NAB 2005: Fritts Surveys Industry Changes

Apr 18, 2005  •  Post A Comment

For nearly a quarter-century, Edward O. (Eddie) Fritts, as president and CEO, has dedicated his life to building the National Association of Broadcasters into one of the nation’s most prestigious trade organizations. He has guided it through periods of success, difficulty and upheaval. Having recently announced his impending retirement, Mr. Fritts talked about his life, achievements and career with TelevisionWeek Editor Alex Ben Block. The edited interview follows.

TelevisionWeek: You have long supported localism in broadcasting, but at the same time you supported the right of the industry to consolidate. Doesn’t the growth of these large multinational, multiplatform companies work against localism?

Eddie Fritts: Not necessarily. You don’t have to own the station to be sensitive to community concerns. I think every manager of a station recognizes that the key to his success, particularly as this competitive world has evolved, has been through localism.

We have preached that continually, that the one thing, the one franchise we have that no one else has, is localism. The cable companies don’t have it, for all intents and practical purposes; satellite companies don’t have it; the phone companies don’t have it; the only content distributor providing free services and local services to the community is the local broadcast station.

We are very competitive if you think about it, one with another. There’s still marketplace diversity. I think due to consolidation, for instance, we’ve seen an enormous rise in Hispanic radio and television stations. Consolidation has provided the wherewithal to create these niche services that weren’t previously thought of as opportunities.

TVWeek: One of your achievements at the NAB has been bringing radio together with TV under the same umbrella. Should they be in the same tent?

Mr. Fritts: In 1992, when the Cable Act was being formulated, it was a showdown vote between TV and the cable industry, and Hollywood teamed with the cable industry at the time. I think in addition to local TV stations coming to town and lobbying [to turn things around], what we also had were local radio stations, who in some instances had better contacts with their members of Congress than did the television stations. They came to town and talked to members of Congress on behalf of their brethren, and quite frankly, tipped the scales toward us winning in the final analysis.

Radio and TV are both licensed by the FCC. They face many of the [same] rules regarding decency or indecency, many of the same rules on license terms, political broadcasting rules. These are virtually identical for both mediums. If you have both working together, you have a more united front. It’s been enormously successful for us, and I hope that model continues well into the future.

TVWeek: After passage of new legislation in 1996, things changed rapidly. Cable grew significantly. Satellite really became a player. There were other forms of new media and the Internet, all vying for attention. Has all this changed things significantly for broadcasters, many of whom now have divergent interests?

Mr. Fritts: There have always been conflicts within the NAB membership, as with any trade association. You never can get 100 percent. What the NAB has been is a forum for everybody to sit at the table and have the opportunity to advance their position. And if, at the end of the day, the majority went against them, then those organizations go off and lobby on their own. That has changed some.

Back to 1996, we played a very major role in [deregulation legislation], especially where it concerned radio. At that time 60 percent of the stations were losing money because the [Federal Communications Commission] had overpopulated the landscape. The competition was just too great in the industry.

Consolidation has allowed us to have a reasonable return on our investment, a reasonable profit margin, which in turn has allowed us to maintain our superlative record of community service and public interest broadcasting. So from that point of view, it’s been very favorable.

We also in that legislation received the additional digital spectrum-that was a gateway to our future. If we were locked in the analog world as the digital universe progressed, then we were obviously going to be left out. So we have been unified in our ability in that area, and things like moving a three-year license to an eight-year license in the Telecom Act were vitally important.

We also gained renewal expectancy. There used to be a greenmail circumstance, where various groups would challenge your license at renewal time. And that meant [license renewal] was held up for months, if not years. And so, consequently, it was every three years you were spending hundreds of thousands of dollars to renew your license.

The new law changed that so all could have an expectancy of renewal. Only if a station did not serve the community would there be a challenge to the license. In addition to that, we increased the license term from three years to eight years. If you’re in the financial markets and you’re asked how long your license term is, and the broadcaster says, ‘Well, I’ve got three years on my license,’ the financial person would say, ‘Well, let’s make the loan for three years.’ But you can’t pay it back in three years, so an eight-year license added a great deal of stability to the industry. Those have been important features of the Telecommunications Act.

TVWeek: It seems as if the concept of broadcasters operating ‘in the public interest’ has been diluted. Today it is all about business. Do you agree with that perception?

Mr. Fritts: No. Quite frankly, what’s happened is that as more diversification has taken place, the FCC allowed broadcasters to meet their public-interest obligations in different ways. There used to be radio news at the top of the hour. Now you don’t have to do news at the top of the hour. You can do it whenever you want to do it.

In terms of public-interest obligations, it’s interesting to note those obligations have not been lessened. The broadcaster has an opportunity now to serve the community interest in a different manner.

I know [former FCC Chairman] Reed Hunt one time asked us to tell him how much public-service broadcasting was taking place. And at that time, across the nation, we couldn’t quantify that. We didn’t know. So we set about launching a census of radio stations across the nation, asking how much public-service and community-interest programming they were programming on an aggregate basis.

