hearst Corporation: 16;
Discovery Communications Inc.: 12;
Total: 89.
Year: 1999;
Walt Disney Company: 21;
Viacom Inc.: 23;
News Corporation: 17;
Hearst Corporation: 16;
Discovery Communications Inc.: 13;
Total: 90.
Year: 2000;
Walt Disney Company: 21;
Viacom Inc.: 27;
News Corporation: 17;
Hearst Corporation: 16;
Discovery Communications Inc.: 13;
Total: 94.
Year: 2001;
Walt Disney Company: 22;
Viacom Inc.: 26;
News Corporation: 14;
Hearst Corporation: 16;
Discovery Communications Inc.: 14;
Total: 92.
Year: 2002;
Walt Disney Company: 22;
Viacom Inc.: 26;
News Corporation: 14;
Hearst Corporation: 16;
Discovery Communications Inc.: 14;
Total: 92.
Year: 2003;
Walt Disney Company: 22;
Viacom Inc.: 26;
News Corporation: 13;
Hearst Corporation: 16;
Discovery Communications Inc.: 14;
Total: 91.
Year: 2004;
Walt Disney Company: 22;
Viacom Inc.: 26;
News Corporation: 13;
Hearst Corporation: 16;
Discovery Communications Inc.: 14;
Total: 91.
Year: 2005;
Walt Disney Company: 22;
Viacom Inc.: 26;
News Corporation: 13;
Hearst Corporation: 16;
Discovery Communications Inc.: 14;
Total: 91.
Year: 2006;
Walt Disney Company: 20;
Viacom Inc.: 26;
News Corporation: 13;
Hearst Corporation: 16;
Discovery Communications Inc.: 14;
Total: 89.
Year: 2007;
Walt Disney Company: 20;
Viacom Inc.: 26;
News Corporation: 13;
Hearst Corporation: 16;
Discovery Communications Inc.: 13;
Total: 88.
Year: 2008;
Walt Disney Company: 20;
Viacom Inc.: 26;
News Corporation: 13;
Hearst Corporation: 16;
Discovery Communications Inc.: 13;
Total: 88.
Source: GAO analysis of SNL Kagan data.
Note: The top owners were determined using company names presented in
data obtained from SNL Kagan. For example, for 2008, the data indicate
that NBC Universal had an ownership interest in 7 basic cable networks
and General Electric (GE) had an ownership interest in 11 cable
networks. Although GE is a parent company of NBC Universal, this
analysis does not attribute ownership interest in the 7 NBC Universal-
owned cable networks to GE. In 2008, the total number of cable
networks with either a GE or NBC Universal affiliation totaled 18.
[End of figure]
Viacom and Walt Disney Company had ownership interests in the most
cable networks over the last decade, with each owning more than 20
networks in each year. None of the top five owners has increased the
number of cable networks owned since 2001. In 2008, these top five
companies owned about half of basic cable networks.
We analyzed ownership of the 20 most widely distributed basic cable
networks, as measured by the number of subscribers for each year from
1998 to 2008 (referred to as top 20 cable networks). On the basis of
our analysis, we found major broadcasters and companies affiliated
with both major broadcasters and cable operators combined owned 50
percent or more of the top 20 networks. As shown in figure 5, the
number of major broadcaster-owned top 20 cable networks ranged from 6
in 1998 to a high of 12 in 2004 before declining to 8 cable networks
in 2008. The number of top 20 cable networks owned by companies
affiliated with both major broadcasters and cable operators remained
relatively steady during the decade at 3 to 4. Cable operators without
a broadcast company affiliation owned 5 of the top 20 cable networks
in 1998, but this number declined over time and was zero in 2007 and
2008.
Figure 5: Number of Networks by Ownership Interest in the Top 20 Most
Widely Distributed Basic Cable Networks:
[Refer to PDF for image: stacked vertical bar graph]
Number of cable networks:
Year: 1998;
Major broadcaster: 6;
Major broadcaster and cable operator: 4;
Cable operator: 5;
Other: 5;
Total: 20.
Year: 1999;
Major broadcaster: 7;
Major broadcaster and cable operator: 3;
Cable operator: 5;
Other: 5;
Total: 20.
Year: 2000;
Major broadcaster: 9;
Major broadcaster and cable operator: 4;
Cable operator: 5;
Other: 2;
Total: 20.
Year: 2001;
Major broadcaster: 9;
Major broadcaster and cable operator: 4;
Cable operator: 5;
Other: 2;
Total: 20.
Year: 2002;
Major broadcaster: 10;
Major broadcaster and cable operator: 4;
Cable operator: 3;
Other: 3;
Total: 20.
Year: 2003;
Major broadcaster: 11;
Major broadcaster and cable operator: 4;
Cable operator: 3;
Other: 1;
Total: 20.
Year: 2004;
Major broadcaster: 12;
Major broadcaster and cable operator: 4;
Cable operator: 2;
Other: 2;
Total: 20.
Year: 2005;
Major broadcaster: 9;
Major broadcaster and cable operator: 4;
Cable operator: 2;
Other: 5;
Total: 20.
Year: 2006;
Major broadcaster: 7;
Major broadcaster and cable operator: 4;
Cable operator: 2;
Other: 7;
Total: 20.
Year: 2007;
Major broadcaster: 7;
Major broadcaster and cable operator: 4;
Cable operator: 0;
Other: 9;
Total: 20.
Year: 2008;
Major broadcaster: 8;
Major broadcaster and cable operator: 4;
Cable operator: 0;
Other: 8;
Total: 20.
Source: GAO analysis of SNL Kagan data.
Note: We categorized owners that had an ownership interest in a top 20
basic cable network into four categories: major broadcaster, both
major broadcaster and cable operator (or satellite provider), cable
operator (or satellite provider), and other. Basic cable network
owners that fell into the "other" category were generally those that
could not be identified with the three other categories and included
independent cable networks.
[End of figure]
In 2008, the last year of our analysis of ownership of the top 20
cable networks, we found 8 cable networks that were affiliated with
major broadcasters. For example, 2 top 20 cable networks, ABC Family
Channel and Disney Channel, are owned by Disney, a company that also
owns the ABC broadcast network. Four networks in the top 20 were
affiliated with both major broadcasters and cable operators. For
example, in 2008, CNN, TBS, and TNT were owned by Time Warner, a
company affiliated with cable operator Time Warner Cable, broadcaster
CW Television Network, and television production studio Warner Bros.
[Footnote 31] In addition, 8 networks in the top 20 fell in the
"other" category for 2008, because they did not appear to have a
direct affiliation with a major broadcaster, cable operator, or
satellite provider. Some of the networks in this category, including
the Food Network and HGTV network, which are owned by Scripps
Networks, could be identified as independent networks. Other cable
networks identified as independent networks in other studies, such as
the Hallmark Channel and the NFL Network, did not fall into the top 20
cable networks by subscribership in 2008 or in previous years, so they
were not included in our analysis.
Combining ownership in both prime time broadcast programming and
widely distributed basic cable networks, the major broadcasters have
had an interest in a significant share of television programming over
the last decade. Independent producers have been a source for a
smaller share of prime time broadcast programming. Cable operators
without a major broadcaster affiliation are not a source of prime time
broadcast network programming,[Footnote 32] and over the last decade
their interest in the top 20 most widely distributed basic cable
networks has decreased. However, they make programming decisions for
the cable networks they own and determine which cable networks will be
carried on their cable distribution systems. FCC annually reports on
cable network programming variety and ownership as part of its video
competition report, but the report does not assess the extent to which
the sources of programming affect variety in television and selection
choices for the public.
