By Hilton H. Howell Jr.
September 23, 2020 at 5:00 am ET
With the nation facing multiple overlapping crises, local news outlets are stepping up with critical local news and information, providing updates on health warnings, coverage of local economies, reports from the street, and news conferences from local officials. The story you won’t see in these broadcasts is that many of these stations, especially those serving small, rural markets, are at risk due to the economic downturn and the shift of local ad dollars to largely unregulated internet platforms, like Google and Facebook.
These threats are already starting to take their toll on television stations in some of the smallest markets as stations must make painful cuts because they can no longer afford a robust local news operation. Fortunately, there is a straightforward path to shoring up local broadcast news before more newsrooms must shut their doors: updating Federal Communications Commission regulations to allow local television stations to scale up.
Currently, FCC regulations – some of which date back to before World War II – prevent a local broadcaster from owning more than one television station in the vast majority of television markets. Like any of its rules, however, the FCC has the authority to waive it for “good cause” if the FCC finds that a waiver would serve the public interest. It is essential that the FCC use that power now.
The threat to local news is best understood as the convergence of two separate trends. The immediate issue is COVID-19 and the related recession. This has hit local businesses – car dealerships, mom-and-pop retailers and small restaurants – hardest of all. Those are the backbone of local broadcast advertising, and BIA Kelsey, a leading advertising analyst, now forecasts that 2020 local broadcast advertising nationwide will be down nearly 13 percent compared to 2018, the last year impacted by political spending.
This immediate threat comes on top of the shift of local ad dollars to Google and Facebook. Since 2014, these unregulated platforms have dramatically expanded their share of local advertising, increasing more than tenfold in the case of Facebook and nearly tripling in the case of Google. Today, these two companies alone capture just shy of 1 out of every 5 dollars in local ad spend, and Google by itself earns more local ad revenue than all the nation’s local television stations combined.
There is no quick fix to either of these challenges. But there is a demonstrated pathway to making local stations and news gathering operations more sustainable, and that is to allow them to scale up.
Gray Television just commissioned a robust economic study looking at what happens when local broadcast stations are able to combine forces. Contrary to what some might have expected, in such markets the amount of news being provided to the community went up substantially, and to a much greater degree than in markets where no such scaling up occurs. This is especially true in mid-sized and smaller markets.
According to the study, in markets where consolidation occurred, total news output by the affected stations increased by almost 28 percent, while in other markets without any consolidation the total news output grew less than 20 percent over the same period. Importantly, in small markets (those ranked between 101-210 by population according to Nielsen Media Research) the rate that news output increased with consolidation was more than double that of small markets without any consolidation.
The implications of this data are clear: When local stations can join forces, particularly in small markets, the result is a significant expansion in the supply of local news.
That’s good not just for the local broadcast businesses involved, it is good for the entire community and country. Studies show that local broadcast stations are trusted more than any other news source. People who report getting their news mainly from local broadcast news as opposed to social media, are far less likely to believe conspiracy theories or misinformation. They are less polarized and more likely to vote and feel engaged in their community. When Spanish-language local news is available in a community, the rate of voting among the Hispanic electorate goes up.
Unfortunately, such scaling up efforts are being discouraged by federal regulations that generally prohibit a local broadcaster from owning more than one station in most markets. However, the FCC has the power to waive this rule for good cause at any time. If ever there was a time to use that authority, this is it.
Without urgent action, many local broadcast stations in small markets will follow the path of local newspapers, over 2,100 of which have gone under since 2004. At a minimum, investment in robust local news coverage will surely diminish. Indeed, in rural markets like Casper, Wyo., we are already seeing it. However, if the FCC acts now and signals to local broadcasters that it will favorably act on proposals to combine local operations, particularly in smaller markets, then we would anticipate a wave of deals to rescue struggling stations altering the landscape for the better. Across the country, stronger local broadcast businesses would emerge with the resources and incentive to expand local news output and better compete against Google and Facebook.
That would mean better service for local viewers, a stronger advertising offering for local businesses and, above all, more cohesive, well-served communities. That is the very definition of what public policy should aspire to deliver. We urge the FCC to act now.
Hilton H. Howell Jr. is executive chairman and CEO of Gray Television, a leading local broadcast company.
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