FCC Creates Dimmer Picture for TV Stocks

For investors, new media ownership rules proposed by the Federal Communications Commission are a sign that TV companies have little prayer of getting bigger anytime soon.

That could challenge Wall Street valuations that give broadcast assets a premium over newspapers. In so doing, it weakens the argument for media conglomerates to split print assets away from TV in order to win a higher stock price.

Both the newspaper industry and the broadcast TV business epitomize Wall Street's definition of a mature industry with little opportunity for growth left. Usually, companies in mature industries pursue a strategy of consolidation to keep their stock prices moving, but TV companies that own newspapers have been largely barred from such moves due to longstanding ownership restrictions prescribed by bureaucrats in Washington.

Investors for years have kept the stocks aloft under the expectation that the highly politicized process will go away.

"People who watch the media industry would have been shocked if you told them a decade ago that we'd still be arguing about these rules now," says Barrington Research analyst James Goss. "The rationale for relaxing the rules seems to be increasingly evident with the difficulties these companies have had in generating favorable revenue streams as the Googles (GOOG) of the world continue to siphon off a lot of their core advertising business."

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