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NAB’s Fritts: In for the long haul

Apr 8, 2002  •  Post A Comment

With almost 70 percent of commercial TV stations having told the Federal Communications Commission that they won’t be able to meet the agency’s buildout deadline for digital television, NAB President and CEO Eddie Fritts said consumer demand–not regulatory fiat–will dictate the pace of the transition.
That is the pitch Mr. Fritts will be making to the industry as broadcasters meet at the National Association of Broadcasters convention in Las Vegas this week.
Mr. Fritts also confirmed that there has been a rift between his radio and TV station members–and that consolidation has increased Clear Channel Communications’ leverage over association affairs.
The NAB chief, 61, also makes clear that he’s planning to remain in command of the association’s controls, at least through 2005.
Electronic Media: My understanding is that a lot of your members are concerned that NAB has not been able to deliver on digital television, on what they feel they need on DTV–including regulations that would require cable to carry the digital signals during the transition and ensure that all new TV sets are equipped with DTV tuners.
Mr. Fritts: Those issues are teed up at the FCC. We’ve made the filings, made the case at the FCC on digital television. They’ve announced a task force. The digital tuners, the must-carry issues, are certainly teed up there. Those are important. We’re expecting them to make decisions on that.
I don’t know that DTV is so much a regulatory issue as it is a marketplace issue. What we’re seeing is there is a gravitational pull toward digital television. What we’re seeing is that more and more consumers for the first time are beginning to have access to and see a panoply of digital tuners to choose from.
Up until now, this has been a technologically driven issue. Broadcasters have really done a magnificent job in stepping forward in my estimation and developing digital television. We spent years and years developing digital television, and we spent years and years massaging the system, working our way through the regulatory briar patch, if you will, and getting ourselves to the point where now consumers can actually begin to look at digital television and see it. We’re really in the infancy of consumer acceptance. What we’re seeing is it’s happening and consumers like it. Now people are seriously looking at DTV sets.
Consumers will have to drive this revolution. There’s no way NAB or any other institution can go to consumers and require them to purchase a digital television. We’re beginning to provide the incentive to do that for consumers.
EM: I’m not sure you can say broadcasters are doing a great job on the rollout when 870 of the nation’s 1,288 commercial stations, or 68 percent, have applied for waivers because they couldn’t meet the FCC’s May 1 buildout deadline.
Mr. Fritts: That was not a congressional deadline. That was an FCC deadline. What we’re seeing is that most of those filings are for very short periods, certainly less than a year.
EM: Will there be enough stations on by the end of the year to serve as sort of a critical mass to get this moving?
Mr. Fritts: I think so. We’re already offering now a digital television signal to 80 percent of the population. Four more stations will go on the air this week. The fact that our broadcasters have asked for short extensions is very encouraging in this process.
In one of our markets where we’ve actually put digital TV sets in the homes of viewing families, one of the comments was, `I was watching the ballgame. I could see so clearly on digital HD that I could see when the player’s contact lens flew out of his eye.’ That’s pretty darn magnificent. As more and more consumers get the word, and more and more stations get on the air, and more and more programming comes on line, we will see that digital television will take off.
EM: Are you optimistic that’s going to happen this year?
Mr. Fritts: I’m optimistic that this year is a building year. But the curve is certainly upward, and that’s important.
EM: Also on DTV, the whole lobbying pitch of NAB so far seems to have been that the cable guys and the consumer electronics manufacturers aren’t doing their part. Is that enough, or do you have to have some other strategy?
Mr. Fritts: Anybody who looks at this has to look at this toward the horizon and understand that the issue is not how many stations go on the air. The issue is not whether we can get zoning rights in Denver. The issue is when will consumers change out all their television sets? And I think the American consumers have a relationship with members of Congress that will cause them to understand the 85 percent rule [which says broadcasters don’t have to return their analog channels to the government until 85 percent of viewers are able to receive DTV] that they have enacted after careful study is a valid one and important in this process.
EM: All of the networks except The Walt Disney Co.’s ABC have been out of the NAB for a year or more now. Has that hurt your effectiveness in Washington?
Mr. Fritts: There is but one issue we differ on with the networks, and that is the 35 percent issue [the FCC rule that bars broadcasters from acquiring stations reaching more than 35 percent of the nation’s TV households]. We stand ready to welcome them back into membership–at their discretion, obviously. There is certainly no ill will from NAB toward our friends at the networks. And indeed on 95 percent of the issues we work on we have a common interest.
