consumer advocates deplored yesterday's changes to media ownership
rules as a blow to democracy, investors bought up shares of the
biggest media companies.
Both advocates and investors agree that the latest rule changes
are likely to let media leviathans like the News
Corporation and Viacom
fortify their positions while increasing the odds against newcomers
and small fry.
The changes mainly loosen restrictions on the ownership of local
television stations. But even in the one area the radio industry
where the Federal Communications Commission tightened the rules
on media consolidation, the changes will have the unintended effect
of making it more difficult for smaller rivals to challenge the
dominance of the industry giant, Clear
To curtail the swift consolidation of radio broadcasting since
its deregulation in 1996, the commission set new limits on the
maximum number of stations one company can own in certain cities and
towns. The new rules will impede Clear Channel's future expansion.
But at the same time, the commission let Clear Channel keep its
clusters of stations that exceed the new caps, preventing its
smaller competitors like Cumulus
Media and Citadel Broadcasting from ever catching up.
Citadel had sought rules that would force it to sell some of its
approximately 200 stations, in the hopes of forcing Clear Channel to
shed some of its 1,200.
"Whether you call it revolution or evolution, the big
companies now have the opportunity to be even bigger and
stronger," said Blair Levin, a former top official for the
commission who is now an analyst at the investment bank Legg
"Everyone in the business has to wake up tomorrow and ask,
Do I want to be a buyer or a seller? In a relatively condensed time
frame three or five years there will be a pretty large
turnover in the way the map looks," Mr. Levin said.
Together with recent deals like News Corporation's proposed
acquisition of the satellite broadcaster DirecTV, the changes may
create opportunities and pressures for more mega-mergers.
In a little-noticed shift, the commission declined to reinstate a
rule that blocked cable companies from owning local television
For the first time, the cable giant Comcast
could now merge with the Walt
Disney Company, owner of ABC and some of its owned-and-operated
broadcast television stations. AOL
Time Warner, owner of Time Warner Cable, could buy NBC from General
Electric. Both moves have come up for discussion by analysts and
investment bankers as logical responses to match the new power of
News Corporation, which will now combine studios, major broadcast
and cable networks, and pay television distribution. Another
investment banker fantasy: Viacom, owner of Paramount, CBS and MTV,
might merge with the other satellite service, Echostar.
The centerpiece of the changes effectively makes it easier for
networks, newspaper publishers, radio station owners and others to
buy local television stations. Broadcasters sought the new rules to
help support free over-the-air stations, which face growing
competition from cable and satellite services as well as higher
costs for programs and digital upgrading, said Victor Miller, an
analyst at Bear, Stearns.
Owning local television stations in tandem with other television
or radio stations, newspapers or cable systems in the same market
offers the prospect of more economies of scale in producing news or
The change was a victory for the major networks, raising the cap
on the maximum share of the national audience one company can reach
with its stations to 45 percent from 35. News Corporation's Fox
television subsidiary and Viacom's CBS division already own stations
reaching about 40 percent of the market.
But owning more stations gives the networks more power over their
affiliates in negotiations over fees and what programs to show. It
also enables the biggest companies to consolidate the advantages of
size over their smaller competitors.
One side effect of the rules, for example, caps the number of
stations in some markets that can enjoy the benefits of merging with
a local rival. The rules preclude a company from owning more than
one of the top four stations in a market, so in markets with just
five or six stations one or two will inevitably be left to go it
alone. The loners in the market will face a permanent disadvantage,
said Tom W. Davidson, a lawyer at Akin, Gump, Strauss, Hauer &
Feld who represents the station owner Granite
In recent weeks, some in the industry, most notably the
entrepreneurs Ted Turner and Barry Diller, have raised alarms that
the changes will make it harder for new or independent voices to be
heard in television programming.
But most analysts do not expect quick or earth-shaking reactions
to yesterday's changes, or the start of a race to snap up local
stations. "You could argue that not much might come of
it," Mr. Miller of Bear, Stearns said. "We don't think
there are a lot of natural buyers and few major potential
He said the newspaper publishers McClatchy and Pulitzer and the
publisher and station owner Hearst might be candidates to trade or
merge with broadcasters. Gannett might buy newspapers and the Tribune
Company might buy television stations.
Analysts said broadcasters were likely to swap stations to amass
positions in certain markets, effectively carving up territories
Dissatisfied companies and consumer advocates are expected to
challenge the ruling in court. Yesterday, Clear Channel, the radio
broadcaster, denounced the new rules because they limit its ability
to expand or to sell some of its clusters of stations without
breaking them up. "Radio has got a bad rap," said Andrew
Levin, a spokesman for Clear Channel. He called it "an urban
myth" that the industry's ownership had become concentrated.
"Everyone has something to litigate about," said
Michael Russell, an analyst at Morgan
Stanley, noting that recent F.C.C. decisions have often been
overturned by courts. "That is going to be the hard part of all
this. This was as we expected, but is this going to be what we