‘Split’ Decisions Could Bypass Ownership Rules - Broadcasting & Cable

‘Split’ Decisions Could Bypass Ownership Rules

Flurry of recent spinoff moves viewed as seeking more Wall Street value from broadcast/digital side
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Recently announced splits into publishing and broadcast/ digital companies for Tribune, Scripps/Journal and now Gannett would likely allow them to buy newspapers or stations without running into newspaper/broadcast crossownership prohibitions. Gannett, in its announcement, noted the move would give it more regulatory flexibility to make targeted purchases.

Currently, companies are not allowed to buy newspapers where they own TV stations, and vice versa.

A former FCC official said the amount of freedom the companies would exercise in buying stations and papers, if they wanted to, would depend on how the individual spinoffs were structured. But so long as the companies were independently run and the stocks widely held, they should be free to buy in either space. Yet the official agreed the move also offers the potential complementary benefit of unlocking shareholder value in the broadcast/digital side.

That’s not to say the arrangements won’t somehow backfire. Station groups creating sharing agreements were themselves following the letter of the law when the FCC under chairman Tom Wheeler was frowning on such deals if it believed them to be a way to use that letter to skirt the spirit of local ownership rules.

“Up to now, the FCC has not been willing to look at other types of relationships, but recent changes in the way the FCC evaluates shared services and other agreements among stations might signal the possibility of a different approach here as well,” said broadcast attorney Jack Goodman.

Wheeler backed off plans by his predecessor to loosen or lift the cross-ownership ban. He has signaled it will be a couple of years before the FCC wraps up the next media ownership regs review. With that, immediate regulatory relief appears to be nowhere in sight.

“To the extent that these companies might want to make further investments in local broadcasting in markets where they had newspapers, the FCC’s decades-long record of refusing to deal with changes in the media marketplace certainly would not leave anyone with any expectation that the newspaper-broadcast rule will change in the near future, unless the courts intervene,” Goodman said.

But various sources, including analysts and former FCC officials, see the moves more as a way to ensure that the burgeoning digital and strong broadcast performance could get full value from Wall Street rather than be tied to the declining fortunes of the print business.

Belo, now part of Gannett, made a similar move in 2007 when it spun off its newspapers into a separate company, a move to boost value by having the broadcast assets trade independently from the slumping paper assets, and one that eased the way for the Gannett deal.

One analyst speaking on background said he thought Gannett’s move was primarily financially motivated to separate out a business perceived as declining—newspapers—from one perceived as stable or growing, and boost the valuation of that side of the business.

Goodman thinks there are several reasons behind each spinoff. “It frees the broadcast company’s stock price from the drag of the newspaper division, on which Wall Street places a low value. Second, to the extent that the newspaper division must make hard choices about levels of publishing and employment, it separates those difficulties from the broadcast company.”

FOUR STRIKES—BUT STILL SWINGING

If persistence was the measure of success, Aereo would be back in business. Instead, it suffered its fourth loss in the last six weeks when two New York courts rejected its call for emergency action on “injunction” issues as it tries to convince the courts and Copyright Office that it is essentially a multichannel video programming distributor and therefore eligible for a blanket license.

The first strike was the Supreme Court decision that Aereo delivered a public performance (as do cable and satellite operators) and thus could not deliver TV signals over the Internet without paying broadcasters. In the second, the Copyright Office said it still thinks over-the-top transmissions are not eligible for the blanket license.

Strike three was when an appeals court rejected Aereo’s petition for emergency action, arguing that every day it was unable to operate it was “bleeding it to death,” at least metaphorically. Strike four came almost immediately after that, when the District Court for the Southern District of New York also denied Aereo’s emergency petition.

Recently announced splits into publishing and broadcast/ digital companies for Tribune, Scripps/Journal and now Gannett would likely allow them to buy newspapers or stations without running into newspaper/broadcast crossownership prohibitions. Gannett, in its announcement, noted the move would give it more regulatory flexibility to make targeted purchases.

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