EM: Do you work together on some issues?
Mr. Fritts: We do indeed work together. The Torricelli amendment [proposed legislation broadcasters defeated that would have required TV stations to give politicians steep ad discounts] is a good example of where we were hosting these conference calls that certainly included network representatives.
EM: With the networks out of your fold, they appear to be starting at least an informal association with station representatives through Jeff Smulyan, chairman and CEO of Emmis Communications, and Peter Chernin, president and chief operating officer of News Corp. Have you been in on the meetings at all?
Mr. Fritts: I have not personally been in on them, but I get updates from Jeff on a fairly regular basis.
EM: Do you think that will go anywhere?
Mr. Fritts: I don’t think the goal here is to necessarily develop a new association, certainly not in the mold of an NAB. I think their goal is to find a way that they can legally pool their resources in the various markets to be able to compete with the monopoly cable provider.
EM: What are their leading proposals?
Mr. Fritts: You need to talk to them about the specifics. I would feel uncomfortable speaking on their behalf. The important note I can say is we’ve been made aware of their discussions; they’re going forward certainly with our knowledge and understanding. While we are not leading that particular parade, we are staying abreast of it.
EM: My understanding is that there’s also a behind-the-scenes clash between your radio and TV board members over whether to seek legislation that would make it easier from a copyright standpoint to stream their signals on the Internet. The radio people, I am told, want to make it easier to stream, while the TV people are opposed.
Mr. Fritts: Virtually every segment of our industry is represented on our board of directors. That’s the beauty of NAB. Our diversity is our strength. Some people say you can’t make a decision because you have opposing views. Au contraire. We not only make decisions, but we make decisions that have the full weight and influence of the entire association and its membership behind them, while any member at any time can be concerned about a particular issue and stake out their own positions with members of Congress and the FCC. The fact is that broadcasting unifies under the NAB banner.
Are there conflicting points of view on our board positions? Of course there are. There always have been, there always will be. It’s not the first time we’ve had a point of tension between broadcasters.
EM: Do some statio
n representatives see this as a reason for radio to go its own way and TV to go its own way?
Mr. Fritts: This is an issue that’s evolving. It’s not decided. It’s continuing to evolve. It’s clear that television has very strong interests in maintaining the sanctity and the purity of the local market system. And I think time and time again NAB has proven its steadfast loyalty to that precept. We will continue to protect television’s interests.
On the other hand, you have a series of events taking place in the copyright community that affect the streaming of radio stations and webcasting. There are some concerns–legitimate, I might add–that once you open a congressional can of worms, you have allowed yourself to let the process get out of control. There are those who think this issue could be resolved by telling the members of the [House] Judiciary Committee who have asked for views. The views would be this is not good for television and there are certain facets of it that may be good for radio. We know [they won’t] legislate on this momentarily. And consequently there will be a period of time during which we will continue to study the issues.
To the extent that we have diverse views, I think we’re strengthened. We will work our way through this issue as we have worked our way through many contentious issues in the past. I’m not saying this is a contentious issue. I’m just saying that there are contrasting points of view that will need to be reconciled before the board takes a final position.
(Editor’s note: At deadline, a well-placed source said the NAB radio and TV boards had tried to resolve the controversy, at least for the time being, by taking the position that the association could support legislation making it easier for radio to stream, as long as television is completely exempted. A TV industry source, however, questioned whether the position is tenable.)
EM: That was presented to me as an example of how the radio and TV industries are growing in different ways, suggesting there could be more friction.
Mr. Fritts: Let me give you an example. The Torricelli amendment did not include radio. Radio would not have had to adhere to any of the precepts in the amendment. Radio could have walked away and said, `Let them screw television.’ They didn’t. They said, `This is bad for our friends in television. We compete with television. But this is bad for them. It’s bad public policy. As a result, we’re going to unify and we’re going to fight this hammer and tong.’ And our industry did that. And so while there may be a momentary chasm, I think it will be easily bridged as we go forward.
EM: One radio owner told me he felt that NAB didn’t mount an effective fight against XM Satellite Radio (a national subscription satellite radio service that competes with NAB’s local radio station members) because Lowry Mays, head of Clear Channel Communications, which owns 1,200 local radio stations, has a major investment stake in XM.