Stakeholders Cited Economic Factors, Technical Issues, and Legal
Conditions as Affecting the Availability of Independent Television
Programming:
In Broadcast Television, Economic Factors Influence the Availability
of Independent Programming:
Industry stakeholders we interviewed stated that the high cost of
developing, producing, and distributing television programs is a
significant factor that affects the availability of independent
programming in broadcast television. According to television broadcast
executives and representatives of independent producers, developing
and producing broadcast television programs is costly and financially
risky. For example, one report estimated that major broadcasters spent
about $120 million for the 1997-1998 season to develop 49 drama pilots
and used 14 in their schedules, of which 1 program returned for a
second season.[Footnote 33] Moreover, according to television
broadcast executives, once programming is developed, the costs to
produce a scripted drama or comedy program range from about $21
million to $48 million for 21 program episodes per season, with no
guarantee that a program will continue to be produced for another
season.[Footnote 34]
Producers need to sell their program ideas to major broadcasters and
secure financing to cover the costs of developing and producing
scripted television programs. Because of their large size and access
to capital, major broadcaster-affiliated studios and other large
unaffiliated studios often have the ability to finance development and
production costs.[Footnote 35] However, representatives of independent
producers stressed that it is difficult for them to obtain financing
for development and production costs, and oftentimes they must secure
financing through the major broadcaster-affiliated studios. The
independent producers said since major broadcasters have the ability
to finance production costs and make programming decisions, it results
in seven or eight companies controlling a significant portion of the
program content on television.
When selecting programming for prime time, television broadcast
executives told us that they strive to air programming that will
achieve high ratings. Advertisers will generally pay more for programs
that achieve higher ratings, and since major broadcasters rely on
advertising revenue, it is in their financial interest to select
programs that will accrue the high level of audience that drives
advertising revenue. Television broadcast executives and an academic
expert we contacted stated that they also consider quality for prime
time programming, and not necessarily the source of programming (i.e.,
whether the program was produced by an independent producer or an
affiliated production studio).[Footnote 36] They said quality
programming will attract the largest share of viewers, which in turn,
drives advertising revenue. Further, they stated that since
advertisers spend less overall during times of economic downturn and
have multiple choices for their advertising dollars (such as on cable
television and the Internet), it is all the more essential to have
quality programming to attract the advertisers.
While television broadcast executives said that it is the quality, not
the source, of programming that influences the selection of prime time
programming, major broadcasters are, nevertheless, financially
invested in the affiliate-produced programs and stand to gain
additional profits if the affiliated programming makes it to
syndication. Consequently, some stakeholders said broadcasters might
choose their own programming over that of independent producers. In
particular, according to an academic expert and representatives of
independent producers, if both major broadcaster-affiliated studios
and an independent producer offer similar genre and programming
content to a major broadcaster, the major broadcaster will select the
program from its affiliated studio over an independent producer
because of these financial interests. As we previously noted, major
broadcaster-affiliated studios (5 companies) produced 82 percent of
prime time programming in the fall 2009 prime time schedule. While
independent producers most likely would be unable to produce and
distribute programming without some financial arrangements with major
broadcasters, they said working under the major broadcasters' control
could cause them to lose creative control of the program's content,
with the writing of the program being directed by the studio bearing
the financial risk of production. For example, an independent producer
cited the replacement of a writer for CBS's The Education of Max
Bickford, a drama on the major broadcaster's 2001 prime time schedule,
when creative differences arose with the major broadcaster that owned
the program.
In Cable Television, Economic Factors, Finite Capacity, and Federal
Law Affect Network Carriage:
For carriage on cable television, stakeholders cited (1) economic
factors, (2) finite capacity, and (3) federal law as affecting
carriage of new independent networks.
Economic factors. Representatives of independent networks and some
video providers said economic factors affect carriage of new
independent networks and their programming. According to video
providers, it is difficult to determine the cost and value of new
independent networks and how many subscribers will be gained based on
concepts and business plans of unproven independent networks.
Representatives of independent networks we contacted and a study we
reviewed indicated that a new network usually faces considerable
uncertainty as to whether it will be distributed by a sufficient
number of video providers to make its operations viable. Similarly, an
academic study indicates that for new networks, there is a high cost
to sustaining operations while attracting a sufficient number of video
providers and their subscribers.[Footnote 37] For instance, one report
stated that cable network Fox News Network had invested over $150
million by the time it launched in 1996, but it was expected to lose
up to $400 million in the next 5 years.[Footnote 38] Representatives
of independent networks told us that it is difficult to obtain
financing for a new cable network because commercial banks want a
network to secure carriage with a major cable company, such as
Comcast, before extending financing to it.
By contrast, cable networks developed by cable operators, major
broadcasters, or other media companies are generally more able to
finance the development of affiliated networks over new independent
networks. As our analysis indicated, major broadcasters and their
affiliated companies owned at least half of the most widely
distributed cable networks. Basic cable networks that are affiliated
with cable operators, major broadcasters, or other media companies can
negotiate carriage of an affiliated cable network as part of an
agreement for carriage of an established affiliated network. For
example, the Walt Disney Company owns ESPN, SoapNet, and ABC Family
cable networks, along with ABC. According to representatives of small
cable operators, during the course of negotiating for carriage for
ESPN, they must also carry ESPN's spin-off cable networks, including
ESPN2 and ESPNEWS. In another example, a new cable network--Wedding
Central--that is affiliated with cable operator Cablevision was
launched in August 2009 on its distribution system.
Finite capacity. Stakeholders also cited finite capacity in cable
system infrastructure of some video providers as a technical issue
that affects selection and availability of independent programming.
Representatives of video providers we contacted commented that
although their overall capacity to carry television programs has
expanded with advanced technology, it remains finite. Because cable
operators and telecommunications companies offer a wide array of
services over their broadband networks, they must determine how to
allocate their systems' capacity among these multiple services.
[Footnote 39] Representatives of cable operators and television
broadcast executives told us that adding another cable network--
independently produced or otherwise--when more than 75 already exist
in basic cable, might not be considered the most efficient use of
cable operators' resources and capacity. For example, given the demand
for high-speed Internet services, cable operators told us they want to
ensure they are using the finite capacity of their systems efficiently
to be able to meet that demand.
Despite the constraints on capacity in the cable system
infrastructure, representatives of video providers and television
broadcast executives we spoke with noted that alternative distribution
platforms, such as online video streams, have provided more outlets
and opportunities for independent programming. For instance, in 2007,
two independent producers produced a television drama called
Quarterlife, which was aired on the social network Web site
MySpace.com. On the other hand, television broadcast executives and
representatives of independent producers we contacted commented that
although the Internet provides the opportunity for distribution of
independent programming, it does not translate to success with regard
to attracting the number of viewers that television offers.
Federal law. Stakeholders cited, and studies have reported, that FCC
rules and regulations implementing certain federal statutes can also
influence programming decisions.
* Retransmission issues.[Footnote 40] As we previously mentioned,
representatives of some video providers stated that the business
practice of bundling networks--meaning that certain networks are sold
as a package with broadcast networks rather than being sold
individually--which may occur during negotiations between broadcasters
(which can include major networks and local stations) and video
providers for retransmission rights. Such bundling influences video
providers' carriage decisions and limits their ability to select
independent programming. In 2004, we reported that because the terms
of retransmission agreements often include the carriage of major
broadcaster-owned cable networks, cable operators sometimes carry
cable networks they otherwise might not have carried.[Footnote 41]
Representatives of some video providers told us recently that this
practice also fills their systems' capacity, leaving less capacity for
independent cable networks and making it difficult for independent
cable networks to gain carriage. Television broadcast executives, on
the other hand, commented that negotiations in lieu of invoking the
retransmission rule may be necessary for them to be fully compensated
for their content.
As part of its annual report on the status of competition in the
delivery of video programming, FCC is currently seeking data and
analysis on implementation of the retransmission consent rules.
[Footnote 42] FCC also has a separate proceeding specifically looking
at revisions to the retransmission consent rules and whether it would
be appropriate to preclude the practice of programmers tying desired
programming with undesired programming, such as tying carriage of a
major broadcaster-owned cable network to retransmission conditions for
a broadcast signal.[Footnote 43] The comment period for the notice
closed in December 2007, and FCC officials are currently reviewing
comments.
