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FCC Revamps Cross-Ownership; Analysts advise: Get a strategy

August 2003

FCC Revamps Cross-Ownership; Analysts advise:

Get a strategy

by Travis Loop; E-mail: loopt@naa.org
August 1st 2003

For many newspaper industry executives anticipating the relaxation or removal of the ban on ownership of newspapers and television stations in the same market, June 2 was a long-awaited day. Although the Federal Communications Commission's 3-2 vote stopped short of completely eliminating the ban, it did create new rules that permit cross-ownership in certain types of markets.

The FCC developed a Diversity Index to measure the concentration of media ownership in a particular market. The commission concluded that there are three sizes of markets for measuring "viewpoint diversity," with each warranting its own regulations:

* In small markets, with three or fewer television stations, the FCC will not allow cross-ownership, although waivers may be considered in particular cases.

* In medium-sized markets, with four-to-eight television stations, the FCC will allow limited cross-ownership combinations.

* In large markets, with nine or more television stations, the FCC has eliminated the newspaper-broadcast cross-ownership ban.

Details about the new ownership rules can be found on the FCC's Web site, www.fcc.gov.

"We feel that newspapers were really the biggest media winner in the FCC decision, even though the commission didn't go as far as we would have liked it to and fully repeal the cross-ownership ban," says John F. Sturm, NAA president and chief executive officer.

"This decision meant that the government is finally ending an unjustified and discriminatory ban that makes absolutely no sense in today's media landscape," Sturm says. "In fact, the record at the FCC shows that cross-ownership of newspapers and broadcast will serve the public's interest by providing more and better news. The public is the real winner."

But the work by NAA and its members isn't over yet, he says. "Over the next few months, we will be directing our resources to protecting the commission's deregulatory decision from any assault in Congress or in the courts, where we can expect challenges from the opponents of change."

In fact, on June 19, the Senate Commerce Committee approved a bill addressing the FCC changes that included an amendment restoring the newspaper-broadcast cross-ownership ban. A secondary amendment was also included that states that in small markets (DMAs from 150-210), the state public utilities commission may recommend, on a case-by-case basis, a waiver of cross-ownership rules if it finds that it will enhance local news and information; promote the financial stability of a newspaper, radio or TV station; or otherwise promote the public interest.

As of press time, the Senate had not scheduled floor time for the bill. Rep. Billy Tauzin (R-La.), chairman of the House Commerce Committee, indicated he does not intend to take up similar legislation, and President Bush would have to sign off on legislation to reverse the FCC rule changes.

Other obstacles could come via the legal system, which allows 60 days from the date the FCC published the rules for petitioners to challenge them. "It's almost certain that consumer groups will file a petition against the changes," says Paul Boyle, NAA senior vice president of government affairs. "NAA will consider filing a brief in these cases in support of the FCC rule changes."

One of the most outspoken members of the industry opposed to the FCC rule changes is Frank Blethen, publisher of The Seattle Times. "The ruling is a threat to democracy," says Blethen. "Democracy is based on a variety of voices which are connected to the local communities. The FCC decision moves us further away from that."

One of the first companies to move after the ban was lifted was MediaNews Group Inc. in Denver, which owns 47 daily newspapers including The Fairbanks (Alaska) Daily News-Miner. MediaNews was expected to exercise its three-year-old option for KTVF-TV, an NBC affiliate in Fairbanks. When he testified in May before the Senate Commerce Committee as NAA immediate past chairman, MediaNews Vice Chairman and CEO William Dean Singleton cited the Fairbanks market as one whose citizens would benefit from improved news operations if the ownership rules were lifted (Presstime, June, p. 6).

Other newspaper companies in a position to take advantage of the rule changes are those that already own broadcast stations, such as Gannett Co. in McLean, Va., Media General Inc. in Richmond, Va., and Tribune Co. in Chicago.

"I doubt whether we are going to see any major entry into the newspaper business by non-newspaper companies because that could have happened in the past regardless of ownership rules, and it didn't," says Sturm.

Of the FCC decision, Tribune President and CEO Dennis FitzSimons says, "Our readers, viewers and listeners across the country are the real winners . . . they will benefit as we explore additional ways of enriching the content of our newspapers, television stations and Web sites."

J. Stewart Bryan III, chairman and CEO of Media General says, "Media General has gained an opportunity to expand its convergence efforts across the Southeast. Our pace going forward will be deliberate and will depend on the availability of desirable properties at prices we are willing to pay."

Blair Levin, managing director of Legg Mason in Washington, says of the rule changes, "It's about how media companies will use them to improve profitability in local markets and increase leverage with the large content and distribution entities. If it's true that combining newspaper and broadcast allows some operational costs to be reduced and sales of advertising to improve, then revenue can be increased."

Ken Marlin, managing partner of Marlin & Associates in New York City, sees a shift in supply and demand from the rule changes. "Demand has potentially expanded and we could expect an increase in the number of bidders for a TV or newspaper, therefore increasing the price."

Marlin says, "Another type of thing we might see from these changes, for example, is that The New York Times was not permitted to own a TV station in New York City and now it is. Meanwhile, an organization like Tribune owns a TV station in New York, but not a newspaper. Those two may well be interested in swapping properties."

Marlin wants people to remember that although the overall ban is gone, the FCC still has to approve all broadcast ownership changes and they must be in the public's interest. Also, all changes of corporate ownership are still subject to antitrust laws.

Levin says, "This is a wait-and-see situation. But everyone has to start looking. No one can afford to not have a strategy because they are competing with companies that are going to change -- they will be left behind."

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