MG - Once the public domain was handed over to a handful of rich, politically connected people, they consolidated their position by taking control of the media, of education, and the churches. This has become so much a part of our being that people hardly think about it, and what it implies. No one needs to pay off the press: in most cities, the biggest single downtown landowner is the press itself. No one needs to pay off radio and TV stations: their spectrum assignments are the basis of their being.  Read the whole article

Chuck Metalitz: Licenses to Steal Are Expensive

Using financial reports filed by owners of radio broadcast licenses, this Research Note shows that license values are approaching, or may even have reached, such levels. It also shows that the main asset on these companies’ books is their licenses. This means that, while Henry George would recommend that substantially all the rent of these licenses be collected thru taxation, such a policy would be a major inconvenience for such companies.

This paper stems1 from an event last year, shortly before the Des Moines conference. Chicago’s only remaining privately-owned classical music station, WNIB2, was sold for $165 million. Bonneville International Corporation bought the station not because they wanted to continue or improve its operation; what they really bought was a license to broadcast to a market of nearly 10 million people. In fact, they bought the market, at a cost of about $17 per person.

Well, I used to listen to WNIB, and I resented being sold for $17. I wanted to look into the business of broadcast radio, and try to analyse it in Georgist terms. George pointed out that those who could monopolize natural opportunities could exact a toll on users, and that speculation could lead to excessive costs of access which eventually make productive use impossible.

What I found is, first, that the major asset of broadcasters is privilege. Actually, I could have figured that out just by reading the Chicago Tribune3, who quoted the publisher of a radio trade magazine: “These radio stations are a license to steal. They’re gushing oil wells.”

And, second, I found that speculation in broadcast licenses does indeed appear to have reached a point where productive activity is quite difficult, though not yet impossible. One can make money in radio, but it’s mainly done by holding licenses rather than producing programming. ...

I’m going to give some background on the industry, then some detail to support the assertions made above. Then I’ll treat some related matters, including the implications of spectrum auctions, future trends in license values, and, of course, Henry George’s recommendations. Limited financial data about the radio broadcast industry is available.

 The 4685 AM and 8032 FM commercial stations licensed4 in the United States have literally hundreds of owners. Many are privately-held corporations with just a few stations, or companies in other businesses— notably newspapers— with a station or two among their holdings. But the really valuable licenses, those serving large metropolitan areas, are largely controlled by a few huge corporations. One report claims that four companies control the stations receiving 90% of radio advertising revenue.5

The biggest radio broadcaster, Clear Channel Communications, owns 1,140 stations, including five or more in each of the seven largest market areas.

Infinity Broadcasting, a subsidiary of multimedia conglomerate Viacom, has 184 stations in 41 market areas, accounting for 13% of total U. S. radio advertising expenditures6. Some other large broadcasters are shown in Table 1. ...

As one station broker put it, “First time buyers are not going to get bank financing. In the present business climate some experienced buyers are not going to get loans unless they have ‘outside’ assets to pledge. . .Most bankers do not understand the broadcasting business. . . if it does not have a car title attached they are without a clue.”14

The FCC does not seem to recognize this problem. In their paper which “explains why auctions are superior to comparative hearings for selecting among mutually exclusive applications for spectrum licenses,” FCC staff address the concern that small businesses may be unable to compete, using phrases reminiscent of economist jokes: “Given efficient capital markets, the bidder with the best business plan, producing the highest expected profits, will get the best financial backing and will be able to place winning bids15.” The paper, of course, does not consider any other method of spectrum allocation. ... read the whole article

Mason Gaffney: Geoism, Recession and Control of Monopolies