FCC Confirmation

Robert McDowell joins.
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Broadcasters and newspaper owners looking for more latitude on the merger front got a lift with Senate confirmation of the Federal Communications Commission's fifth commissioner, Robert McDowell.

Media companies believe their expansion has been stymied by regulations governing local newspaper and TV station cross-ownership, as well as by rules governing local TV station ownership. So bigwigs hope Friday's addition of a third Republican to Chairman Kevin Martin's FCC could lead to relaxed restrictions.

"It goes without saying that TV station owners are happy about it," said one industry insider.

At issue for local media owners is their ability to swap stations and newspapers and the right to own multiple properties in given markets. In a day and age when consumers have multiple choices in terms of the media they consume, some argue the rules are antiquated and inhibit their ability to compete. For example, an owner can hold two or even three TV stations in a given market provided they don't own two of the top-four performing stations in the area.

It is argued by many in the industry that a loosening of the rules would reduce costs and allow stations to compete more effectively for ad dollars. Similarly, an easing of newspaper/TV ownership restrictions would allow companies to swap assets and create synergies across properties.

Analysts covering the broadcasting space were quick to note that the appointment should generate some relief for owners -- eventually.

Stifel Nicolaus analyst Blair Levin wrote Tuesday in a research note that apart from giving Chairman Martin another potential vote to move his agenda, the McDowell confirmation "is also expected to help Mr. Martin open a broadcast/media ownership rulemaking, which has been deadlocked by the 2-2 partisan split for almost a year."

Levin points out that broadcasters such as




Media General


who are interested in M&A activity are hoping the FCC will be able to relax ownership restrictions "in a way that can pass court muster."

The Third Circuit Court of Appeals in Philadelphia executed a stay against the FCC's earlier ownership relaxation proposals in 2003 and sent the issue back the FCC's way. Chairman Martin is said to be anxious to push the process ahead and reportedly wants to get the ball rolling. An upcoming FCC meeting is likely to involve discussions about media ownership.

In a research report last week on the state of local TV, Bear Stearns' Victor Miller said that "the June 2003 ownership rules offered by the Federal Communications Commission would have also allowed relaxation in newspaper-broadcast cross-ownership that would have been particularly helpful to news-centric TV stations which wanted to complement the news gathering prowess of local stations with that of a local newspaper."

However, those looking for instant relief might not want to hold their breath, despite the chairman's best intentions. Bear Stearns' Miller also said in his research that "media ownership rulemaking will not be seen until mid to late 2007 at a minimum."