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MMTC: ‘Perfect Storm’ Stalled Minority Ownership

Social change takes place through positive action by individuals. Working together, like-minded individuals can band together to make changes happen more quickly.

Social change takes place through positive action by individuals. Working together, like-minded individuals can band together to make changes happen more quickly. Sometimes that effort works well. Sometimes it doesn’t.

Ultimately, it depends on the social and political climate. Are the legislators, regulators and citizenry primed and ready to accept some level of change? If not, then what might appear to be a fast-track to social change could end up looking more like a long, lonely, winding road.

That’s pretty much the situation for minority ownership of radio and TV stations here in the United States.

Fifty years ago in 1956, there was only one minority-owned radio station that had been built from the ground up: WCHB(AM) in Inkster, Mich. At the time, according to my own research, there were no more than three minority-owned radio stations operating anywhere in the country.

Currently, according to the most recent data available, there are about 400 to 450 minority-owned radio and TV stations.

That may sound like a lot, but it’s still a small percentage of the industry’s total number of broadcast outlets. In fact, in 1995 minorities owned fully 350 broadcast outlets. Their growth in station ownership over the last 10 years — a time of rapid media consolidation — has been hampered by what some have called “a perfect storm” of events.

Still, as minority entrepreneurs continue on the slow road to broadcast ownership, they can take pride in knowing that some of the individuals and organizations that helped pave the way — such as the Minority Media and Telecommunications Council, and the Office of Communication for the United Church of Christ — are still working hard to finish their work and make it easier for anyone who wants to own a radio or TV station to do so.

The MMTC is the youngest one in this group, celebrating 20 years of hard work in 2006. The UCC’s Office of Communications is now 50 years old.

And at the center of it all is Dr. Everett C. Parker, who celebrated his 94th birthday in late January. Parker became active in minority broadcast ownership fully 50 years ago, first with the UCC and then with the MMTC. He is still active today.

Making waves

The MMTC was founded in 1986. According to MMTC Executive Director David Honig, that founding day was “the day after the FCC, to everyone’s surprise, suspended two of the FCC’s three minority-ownership policies.”

Honig was referring to three FCC policies designed to help minorities participate in broadcast ownership.

In a nutshell, those policies are: awarding tax certificates to licensees who sell a station to a minority; offering a preference to minorities in applications for new frequency allocations; and allowing licensees forced into a distress sale to recoup some of their losses through a sale of that license to a minority.

A decision in the late 1970s by the D.C. Circuit Court of Appeals said that minority applicants should receive additional consideration “when minority ownership is likely to increase the diversity of content, especially of opinion and view point.”

Tax certificates and distress sales also were developed as FCC policy in the late 1970s, under the auspices of Dick Wiley, a Republican, who served as FCC chairman from May 1974 until October 1977.

When Democrat Jimmy Carter was elected president in 1976, the FCC’s next chairman was Charles Ferris, who served in that role from 1977 until February 1981. It was under Ferris that the tax certificate policy was finally adopted.

The next president, Ronald Reagan, appointed Republican Mark Fowler as FCC chairman.

The Fowler FCC suspended minority-preferences for distress sales and new frequency allocations. Tax certificates, however, remained part of the FCC’s policy until Congress repealed that policy in 1995.

Honig says the FCC’s tax-certificate policy lifted minority broadcast ownership from 60 stations in the late 1970s to over 300 in 1995.

Henry Rivera is another co-founder of the MMTC. At the FCC, Rivera served as one of the Democratic commissioners there from 1981 to 1985.

Rivera said minority broadcasters are suffering from a “perfect storm” of events that have stagnated station-ownership growth: “I think there has been a confluence of things that have happened in the last 20 years. It’s sort of like the perfect storm. Bad Supreme Court decisions. We’ve had an economy that wasn’t really great. We’ve had a Republican Congress for the last 12 years and they have not been particularly interested in helping minorities.”

As for the demise of tax certificates in 1995, Rivera said, “Part of that was our fault. We’ve had some who took this thing to a point where it became a thorn in people’s sides.”

Rivera was referring to the mid-1990s, proposed acquisition of Viacom’s cable systems by an investor group headed by Frank Washington. If that $2.3 billion deal had been finalized, Viacom would have been able to defer an estimated $400 million in capital gains because the sale would have been made to a partnership controlled by a minority.

That deal didn’t go through and it marked the very-quick end for tax certificates.

Ultimately, the ability to expand minority broadcast ownership boils down to money. That was true in the beginning and it’s still true now. As Rivera put it, “The single biggest problem minorities have is access to capital. I chaired an advisory committee at the FCC when I was there and that was the case then. It continues to be the case.”

To help solve that problem, MMTC established a brokerage business, MMTC Media Brokers, in 1997. The goal was to make it easier to put aspiring minority broadcasters in front of money people, either banks or private equity firms.

Three years after it was formed, MMTC Media Brokers was able to help minority broadcasters buy 40 stations in eight deals from Clear Channel — just a few of the spinoffs required by the media ownership rules and in the wake of Clear Channel’s multi-billion-dollar acquisition of AMFM.

In total, Clear Channel spun off more than 100 stations in the AMFM merger. Honig says the 40 stations minorities acquired were bought for a total $1.65 billion.

By popular demand

Now, MMTC is poised to get involved again. Clear Channel announced recently that it would sell 441 radio stations and all of its TVs as it takes the company private in a leveraged buyout.

MMTC hasn’t been content to wait for mega-opportunities like this to come along in order to help minority broadcasters get access to capital and deals. Every July, MMTC has organized an annual “fly-in” to help educate aspiring station owners in the finer points of broadcast ownership, station acquisition and capital formation.

But July is still a long way away and those Clear Channel spinoffs won’t sit around for long.

In anticipation of all this, MMTC co-hosted a three-day conference in January to help put aspiring minority entrepreneurs in front of private equity firms, banks, communications attorneys and others. The event was sponsored in part by the NAB and Clear Channel.

“The significant thing is that the majority broadcasters who are interested in selling to minority broadcasters come to us now, because we have that reputation in the community of being connected with the entrepreneurs,” said Honig. “That’s just a reputation we’ve built over the last 20 years.”

The other major project for this year is to bring back minority tax certificates. The timing may be right. Tax certificates were killed by a Republican Congress.

The Democrat-controlled 110th Congress may like the idea of bringing back tax certificates. If so, that may be all that’s needed because it appears that FCC Chairman Kevin Martin likes the idea of reinstating tax certificates too.

During a recent press conference, Martin said his commission continues to recommend that tax certificates be reinstated. Specifically, Martin said, “The commission has had [tax certificates] as a recommendation for legislative action for quite some time.” He said that such a recommendation has been included regularly in the FCC’s reports that are submitted to Congress.

Martin also said his commission “always tries to make sure that we’re balancing the opportunity for minorities and diversity of viewpoint in the media realm. We value that as one of the core principles that the commission ends up fostering.”

If our legislators are listening and opt to bring back tax certificates, they’ll greatly contribute to transforming the road to minority broadcast ownership to a smooth, multi-lane highway.

RW welcomes other points of view.

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