Jessell at Large

The DOJ's Anti-JSA Arguments Are So 1997

Justice’s 18-page filing in support of the FCC’s proposal to kill JSAs is a bloated document that has a slap-dash quality and is notably short on substance. What’s worse, it references comments it made in a similar FCC proceeding in 1997, saying they continue to make a lot of sense. 1997?! That's 17 years ago. I would say that anything written about media markets in 1997 is totally irrelevant today.

Twenty bureaucrats put their names on the Department of Justice's 18-page filing last week backing FCC Chairman Tom Wheeler's plan to force broadcasters to dismantle duopolies that rely on joint sales agreements.

The signatories were topped by no less than William Baer, the head of DOJ's antitrust division, and also included four deputy assistant attorneys general, a couple of directors, seven chiefs and assistant chiefs, four plain old attorneys and two run-of-the-mill economists.

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The filing is a wonder. It's a wonder why anybody would want to be associated with it.

For all its fancy lawyer and economist talk, the filing has a slap-dash quality and is notably short on substance. What they say in 18 pages could have been said in three.

The filing is anything but clear and straightforward. But the thrust of it seems to be that JSA-based duopolies are anticompetitive in that they give the duopoly broadcasters too much market power — that is, the ability to gouge advertisers on spot TV rates.

The assertion is based largely on DOJ's insistence that broadcast spot inventory is a rare and precious resource. "Advertising on local broadcast stations has no close substitutes," the filing says.

Brand Connections

The premise is demonstrably false. There may be no perfect substitutes, but there are plenty of close ones — other media that auto dealers, personal injury lawyers and furniture stores can turn to if they don't like the deal they are getting from the broadcasters.

Randy Bongarten, CEO of Bonten Media Group, made the point last week when he visited FCC officials in an attempt to stave off the JSA crackdown.

"[I]n the highly competitive local advertising market, television stations compete not only against other television stations and radio stations, but also against websites such as Google, Groupon, Yahoo and Microsoft as well as cable and newspapers," Bongarten says.

Mark Fratrik of BIA/Kelsey says local broadcasters go up against 11 other local media for ad dollars, everything from radio to newspapers to mobile.

Fratrik estimates that TV stations accounted for just 14.8% of the $132.7 billion in local ad spend in 2013 and that the percentage will remain essentially flat for the next four years.

With 5.2% of the market in 2013 (to grow to 5.7% by 2017), cable is the most direct competitor, he says. "It has the same type of access to local audiences as TV stations. The best example is Monday Night Football on ESPN. How is that any different than Sunday Night Football on the local NBC affiliate?"

The medium to watch is mobile, Fratrik says. Its share of the local ad spend will go from 2.1% to 7.1% between now and 2017 and much of the advertising will be video.

In his visit to the commission this week, Jay Howell, the new head of television of LIN Media, told officials that the competition from cable is "intensifying."

According to a public record of his discussions, Howell argued that with the use of interconnects and their own joint sales arrangements, MVPDs are "taking larger shares of the local television advertising pie each year.

"They cannot simply be ignored when considering an agency rule to regulate identical business practices by local broadcast stations with which they compete."

Schurz Communications and Entravision poked another hole in the DOJ filing this week during its trip to the FCC.

Given the DOJ's professed interest in case-by-case review of TV deals, the two stations groups say in an account of their meetings, it was surprised that it backed Wheeler's plan for what amounts to a blanket ban on JSA-based duopolies.

"Such a bright line test, ignoring the identity of the stations involved in any agreement and failing to account for increases in competition or of service to the public, is at odds with how Department of Justice itself handles agreements among television stations.

"Its recommendation, therefore, should carry little weight."

I can see why the DOJ's job of assessing the antitrust aspects of a merger is tough. In most cases, the lawyers and economists have to guess at what the competitive impact will be based on what they can reasonably deduce from an examination of the companies and their markets.

But in the case of JSAs, all the DOJ has to do is ask to find out exactly what is happening. JSAs and duopolies of all varieties now have a long history in television. There is no mystery about who is running them and where they are.

The DOJ could go to Augusta, Ga., or Montgomery, Ala., or Dayton, Ohio, and talk to advertisers and their agencies about the competitiveness of the media markets.

What impact did the advent of duopolies have on spot rates? Did they go up or down? If up, by how much? Did you actually lose business as a result of the higher rates and your inability to advertise on broadcast TV as much? Is cable TV a credible alternative to broadcast TV?


Comments (5) -

Roger Thornhill Nickname posted over 3 years ago
This is a case of the DOJ straining out the gnat on JSAs while gulping down the camel with the Comcast/TWC merger. The fact that Tom the Cable Guy has said nothing about the proposed merger while saying plenty against these broadcaster agreements tells us exactly where his sympathies lay and why he is unfit for the job of Chairman. He should step down and/or be investigated. I highly doubt he has divested himself of all his ties to the cable industry.
Dennis Brown posted over 3 years ago
There's no evidence to support a suggestion of improper behavior against Wheeler. A person who's served as head of an industry association can naturally be expected to see that industry's arguments most clearly without the need to suspect him of any improper relationship.
Roger Thornhill Nickname posted over 3 years ago
Well, Tom was also on the board of PBS. Let's hope he's equally sympathetic to the recent APTS announcement that an overwhelming majority of its member stations won't be participating in the incentive auction. As Harry's essay makes clear, JSAs are basically a non-issue. There is no proof that they provide much of an advantage over other media in the market and clients aren't complaining about them. So why is Wheeler so focused on JSAs? The only groups complaining have been the cable and satellite industries and as Harry indicates this may well have prompted Wheeler, who as we all know was at one time president of the NCTA, to seek a ban on duopolies and the JSAs. Tom's actions, so far, seem to indicate that his past relationships with the cable and wireless industries make him incapable of objectivity. And that makes Tom Wheeler an inappropriate choice in my book. Keep in mind that when Wheeler was first tapped to succeed little Julius as Chairman he had to hurriedly cut his ties with the cable and wireless industries before the vetting process could begin. But did he really cut those ties? I have my doubts. All I can say is that once Tom leaves the chairman's office, it will be instructive to see where he goes next and who offers him what.
SpotGal Nickname posted over 3 years ago
Right now if seems that the only possible objections to JSAs would come from the cable industry. However, there are plenty of small group broadcasters and/or investors who have wanted to buy some stations that are now JSAs and have been effectively frozen out by the mega- buyers. Restraint of trade? I am not a legal expert in that area, but there is definitely a whiff of repressed competition. Then again, broadcasting is simply following the model of the U.S. economy with the privileged 1% amassing the most.
Upwind Nickname posted over 3 years ago
Let us recall that television stations, radio stations and, to a certain extent, satellite MVPD's differ from the other delivery systems mentioned in this article in that they have licenses (not deeds) to use the public elctro-magnetic spectrum. Therefore they submit to heavier regulation than those that do not use the public spectrum. Seeking to circumvent owner restrictions/regulations, the industry consulted their best lawyers and lobbyists years ago and came up with SSAs & JSAs. Now, after a marked increase in these regulatory avoidance schemes, the regulating agency is re-examining the impact on an industry that is controlled by a relatively small number corporations. The outrage is palpable. The question is; "What is best for the American people?" (the spectrum owners) rather than; "What is best for the bottom line of broadcasters?" (the license holders). If the answer is that increasing ownership limits - overall and in the same markets - will serve the public, why does not the industry propose revised ownership limits rather than screaming about the regulators doing their job?
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Overnights, adults 18-49 for September 22, 2016
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