'Newsday' Sale to Murdoch on Hold?

If Rupert Murdoch's News Corp. bid for Newsday is successful, it could be the first test of the FCC's new newspaper-broadcast cross-ownership rule change.

But there was little clarity about the issue last week. It appears the new rule would prohibit the deal unless the FCC grants News Corp. another waiver, which would almost certainly roil anti-consolidation groups. A Senate committee last week voted to nullify the cross-ownership rule, but if that proposal gets anywhere on the Senate floor and beyond, the White House has promised to veto it.

The cross-ownership rule, voted on by the FCC last December, allows a company located in a Top 20 market to own one TV station and one newspaper if there are at least eight independent stations in the market. So far, so good.

But the new rule doesn't allow that owner to hold the license to a station that is among the top four in the market. With News Corp.'s WNYW, the Fox flagship, the company fails that test.

The FCC earlier gave News Corp. a permanent waiver to own WNYW and the New York Post, and a temporary waiver to own WWOR. That waiver expires this October. News Corp. can own The Wall Street Journal, which it recently acquired, because the FCC considers it a national newspaper (Gannett, similarly, was allowed to own a Washington TV station and USA Today, which is based in the market).

There seemed to be some question, and no ready answers last week, about whether News Corp. would need a waiver from the FCC to retain its licenses for WNYW and WWOR if it buys Long Island-based Newsday, too. FCC lawyers were still huddling, and News Corp. wasn't commenting. Tribune Co., which owns Newsday, was said to be discussing the paper's sale with other bidders as well, but other sources said Murdoch had agreed to pay $580 million for it, and expected to close the deal soon.

News Corp. would not actually have to get FCC approval to buy the paper. The FCC does not review broadcaster purchases of newspapers. But the commission does become involved when that broadcaster's stations come up for license renewal.

Indeed, News Corp.'s licenses are currently up for renewal in New York. If the FCC applies the new cross-ownership rule it adopted in December, and FCC Chairman Kevin Martin said last week that it would, the commission would have to either grant News Corp. a waiver from the new rule or require it to divest the stations.

As a strategy, News Corp. could wait until its licenses were renewed to buy the paper, and then have eight years—the length of a license term—before the FCC could step in. But there are various license challenges to the renewals from activist groups, which could tie the proceedings up for many more months. News Corp. likely doesn't want to wait that long.

The prospect of Rupert Murdoch owning two TV stations and three newspapers in New York drew ire from anti-consolidation activists.

Andrew J. Schwartzman of consolidation critic Media Access Project said that if there is a Newsday deal, it should face “a very strong presumption against it.”

Free Press, a media activist group that is challenging the New York Post permanent waiver in court, said the FCC should put the kibosh on any deal.

“The sale of Newsday to News Corp. is a clear violation of even the severely weakened FCC limits on how much media one company can own in one market,” the group said, in a statement.

Martin, meeting with reporters late last week, said that he would not talk about the specific transaction. But he did say that, hypothetically, the commission “will apply its rules on media ownership as they currently are, including the reforms we made in December,” to any transaction before it. And he added, “I think we will follow those rules very closely.”

Sen. Byron Dorgan (D-N.D.) called the potential purchase “another example of concentration that I think is unhealthy. He [Rupert Murdoch] already owns newspapers and broadcast properties in the market.”

But Dorgan said he was not sure either whether the company would need a waiver to own the stations. “I'm looking at that,” he said. Asked whether the proposed deal could become a lightning rod on the issue, he was more emphatic: “Well, I hope there are a few lightning rods around that will convince the American people that diversity of ownership is important.”