Personal information
Current company: Law Firm of Garvey Schubert Barer
Position: Owner
Location: Washington, DC
Place of Birth: Buffalo, New York – born while father was attending law school. Used Black’s Law Dictionary as a pillow
Date of Birth: A long time ago
Spouse/Kid/Personal info: Married for 37 years to Lynn Berry, an attorney in private practice in Springfield, Virginia. Four children (three sons and one daughter), all grown up, independent and at various times scattered across the northern hemisphere.
College: Georgetown University, Bachelor of Science in Foreign Service and JD
Favorite composer: JS Bach
Sports Team Preferences: Nats, Hoyas
Hobbies/Passions: Spent 11 years as a certified rowing referee
Questions:
1. How did you get started in the business?
I became a ham radio operator in my early teenage years and spent a lot of time fooling around with radio equipment. I built a Heathkit transceiver that operated on 144 MHz and even did some experimenting on 430 MHz, which at that time was considered too high a frequency to be of much practical use. I built my own yagi-style beam antennas out of broom sticks and aluminum wire. My crowning achievement came when I used one of those homemade antennas hooked up to my 5-watt 144 MHz transceiver to communicate across Lake Ontario to another ham radio operator in Canada.
After I graduated from law school, I spent two years clerking for a judge on the Court of Appeals in DC. Because of my interest in communications matters, I was looking for a position with a communications law firm and interviewed with Mike Bader, a legendary communications attorney and a member of the MCI Board. As luck would have it, the judge for whom I was clerking was a good friend of Mike’s, but he nevertheless recommended that Mike hire me. Working with Mike and his partner Bill Potts was a great experience. Because of the smallness of the firm, I found myself handling cases that would have been assigned to much older attorneys at larger firms. At the tender age of 28, I drafted the brief leading to the Supreme Court’s decision to let stand the decision of a federal court of appeals freeing up the long-distance telephone business so that our client MCI could compete with AT&T. A few years later, I successfully argued before the Commission and the federal court in DC the case in which the Commission made its first award of a cellular license in a comparative hearing. Throughout this time, I was heavily involved in broadcast litigation, including the case that led to the elimination of the Fairness Doctrine.
2. How does the station trading environment seem to be shaping up from your legal vantage point? In particular, TV has been hot with entire groups being sold; any chance there will be movement of radio groups in the near future?
The television industry has been blessed by two developments. First, it has seen a surge in political advertising and that has led to an increase in station revenues which, in turn, translates into higher sales prices. Second, the upcoming spectrum auction has made poorly performing television stations attractive targets for acquisition inasmuch as their spectrum will be able to be sold in the auction.
Radio stations generally have not been so lucky. Although some radio stations have been able to take advantage of increased political advertising, many have not. That is particularly true in those states that have not been battleground states.
To some extent, radio stations are also still recovering from the bloodletting that occurred several years ago in which some lenders became owners and other lenders simply forced stations into receivership. That was a very unpleasant period in radio broadcast history, but apparently it, unfortunately, was necessary. If we start to see an increase in station valuations, I could foresee a situation in which those lenders who were forced to become owners decide to cash in. Of course, that becomes a realistic scenario only if there are buyers out there. Right now, we have a curious situation in which there are prospective buyers out there who can attract equity, but not debt, and other prospective buyers who have a lender, but have not been able to line up the equity.
Having said all that, however, I must say that the NAB convention last April was one of the more encouraging conventions that I have attended in recent memory. For the first time in a long time, I was hearing of deals that were in the works.
3. How important are digital assets when a station is being sold?
Broadcast deals are still primarily cash flow deals. Unless the digital assets generate something for the bottom line, they are not going to be a significant factor in establishing the purchase price for the station and will not be particularly important in a buyer’s assessment of the station’s value. Nevertheless, a station with an established, effective web presence will be more attractive than a station that has totally forsaken digital. Digital is a necessary, but not sufficient, component of an attractive station unless the digital is generating net income, in which case it should increase the value of the station. In some rare cases, digital can be an important factor in setting a station’s value. There are certain noncommercial stations sporting a unique format, for example, that are able to generate substantial revenue from out-of-market contributors who listen to the station’s stream.
4. Is the financial community starting to come back or is seller paper going to continue to be a frequently-used tool for getting smaller deals done?
Smaller deals continue to be a problem. I mention above that currently we have a curious situation in which there are prospective buyers who can attract equity, but not debt, and other prospective buyers who have a lender, but have not been able to line up equity. The difference between the two groups of buyers appears to be dependent, to a large extent, on the size of the deal. In smaller deals, the equity is there, but the debt is not. This is true even in very large markets. It is not at all unusual for a prospective buyer to kick the tires of a large market station that is being offered for a purchase price that is a fraction of the purchase price that the station would have brought six or seven years ago, conclude that the price is a good one, but then find that no lenders are interested. In that case, the seller may well find that it cannot sell the station unless it is willing to take back paper.
5. What things can Congress or the FCC do to ensure a vibrant broadcasting industry going forward?
There are three things that can be done.
