December 1, 2015

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First Mediaworks

“Consolidation Has Been Devastating” — NABOB’s Jim Winston (03/08/04)

By Reed Bunzel, Editor-In-Chief

The National Association of Black-Owned Broadcasters was established in 1976 by a small group of African-Americans who desired to establish a voice and viable presence in the industry and to address specific concerns facing African-American broadcasters. The organization is a nonprofit corporation governed by a volunteer board of directors and supervised on a daily basis by Executive Director Jim Winston, who also is a partner in the Washington, D.C. law firm of Rubin, Winston, Diercks, Harris & Cooke, LLP.

NABOB’s two principal objectives are to increase the number of African-American owners of telecommunications facilities and to improve the business climate in which they operate. “The overall objective is to maximize the potential for financial success through providing advocacy resources and information in critical business areas, including advertising sales, station acquisition, financing, and federal broadcast regulation,” observes Winston, who has served as executive director of the organization since 1982.

According to the organization’s stated charter, “economic and political empowerment in the African-American community cannot be achieved without access and control over the mass media resources that impact our lives and the world. NABOB is dedicated to creating opportunities for success for African-Americans in the telecommunications industry.”

Although NABOB was founded in 1976, the organization this year is celebrating the 20th anniversary if its annual black-tie dinner, which honors some of the most prestigious names in entertainment, communications and public service. “The first dinner organized by NABOB was held in March 1985,” Winston recalls. “The view is that we had — and still have — a lot of issues we’re trying to address, in terms of promoting the success of people in the broadcast industry in particular, and people in the entertainment industry in general. We thought that because there were people who were helpful and supportive to us, we should start recognizing them, independent of other organizations that may or may not recognize them.”

At that very first dinner, Winston recalls, NABOB recognized the late Congressman Mickey Leland (D-TX), who was instrumental for NABOB in the early 1980s, and FCC Commissioner Henry Rivera, who at the time was the only minority member of the Commission. “We wanted to let people know that NABOB had important issues to address, and these were people who were helping us address them,” he says.

That first dinner in 1985 drew 200 to 300 people, a fraction of the 1,000+ that the annual gala now attracts. Part of the reason is that NABOB has expanded the spectrum of individuals who are recognized for their achievements; they now honor people for their achievements throughout the entertainment industry. “We now recognize folks from radio, television, music, film and the fine arts,” says Winston. “In the last few years, we have given awards to Jessie Norman, Leontine Price and Wynton Marsalis. So we have a broad spectrum, and this year we again have a broad spectrum of honorees.”

Winston says that the African-American role in broadcasting today is the situation of a glass that’s half full and half empty. “We’ve had some tremendous successes,” he says. “We’ve gone from 30 radio stations and no television stations in 1976, to 240 radio stations and 20 television stations today. For much of that time, we had an independent black cable channel called BET; now we have one coming on line in TV One. We also have the American Urban Radio Network. So we’ve seen tremendous growth in comparison to where we were in 1976 — and certainly since the 1985 dinner. In that respect, there’s a lot to celebrate for our 20th dinner.”

Unfortunately, as Winston continues, “The issues we address today really haven’t changed much from the issues we addressed in 1976. In spite of our growth, African-Americans still own only 2 percent of all radio stations — hardly representative of a population that’s more than 13 percent of the American people. This is not what could be described as African-Americans’ having a fair share in this industry and a fair impact on the national dialogue that this industry provides.”

Noting that the broadcasting industry is still the principle means by which Americans gain news and information, and shape their opinions about important issues of the day, he says that “when you don’t have African-American ownership at a significant level in presenting information on those media, then the African-American community is marginalized and unable to have as effective a part of the national voice as it should have.”

Consolidation Culprit
A primary culprit in this lack of opportunity is the widespread deregulation that was introduced with the Telecommunications Act of 1996. “Consolidation has hurt opportunities greatly,” Winston observes. “The Telecom Act took the national cap off the number of radio stations any company could own, and this has had a very devastating impact on the industry. We have seen a number of small minority-owned companies, as well as small companies of any ownership, leave the industry to be replaced by a handful of large companies that own hundreds of stations. This flies in the face of everything the FCC and Congress had developed in the way of national telecommunications policy for over 70 years, and the result has been detrimental not only to African-American ownership but to the American public as a whole. People are finding fewer and fewer independent voices for information.”