* Program carriage rule.[Footnote 44] Representatives of independent
cable networks and public interest groups stated that although the
program carriage rule is needed to promote independent programming,
FCC criteria for determining discrimination on the basis of
affiliation are unclear. They told us more precise standards for
proving discriminatory or exclusionary conduct by cable operators as
well as the establishment of a time frame for FCC to determine whether
the complaining independent cable networks have sufficient evidence to
proceed to a hearing would make the rule more effective. According to
independent cable network representatives, some independent cable
networks have waited over a year before FCC determined whether it
would conduct a hearing. Because the independent cable network is not
being carried by the defendant cable operator in the interim, some
independent cable networks can go out of business before a decision is
made.[Footnote 45] Representatives of cable operators, on the other
hand, stated that the rule is not necessary because a cable operator's
decision to reject a network could be based on the program quality and
similarity of content and not on the ownership of a network.
* Leased access rule.[Footnote 46] In the case of the leased access
rule, a public interest group official indicated that this rule has
not achieved what it was intended to do because the prices for leased
access were set too high.[Footnote 47] Representatives of cable
operators explained that the rule forces cable operators to carry
programming even if they believe the channel does not bring much value
to the subscribers. Representatives of cable operators cited home
shopping channels as an example of programming that relies on leased
access to gain carriage. The rule also affects the cable operators'
ability to carry other programming because the set-aside channels
consume capacity that could be used for other programming. Cable
operators also noted that the rule does not apply to satellite
providers and their systems.
Stakeholders Cited Various Factors as Influencing Programming
Decisions, Including Format and Playlist Selection, in Commercial and
Public Radio:
Commercial Radio Stations Largely Make Programming Decisions Based on
Economic Factors:
In selecting radio station formats and music playlists, stakeholders
we interviewed stated that (1) advertisement revenue, (2) cost of
programming, and (3) market competition are key economic factors that
influence programming decisions in commercial radio.
Advertisement revenue. Commercial radio stations are primarily funded
by advertisement revenue obtained from selling radio time to companies
seeking to reach specific demographic segments.[Footnote 48] Radio
station owners and experts told us that when making decisions about
format and playlist selection, program directors will consider the
number of listeners that programming will likely attract,[Footnote 49]
and, in turn, the advertisement revenue they may earn.[Footnote 50]
The rates that a station obtains for advertising time depend on the
station's ability to attract listeners within the advertisement
companies' target demographic segment, the length of the advertisement
spot, and the size of the market, with larger markets typically
receiving higher rates than smaller markets. Radio stations compete
for listeners and advertising revenue with other stations within their
respective local markets. Consequently, radio stations continuously
examine their programming content to try to attract an audience that
is highly desirable to advertisers. In particular, a radio station's
format enables it to target specific segments of listeners sharing
demographics that appeal to advertisers. According to a radio industry
expert, if the advertising market is not interested in reaching the
specific target audience of a music format, the station will not be
able to survive economically because it will not be able to gain
enough ad revenue. Moreover, radio station owners with stations in
different markets but of the same format can be more effective at
attracting revenue from advertisers who want to reach a similar
demographic in multiple markets.
Cost of programming. Another economic factor that influences
programming decisions is the cost to produce radio content. For
example, radio station owners and experts told us that increased costs
and decreased advertisement revenue over the past decade have led to
an increase in the use of voice tracking and syndicated programming.
[Footnote 51] According to radio station owners and experts, voice
tracking is less costly than producing shows for individual markets,
and to save programming costs, some stations choose to import
programming from another market during peak listener times rather than
hire their own radio personalities. In addition, radio industry
experts pointed out that historically, stations in small markets have
generally relied on nationally syndicated programming to bring in
marketable talent that will allow them to compete with other stations
in the market. Some stakeholders have expressed concern that voice
tracking and syndicated programming are replacing local programming
and therefore the needs and interests of the local community are not
being reflected by the voice-tracked or syndicated programming.
However, representatives of radio station owners have stated that
there is no evidence that voice tracking or syndicated programming
diminishes localism. For example, one station owner pointed out that
the value of programming is determined by how strongly it resonates
with listeners, regardless of where it originates.
Market competition. Marketplace factors, such as the extent of
competition in a given market, also affect programming decisions. For
example, radio station owners stated that when radio station program
directors are trying to determine a station's format, they will
consider what formats are currently available in the local market and
what formats are missing. If there are already stations programmed
with a popular format in a given market, a radio station will likely
look to competitively differentiate itself by selecting a format
targeted toward a demographic that is not currently being served. In
doing so, a station may also better compete for audiences and
advertising revenues with other media.
Experts and representatives of independent producers told us that
radio station formats have become more specific in recent years in an
attempt to enable stations to target a specific demographic and
attract advertisers, and as a result, radio station formats have
changed over time. According to radio station owners, the number of
radio station formats has increased. Representatives of radio station
owners conducted a study examining radio station formats, and found
that from 2001 to 2005, the number of radio station formats increased
by 7.5 percent. Station owners have characterized this increase in the
number of formats as an increase in variety in radio programming.
However, some experts and representatives of independent producers
have noted that formats with different names often have similar
playlists, diminishing real variety among those formats. For example,
one expert noted that it is very difficult to discern differences in
playlists between radio formats such as Rock and Light Rock.
Local Interests Also Affect Programming Decisions in Both Commercial
and Public Radio Stations:
Stakeholders stated that in both commercial and public radio,
programming decisions such as selection of format and music playlists
are based on the interests of listeners in a given market. Radio
station owners in both commercial and public radio reported that
program directors will conduct research related to the demographics
and preferences of the listeners in their markets to ensure they are
meeting the needs of their community. In commercial radio,
understanding the interests of listeners in a given market is
important for the station to attract a large audience and, as
previously noted, attract advertising revenue. According to radio
station owners, program directors are expected to be familiar with
music interests in their markets and make programming decisions that
will be successful in reaching an audience within their market. A
stakeholder also noted that even among similarly formatted radio
stations, the playlist will vary to meet the needs of the local
market. For example, the type of country music that is popular in
Tucson, Arizona, can be very different from popular country music in
New York City.
According to our analysis, in 2009, the 10 most common formats across
all national radio stations included Country, News, Christian, Adult
Contemporary, Oldies, Sports, Christian Contemporary, Variety, Classic
Rock, and Talk, as shown in figure 6.
Figure 6: Most Popular Formats Nationwide in 2009:
[Refer to PDF for image: vertical bar graph]
Format: Country;
Number of stations: 2,029.
Format: News;
Number of stations: 1,217.
Format: Christian;
Number of stations: 792.
Format: Adult Contemporary;
Number of stations: 733.
Format: Oldies;
Number of stations: 669.
Format: Sports;
Number of stations: 624.
Format: Christian Contemporary;
Number of stations: 580.
Format: Variety;
Number of stations: 559.
Format: Classic Rock;
Number of stations: 526.
Format: Talk;
Number of stations: 427.
Source: GAO analysis of BIAfn data.
Note: The "Primary Format" field in the BIAfn database was used to
identity the most popular formats in 2009 and includes data for 14,628
stations, both in and outside of Arbitron-rated markets, and
commercial and public stations. Stations designated as multicast
stations, or having a construction permit, are not included in this
analysis because multicast stations are available only to listeners
who have purchased an HD radio and radio stations designated as having
construction permits are not yet operating.
[End of figure]
We found that within selected individual markets, the top radio
formats differ from the top radio formats nationally, indicating that
programming decisions are locally based on the preferences and
interests of listeners within a given market. For example, the most
popular radio station formats in New York City (the largest Arbitron
market) include 5 formats not reflected in the top 10 national radio
formats (Alternative, Spanish, Contemporary Hit Radio, Ethnic, and
Adult Album Alternative). In addition, we found 19 percent of all
stations in the New York market were designated as Ethnic and Spanish
formats compared with 7 percent nationwide, suggesting that
programming decisions among radio stations in this market reflect the
demographics and interests in the market.[Footnote 52] By comparison,
in Chicago, Illinois (the third-largest Arbitron market), we found
that 11 percent of stations in this market were designated as Ethnic
and Spanish formats. Furthermore, formats that were among the most
popular in Chicago but not in New York included Christian, Talk, and
Rock (see figure 7).
