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Further Revisions to Media Ownership Study 8A

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Released: December 28, 2012
Further Revisions to

Local Media Ownership and Viewpoint Diversity in Local Television News

FCC Media Ownership Study 8A

Adam D. Rennhoff and Kenneth C. Wilbur

December 21, 2012


Following the submission of our revised media ownership study, “Local Media Ownership and
Viewpoint Diversity in Local Television News,” we created a modified version of the study
aimed at publication in a peer-reviewed academic journal. Through the peer review process we
became aware that an assumption in our model, which we thought was innocuous, was not
innocuous. This is the assumption of the ordering of television stations along the Hotelling line
(see Section 2.3. of our June 2011 revised study). In this memo, we briefly discuss how we
modified this assumption and how we have addressed it to produce revised estimates.

As outlined on page 8 of our June 2011 study, we assumed that the three television stations used
in our model were arranged from left-to-right on a Hotelling line in ascending order of ratings
(market shares). In this manner, the station with the lowest (highest) ratings would be the
leftmost (rightmost) station on our Hotelling line. We thought that this assumption was made
without loss of generality because the ordering could be reversed and produce exactly the same
viewpoint diversity statistic. An anonymous reviewer at the journal Quantitative Marketing &
Economics
provided us with a numerical example that showed different ordering assumptions
could result in different values of the Viewpoint Diversity Index.

Given the importance of the station location assumption, we justify our new ordering approach
based on the previous academic literature on firm location choices. In a revised version of our
academic paper, which will soon be available for free download on the Social Science Research
Network websites, we describe our new television news location assumption as follows:

In order to construct the Viewpoint Diversity Index from the data, it is necessary to order
the available news programs on the Hotelling line. With three stations in the data, there
are six possible orderings. The symmetry property of the Viewpoint Diversity Index
reduces these 6 possible combinations to three.


There may be two ways available to order stations on the line to calculate a
Viewpoint Diversity Index. If the analyst has some prior information regarding
viewpoints, it may make sense to align stations’ positions with the common perceptions
of their viewpoints. For example, if the three stations are MSNBC, CNN and FOX News,
then one might position MSNBC and FOX News on opposite positions on the line and
put CNN in the middle.


In the absence of theoretical information about locations of local television
stations’ newscast locations, we justify our chosen ordering using equilibrium results
from a positioning game. Prescott and Visscher (1977) showed that the middle firm in a

Hotelling model of horizontal differentiation, such as ours, is the firm with the lowest
market share.1 We, therefore, assume that the news program in a market with the lowest
market share is the one located in the middle of the line.

The primary results of Study 8A were presented in Tables 2 and 3. As part of our revised
location assumption, we would like to provide updated results tables. Attached to this memo are
two tables, which we have numbered Tables 3 and 4 in order to correspond to their numbering in
our updated academic paper. Table 3 contains panel (first-difference and fixed effect) estimates
and elasticities for our full sample, as well as a limited subsample. This table encompasses the
same models presented in Tables 2 and 3 of Study 8A. The Table 4 attached to this memo
contains a series of cross-sectional regressions that include our key media ownership variables
and a number of local market demographic variables. Our submitted version of Study 8A
contained no such cross-sectional regressions. Although our preferred specification continues to
be the first-differenced panel regression model (as presented in the attached Table 3), we include
the cross-sectional results in order to provide additional insight into our Viewpoint Diversity
Index. All reported standard errors in Tables 3 and 4 have been clustered.

With respect to our media ownership variables, we find a statistically significant result for only
one media ownership variable: co-ownership of local television stations. Specifically, we find
that viewpoint diversity is positively associated with increases in the number of co-owned
television stations within a market. The cross-sectional results reinforce this finding. The
coefficient on the number of co-owned television stations is positive in all regressions and is
statistically significant in two of the five regressions. We find no evidence of a statistically
significant relationship between viewpoint diversity and the other included ownership variables.

We appreciate the opportunity to provide updated information regarding the results of our media
ownership study. The results presented in this memo should supplant those contained in our June
2011 version of media ownership study 8A.





1 Prescott, E.C., M. Visscher. 1977. Sequential Location among Firms with Foresight. Bell Journal of Economics, 8,
2, 378-393.

Table 3. Panel Regressions

Limite d Sample

Full Sample (2005-09)

(2007-09)

Mean Elasticity Mean Elasticity

First

First

95% Conf. Int.
95% Conf. Int.

Differe nce

Fixe d Effects

Difference

Point
Std.
Point
Std.
Point
Std.
(FD - full
(Limited

Me dia Ownership

Est.
Err.
Est.
Err.
Est.
Err.
sample)
sample)
LocalOwnerTV
.023 (.033)
-.010 (.037)
.013 (.036)
(.00,.00)
(.00,-.01)
Co-Owned TV
.032 (.023)
.056 (.034) *
.024 (.039)
(.00,.00)
(.00,.01)
TV/Radio
-.010 (.035)
.022 (.046)
-.014 (.075)
(.00,.00)
(.00,.00)
Minority
.080 (.070)
(.00,.02)
TV/Newspaper
-.056 (.091)
(.00,.00)
Num. Obs.
264
396
132
R-squared .004
.925
.008
Note: Reported standard errors have been clustered. Year-specific intercept estimates excluded from table for brevity.
** Significant at the 95% confidence level.
* Significant at the 90% confidence level.



Table 4. Cross-Sectional Regression Findings

Poole d (2005-09

Pooled (2007-09

2005
2007
2009

Sample )

Sample)

Point

Std.

Point

Std.

Point

Std.

Point

Std.

Point

Std.

Est.

Err.

Est.

Err.

Est.

Err.

Est.

Err.

Est.

Err.

Media Ownership Variables
LocalOwnerTV
.032 (.050)
.036 (.050)
.016 (.057)
.029
(.029)
-.087
(.095)
Co-Owned TV
.123 (.070) *
.118 (.073)
.097 (.077)
.109
(.043) **
.048
(.047)
TV/Radio
-.142 (.092)
-.055 (.095)
.009 (.109)
-.066
(.071)
.109
(.042)
Minority
.006
(.058)
TV/Newspaper
-.070
(.097)
Demographics and Media Demand Predictors
Median age
.020 (.030)
-.008 (.030)
-.046 (.033)
-.012
(.030)
-.032
(.028)
Median income
.000 (.000)
.000 (.000)
.000 (.000)
.000
(.000)
.000
(.000)
Minority population (%)
-.562 (.502)
-.790 (.510)
-1.132 (.571) *
-.796
(.456) *
-.986
(.448) **
TV channels per capita
.019 (.016)
.022 (.016)
.028 (.018)
.021
(.011) *
.024
(.011) **
Pay TV penetration
-.427 (1.280)
.674 (1.442)
2.714 (1.771)
.773
(1.374)
1.505
(1.520)
TV penetration
-2.015 (1.063) *
-2.179 (1.103) *
-1.179 (1.070)
-1.625
(.629) **
-1.529
(.695) **
Num. Obs.
132
132
132
396
264
R-squared .650
.652
.608
.628
.625
Note: Reported standard errors have been clustered. Year-specific intercept estimates excluded from table for brevity.
** Significant at the 95% confidence level.
* Significant at the 90% confidence level.


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