FCC APPROVES MERGER OF UNIVISION AND HISPANIC BCSTG. CORP.

In approving the merger of the largest Hispanic TV station owner with the largest Hispanic radio owner, the FCC said the Spanish-language market wasn’t separate and competed on the same footing as their English-speaking counterparts. The Commission apparently had to negotiate between its new and old media ownership rules to decide this merger because the new rules are under a court-ordered stay, leaving the old rules still in effect. The agency is demanding that the company sell off some radio stations to comply with the new rules that are being challenged.

In reaching its decision, the FCC determined that the combined company wouldn’t violate the agency’s current radio/TV cross-ownership rule or its recently adopted cross- media limits on ownership of TV and radio stations in the same market. But the Commission found that HBC’s ownership of radio stations would violate the FCC’s new local radio ownership rule in 2 markets if the new rule were in effect. It said the 3rd U.S. Appeals Court, Philadelphia, had stayed the effective date of the new rules (CD Sept 4 p1), so it ordered Univision/HBC to divest the radio stations in the 2 markets within 6 months of the court’s lifting the stay, or when the new local radio ownership rule became effective.

FCC Chmn. Powell and Comrs. Abernathy and Martin, in a joint statement, said the merger would give Hispanic media a better opportunity to compete against big media companies, capturing more advertising revenue to allow it to expand unique language and cultural offerings to its audiences. They also noted support of several prominent Hispanic members of Congress as well as political groups such as the National Council of La Raza. The commissioners said the implications of treating Hispanics as “an insular group removed from the general mainstream of news, entertainment and information are troubling… That approach could prove a limitless notion by opening up claims that there should be language-specific, or even viewpoint-specific, ownership rules.” They said such a mindset could lead to a “balkanization of content for regulatory purposes and would corrode the American notion of a diverse marketplace of ideas.” The commissioners said only a small portion of the market spoke Spanish exclusively, giving them many more media choices. “Hispanic Americans are not sealed off from English media,” they wrote.

Comr. Copps, in his dissent, said “this merger has no business going forward. Permitting one company to have a hammerlock over the news and entertainment that America’s fastest-growing minority population receives is in the interests of neither that minority nor anyone else in this country.” He said the merger would take consolidation to “new and threatening heights.” He said the FCC hadn’t done an adequate analysis to determine whether Spanish-language media were a separate market. Comr. Adelstein, in dissenting, called the decision a “devastating blow” to millions of U.S. Latinos. He said the merger signaled that it was “now open season for media concentration.” He said the decision showed an insensitivity to more than 15 million Americans who speak only or mostly Spanish. “Today’s decree from the FCC is: ‘Let them eat English.'”

The FCC majority said the deal wouldn’t adversely affect competition or diversity in any media market. “The FCC record showed that Univision’s TV stations and HBC’s radio stations do not compete in the same product market,” the agency said. It cited a wide variety of programming alternatives available to Spanish-speaking audiences, easy entry into the marketplace for those wanting to compete in the Spanish-language format and the viewing patterns of Hispanics, which the FCC said “do not indicate that the Hispanic or Spanish-speaking audience constitutes a separate, insular ‘diversity’ or competition market.” It said Spanish speakers probably had more media options available to them than ever.

Univision and its subsidiaries own 50 TV stations as well as the Spanish-language TV broadcast network Univision Network and the Spanish-language cable network Galavision. The Univision Network reaches 97% of all U.S. Hispanic TV households. Telefutura, Univision’s recently launched 24- hour Spanish language broadcast TV network, reaches 77% of U.S. Hispanic TV households. And Galavision reaches more than 5.7 million U.S. Hispanic cable subscribers, or 90% of all Hispanic cable households. The Univision Music Group has 3 record labels that together capture 35% of the Latin music market. Univision also holds a nonvoting minority interest in Entravision, also a Spanish-language media company, and a 50% interest in Disa Records, which specializes in regional Mexican music.

HBC owns and/or programs 68 radio stations in 18 of the largest Hispanic markets in the U.S. and Puerto Rico, including L.A., N.Y., Miami, San Francisco, Chicago, Houston, San Antonio, Dallas, Austin, San Diego, Phoenix, Albuquerque and Las Vegas. The company estimated about 10 million Hispanics listened to its radio stations every week. HBC also operates the HBC Radio Network, the largest Spanish- language radio broadcast network in the U.S. in terms of audience.

Univision has an attributable interest in Entravision, which owns and controls 18 full-service TV stations and 52 full-service radio stations. Univision pledged to convert its voting stock interest in Entravision into a nonattributable, nonvoting stock interest before the deal was signed, the FCC said.

The Justice Dept. in March filed a proposed consent decree saying it wouldn’t oppose the merger if: (1) Univision’s interest in Entravision were converted into a new class of nonvoting Entravision stock that had no voting rights and no rights with respect to the Entravision board. (2) Univision’s total equity interest in Entravision were reduced to 10% over the next 6 years. (3) Certain nonvoting shareholder approval rights associated with the new class of stock were removed. The FCC conditioned its approval of the applications on those pledges and said it should be notified if the consent decree were to change in any way.

Clear Channel, which owns 1,200 full-service radio stations, will have a 3.66% postmerger voting stock interest in Univision. The FCC said the deal would result in Clear Channel’s having a lower percentage of ownership in HBC than it had today and thus didn’t present any competitive problems.

The merger was opposed by several public interest groups, as well as many in the Hispanic community. But the primary opponent was Spanish Bcstg. System (SBS), which itself had tried unsuccessfully to buy HBC. The chief argument of the opponents -- embraced by the public interest groups -- was that Spanish-language media should be considered separate from English language. In that context, Univision and HBC were seen as having a stranglehold over Hispanic viewers and listeners, since there were few options for people who spoke only Spanish.

SBS attorney Philip Verveer said he and his colleagues hadn’t seen the ruling, so a decision about any court challenges would be premature. “That said, we do not see a principled basis for the view that Spanish and English language broadcasters operate in the same market for competitive or diversity purposes. We will be particularly interested in how the three-member FCC majority arrived at the conclusion that there is a single market encompassing both Spanish and English language broadcasting.”

But proponents of the merger, including leading members of Congress and the Hispanic Congressional Caucus, said the merger would give the company the same muscle as such other media powerhouses as Disney, Viacom and News Corp. They argued that it would be discriminatory to block an Hispanic company from building the same kind of economies of scale that those English-language media companies had.

Rep. Menendez (D-N.J.), long opposed to the merger, called the decision “an affront to all Americans, especially the 38 million Hispanic Americans.” Menendez has introduced a House version of the proposed “National Minority Media Opportunities Act,” which would require a public hearing on the potential effects of any acquisition on competition and diversity for minority languages. Sens. Kennedy (D-Mass.) and Clinton (D-N.Y.) introduced the measure in the Senate.

Media Access Project Pres. Andrew Schwartzman said the FCC majority had “never met a broadcast merger it doesn’t like” and that the agency had ignored threats to diversity and localism posed by media concentration.