Mr. Fritts: We have made a significant impact on XM and Sirius [another satellite radio company]. They applied for [a license] 11 years ago. Were it not for NAB, perhaps that issue would have moved more swiftly. Ten years is a long time in any product life cycle. A satellite only lasts 15 years, for crying out loud. Couple of points: One, the international bureau at the FCC granted the licenses for XM and Sirius. They launched and they went on the air. They’ve had a tough, rocky financial start, no question about that. And we as an association find that it’s not our role to tell our members what they can and cannot invest in. One could say that outdoor advertising competes against me, and Clear Channel owns some outdoor advertising, so that’s a bad thing. But one could pick out any segment and say that.
I think the fact that this broadcaster is concerned about XM is the same reason we are concerned. It was NAB that made sure that this was going to be a national service with no local repeaters. It was NAB that unearthed the fact that XM had applied for 1,100 repeaters and had convinced the international bureau to keep them, if you will, under the cover so nobody could find out where they were or what the power was. We’re concerned about the fact that XM used subterfuge to [hide] the fact that they were really after local insertions and local identification, when in fact those satellite licenses were granted to be and intended to be and applied for to be national services. I would respectfully submit that this radio broadcaster is operating without full benefit of the facts.
EM: With all of Lowry’s radio stations, does he have the votes to shape the NAB board, to control it?
Mr. Fritts: Not at all. You get one vote per station, but his stations are not all located in one state. There’s a limit to how many board members Clear Channel can have. They can have two radio board members and one television board member, max.
EM: But they can vote for the other board members, can’t they?
Mr. Fritts: They can certainly have an influence in some states. But clearly they don’t control by a long shot the board voting process at the NAB. And I know them very well, and that’s not their style.
EM: With the continuing erosion of broadcast share, are you optimistic about broadcasting’s future?
Mr. Fritts: I am very optimistic about broadcasting. As we look at sort of an introspection following Sept. 11 to re-evaluate what good broadcasting has created, if you think about the one source that kept us all informed, that kept us together, that kept us unified as a country, it was really broadcasting that unified this country, that raised the millions of dollars, that led the blood drives, not just for the World Trade Center, but for the everyday needs of Americans, and continued to emphasize the societal good promoted by radio and television.
So as I look forward, I see a competitive marketplace, and one that broadcasters can continue to do well in. On Sept. 11, broadcasters outdistanced the cable networks 60 million to 15 million. That’s an erosion we can live with. That’s 4-to-1, broadcast television. It’s still vital; it’s still vibrant; it’s still important.
EM: By all accounts, this has been a phenomenally bad year for advertising-supported media. Do you see a turnaround for broadcasting?
Mr. Fritts: Clearly there’s been a slowdown in the advertising economy for television, radio, for newspaper, for cable, for billboards, the entire advertising-supported medium. As a result, broadcasters–like everybody else–have looked at their expense lines and made adjustments. The good news is that from the reports we’re getting, there is a light at the end of the tunnel. We think the trough is over and we’re on the uptick, and we’ll probably look at some growth now in the advertising economy. What we’re finding is the buys are still coming, but they’re coming later in the cycle, which gives broadcasters less time to do their forecasting. So the net of that is I think we’ve turned the corner. While our growth will be slow, it will be growth.
EM: How’s the attendance shaping up for the convention?
Mr. Fritts: We have a real sprint for the finish in terms of registration. However, we recognize that the economy will reduce the total numbers by probably a margin of 10 percent, maybe 15 percent all told.
EM: From last year?
Mr. Fritts: Down from last year. When you get much larger than we were, you really get congested in Las Vegas. A citywide convention makes it really difficult to get taxicabs, to move around. So there could be a silver lining in that the people who come will be the real buyers, not necessarily just the tire-kickers.
EM: There are rumors that you’ve been having health problems recently.
Mr. Fritts: One, I’ve been fortunate that I’ve had no health problems. The only health problem I had [involved complications from knee-replacement surgery] in 1998. Like anybody else, I’ve had bouts of flu and that sort along the way. My contract goes through 2005, subject to continuation by our board.
EM: So you’re going to be around at least until 2005?
Mr. Fritts: That’s my in
tention. I’m happy with what I do and I like what I’m doing. As long as I’m healthy and happy, I’ll continue doing what I’m doing.