VOICES
False Alarm at the FCC
ENDING
TV-NEWSPAPER CROSS-OWNERSHIP
RULES MAY HAVE LITTLE EFFECT
BY
JONATHAN A. KNEE
A
tentative
June 2 date has been set for a Federal Communications Commission
vote on whether and to what extent the existing restrictions on
newspaper-TV cross-ownership should be relaxed. Much of the debate
has centered on the importance of maintaining so-called viewpoint
diversity. There has been little consideration of whether such
a regime change will have any practical impact on who actually
owns what. An examination of the current industry structure suggests
that, regardless of the merits of the issues, relatively little
is likely to happen in the near term even if the restrictions
were lifted entirely.
The largest TV station groups are those owned by the four leading
networks — ABC, CBS, NBC, and Fox. Each of these networks
is part of a larger, widely held, publicly traded conglomerate.
The newspaper industry by contrast is highly fragmented, with
the ten largest newspaper groups accounting for only half of overall
circulation. Even the largest newspaper company, Gannett, is a
fraction of the size of any of the four TV conglomerates.
It’s argued that such an industry structure is an invitation
for the giant TV conglomerates to gobble up the smaller newspaper
companies. Three highly relevant factors make that unlikely.
First: Of the four TV conglomerates, only News Corp. (Fox) owns
any newspapers in the U.S. — a single money-losing tabloid,
the New York Post. Of the other three, none have expressed
interest in newspaper ownership. Disney sold all the newspapers
it acquired with its purchase of ABC. News Corp. has a historic
attachment to newspapers, but Rupert Murdoch’s other media
aspirations make an aggressive push into newspaper ownership financially
impractical.
Second: Newspapers don’t often come up for sale. Family control
is the norm in the newspaper industry. All but a handful of the
public companies ensure continued family control through a special
class of voting stock.
Third: Even if broadcasters were eager to buy newspapers, and
even if newspaper groups put some of their papers up for sale,
the market overlap between any major newspaper group and any major
broadcaster is limited. The result would be that the broadcaster
might get the supposed benefit of cross-ownership in one or two
markets, but this would represent a tiny portion of the overall
transaction.
So much for broadcast buying up print. What about the reverse?
If it is unrealistic for broadcasters to buy newspapers in a world
of permissible media cross-ownership, will newspaper companies
start buying broadcast stations in the cities in which they publish?
Here it is useful to distinguish between pure newspaper companies
and those that already are in the broadcasting business.
Anthony Ridder, the CEO of Knight Ridder — which owns no
TV stations and is the largest pure newspaper company — has
declared that he sees no operating benefits in combining newspaper
and television operations. A number of other major newspaper companies,
such as Pulitzer and Lee, once owned large station groups but
have jettisoned them. The size of the remaining print-only newspaper
companies, and their general aversion to debt, makes them unlikely
buyers of television stations. This leaves those newspaper companies
that are already broadcasters. The two largest, Gannett and Tribune,
indeed have expressed interest in taking advantage of changes
in the cross-ownership rules. But Tribune already has cross-ownership
in its largest markets through FCC waivers and combinations that
predate the rule — so-called grandfathering. Gannett also
benefits from cross-ownership under a grandfathered situation
in Phoenix. These acquisitive companies are likely to find relatively
few incremental opportunities of size in which to exploit relaxed
cross-ownership rules.
Lifting cross-ownership rules completely would allow a number
of transactions that might not otherwise occur. Given the strategic
focus of the TV conglomerates on owning their major-market affiliates,
these deals are likely to happen primarily in smaller markets
as individual stations or newspapers come up for sale. But there
is no reason to expect that such deregulation would fundamentally
alter the media ownership landscape. While the ideological debates
over the cross-ownership issue are healthy, it is useful to keep
in mind that, at least with respect to TV and newspapers, they
may in the end be much ado about very little.
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Jonathan
A. Knee is a senior managing director at Evercore Partners, an investment
firm, and an adjunct professor at Columbia’s business school.
He has represented a number of newspaper and broadcasting companies
including, currently, Freedom Communications.
