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NAB Insists on Further Deregulation

Says FCC has failed to reform regulation to reflect marketplace realities

In its latest filing with the Federal Communications Commission, the National Association of Broadcasters says radio owners should be allowed more economies of scale, laying out a grim picture about the business conditions and outlook for radio.

Every two years the FCC must prepare a report assessing the state of competition in the communications marketplace, including in audio and video services. The NAB has used the comment period to repeat and expand on its longstanding arguments that local broadcasters face fierce competition while burdened by “antiquated and asymmetric regulatory restrictions.”

The report is 63 pages plus another 102 of appendices. But here are several main points about radio specifically; and a link to the full report is at the end:

Splintered media

“Similar to the effects of the Great Recession, the pandemic and associated economic downturn dealt a serious blow to the radio industry, with stations struggling to regain their pre-COVID position in the marketplace,” NAB wrote.

It provided numerous data points to show that consumer adoption of digital devices and competing audio services continues apace. 

“This widespread consumer adoption of other audio (and video) options has splintered the formerly ‘mass’ media audiences for broadcast radio (and TV). AM/FM radio’s share of listening by Americans 13+ has fallen over time … This decline clearly was exacerbated by the pandemic, which reduced the time consumers spent (and still spend) in their cars, but it also reflects the increase in audiences’ time spent on streaming audio, podcasts, satellite radio, music videos on YouTube, short video clips on social media sites, audiobooks, and still other options.”

The conclusion, NAB said, is that “the commission must reconfirm that AM/FM radio operates in a larger audio marketplace and has multiple and growing competitors for audiences’ time and attention.”

A larger market

The “Great Recession” and the “Great Pandemic” both delivered serious economic blows to the radio industry, NAB continued.

It said that given their dependence on advertising revenues and the source of those revenues, the radio industry was particularly hard hit by the COVID-19 pandemic and subsequent economic downturn, and that there were 180 fewer full-power commercial AM/FM stations at the end of 2021 compared to two years earlier.

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“Advertising-dependent local broadcast stations cannot expend resources they do not have to improve their services offered to local communities or even, in some cases, to maintain the same level of services they provided in the past.”

NAB said the FCC “must confirm in its upcoming competition report that AM/FM radio is only one participant in a broader advertising market dominated by large digital ad platforms and is only one content provider in a media market with seemingly unlimited listening (and viewing) options for consumers.”

Not a level field

“The broadcast industry competes on an unequal playing field against much larger competitors and needs greater scale and investment to continue offering effective local service to communities of all sizes,” NAB wrote.

It said broadcast radio consists of tens of thousands of stations owned by thousands of separate owners. “Even full-power commercial radio station ownership is dispersed among 3,001 separate owners.” That compares to much higher concentrations in satellite radio (with one provider), the digital ad market and recorded music.

The association argued that “most of radio’s toughest competition” comes from internet companies owned by vastly larger entities, including America’s biggest tech platforms. The leading online brands are Spotify, YouTube Music, Pandora, Apple Music and Amazon Music. 

“To say that broadcasters face challenges in successfully competing in a marketplace dominated by competitors of such vast scale and financial resources seriously understates the problem.”

Further, the same companies, unlike radio broadcasters, own and control the technologies consumers use to access and listen to online audio, and have expanded their reach into automobiles through integrated mobile operating systems.

“[H]ow are the thousands of separate owners of radio stations — even the largest of which has but a fraction of the negotiating power of the tech giants — supposed to ensure their place in the dashboard of the future? The commission cannot simply assume that in the digital age auto makers will continue to include AM/FM radio in cars’ ‘infotainment’ systems or, even if included, will ensure that terrestrial radio remains easily accessible in a dashboard configured to feature Apples/Google’s integrated mobile operating systems, satellite radio and/or Amazon’s voice assistant technology. The tech and audio giants have no incentive to design any systems to feature competing content sources, such as AM/FM radio.”

NAB said the FCC needs to recognize “these larger competitive and technological forces that may threaten the viability of OTA, ad-supported AM/FM stations licensed to local communities.” It should  reexamine its regulatory regime and eliminate or revise rules “uniquely burdening terrestrial radio stations but not broadcasters’ exponentially larger competitors.” Specifically, the FCC should revise the local radio ownership limits, which it says discourage investment and impede stations in numerous ways. 

The only way broadcasters can pay for enhanced programming, staff and infrastructure, NAB concluded, is to allow broadcasters to “achieve increased scale economies.”

In sum, NAB said, if the country wants public service, “the FCC’s policies must support the broadcast industry’s ‘economic viability’ in today’s — not yesteryear’s — media and advertising markets. … At some point, some broadcasters may come to believe that the best competitive strategy may be a simple shift to offering audio and video content via unregulated platforms.”

[Read the filing.]