SOME SEE OPPORTUNITY FOR DEALS IN FCC RULES, OTHERS SEE LEGAL ACTION

Former FCC trial lawyer Thomas Davidson, who represents Granite Bcstg., said the new limits were “somewhat discriminatory” because they restricted TV combinations among the top 4 rated TV stations in a local market. The limit on duopolies actually creates an incentive to get deals done fast because, if another station gets there first, the others in small and midsize markets will be shut out, he said. FCC Media Bureau Chief Kenneth Ferree acknowledged that fact in a news conference after the FCC decision Mon. Asked about markets where there were only 5 eligible stations, Ferree said only one deal could be done. “There’s going to be a land rush,” Davidson said, unless stations in smaller markets sought and received waivers. Ferree said that was a possibility for failing stations.

But former FCC Chmn. Richard Wiley predicted there would be no land rush. Saying he thought the decision would take as long as 3 months to take effect, he saw a more moderate and cautious industry atmosphere. There are likely to be petitions for reconsideration and attempts to seek a stay, he said, but he doubted either would be granted. Wiley saw the most opportunity for newspaper owners who wanted to buy TV stations.

Legg Mason analyst Blair Levin said he believed potential winners included the TV network owners, Viacom, News Corp., Disney and General Electric and newspaper publishers that either had TV properties or were interested in acquiring them, including Belo, Gannett and Tribune. “We believe the rule changes mean that over the next several years major players will have to be buyers or sellers, reshuffling their assets to take advantage of the new rules, as well as respond to competitor moves,” Levin said.

Bear Stearns analyst Victor Miller, in a series of research notes to investors, said he believed newspapers were the “big theoretical winners.” However, he also said he saw few committed newspaper buyers and few acquisition candidates at this point. On duopolies, Miller said Gray TV didn’t fare well because there was no chance of duopoly in 14 of its markets. He also said a court battle was likely. “Offering even more relief in larger markets in a ‘bright line’ basis and then offering no ‘bright line’ relief in 44 of the markets ranked 51-150 does not make much sense. We think small to midmarket players will take this issue to court,” he said. As for the networks, Miller said Fox and Disney might “sit out” any possibilities for acquisitions, while NBC’s major affiliate groups might not want to sell. Bear Stearns expects Tribune and Viacom to be the most aggressive in adding stations and NBC is likely turn to Telemundo and Pax.

Lawyers at O'Melveny & Myers said that, like most FCC decisions, this one probably would be appealed in court. Most of the order should withstand challenge, they said, but some details, particularly one that allows women- and minority-owned businesses to exceed the new cross-ownership caps, are “probably suspect.”

Consumer Federation of America Research Dir. Mark Cooper said the rules “can only be seen as a radical deregulation” of the media industry. Mergers now will be allowed in more than 150 markets, representing 98% of the nation’s population, he said. “The result is certain to be an increase in concentration of local markets and consolidation of the media in national chains,” Cooper said.

Analyst Peter Mirsky of Fahnestock & Co. said many were predicting a “big rush of consolidation… (but) I don’t think it’s going to happen.” But, he said, “it sets the stage for a possible merger frenzy.” Viacom COO Mel Karmazin told a Deutsche Bank media conference in Boston the decision gave Viacom an opportunity to acquire duopolies, and he had told CBS affiliates last week that Viacom would be actively seeking to buy stations (CD June 2 p8).

The Sinclair Bcst. Group said the FCC decision “will allow us to immediately move forward” to buy stations it currently operated under local marketing agreements, citing specifically stations in Colombus, O.; Baltimore; N.C. and S.C. Writers Guild of America West Pres. Victoria Ruskin called the FCC’s 3-2 vote “profoundly troubling… The winners today were the 5 media giants. The losers were the American people… The creativity, diversity and quality of American televison will suffer as a consequence.”

Media General said the ruling had given the company an opportunity to expand its convergence efforts across the Southeast. “Our pace going forward will be deliberate and will depend on the availability of desirable properties at prices we are willing to pay,” CEO Stewart Bryan said. In addition to Tampa, which is grandfathered, the company owns TV and newspapers in 5 other southeastern markets. “The Commission’s decision allows us to keep these combinations, legitimizing our convergence strategy,” he said. However, he also said the company believed the FCC’s ruling was flawed “because it draws a line that is unsupportable,” since it did little to help struggling stations in smaller markets.

With the FCC action removing fears that radio station divestitures would be required under the new definition of a radio market, media stock prices recorded significant jumps after the decision was announced Mon. Cumulus rose 9.5% to $19.75, Clear Channel Communications (CCC) 5.3% to $48.26, Enetercom 3% to $50, Cox Radio 5.3% to $23.99, Radio One 7% to $17.83, Emmis 4% to $22.05.

Clear Channel, by far the largest owner of U.S. radio stations with more than 1,200, said it was “deeply disappointed” by the ownership restrictions still in place. COO Mark Mays said the FCC’s action “will extinguish the substantial benefits brought by radio deregulation” of the 1996 Telecom Act. He said the Commission “chose politics over the public interest and American consumers will be the ultimate victims.”