VOICES
False Alarm at the FCC
Ending TV-Newspaper Cross-Ownership Rules May Have Little Effect
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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