DEREGULATION
New ownership rules


Here's what the changes mean for the media in Buffalo

By ANTHONY VIOLANTI
News Staff Reporter
6/4/2003

 

Michelle Russo is not afraid.

John Robshaw is worried.

Both are coping with the new rules of media deregulation voted in Monday by the Federal Communications Commission. It lifted bans on cross ownership of newspaper, television and radio properties. The FCC also allowed big media companies to buy more television stations.

"It just looks like the big guys are going to get bigger and bigger," said Robshaw, a local lawyer who has worked on media mergers. "My gut reaction is that the little guys are going to get pushed out. It's a fact of life."

Russo works for the FCC and understands the uncertainty and fear displayed by the public.

"If I didn't work for the FCC and I was out there sitting and watching what was going on, I would be concerned about these scary rules, too," Russo, a spokesperson for the agency, said in a telephone interview from Washington, D.C. "But they're not scary. We're trying to maintain a level of diversity and independent news sources. The old rules were unenforceable because the courts struck them down."

Owners of newspapers can now also own television and radio stations in the same market.

In Buffalo, a mid-size market with eight commercial television stations, the rules allow the following:

A company could own a daily newspaper and one television station and three radio stations.

A company could own a newspaper and six radio stations.

A company could own two television stations (including only one of the top four stations) and six radio stations.

But don't look for any media buying sprees soon.

"We're not likely to be buying any media properties, and we're definitely not selling," said Stanford Lipsey, publisher of The Buffalo News. The paper is owned by Berkshire Hathaway, headed by Warren E. Buffett, who is chairman of The News.

Other big newspaper and media companies, such as Gannett, may be more aggressive in going after media properties.

"This ruling has made television stations attractive to newspaper companies," said John Morton, a media analyst with Morton Research of Silver Springs, Md. "It's a seller's market."

Morton added that rather than just buying up properties, newspaper companies may "trade" them in deals with other corporations. Such trades could allow the newspaper company to cluster its holdings in a market with its other media properties.

"I wouldn't rule out anything'

There are advantages to cross ownership for a newspaper company, Morton said: cross promotion with a TV station and the paper; selling advertising for both and reaching a larger audience and more efficient operation.

Gannett already owns a television station in this market, Channel 2, and Morton said he was "sure" the company would see The Buffalo News as a prime asset, but doubted it would be sold.

Local television station general managers have a cautious reaction to the new FCC rules.

"I don't see from what I'm reading, it will have any great impact in Buffalo," said Lou Verruto, general manager of Channel 4 and Channel 23.

"I think there will be appeals all over the place," he added. "I don't think anybody walked away with what they wanted. I think it will be challenged by litigation and challenges in federal courts and Congress. It will take about a year to be sorted out.

"I wouldn't rule out anything. The Buffalo News could, if it wanted to, go back to the original way when they founded the company of owning a newspaper, television station and radio station."

He added that he could see CBS interested in Buffalo's Channel 4 because it is a National Football League market. "Before Lin (Lin TV Corp.) purchased WIVB (Channel 4) from King World, the original buyer was CBS," Verruto said. "The deal fell through. It is a very strong CBS affiliate. But my guess is the Big Four would be looking at the top 20 markets. That's where the money is."

Channel 7 General Manager Bill Ransom also believes Buffalo is not a major acquisition target for television.

"I don't think Buffalo is on anybody's radar screen," he said. "The Big Four (CBS, NBC, ABC and Fox) will be concentrating on the Top 25 markets and we're not in the Top 25."

Ransom did say the rules changes help Granite, Channel 7's owner, in two markets, San Francisco and Detroit, where it has WB affiliates. Those markets are now allowed to own additional stations.

"It makes those stations more valuable," he said. "It creates a revenue profit for us and helps us (the company) pay down debt."

Charles Banta, who owned local radio stations and is now with the media investment firm, Mercury Capital Partners, believes the new rules, "will be good for Buffalo because they will help old-line, existing media companies" be more competitive.

Banta added that new media competition such as the Internet, satellites and cable services have changed the way companies do business.

"This is the first time the FCC acknowledged that advances in technology have created a tremendous amount of choice for consumers and advertisers," Banta said. The new rules, he believes, allow the old line media companies to better compete.

Radio was transformed by the deregulation in the Telecommunications Act of 1996. Now, local ownership of major commercial stations has virtually disappeared. All the major commercial stations in Buffalo are owned by three out-of-town companies.

The new FCC rules will have little impact on radio in Buffalo, said Greg Ried, vice president and general manger of Entercom Communications Corp, which owns six stations here.

"It's hard to predict what will happen, but I don't see any major changes in radio," Ried said. The companies that own the stations are firmly entrenched and paid high prices for them, which could make it prohibitively expensive to buy the stations now.

The biggest change in the Buffalo market might happen through mergers, said Fritz J. Messere, a former FCC official now at Oswego State College. "One of the smaller television owners could be merged with a bigger company," he said.

Expecting court battles

The new rules are complex. For example, a broadcaster can now own stations that reach 45 percent of America's television households. But because UHF stations only count as one-half of a VHF station, a company could exceed that 45 percent limit.

"It could easily exceed 50 percent, and that's the problem with these rules. They are hard to enforce and it can become smoke and mirrors," Messere said.

That's why Michelle Russo and the FCC are expecting court battles. "The consumers and the corporations," have been critical over the new rules, she said, adding, "everybody knows we're going to court."


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