Numbers of Media Outlets and Owners Generally Increase with Market Size, Although Operating Agreements May Reduce the Effective Number of Independent Outlets

Markets with large populations have more television, radio, and  newspaper outlets than less populated markets. In more diverse markets,  we also observed more radio and television stations and newspapers  operating in languages other than English, which contributed to a greater  number of outlets. For example, some media  companies participate in agreements to share content among several  outlets. This example suggests that the number of independently  owned outlets in a given market might not always be a good indicator of  how many independently produced local news or other programs are  available in a market. The Internet Is Expanding Access to Media Content

The Internet delivers content from a virtually limitless supply of sources. These weaknesses include (1) exemptions from filing for certain types of  broadcast stations, such as noncommercial stations; (2) inadequate data  quality procedures; and (3) problematic data storage and retrieval. We identified three primary barriers  contributing to the limited levels of ownership by minorities and women. These barriers include (1) the large scale of ownership in the media  industry, (2) a lack of easy access to sufficient capital for financing the  purchases of stations, and (3) the repeal of the tax certificate program,  which provided financial incentives for incumbents to sell stations to  minorities. A Variety of Economic, Legal and Regulatory, and Technical Factors Influence Media Ownership

Economic factors—including high fixed costs and the size of the market— influence the number of media outlets available in markets, the presence  of operating agreements between outlets, and incentives for firms to  consolidate their operations. Legal and regulatory factors appear to  influence ownership of media outlets as well, by constraining the number  and types of media outlets that a single entity can own. High Fixed Costs and Local Market Size Are Important Economic Factors that Influence the Number and Ownership of Media Outlets

We found that fixed costs are prevalent in the media industry and are an  important economic factor influencing the number and ownership of  media outlets. Stakeholders’ Opinions Varied on Modifications to Media Ownership Rules, but Business Stakeholders Were More Likely to Favor Deregulation

The stakeholders we interviewed seldom agreed on proposed  modifications to media ownership rules. However, most business  stakeholders expressing opinions on these rules were more likely to report  that they should be relaxed or repealed. In contrast, nonbusiness  stakeholders who expressed opinions on the rules were more likely to  report that the rules should be left in place or strengthened. Both business  and nonbusiness stakeholders who expressed an opinion on the previously  repealed tax certificate program supported either reinstating or expanding  the program to encourage the sale of broadcast outlets to minorities. Though media  options vary by local market, the overall growth in the communications  industry and the emergence of the Internet have provided unprecedented  levels of media choices to the American public. In undertaking this effort, FCC noted that it was  appropriate to develop “precise information on minority and female  ownership of mass media facilities” and “annual information on the state  and progress of minority and female ownership,” thereby positioning “both  Congress and the Commission to assess the need for, and success of,  programs to foster opportunities for minorities and females to own  broadcast facilities.” Yet, data weaknesses stemming from how the data  are collected, verified, and stored limit the benefits of this effort. Recommendation for Executive Action

To more effectively monitor and report on the ownership of broadcast  outlets by minorities and women, we recommend that the Chairman, FCC,  identify processes and procedures to improve the reliability of FCC’s data  on gender, race, and ethnicity so that these data can be readily used to  accurately depict the level, nature, and trends in minority and women  ownership, thereby enabling FCC and the Congress to determine how well  FCC is meeting its policy goal of diversity in media ownership. To select the case study DMAs, we used  a stratified random sample.
Why GAO Did This Study

The media industry plays an important role in educating and entertaining the public. While the media industry provides the public with many national choices, media outlets located in a local market are more likely to provide local programs that meet the needs of residents in the market compared to national outlets. This report reviews (1) the number and ownership of various media outlets; (2) the level of minority- and women-owned broadcast outlets; (3) the influence of economic, legal and regulatory, and technological factors on the number and ownership of media outlets; and (4) stakeholders' opinions on modifying certain media ownership laws and regulations. GAO conducted case studies of 16 randomly sampled markets, stratified by population. GAO also interviewed officials from the Federal Communications Commission (FCC), the Department of Commerce, trade associations, and the industry. Finally, GAO reviewed FCC's forms, processes, and reports.

What GAO Found

The numbers of media outlets and owners of media outlets generally increase with the size of the market; markets with large populations have more television and radio stations and newspapers than less populated markets. Additionally, diverse markets have more outlets operating in languages other than English, contributing to a greater number of outlets. Some companies participate in operating agreements wherein two or more media outlets might, for example, share content. As such, these agreements may suggest that the number of independently owned media outlets might not always be a good indicator of how many independently produced local news and other programs are available in a market. Finally, the Internet is expanding access to media content and competition. On a biennial basis, FCC collects data on the gender, race, and ethnicity of broadcast owners to, according to FCC, position itself and the Congress to assess the need for, and success of, programs to foster minority and women ownership. However, these data suffer from three weaknesses: (1) exemptions from filing for certain types of broadcast stations, (2) inadequate data quality procedures, and (3) problems with data storage and retrieval. These weaknesses limit the benefits of this data collection effort. While reliable government data are lacking, available evidence suggests that ownership of broadcast outlets by minorities and women is limited. Several barriers contribute to the limited levels of ownership by these groups, including a lack of easy access to sufficient capital. A variety of economic, legal and regulatory, and technological factors influence media ownership. Two economic factors--high fixed costs and the size of the market--appear to influence the number of media outlets in a market, the incentive to consolidate, and the prevalence of operating agreements. By limiting the number and types of media outlets that a company can own, various laws and regulations affect the ownership of media outlets. Technological factors, such as the emergence of the Internet, have facilitated entry for new companies, thereby increasing the amount of content and competition. Stakeholders expressed varied opinions on modifications to media ownership rules. Most business stakeholders expressing an opinion on various media ownership rules were more likely to report that the rules should be relaxed or repealed. In contrast, nonbusiness stakeholders who expressed an opinion on the rules were more likely to report that the rules should be left in place or strengthened. Both business and nonbusiness stakeholders who expressed an opinion on a previously repealed tax certificate program supported either reinstating or expanding the program to encourage the sale of broadcast outlets to minorities.