Figure 7: Most Popular Formats in Arbitron Market 1 (New York) and
Arbitron Market 3 (Chicago) in 2009:
[Refer to PDF for image: horizontal bar graph]
New York:
Format: News;
Number of stations: 8.
Format: Alternative;
Number of stations: 6.
Format: Spanish;
Number of stations: 5.
Format: Contemporary Hit Radio;
Number of stations: 4;
Format: Variety;
Number of stations: 4.
Format: Adult Contemporary;
Number of stations: 4.
Format: Ethnic;
Number of stations: 4.
Format: Adult Album Alternative;
Number of stations: 3;
Format: Sports;
Number of stations: 3.
Chicago:
Format: Variety;
Number of stations: 19.
Format: News;
Number of stations: 13.
Format: Adult Contemporary;
Number of stations: 9.
Format: Christian;
Number of stations: 9.
Format: Talk;
Number of stations: 7.
Format: Ethnic;
Number of stations: 4.
Format: Rock;
Number of stations: 4.
Source: GAO analysis of BIAfn database.
Note: Datasets for Arbitron Market 1 (New York) included data for 74
radio stations and 130 radio stations for Arbitron Market 3 (Chicago).
Both datasets included commercial and public FM and AM stations.
[End of figure]
As is the case in commercial radio, representatives of public radio
reported that programming decisions are locally based on the
preferences and interests of listeners within a given market; however,
they said their community service orientation also influences
programming decisions. Representatives of public radio explained that
local public stations select their own formats and determine their own
audience strategies based on their understanding of local community
needs, and their role in serving those needs. They also said the cost
of programming is a final consideration for public radio stations
after quality-and mission-related factors are considered. In addition,
representatives of public radio noted that public stations generally
play music from artists that are signed to small, independent labels.
[Footnote 53] Independent labels generally seek out a station if the
station's format includes music similar to that of the labels, and
will then establish relationships with such stations. On the basis of
our review of 2009 format data for commercial and public radio
stations, we found that the top 10 formats in public radio differ from
the top 10 formats in commercial radio (see figure 8). Only two
formats (News and Spanish) were among the top 10 formats in both
commercial and public radio.
Figure 8: Top 10 Formats among Commercial and Public Radio Stations:
[Refer to PDF for image: horizontal bar graph]
Commercial Radio Stations:
Format: Country;
Number of stations: 2,014.
Format: News;
Number of stations: 962.
Format: Adult Contemporary;
Number of stations: 710.
Format: Oldies;
Number of stations: 652.
Format: Sports;
Number of stations: 622.
Format: Classic Rock;
Number of stations: 522.
Format: Talk;
Number of stations: 407.
Format: Hot Adult Contemporary;
Number of stations: 367.
Format: Spanish;
Number of stations: 354.
Format: Classic Hits;
Number of stations: 336.
Public Radio Stations:
Format: Christian;
Number of stations: 525.
Format: Variety;
Number of stations: 443.
Format: Christian Contemporary;
Number of stations: 417.
Format: Classical;
Number of stations: 255.
Format: News;
Number of stations: 255.
Format: Religion;
Number of stations: 244.
Format: National Public Radio (NPR);
Number of stations: 147.
Format: Alternative;
Number of stations: 139.
Format: Spanish;
Number of stations: 60.
Format: Religious Music;
Number of stations: 18.
Source: GAO analysis of BIAfn data.
Note: Data used for analysis include 6,946 commercial stations and
2,503 public stations, both inside and outside of Arbitron-rated
markets, and FM and AM stations. Stations designated as multicast
stations, or having a construction permit, are not included in this
analysis.
[End of figure]
Opinions Vary on How Consolidation in the Radio Industry Has Affected
Programming Decisions:
Stakeholders that we interviewed generally agreed that since 1996, the
number of stations owned by a single radio station owner has
increased; however, viewpoints varied about the extent to which
consolidation has affected programming decisions. Experts and
representatives of independent producers we contacted stated that the
elimination of the radio ownership limits in 1996 resulted in an
increase in the number of stations owned by a single station owner
nationally and in local markets. Independent producers have reported
that the radio station holdings of the 10 largest radio station owners
have increased significantly. On the basis of our analysis, we found
that the share of commercial stations owned by the top 10 station
owners did increase, from 4 percent in 1996 to 20 percent in 2009.
However, throughout that period, the top 10 radio station owners did
not own more than 21 percent of all commercial stations, as shown in
figure 9.
Figure 9: Share of Commercial Radio Stations Owned by Top 10 Radio
Station Owners for Selected Years:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year: 1995;
Percentage owned by other station owners: 96%;
Percentage owned by top 10: 4%.
Fiscal year: 1997;
Percentage owned by other station owners: 92%;
Percentage owned by top 10: 8%.
Fiscal year: 1998;
Percentage owned by other station owners: 89%;
Percentage owned by top 10: 11%.
Fiscal year: 2000;
Percentage owned by other station owners: 83%;
Percentage owned by top 10: 17%.
Fiscal year: 2001;
Percentage owned by other station owners: 81%;
Percentage owned by top 10: 19%.
Fiscal year: 2002;
Percentage owned by other station owners: 79%;
Percentage owned by top 10: 21%.
Fiscal year: 2007;
Percentage owned by other station owners: 79%;
Percentage owned by top 10: 21%.
Fiscal year: 2009;
Percentage owned by other station owners: 80%;
Percentage owned by top 10: 20%.
Source: GAO analysis of FCC and BIAfn data.
Note: Because of data limitations, we did not include data for 2003
through 2006 and for 2008.
[End of figure]
In addition, we analyzed data for the top 10 national radio station
owners in 2009 and found that for most owners (7 out of the 10
owners), stations' formats were differentiated within individual
markets. For example, Clear Channel--the largest radio station owner--
owns multiple radio stations in 148 Arbitron markets. We found that in
most of those markets (72 percent), Clear Channel programmed its
stations with different formats, while in 28 percent of those markets
some stations were programmed with the same format. As illustrated in
table 3, among the station owners that we reviewed, those with the
highest percentage of overlap among radio stations in the same market
included American Family Association (78 percent), Cox Radio (56
percent), and Educational Media (56 percent). We also found that 75
percent of the markets where format overlap did exist included large
markets with 30 or more radio stations.
Table 3: Percentage of Format Overlap among Top 10 Radio Station
Owners in 2009:
Radio station owner company: Clear Channel Communications Inc.;
Number of Arbitron markets where owner is present: 153;
Number of Arbitron markets where owner owns multiple stations: 148;
Percentage of markets where owner owns multiple stations with the same
format: 28.
Radio station owner company: Educational Media Foundation;
Number of Arbitron markets where owner is present: 103;
Number of Arbitron markets where owner owns multiple stations: 34;
Percentage of markets where owner owns multiple stations with the same
format: 56.
Radio station owner company: Cumulus Broadcasting LLC;
Number of Arbitron markets where owner is present: 58;
Number of Arbitron markets where owner owns multiple stations: 54;
Percentage of markets where owner owns multiple stations with the same
format: 19.
Radio station owner company: Citadel Communications;
Number of Arbitron markets where owner is present: 48;
Number of Arbitron markets where owner owns multiple stations: 43;
Percentage of markets where owner owns multiple stations with the same
format: 33.
Radio station owner company: American Family Association Inc.;
Number of Arbitron markets where owner is present: 45;
Number of Arbitron markets where owner owns multiple stations: 9;
Percentage of markets where owner owns multiple stations with the same
format: 78.
Radio station owner company: Salem Communications Corporation;
Number of Arbitron markets where owner is present: 35;
Number of Arbitron markets where owner owns multiple stations: 28;
Percentage of markets where owner owns multiple stations with the same
format: 39.
Radio station owner company: CBS Radio;
Number of Arbitron markets where owner is present: 30;
Number of Arbitron markets where owner owns multiple stations: 28;
Percentage of markets where owner owns multiple stations with the same
format: 21.
