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Playing for Keeps

Three media giants hope the FCC will waive crossownership rules 8/08/2004 08:00:00 PM Eastern

Three of the largest TV-station groups in the U.S. could be ordered to divest major media properties beginning next year unless they win favorable treatment from the FCC.

Media General, Tribune Co. and Gannett own both a TV station and a newspaper in a total of eight markets, despite FCC rules forbidding crossownership in a single market. The combinations have been permitted to exist because of temporary waivers granted by the FCC and loopholes that allow a TV-station owner to buy a newspaper in a single market and hold onto both properties until the station's license is up for renewal.

Richmond, Va.-based Media General will be the first company to go under the FCC's microscope. The company's license for WBTW Florence, S.C., expires Dec. 1. The company also owns The Morning News
in Myrtle Beach, which is considered the same market by the FCC. If the FCC denies a waiver, one of the properties would have to be sold, probably by October 2005.

Old ban stays in place

Media General combinations in Panama City, Fla., Columbus, Ga., and Johnson City, Tenn., also must get waivers to stay intact when stations in those markets come up for renewal over the next 12 months. "We're working with the FCC," said a Media General spokesman when asked about the chances of a waiver.

Breaking up any one of the combinations would be a big blow to Media General's business strategy. Expecting the FCC to eliminate its ban on local crossownership, Media General, Tribune and Gannett invested hundreds of millions to build combinations in markets across the country. In midsize cities across the Southeast, Media General hopes to combine news operations to save costs and build a strong local following for a jointly branded news product.

The companies' plans to expand crossowned operations were thrown into limbo in June when a federal appeals court struck down the FCC's 2003 deregulation. Though saying the FCC could legally eliminate its blanket ban on TV/newspaper crossownership, the judges threw out new rules permitting combinations where there were four or more TV stations. The judges said the FCC had little rationale for the four-station limit—a sign that they may favor a tighter one.

Since the court decision, the stock prices of all three companies have slid modestly. While the FCC takes another crack at writing rules, the old ban remains in place.

"We will be working actively with the commission to try to secure interim guidance," Media General Chairman J. Stewart Bryan III told investors July 13. The company's TV/newspaper combinations were established when the company bought newspapers from Thomson Media for $237 million four years ago. Media General also owns TV/newspaper operations in Tampa, Fla., and Lynchburg/Roanoke, Va., which don't need waivers because they were already in existence when the FCC banned local crossownership in 1975. The Tampa Tribune and WFLA are Media General's flagship combo, and it houses both in a $35 million facility.

Victor Miller, an analyst at Bear Stearns, predicts the FCC will be lenient when ruling on waiver requests because the judges agreed the total ban served no purpose. But others following the ownership debate say that even the deregulation-minded Bush Administration doesn't want the FCC going easy on waiver requests because the White House doesn't want renewed attention on the ownership debate.

FCC Chairman Michael Powell has avoided discussing his plans for handling crossownership mergers while the rules are being rewritten.

"The ban may well be in place for quite a while," says Harold Feld, associate director of Media Access Project, one of the activist groups that challenged the FCC's deregulation in court. MAP and other activists loathe crossownership because, in their view, it gives one company too much control over a local-news market. Daily newspapers typically have the largest reporting staffs in town and provide the greatest amount of local news, while TV stations are typically the most profitable media outlets.

Waivers needed

Gannett needs a waiver to keep both KPNX Phoenix and the Arizona Republic; the latter was acquired in 2000. Tribune Co. needs waivers to preserve combos in Los Angeles and New York that were established when it bought Times-Mirror in 2000. A previous Tribune combo in Hartford, Conn., must also obtain waivers. Tribune's flagship combination in Chicago—the Chicago Tribune, WGN(TV) and WGN(AM)—is grandfathered. The company's Miami combination of WBZL and the South Florida Sun-Sentinel
has a waiver lasting until the FCC court battle ends.

Last month, Tribune asked the federal judges who struck down the FCC's deregulation to allow combinations in markets with at least nine television stations.

If any divestitures are ordered, Tribune will go back to court, insists company lobbyist Shaun Sheehan. "Hopefully, the stay on crossownership will be lifted by then," he says.

Sheehan's wish may depend on the outcome of the election. If John Kerry wins the White House, many predict Democratic Commissioner Michael Copps will become FCC chairman and set the agency on a course towards tougher crossownership limits than the industry would like.

Staying Together
Media conglomerates will need FCC waivers to retain some TV/newspaper combos
Owner Market License Station Expiration Newspaper
Source: Company reports, FCC
Media General Myrtle Beach, S.C. WBTW Dec. 1, 2004 The Morning News
Panama City, Fla. WMBB Feb. 1, 2005 The Dothan Eagle (Ala.)
Columbus, Ga. WRBL April 1, 2005 Opelika-Auburn News (Ala.)
Johnson City, Tenn. WJHL Aug. 1, 2005 Bristol Herald Courier (Va.)
Tribune Los Angeles KTLA Dec. 1, 2006 Los Angeles Times
Hartford, Conn. WTIC April 1, 2007 Hartford Courant
New York WPIX June 1, 2007 Newsday (Long Island)
Gannett Phoenix KPNX Oct. 1, 2006 Arizona Republic