Noting that it’s difficult to crawl inside the collective mind of Congress, the FCC, and the White House, Winston notes that no one talked in terms of the kind of consolidation we see now — except NABOB. “We were opposed to the legislation then; and unfortunately, we were a minority voice in every sense of that word,” he says. “Even when we were opposing consolidation, we who opposed it couldn’t anticipate that it was going to get this bad.”

In spite of an industry that appears to be heading toward big business, African-Americans have managed to see signs of success. “Radio One has 66 stations, Inner City has almost 20 stations, and Access.1 will be near 15 stations soon,” Winston points out. “We’re definitely seeing growth, which we at NABOB applaud. But our concern is that we hate to see this happen while there are small stations being sold and small owners going out of business. After all, they are an important part of the American broadcast landscape. So, while some of our companies are able to adapt to this new consolidated industry structure, we think consolidation is not in the best interest of the overall American populace.”

Other Factors
Not all of today’s challenges for African-American broadcasters can be blamed on regulators and legislators, however. Much of the problem stems from the fact that adequate funding often is not available to minority owners or entrepreneurs, thus limiting their ability to start or build radio companies. The investment community views these as “small potatoes.”

“Investors are not willing to invest in one- or two-station purchases,” Winston explains. “It’s very much a size problem. Today’s small, first-time buyer will not be able to put together the kind of business venture that would be attractive to the investment community. They are of the opinion that you must have a large cluster of stations in a market to be successful against broadcasters that also have large clusters in those markets. So, unless you can come in with a business plan that proposes acquisition of a significant number of stations in a very short period of time, most capital sources will not consider investing.”

To complete a substantial transaction, today’s African-American entrepreneur must come to the table with a significant amount of their own financial resources, because nobody will finance 100 percent of the transaction. “This makes it extremely hard for new entrants into the industry,” says Winston, “and that’s who’s suffering the most from consolidation.”

Adding insult to injury: “If a small entrant tries to acquire a station,” Winston continues, “or even if an existing owner is trying to expand his or her portfolio, they often are forced to advise the potential seller that they need 30 days to complete their financing before they can sign an asset purchase agreement. Meanwhile, the seller will get an offer from a conglomerate that already has a line of credit for $200 million and can close a $10-million transaction. Because they have no financing contingencies, the larger company can outbid the smaller broadcaster, who may have taken several months to get a group of investors and banks in line to do a $10-million offer. The next day, they find out that someone swept in with an $11-million offer, and they have to go back to a committee to up their bid,” Winston observes. “We’re seeing an awful lot of potential buyers who are just being outbid by these existing operations.”

One solution that could help level the playing field for the African-American entrepreneur (if only slightly) is the “tax certificate.” In the past, this part of the IRS code allowed companies that sold to minorities to defer capital gains on the sale of assets. “This certainly was very successful when it was being enforced,” Winston says. “Unfortunately, since the tax certificate policy was eliminated by Congress, there hasn’t been any ability to get it reinstated. Senator John McCain [R-AZ] has proposed legislation several different times, and we’ve had Congressman Charles Rangle [D-NY] propose legislation to reinstate the policy. But so far, we have had no luck in getting either bill passed. As a result, there is no tax certificate available, although the need for it is increasingly important, because today, more and more transactions are being done by tax-free exchange, where the buyer provides stock in its company to the seller.”

If someone is not in a position to offer that exchange, Winston notes, it’s a great burden to make an offer of comparable value.

“Fortunately, Congress is not a static institution,” Winston points out. “There are congressional elections every two years, and a third of the senate is up for election every two years. As we move into a November election cycle, these issues will come up in the critical debate. Hopefully, the American public will say, ‘No more.’
“It’s interesting that there’s a growing concern about what’s being broadcast on radio and television, and there’s a certain amount of thought that a large part of the decline of quality and taste in programming is a result of putting a large part of the industry into the hands of the conglomerates, where the persons in charge are very far away from the programming.”

As the election approaches, there may be some concern about repealing the Telecom Act in part or in whole to address the problem that consolidation presents in entertainment and information programming, Winston says.