Radio station owner company: Entercom;
Number of Arbitron markets where owner is present: 24;
Number of Arbitron markets where owner owns multiple stations: 21;
Percentage of markets where owner owns multiple stations with the same
format: 33.
Radio station owner company: Cox Radio Inc.;
Number of Arbitron markets where owner is present: 19;
Number of Arbitron markets where owner owns multiple stations: 16;
Percentage of markets where owner owns multiple stations with the same
format: 56.
Radio station owner company: Saga Communications Inc.;
Number of Arbitron markets where owner is present: 14;
Number of Arbitron markets where owner owns multiple stations: 13;
Percentage of markets where owner owns multiple stations with the same
format: 15.
Source: GAO analysis of BIAfn data.
[End of table]
Radio station owners and representatives of independent producers
offered different perspectives on how consolidation in the radio
industry has affected programming decisions nationally and in
individual markets. On one side, radio station owners and experts told
us that to remain financially viable, stations have had to eliminate
duplicative operating and overhead expenses and establish a business
model where one program director is responsible for programming
decisions for multiple stations. Some station owners added that
program directors overseeing programming decisions for stations in
multiple markets make decisions based on the interests of listeners
within the individual markets. Further, radio station owners and
experts have reported that common ownership of multiple stations in a
single market benefits the audience in that market, as the station
owner will choose to diversify formats among its stations to attract a
large share of the listening audience in the market.[Footnote 54]
Another viewpoint expressed by representatives of independent
producers and experts is that the increased consolidation has changed
the stations' decision-making structure, resulting in homogenized
programming decisions across markets and resulting in large companies
using centralized methods to make programming decisions. According to
this view, as jobs are consolidated when one entity owns multiple
stations, one program director may make similar programming decisions
across multiple stations in different markets. The independent
producers said that as a result, playlists of radio stations owned by
the same owner will overlap. Studies conducted by representatives of
independent producers and academic experts examined playlists of radio
stations owned by the same owner across all markets and found overlap
in playlists of stations with the same format.[Footnote 55] For
example, a December 2006 study published by the Future of Music
Coalition found examples of overlap among playlists of individual
stations owned by the same company in different markets--such as an
overlap for the playlists of two country stations located in different
markets (WQRB-FM in Eau Claire, Wisconsin, and WRWD-FM in
Poughkeepsie, New York). However, the study did not examine overlap
and differences among playlists of owners' radio stations in the same
market. A January 2006 study conducted by an academic expert also
examined playlist data for each owner's radio stations and found that
the playlists of radio stations in different markets overlapped, but
that the playlists of radio stations in the same market were different.
Agency Comments:
We provided a draft of this report to FCC for official review and
comment. FCC provided technical comments that we incorporated where
appropriate. FCC's written comments appear in appendix III.
We will send copies of this report to the Chairman of the Federal
Communications Commission and appropriate congressional committees. In
addition, the report is available at no charge on GAO's Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions concerning this report, please
contact me on (202) 512-2834 or wised@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions
to this report are listed in appendix IV.
Signed by:
David J. Wise:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To obtain information on the extent to which sources of programming in
television have changed over last decade, we analyzed available data
on two major sources of television programming--companies producing
prime time broadcast television programs and companies with cable
channel ownership interests during the last decade. We focused on
programs broadcasted during prime time because that is the block of
time on television with generally the most viewers and in turn
generates the most advertisement revenue for networks.[Footnote 56] To
determine which companies produced prime time broadcast television
programming, we used a previous Federal Communications Commission
(FCC) study and the International Television & Video Almanac to
classify prime time programs into two categories: (1) programs
produced by major broadcasters, and (2) programs produced by
independent production companies not affiliated with a major
broadcaster (independent producers). We analyzed the fall prime time
schedules in 2002, 2005, 2008, and 2009 and classified them in the two
categories. We selected these years because annual data that tracked
production information in the two categories were limited; FCC's
previous study contained data in the two categories for 2002. We then
conducted our analysis for every third year (2005 and 2008) using the
Almanac's production company information for each television program
in that year's debut fall broadcast prime time schedule and classified
the programs into the two categories. We also analyzed the Almanac for
the 2009 fall prime time schedule to provide the most current data
available. Additionally, since basic cable networks are also a source
of television programming, we analyzed the ownership of those networks
as an indicator of which entities control the television programming
on the networks. To determine cable network ownership over the last
decade, we used data from SNL Kagan, which show companies having an
ownership interest in each of the basic cable networks from 1998 to
2008.[Footnote 57] We analyzed these data to determine the types and
the number of companies that have had an ownership interest in basic
cable networks and the companies that owned the largest number of
networks during this period. To analyze cable network ownership for
the most widely distributed networks, we used the 20 basic cable
networks with the most subscribers (the top 20 networks) from 1998 to
2008 and classified the networks into one of four categories: (1)
networks owned by major broadcasters, (2) networks owned by video
providers, (3) networks owned by both major broadcasters and video
providers, and (4) networks owned by other types of companies. We also
examined the top 20 networks in 2008 for any independent cable
networks; that is, any network that did not have an affiliation with a
major broadcaster or video provider, or an affiliation with a major
holding company with media interests.
To determine the factors and conditions that stakeholders identified
as affecting the availability of independent programming in television
and factors that influence radio programming decisions, we interviewed
or obtained written comments from a variety of experts and industry
stakeholders, including academics, industry representatives, media
companies, and public interest groups (as shown in table 4) to obtain
their views on the factors that affect the availability of independent
programming in television and radio.
Table 4: Experts and Industry Stakeholders We Contacted:
Stakeholder groups: Academic experts;
Stakeholders:
Mara Einstein, New York University and Queens College;
David Waterman, Indiana University;
Philip Napoli, Fordham University;
Andrew Sweeting, Duke University.
Stakeholder groups: Broadcast television and affiliates groups;
Stakeholders:
The Walt Disney Company/ABC;
CBS Corporation;
NBC Universal;
News Corporation/Fox;
CBS and NBC Affiliate Association;
Sinclair Broadcast Group;
Young Broadcasting.
Stakeholder groups: Radio station owners group;
Stakeholders:
Clear Channel Communications;
Citadel Broadcasting;
American Public Media/Minnesota Public Radio.
Stakeholder groups: Public television and radio;
Stakeholders:
Association of Public Television Stations;
Public Broadcasting Service;
National Federation of Community Broadcasters;
National Public Radio.
Stakeholder groups: Video providers;
Stakeholders:
Comcast;
DirecTV;
DISH;
AT&T;
Verizon.
Stakeholder groups: Cable networks;
Stakeholder:
Discovery Communications.
Stakeholder groups: Industry associations;
Stakeholders:
American Cable Association;
National Association of Broadcasters;
National Association of Independent Networks;
National Cable and Telecommunications Association.
Stakeholder groups: Independent programming groups;
Stakeholders:
Independent Film and Television Alliance;
Writers Guild of America, West;
Center for Creative Voices in Media;
American Association of Independent Music;
Future of Music Coalition.
Stakeholder groups: Public interest, nonprofit groups;
Stakeholders:
Consumers Union;
Consumer Federation of America;
Media Access Project;
Progress and Freedom Foundation;
Free Press.
Stakeholder groups: Industry Research Group;
Stakeholder:
Edison Research.
Source: GAO.
[End of table]
We selected the experts and stakeholders based on relevant published
literature, including FCC filings and reports, stakeholders'
recognition and affiliation with a segment of the media industry
(i.e., cable operators, satellite providers, broadcasters, radio
station owners, independent radio advocacy groups, and so forth), and
other stakeholders' recommendations. In our selection of experts and
stakeholders, we intended to obtain balanced and diverse views; we did
not weight experts' and stakeholders' views but grouped similar
stakeholders that represent a segment of the media industry. We
conducted semistructured interviews and analyzed the responses to
determine patterns and the extent to which the experts and
stakeholders agreed on the key factors affecting independent
programming and radio programming decisions. We also spoke with FCC
officials and reviewed the relevant laws, regulations, literature,
comments filed by stakeholders in various FCC proceedings, FCC
studies, and FCC-sponsored research on television and radio
programming.
