The FCC, Ad Discrimination, and the Marketplace of Ideas

Twenty-seven years after its first hearing on broadcast advertisement discrimination, the Federal Communications Commission has started serious enforcement of its ‘do not discriminate’ rule on advertisement.

Under this rule, broadcasters renewing their licenses must certify that their advertising contracts do not discriminate on the basis of race or gender and that such contracts contain nondiscrimination clauses. The FCC implemented this rule in order to prevent advertisers from not advertising products to a certain group based on that group’s race or gender. The other rationale for the rule was to facilitate the increase in the number of minority broadcasters. Unfortunately, this rule does not go far enough in meeting either goal.

First, when it comes to fighting discrimination, intent of the rule can be circumvented via the free market’s only acceptable method of discrimination: price.

There is no problem discriminating on price. Economists refer to this as market segmentation. For example, an auto dealer wants the city’s local broadcaster to run a number of advertisements for the dealership. The broadcaster owns an urban-music station, a country-music station, and pop-music station. Based on his market research of the consumers that tune into each station, the auto dealer has information on the average incomes earned by listeners to each station.

In order to maximize the number of vehicles sold, the auto dealer and broadcaster develop advertisement that will highlight vehicles that match an acceptable price point in that market. The result is Alan Jackson singing about trucks on the country station, while Eric Benet is crooning about driving your lady in style in an elegant sedan on the urban station. Lord only knows what the pop music types drive. Probably those little hybrid green cars.

Bottom-line, even when advertisers adhere to the non-discrimination rule, the price mechanism may result in certain ads being more prominent in certain markets than in others.

So, if the FCC wants the same messages going out to all races, you would need more black listeners like myself who actually listen to three different music genres at any given time. (Except for country unless it’s Randy Travis or Brooks and Dunn. But I digress.) This way we ensure that we receive all the ad messages broadcasted via different broadcast stations.

Second, if the other intent of the rule is to help increase the number of minority broadcast stations, this rule will have very minimal, if any, effect. One could argue that by requiring nondiscrimination clauses be put in each advertising contract that advertisers will end up shuttling ad money into the budgets of minority stations. We may see this where a broadcaster owns a diverse portfolio of broadcast stations such as urban radio, country, pop, etc.

But what about stand alone stations or broadcast networks owned by minorities that cater primarily to urban markets? Since we can’t force advertisers to buy advertising from these stations, requiring nondiscrimination clauses in nonexistent advertising contracts does nothing when it comes to keeping these stations afloat.

While the FCC’s efforts appear noble, they leave me suspect, especially when it comes to ensuring that minority consumers of information are being served adequately by a broadcast industry that uses our public airways to sell ads and enrich themselves.

Alton Drew is a political analyst, commentator, and political economist. In short, a thought driver. In addition to being a contributing writer at Politic365.com, Mr. Drew blogs at Law and Politics of Broadband and The American Centrist. Follow him on Twitter @altondrew or visit his website at www.altondrew.com.

More on Politic365

• Will Julian Assange be Extradited?
• Congressman Hansen Clarke Lives and Breathes Public Service
• So, When Can I Expect a Raise?

4 Responses to The FCC, Ad Discrimination, and the Marketplace of Ideas

1. SouthernObserver says:

   1:06am May 1, 2011 at 1:06 am

   Brooks and Dunn? You're kidding, right?

   Reply
2. Wm_Tucker says:

   4:18am May 2, 2011 at 4:18 am

   This rule isn't about facilitating, "… the same message going out to all races…", or increasing minority and/or female ownership of stations.

   The FCC adopted the policy in order to ensure advertisers, regardless of their race or gender, would have equal access to the airwaves. While the policy is vaguely worded, its intent is to counter the redlining of time inventory as practiced by many broadcasters. Advertisers will still be free to place buys narrowly tailored for specific demographics, i.e.; women, Af-Ams, etc. Also keep in mind many programs that air on broadcast TV and radio stations are purchased under 'brokered time' agreements that, for all intents and purposes, count as advertising sales.

   Reply
3. John_Q_Public says:

   2:32pm May 2, 2011 at 2:32 pm

   Your skepticism is warranted. As the saying goes, "the devil is in the details." Moreover, in this context, it remains to be seen how vigorously these rules will be enforced, if at all. We should be wary given the long gestation of this rule.

   Reply
4. S. W. says:

   11:28pm May 4, 2011 at 11:28 pm

   I really hope the FCC takes its enforcement role seriously… and also takes many more steps to increase equality and minority representation in broadcast advertising generally.

   Reply