The first year we ran the survey, we came up with $6.8 billion [in public-interest programming] as a very conservative number. Our reporting and census taking have developed and we were able to get more stations involved in the process. You have to sit down and say, ‘Tell me what you’ve done in the past year in terms of service.’ So they have to assign someone to go back through their logs, find the shows and assign a dollar value to them. We run this census every other year.

The last number we have is $9.9 billion of community-interest and public-service broadcasting on the air, which is larger than the top 100 foundations combined. For those who say we’re not meeting our public-interest obligations, those are very conservative numbers. They’re documentable. They’re unassailable. We’ve been able to show that clearly they are conservative numbers. And we haven’t included everything that has run, such as, when doing newscast, [if it’s reported] that there’s going to be a fund-raiser for a particular charity, [we don’t count that].

Oftentimes those things are included in newscasts. I think it goes without saying that, following coverage of 9/11, following coverage of hurricanes, floods, fires in Southern California, we haven’t had the locust attacks yet-we’ve had everything but that-your broadcast station is your first source and your best source of information for what’s hap
pening locally. We’re, quite frankly, very proud of that record of service. But there are those who want us to do more and take on their particular charities, and what’s happened is local stations have to make local decisions about the things that are most important in their respective communities. They do that on a daily basis. I think if you ask any of the charitable organizations around the country what type of reception they receive from the broadcast community, they’ll be more than pleased to say that they’ve been treated quite well, and have received an awful lot of public-service time from our stations.

TVWeek: What is going on with the four major broadcast networks and the NAB?

Mr. Fritts: They have left membership in NAB because of conflicts over the ownership rules some time ago. I would say about 95 percent of the issues the networks and NAB are in agreement on, but on the ownership rules, there was a dispute between the networks and the NAB board, and the networks unfortunately chose to leave membership. It remains that way now.

TVWeek: Think anyone can get the Big 4 back in the tent?

Mr. Fritts: Well, I certainly hope so. That will be one of the challenges for the new president of the NAB, to reach out to the networks. I have done so on a continual basis and have thus far been unsuccessful in getting the networks back into membership, but hope springs eternal.

I think the important note here is that local stations have the political horsepower in their communities. They’re much closer to members of Congress.

Our central mission, if you think about it, is to make sure the government does no harm. That’s the first rule of government, if you will. We have had a fairly important impact on how broadcasting is regulated, how it’s treated, how it’s respected across our land, and we’ve done a number of very positive outreach activities that have helped that.

TVWeek: Broadcasters and cable TV are not on a level playing field when it comes to the issue of regulation of content, or the so-called indecency issue. What do you foresee?

Mr. Fritts: We believe strongly in the First Amendment. We believe that the government should not intrude into the area of content. Having said that, however, it’s clear that the government has rules, [and] the courts have spoken in the area of obscenity and indecency. I would never encourage members of Congress to pass rules and regulations on broadcast, but if they do, and if they’re bound and determined to do that, it’s only fair and equitable that all competing media operate on equal footing.

Some will say it’s unconstitutional. I’ve heard prominent members of Congress say that the people who are saying that also say the must-carry rules should be held unconstitutional, and they were not. In fact, they were sustained by the Supreme Court. It is a difficult and thorny area, but a 5-year-old child going across the dial doesn’t know whether he’s switching to a broadcast station or cable. Or if a mom has a carpool, taking the kids to school, and she has a satellite radio, there’s no way to determine whether they’re listening to satellite or over-the-air radio, as far as the youngsters are concerned. I think it’s only fair that we operate on level footing, but again, I would encourage the government to stay out of this area.

TVWeek: Most current bills seem to apply only to broadcast.

Mr. Fritts: I would say that there are no final victories and no final defeats. What’s moving in the Congress is not necessarily what will be enacted in the Congress. I can’t predict what will happen, but the chairman of the powerful Senate Commerce Committee has indicated that he thought there should be level footing for both broadcast and basic and expanded basic cable and for satellite, and clearly his thoughts and ideas have stirred up a lot of attention. I think we’ll have to see how that plays out.

TVWeek: What is your position on a la carte in terms of cable?

Mr. Fritts: I don’t have a position. The industry has not really addressed that as an issue that’s relevant to our TV stations.

TVWeek: Didn’t the NAB suffer a loss on the issue of digital must-carry?

Mr. Fritts: That was at the FCC. I think that the digital television bill and a rewrite of the Telecommunications Act are moving through Congress or will start moving through Congress within the next several weeks or months. There will be a DTV bill that will be winding its way through Congress, and what I would expect is that they will address the multicast-carriage issue in legislation.

There are three ways that things happen. One is [through] a marketplace negotiation; two is the FCC makes a ruling; three, Congress enacts laws for it to happen. The marketplace negotiations have been stymied because of the monopolistic cable gatekeepers and the FCC. [Former FCC Chairman] Michael Powell did the same thing [previous Chairman] Bill Kennard did on his last week or month in office-sort of stuck a finger in our eye on the way out the door.