In addition, for radio, we examined radio station formats, indicating
the genre and types of programming, such as Adult Contemporary,
Country, News, Sports, and Talk, a station might play. We obtained
historical data on the distribution of radio stations by their primary
formats nationwide and in local markets from 1999 to 2003 and format
data from the Broadcast Investment Analyst Financial Network's (BIAfn)
Media Access Pro Database, containing station-level data for
commercial and public radio stations in the United States from 2004 to
2009. Although the BIAfn format data provide a general overview of the
genre of programming aired on a given radio station, they do not
identify specific programming content that is played on the station.
We did not look at independently produced programming on radio because
national playlist data identifying record label affiliation are not
available. We analyzed the data to determine programming variety and
distribution of radio stations by their format nationwide and in local
markets in 2009. To highlight programming variety in local markets, we
selected two radio station markets-New York and Chicago-and analyzed
the format data of radio stations in those markets and compared them
with national radio station format data in 2009. We selected New York
and Chicago because these two markets are similar in size, (New York
is the largest market, and Chicago is the third-largest market) but
have different demographic populations. In addition, each market
contains both commercial and public stations, FM and AM stations, and
contains multiple radio station owners in the market. To highlight
similarities and differences in programming variety among commercial
and public stations, we examined 2009 format data for commercial and
public radio stations and identified the top 10 most popular formats
(based on the number of stations with the particular formats
available) for each group nationwide. Finally, to examine programming
variety for each owner's radio stations and consolidation in the radio
industry, we selected the top 10 radio station owners--that is, owners
who own the most radio stations nationwide--and reviewed format data
of stations owned by the top 10 owners. To identify the top 10 radio
station owners in 1996-1998, 2000-2002, 2007, and 2009, we used data
from FCC reports and the BIAfn database. The top 10 radio station
ownership data were not available in 2003-2006 and 2008. Collectively,
in 2009, the top 10 owners owned a total of 2,262 commercial radio
stations, or 20 percent of all U.S. commercial radio stations. In
addition, the top 10 owners owned stations that reach a 44 percent
share of total Arbitron listeners in the United States and collect 52
percent of the radio industry's revenue. For each station owner, we
then examined similarities and differences in formats among commonly
owned radio stations in the same market. We also reviewed studies on
radio programming for information on radio station playlists and the
extent to which playlists for commonly owned radio stations overlap in
the same market.
To assess the reliability of the basic cable network data obtained
from SNL Kagan, and radio data obtained from BIAfn used in our
analysis, we (1) obtained information from the system owners on their
data reliability procedures, (2) reviewed systems documentation, (3)
reviewed data to identify obvious errors in accuracy and completeness,
and (4) compared the data with information we obtained from other
sources, including FCC studies. After reviewing the data sources, we
determined that the data were sufficiently reliable for the purposes
for which we have used them in this report.
We conducted our work from May 2009 to March 2010 in accordance with
all sections of GAO's Quality Assurance Framework that are relevant to
our objectives. The framework requires that we plan and perform the
engagement to obtain sufficient and appropriate evidence to meet our
stated objectives and discuss any limitations in our work. We believe
that the information and data obtained, and the analysis conducted,
provide a reasonable basis for any findings and conclusions in this
product.
[End of section]
Appendix II: Registered Marks Used in the Report:
Registered mark: 20th Century Fox;
Listed owner: Twentieth Century Fox Film Corporation.
Registered mark: ABC;
Listed owner: American Broadcasting Companies Inc.
Registered mark: ABC Family;
Listed owner: American Broadcasting Companies Inc.
Registered mark: Arbitron;
Listed owner: Arbitron Inc.
Registered mark: AT&T;
Listed owner: AT&T Intellectual Property II L.P.
Registered mark: BIAfn;
Listed owner: BIA Financial Network Inc.
Registered mark: Cablevision;
Listed owner: Cablevision Systems Corporation.
Registered mark: CapStar Broadcasting;
Listed owner: CapStar LLC.
Registered mark: CBS;
Listed owner: CBS Broadcasting Inc.
Registered mark: CBS Radio;
Listed owner: CBS Broadcasting Inc.
Registered mark: Citadel Communications Company;
Listed owner: Citadel Communications Company.
Registered mark: Clear Channel;
Listed owner: Clear Channel Communications Inc.
Registered mark: CNN;
Listed owner: Cable News Network LP.
Registered mark: Comcast;
Listed owner: Comcast Corporation.
Registered mark: Comcast SportsNet;
Listed owner: Comcast Sports Management Services LLC.
Registered mark: Consumers Union;
Listed owner: Consumers Union of United States Inc.
Registered mark: Consumers Federation of America;
Listed owner: Consumers Federation of America.
Registered mark: Cox Communications;
Listed owner: Cox Communications Inc.
Registered mark: Cox Radio;
Listed owner: Cox Radio Inc.
Registered mark: DirecTV;
Listed owner: Directv Inc.
Registered mark: Discovery Channel;
Listed owner: Discovery Communications LLC.
Registered mark: DISH Network;
Listed owner: DISH Network LLC.
Registered mark: Disney Channel;
Listed owner: Walt Disney Productions Corporation.
Registered mark: Edison Research;
Listed owner: Edison Media Research Inc.
Registered mark: Entercom;
Listed owner: Entertainment Communications Inc.
Registered mark: ESPN;
Listed owner: ESPN Inc.
Registered mark: Fox;
Listed owner: Twentieth Century Fox Film Corporation.
Registered mark: Fox News;
Listed owner: Twentieth Century Fox Film Corporation.
Registered mark: GE;
Listed owner: General Electric Company.
Registered mark: Hallmark;
Listed owner: Hallmark Licensing Inc.
Registered mark: HBO;
Listed owner: Home Box Office Inc.
Registered mark: HGTV;
Listed owner: Scripps Networks Inc.
Registered mark: Independent Film and Television Alliance;
Listed owner: Independent Film & Television Alliance Corporation.
Registered mark: ION Television;
Listed owner: ION Media Networks Inc.
Registered mark: Lifetime Networks;
Listed owner: Lifetime Entertainment Services LLC.
Registered mark: Media Access Project;
Listed owner: Media Access Project.
Registered mark: Minnesota Public Radio;
Listed owner: Minnesota Public Radio.
Registered mark: MTV Networks;
Listed owner: Viacom International Inc.
Registered mark: MyNetworkTV;
Listed owner: MynetworkTV Inc.
Registered mark: National Public Radio;
Listed owner: National Public Radio, Inc.
Registered mark: NBC;
Listed owner: NBC Universal, Inc.
Registered mark: News Corporation;
Listed owner: News Holdings Pty Ltd.
Registered mark: NFL Network;
Listed owner: National Football League.
Registered mark: Paramount Television;
Listed owner: Paramount Pictures Corporation.
Registered mark: Saga Communications Inc;
Listed owner: Saga Communications Inc.
Registered mark: Salem Communications Corporations;
Listed owner: Salem Communications Corporation.
Registered mark: Scripps Networks;
Listed owner: Scripps Howard Broadcasting Company.
Registered mark: Showtime;
Listed owner: Showtime Network Inc.
Registered mark: SNL;
Listed owner: SNL Financial LC.
Registered mark: SoapNet;
Listed owner: Disney Enterprises Inc.
Registered mark: Sony Pictures;
Listed owner: Sony Corporation.
Registered mark: Starz;
Listed owner: Starz Entertainment Group LLC.
Registered mark: TBS;
Listed owner: Superstation Inc.
Registered mark: The Food Network;
Listed owner: Television Food Network, G.P. , et Al.
Registered mark: Time Warner Cable;
Listed owner: Time Warner Inc.
Source: Trademark Electronic Search System, United States Patent and
Trademark Office.