Advertising Dictates
Another lingering problem, despite concerted efforts to change it, is the ongoing problem of “no-Urban” dictates, as when advertising agencies communicate to nation rep firms that they don’t want to place their advertising on Urban-formatted (i.e., African-American) radio stations. “When NABOB was founded, one of the real problems we faced was that some advertisers discriminated against stations that targeted African-American consumers. It’s an ongoing battle that our stations must fight because, if you look at the advertising community, you see a great number of media buyers who can be fairly inexperienced. They often come from a background that has not provided any information about the African-American community and the potential benefit a client might have for targeting the African-American community. Because of mistaken beliefs, many of our stations are prevented from achieving their full potential.”

Despite an ongoing educational process, the problem doesn’t seem to be diminishing, Winston says. “We have to keep going back to the advertising agency,” he explains. “We have to tell them that, despite promises they’ve made to clean this up, we’re still fighting this sort of thing. Because the employee base turns over, new employees invariably bring old prejudices and misconceptions with them.”

Part of the problem — possibly the biggest part — is that, despite decades of work toward bridging the U.S. racial gulf, the gap of understanding and acceptance is still wide and deep.

“Unfortunately, there is a still a huge divide, and the reasons for that divide are long-term and complex,” Winston observes. “Most small businesses start up without formal financing. They start up with some sort of angel seed money — someone who says, ‘I believe in this entrepreneur, I believe in this idea, and I’m going to help get you started.’”

In reality, Winston says, most “angels” tend to be family members. “The average net worth of the average African-American family is one-tenth that of the average white family. As a result, looking for angels within the family has been difficult for the African-American entrepreneur. If you get that initial funding, then you can get that next round of financing when you’re up and running. But if you’re a minority entrepreneur, you never get to round two.”

What’s the most pressing challenge facing NABOB this year?

“Because it’s an election year, the biggest thing will be that our members will be actively involved in a ‘get out the vote’ campaign,” Winston says. “Minority populations have the potential to really affect the outcome. Each election cycle, the minority population continues to grow, and there is potential for minorities to have a greater impact in the decision-making process. I’m very pleased when I see our members out there doing voter education programs.

“NABOB will be doing some PSAs again this year, sharing them with our members to help them get out the message. One of the many problems we face at NABOB is getting the government to realize that it should step in and take some, dare I say, ‘affirmative action.’ There is a need for ‘affirmative action’ in order to bring minorities into the business community. When there’s a chance to change the political landscape, it’s important for the minority community to be visible, active and educated so our electorate can make informed choices.”

Who’s Who At NABOB
NABOB’s board of directors is comprised of some of the top leaders in the broadcasting industry. Because they are broadcast station owners and senior management, the members understand the struggles of ownership first hand, and possess an outstanding commitment to achieving NABOB’s overall objectives.

Board members are:
Pierre M. Sutton Chairman of the Board
Bennie L. Turner President
Michael L. Carter Vice President
Sydney L. Small Treasurer
Ellen McClain Secretary
Lois E. Wright Counsel to the Board
Carol Moore Cutting Northeastern Regional Representative
Alfred C. Liggins Southeastern Regional Representative
James E. Wolfe, Jr. Midwestern Regional Representative
Karen E. Slade Far West Regional Representative
Michael V. Roberts Television Representative
James L. Winston Executive Director and General Counsel

An Hour With Chairman Powell
What would Jim Winston discuss with FCC Chairman Michael Powell if he had one hour to sit down and chat?

“He and I do chat from time to time, although not as frequently as I would like to,” Winston says. “He has stated to me his concern about African-American ownership and has said that he would like to make sure that minorities continue to be a growing part of the communications industry. Where we differ is that he is concerned about the legal ramifications of policies to promote minority ownership. The FCC has had court cases where the exact policies that may or may not be permissible come across as kind of vague. He has said to me that he would like to see in place some policies that would withstand judicial challenge without engendering a lot of political turmoil.

“The one thing we can agree on is that the tax certificate policy should be reinstated,” Winston continues. “Hopefully, we’ll be able to find other, mutually agreeable areas where we can promote ownership by minorities. From my viewpoint, it’s not urgent enough, but I have a different perspective than he has. I would like to see minority ownership a much higher priority at the FCC than it seems to be right now.

“Certainly, the Commission currently has its Diversity Advisory Committee to look at that issue,” Winston observes. “My fear is that it may be too little too late. This is an effort that should have taken place before the Commission adopted its proposed ownership rule changes in June. The Court in the 3rd Circuit has stayed those changes, but it’s a situation that really should have been investigated prior to adoption of those rules.”

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