First, it is essential that both Congress and the Commission take steps to eliminate the antiquated restrictions on foreign ownership of broadcast stations. Right now, we have the anomalous situation in which there is substantial foreign ownership of the country’s wireless carriers, but broadcasters are still stuck with limitations that were put in place many decades ago. On several occasions, I have had discussions with foreign financial institutions interested in becoming broadcast investors who simply stopped the dialogue once they understood the limitations imposed by the Communications Act as it is currently applied by the FCC. This is not a case in which the Commission must wait for Congressional action (understanding full well that the phrase has become an oxymoron). The Communications Act already gives the Commission the ability to lift those restrictions. The time has come to do so.
Second, the Commission needs to do more to protect the integrity, and improve the quality, of broadcast signals. There are too many situations arising in which broadcasters are being subjected to interference. The Commission’s decision to permit translators to rebroadcast AM stations was definitely a step in the right direction. The Commission needs to make sure, however, that those translators, as well as the numerous LPFM stations that will be authorized when the LPFM window opens this Fall, do not cause interference to full-service stations. As more and more cars become web-enabled, broadcasters will be competing with Internet stations that have signals that are largely devoid of interference. If broadcast stations are to remain competitive, they cannot be handicapped by being forced to operate with a signal that sounds like a mashup.
Finally, the Commission needs to pay careful attention to its processes. The Commission does a wonderful job of processing routine applications. It is not at all unusual, however, for a petition to deny or an application for review to gather dust at the Commission for many years. That delay is antithetical to sound business decision-making. No one can make business plans if the underlying facts necessary for a reasoned decision are in flux as a result of a delay at the Commission. The Commission needs to pay particular attention to the delays caused by allegations that a station has aired indecent programming. Those allegations hold up the grant of the station’s renewal application, no matter how frivolous the indecency allegations are. An ungranted renewal application casts a pall on efforts to sell the station and the Commission’s band-aid solution of using tolling agreements, far from facilitating sales, do no more than create a convenient institutionalization of the Commission’s inertia that is likely to lead a buyer to think twice about buying the station.
6. You helped bring about the demise of the Fairness Doctrine, but the warning comes from some quarters that there are some trying to bring it back. Is there any chance of reviving it – why or why not?
It is always a question of whose ox is being gored (no pun intended). Back before the demise of the Fairness Doctrine, everyone on the Hill seemed to be worried that they would be done in by the broadcasters. The Republicans were afraid of what they perceived as left-leaning networks; the Democrats were afraid of local broadcasters who were thought to be too close to the Republican establishment. The Supreme Court’s decision in Citizens United, of course, led to an onslaught of political advertisements. If a candidate had the misfortune of being the de facto target of one of those advertisements, the natural tendency was to cry foul and, in some cases, to suggest that the time had come for a resurrection of the Fairness Doctrine. I do not think, however, that the return of the Fairness Doctrine could survive Constitutional scrutiny at this point. Our democracy has survived without the Doctrine for more than 25 years. Its Constitutional underpinnings were suspect back when the Commission eliminated it. Those underpinnings are even more suspect now given the increase over the last 25 years in the number of media outlets, whether in the form of cable news stations, Internet radio and even television stations, Internet news services and the like.
It is important, however, that broadcasters remind those that seek the return of the Fairness Doctrine that the effect of the Doctrine seldom had been to increase the amount of programming on controversial issues so as to achieve a balance. Rather, the Doctrine usually had just the opposite effect. It inhibited the airing of programming on controversial issues. The networks, for example, generally had a policy of refusing to accept any issue advertising. The problem was not that the networks were averse to carrying controversial programming or were unusually pusillanimous. Rather, the problem was that the ground rules surrounding the Fairness Doctrine were so unclear and subjective that it was virtually impossible for a broadcaster to make a reasoned decision as to whether the airing of an issue advertisement would require the broadcaster to air programming presenting the other side of the issue. Even if it was reasonably clear that the broadcaster was required to air programming to provide balance, there was then the question of determining how much of that programming the broadcaster would need to air before a government official would conclude that “balance” had been achieved. I remember one Commission staffer acknowledging that the staff actually used stopwatches to time the amount of controversial programming included in a given advertisement and the countervailing programming used to provide balance. The point of the exercise was to determine whether the broadcaster had broadcast sufficient programming airing the opposite side of the issue addressed in the issue advertisement. Faced with the prospect of a government official determining that it had failed to provide sufficiently balanced programming, most networks were unwilling to take the risk and chose instead to air no issue advertising.
7. Is there any question you’d like to answer that we forgot to ask?
I thought for sure that you would ask me where the broadcast industry will stand 10 years from now.
Ten years ago, there was no iPhone. There was no Kindle. The iPad was seven years on the horizon. The digital dashboard was unheard of.
Given the development of technology over the last 10 years, it is likely that the “next best thing” is still a figment of someone’s imagination. That being the case, anyone who knows where the industry will stand 10 years from now stands to become phenomenally rich and, if I find myself in that position, I will be glad to let you know so that you can share in the wealth.