[End of table]
[End of section]
Appendix III: Comments from the Federal Communications Commission:
Federal Communications Commission:
Washington, D.C. 20554:
March 1, 2010:
David Wise:
Director, Physical Infrastructure Issues:
United States Government Accountability Office:
Washington, D.C. 20548:
Re: GAO-10-369:
Dear Mr. Wise:
Thank you for the opportunity to review and comment on the Government
Accountability Office Draft Report Media Programming — Factors
Influencing the Availability of Independent Programming in Television
and Programming Decisions in Radio.
While the Draft Report does not contain any specific recommendations
for action by the Federal Communications Commission, the Draft Report
does recognize the important role that the media industry plays in
educating and entertaining the public and acknowledges that the
Commission's rules can affect programming decisions. To that end, the
Commission's longstanding goals in the development and implementation
of media policy have been the promotion of diversity, competition, and
localism in media. The report covers several subjects pertinent to our
media ownership policy. The Commission does not propose any editorial
recommendations to the Draft Report. In an attachment to this letter,
however, we offer technical corrections for your consideration.
As the Draft Report notes, the Commission is required to review its
media ownership rules every four years to determine whether those
rules are necessary in the public interest. Currently, the Commission
is in the early stages of the 2010 quadrennial media ownership review.
The Draft Report's availability comes at a time that its information
and findings can assist the Commission as it moves forward in the
ownership review.
Thank you for the opportunity to comment on the Draft Report. The FCC
appreciates your contribution regarding the important subject areas
covered.
Sincerely,
Signed by:
William T. Lake:
Chief, Media Bureau:
Attachment:
On p.1, clarify the actions taken by the Telecommunications Act of
1996 ("The 1996 Act"). The 1996 Act eliminated nationwide broadcast
television and radio station ownership limits and relaxed (rather than
"reduced") local broadcast radio station limits. The 1996 Act did not
change local television ownership limits, but directed the FCC to
conduct a rulemaking to evaluate its existing local television
ownership limitations. See 1996 Act § 202.
Regarding p.8 n.15, at the time of the 1996 Act's enactment, the FCC's
rules contained a national radio limit of 20 AM plus 20 FM stations
and a local radio limit of two or three AM plus two or three FM
stations, depending on the size of the local market. See Revision of
Radio Rules and Policies, 9 FCC Rcd 7183 (1994).
Regarding the second paragraph of the "Retransmission Consent" bullet
on p.23-24, the FCC released an Order on January 10, 2010 in the
program access proceeding adopting rules permitting complainants to
pursue program access claims involving terrestrially delivered, cable-
affiliated programming similar to the claims that they may pursue for
satellite-delivered, cable-affiliated programming, where the purpose
or effect of the challenged act is to significantly hinder or prevent
the complainant from providing satellite cable programming or
satellite broadcast programming. See 2009 WL 236800 (released Jan. 20,
2010).
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO contact:
David Wise, (202) 512-2834 or Wised@gao.gov:
Acknowledgments:
In addition to the contact above, Sally Moino, Assistant Director; Amy
Abramowitz; Brad Dubbs; Alana Finley; Bert Japikse; Delwen Jones;
Jennifer Kim; Maria Mercado; and Andrew Stavisky made key
contributions to this report.
[End of section]
Footnotes:
[1] Independently produced programming has no affiliation with
broadcast networks, cable operators, or satellite providers.
[2] In re Review of the Syndication and Financial Interest Rules,
Sections 73.659-73.663 of the Commission's Rules, F.C.C. 95-382, 10
F.C.C.R. 12165, 10 F.C.C. Rcd. 12165, (1995).
[3] Pub. L. No. 104-104, Title II, § 202, 110 Stat. 110, 111-112, as
amended by Pub. L. No. 108-199, Div. B, Title VI, § 629, 118 Stat. 3,
99-100 (2004) (47 U.S.C. § 303 Note).
[4] A broadcast network is an organization that may produce and
distribute television programs, such as drama, comedy, reality
programs, and news, to the public through local television stations.
We refer to the broadcast networks (ABC, CBS, Fox, and NBC) as major
broadcasters in this report, although the term "broadcasters" can
include local television stations that are not owned by the major
broadcast networks. Throughout this report, we refer to media firms by
their popularly known acronyms or names, some of which like ABC, CBS,
Fox, and NBC, are registered trade or service marks. Appendix II
contains a list of registered marks appearing in this report.
[5] A basic cable network is an organization that may produce
television programs, which are distributed to the public through a
subscription video service.
[6] To analyze the fall prime time schedule in each year, we included
programs on the schedule Monday through Saturday from 8 p.m. to 11
p.m., and on Sunday from 7 p.m. to 11 p.m. Because some prime time
program schedule changes or cancellations can occur in the fall prime
time schedule, we used the debut schedule of programs that appeared in
September of each selected year.
[7] SNL Kagan Media and Communications is a private research company
that collects and maintains data on cable networks.
[8] A radio station format refers to the type of programming content
on a radio station, such as Adult Contemporary, Country, Jazz, News
and Information, Sports, Talk, and so forth.
[9] Local markets, also known as Arbitron markets, are geographically
contiguous areas in which Arbitron Inc. surveys the listenership of
radio stations for rating. These markets align with the Office of
Management and Budget's Metropolitan Statistical Area (MSA)
definitions. As of August 2009, there were 300 Arbitron markets.
[10] Public radio stations are locally owned and operated stations
that receive some or all of their funding from listener contributions,
the federal government, or other sources. Some public radio stations
are affiliated with National Public Radio, which is a national radio
service that provides station programming content.
[11] Affiliated stations are stations not owned by major broadcasters
but grant broadcasters use of specific time periods for network
programming and advertisement, for compensation.
[12] Video providers offer subscribers television programming through
different service tiers--that is, bundles of networks grouped into a
package. A basic tier, which is the lowest level of cable services,
includes the local broadcast stations. Video providers also offer an
expanded basic service tier, which expands upon the basic service.
Additionally, subscribers can also purchase digital tiers and premium
pay channels, such as HBO and Showtime, for an additional fee.
[13] Video providers must also pay licensee fees--usually on a per
subscriber basis--for the rights to carry cable networks and their
respective programming.
[14] The number of stations includes full-service commercial and
public stations and excludes low-power FM stations and stations with
construction permits.
[15] Pub. L. No. 104-104, §202(h), 110 Stat. 56. In response to the
directive in the 1996 Telecommunications Act, FCC eliminated the
nationwide radio ownership limits rule.
[16] In 1999, CapStar Broadcasting and Chancellor Media Corporation
merged and were later acquired by Clear Channel Communications Inc.,
which subsequently became the largest radio station owner, with over
1,000 radio stations in 2007. In 2006, Clear Channel sold off several
of its radio stations.
[17] In re Review of the Syndication and Financial Interest Rules,
supra. The Fin-Syn rules were adopted in 1970 to limit broadcasters'
control over television programming and restricted their ability to
own and syndicate programming.
[18] Broadcasters can request syndication rights for programs when
they are negotiating the financing of programs. If a program remains
on the network long enough to accumulate about 80 to 100 episodes,
then the program can be syndicated, that is, offered and sold to local
television stations or cable networks for the right to broadcast the
programs again during non-prime time hours.
[19] Telecommunications Act of 1996, § 202, as amended (47 U.S.C. §
303 Note).
[20] The Cable Televisions Consumer Protection and Competition Act of
1992, Pub. L. No. 102-385, 106 Stat 1460, established these rules,
placed in Sections 325, 614, and 616 of the Communications Act, as
amended (47 U.S.C. § 534). FCC then established regulations to put
into effect those statutory provisions. (In addition, the act
established the program access rule to prevent a vertically integrated
cable operator from discriminating in the process, terms, and
conditions that it makes programming available to unaffiliated
distributors or have exclusive access to the programming in which it
has an ownership interest. Because stakeholders we interviewed did not
identify how this rule affects independent programming, we did not
include a discussion of the issue.)
[21] Communications Act of 1934, § 614, as amended (47 U.S.C. § 534);
47 C.F.R. §§ 76.56, 76.64.
[22] Compensation can take the form of cash payments, the video
provider's purchase of advertising time on the broadcast station, the
broadcaster being given free advertising time on the video provider's
system, the video provider's carriage (and tier placement) of other
program networks owned by the broadcaster, or some combination of
these.
