After June 2, Papers May Make Broadcast News

By: Mark Fitzgerald and Todd Shields Like eager teenagers perusing used-car ads in the classifieds as they wait for their first driver's licenses, many newspapers have been checking out potential broadcast acquisitions, anticipating that the Federal Communications Commission (FCC) will drop most cross-ownership restrictions when it meets on June 2.

"We have been doing informal broadcast market studies for various daily newspapers," said Larry Grimes, president of the Gaithersburg, Md.-based newspaper brokers W.B. Grimes & Co. "We've completed a bunch of them. I can't tell you for whom, but I can tell you we have looked at about 75 markets."

Some papers will be ready to buy broadcast immediately if the FCC drops the ban, said Owen Van Essen, president of Santa Fe, N.M.-based Dirks, Van Essen & Murray: "A few companies who have taken this very seriously are way out in front of this (and) some ... already have deals lined up."

Brokers say they don't expect a land rush on broadcast properties. One factor dampening the market is the likelihood that newspapers in the smallest markets will continue to be forbidden from owning a nearby station.

But with the decision just days away, it's still unclear how small will be too small for the FCC. The consensus among lobbyists on both sides of the cross-ownership issue seems to be that the FCC draft regulations permit cross-ownership in at least the top 100 markets, with some saying even papers nearer the bottom of the top 200 will be allowed to buy broadcast in their communities.

"Smaller companies haven't been as aggressive because that's where there's the least clarity," Van Essen said. Still, brokers have been gently pushing newspaper companies to bid sooner rather than later if they are giving serious thought to buying broadcast.

"TV companies will move quickly in forming duopolies," Van Essen said, referring to a draft FCC proposal to relax restrictions on common ownership of two TV stations in the same market. "One of the things we've said is, yes, you can take a wait-and-see approach -- but that TV station that could be a perfect fit might be swallowed up."

Despite all the talk of broadcast consolidation, especially in radio, there are plenty of available properties, Grimes said: "Broadcasters are not tied to ownership the way newspaper people are. They buy properties and flip them." W.B. Grimes has affiliated with the broadcast broker Media Services Group for cross-ownership opportunities.

Publishers may experience a little bit of sticker shock as they window-shop radio and TV. "The reality is, broadcasting in general is selling for a few multiples [of cash flow] higher than newspapers," said Tom Buono, CEO of BIA Financial Network, which is working with Dirks, Van Essen & Murray on broadcast transactions. "If newspapers are going for multiples of 8 to 12, it's more like 10 to 14 for TV, and radio is even higher," Buono said.

Whatever the final shape of the cross-ownership regulations, it appears increasingly certain that the FCC will go ahead with a party-line vote on June 2 despite mounting opposition, much of it from Democrats. Chairman Michael Powell, a Republican, has rebuffed requests from Democratic commissioners for a delay, saying the agency must move quickly to rectify defects that courts have identified in the rules.

Even Commissioner Jonathan Adelstein, a Democrat who calls the proposed rules relaxation "an extreme proposal," said he sees nothing standing in way of the vote.

In a speech last week at The Media Institution, a Washington think tank, Adelstein proposed that potential buyers of additional TV stations or newspapers should answer a series of questions, including whether they will bolster news staff, preserve separate editorial discretion for each entity, and respond to complaints of stories not covered. "The FCC should then require an annual showing that it met its commitments," Adelstein said.

And there could be a backlash from the public and from elected representatives if consolidation brings business efficiencies, but no additional benefits to local communities, he said.
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