[23] Communications Act of 1934, § 616, as amended (47 U.S.C. § 536);
47 C.F.R. §§ 76.1301, 76.1302.
[24] Communications Act of 1934, § 612, as amended (47 U.S.C. § 532);
47 C.F.R. §§ 76.970, 76.971.
[25] Cable operators with 36 to 54 activated channels must set aside
10 percent, while cable operators with 55 to 100 activated channels
must set aside 15 percent of those channels not otherwise required for
use or prohibited from use by federal law or regulation. Cable
operators with more than 100 activated channels must designate 15
percent of such channels for commercial use.
[26] The Cable Television Consumer Protection and Competition Act of
1992, Pub. L. No. 102-385, § 9, 106 Stat. 1460 (codified at 47 U.S.C.
§ 532)
[27] Warner Bros. is affiliated with the CW Television Network.
[28] Mara Einstein, "Program Diversity and the Program Selection
Process on Broadcast Network Television," Federal Communications
Commission Media Ownership Working Group, Washington, D.C., September
2002.
[29] Our analysis included ownership interests in basic cable
networks, which are those cable networks that often appear in the
basic service tier for consumers, and did not include other cable
networks carried on a digital tier and premium cable networks, such as
HBO, Showtime, and Starz.
[30] During the last decade, the number of basic cable networks has
ranged from about 160 to 180.
[31] Because of data availability, our analysis was for the 11 years
from 1998 to 2008. In 2009, Time Warner announced a spin-off of its
Time Warner Cable operations.
[32] In December 2009, Comcast, a cable operator, announced that it
had signed a definitive agreement with GE (owner of NBC) to form a
joint programming venture that will be 51 percent owned by Comcast, 49
percent owned by GE, and managed by Comcast.
[33] Joe Schlosser, "Wolf Says Shows Can Fly without Pilots,"
Broadcasting & Cable, July 6, 1998, 30.
[34] In contrast, nonscripted programs are less costly to produce
because there are no costs associated with ordering scripts and pilots.
[35] An example of a large unaffiliated studio is Sony Pictures
Television Studio, which is not affiliated with any broadcasters.
Although large unaffiliated studios may have the ability to finance
production costs, stakeholders said they produced fewer programs than
broadcaster-affiliated studios because one of the few unaffiliated
studios decided to primarily produce movies rather than television
programs.
[36] Although quality is subject to the preferences of the networks
that select the programs, according to television broadcast
executives, general criteria for quality include good ideas, mass
audience appeal, and whether the content of the program meets the
specific needs of the network. Literature we reviewed indicated that
quality programming depends on talent and high production values, both
of which can be costly.
[37] Richard Caves, Karen Guo, Catherine O'Gorman, Matthew S.
Rosenberg, and Richard J. Wegener, Switching Channels: Organization
and Change in TV Broadcasting. (Cambridge, Mass.: Harvard University
Press, 2005).
[38] Jim McConville, "Fox Ready to Roll Dice in All-News Gamble,"
Broadcasting & Cable, October 7, 1996, 52.
[39] The array of services that cable operators and telecommunications
companies offer includes high-speed Internet, telephone, and digital
television, as well as traditional analog television services. A
satellite provider we interviewed stated that competing uses for
broadband is not an issue, since it cannot offer high-speed Internet
and telephones services, but it noted that available capacity on its
basic service tier is also limited.
[40] 47 C.F.R. § § 76.56, 76.64. As previously mentioned, the
retransmission consent rule requires local broadcast stations, some of
which are owned and operated by broadcasters, who have opted against
must carry status, to negotiate individual retransmission consent
agreements with each cable operator in its service area for
compensation in exchange for the cable operator's right to carry the
broadcast signal.
[41] 47 C.F.R. § § 76.56, 76.64. As previously mentioned, the
retransmission consent rule requires local broadcast stations, some of
which are owned and operated by broadcasters, who have opted against
must carry status, to negotiate individual retransmission consent
agreements with each cable operator in its service area for
compensation in exchange for the cable operator's right to carry the
broadcast signal.
[42] In the Matter of the Annual Assessment of the Status of the
Competition in the Market for the Delivery of Video Programming, FCC
MB Docket No. 07-269. FCC 07-207, 24 F.C.C.R. 750, 24 FCC Rcd. 750
(January 16, 2009), as supplemented at 24 F.C.C.R. 4401, 24 F.C.C.
Rcd. 4401 (April 9, 2009).
[43] In the Matter of the Review of the Commission's Program Access
Rules and Examination of Programming Tying Arrangements, FCC MB Docket
No. 07-198, Notice of Proposed Rulemaking, 22 F.C.C. Rcd. 17791
(October 1, 2007).
[44] 47 C.F.R. §§ 76.1301, 76.1302. As previously noted, the program
carriage rule prevents video providers from requiring financial
interest in programming as a condition for carriage.
[45] FCC officials told us that it takes time to adjudicate these
cases because program carriage disputes are complicated and often
result from behavior related to program carriage negotiations and
require an evaluation of facts and behavior. They further noted that
an action one party views as prohibited under the statute may be
viewed by the other as a legitimate business practice. In some
instances, additional measures are required to perform a proper
evaluation. In the event that the staff is unable to resolve a program
carriage complaint on the basis of the written record, a case may be
sent for a hearing before an administrative law judge.
[46] 47 C.F.R. §§ 76.970, 76.971. The commercial leased access rule
requires cable operators to set aside a certain number of channels
that can be leased out to independent cable networks for access on its
distribution system.
[47] FCC reviewed the price rate for leased access and announced its
decision to reduce the charge in November 2007. In the Matter of
Leased Commercial Access, FCC 07-208, 23 F.C.C.R. 2909, 23 F.C.C. Rcd.
2909 (Feb. 1, 2008). However, FCC's decision has been appealed.
[48] In contrast, public radio stations are primarily funded by
contributions received from listeners and, in some cases, government
funding.
[49] By "format" of radio programming, we mean the genre of
programming content on a radio station, such as Country, Sports, Adult
Contemporary, Smooth Jazz, and Rock.
[50] Advertisers and radio stations use data published by audience
measuring services, such as Arbitron Inc., to estimate the number and
demographics of listeners within an Arbitron radio market.
[51] Voice tracking occurs when a radio station personality prerecords
a program that is then aired in multiple markets, including markets
other than that of the local radio station. Syndicated programming
includes programming that is purchased by a radio station (such as the
Ryan Seacrest Top 40 Program) to air on multiple stations in different
markets.
[52] FCC commissioned 2007 Media Ownership Study 5 (Tasneem Chipty,
Station Ownership and Programming in Radio, Boston, Mass.: CRA
International, June 24, 2007) indicated that ethnic formats included
Asian, Greek, Hawaiian, International, Japanese, Korean, Polish, and
Portuguese formats. Spanish formats included Hurban, Mexican,
Ranchera, Reggaeton, Spanish, Spanish Adult Contemporary, Tejano, and
Tropical formats.
[53] An independent label refers to a record label that is not
associated with a major record label.
[54] A 2007 FCC-commissioned study (Tasneem Chipty, Station Ownership
and Programming in Radio, Boston, Mass.: CRA International, June 24,
2007) and other academic studies (Andrew Sweeting, Too Much Rock and
Roll? Station Ownership, Programming, and Listenership in the Music
Radio Industry, Evanston, Ill.: Northwestern University, January 15,
2006) found similar results, finding that markets with large radio
ownership groups offer more format choices within given markets.
[55] While our analysis examined format data, these studies looked at
playlists.
[56] To analyze the fall prime time schedule in each year, we included
programs on the schedule Monday through Saturday from 8 p.m. to 11
p.m., and on Sunday from 7 p.m. to 11 p.m. Because some prime time
program schedule changes or cancellations can occur in the fall prime
time schedule, we used the debut schedule of programs that appeared in
September of each selected year.
[57] Because data that track program production information were
limited for programming on all cable networks, we looked at the
ownership of basic cable networks only.
[End of section]
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