Tribune leads push to level the field

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As cross-ownership rules relax for radio and TV, newspaper executives are pushing the Federal Communications Commission to change a rule that affects their industry as well.

At stake is the opportunity for media companies to compete in a multimedia environment by opening the way for these companies to operate a broadcast station in markets where they already own a newspaper. The rule governing newspaper and broadcast cross-ownership, which dates back to 1975, has nearly 40 exceptions as a result of a grandfather clause.

Now, executives such as Dean Singleton, CEO of MediaNews Group and the incoming secretary of the Newspaper Association of America, argue that all newspaper groups need more flexibility to compete in an era of deals such as those pending for AOL-Time Warner and CBS-Viacom.

"Everyone else has had the walls taken down to some extent, or completely. Newspapers are left with very little flexibility," says Mimi Feller, senior VP-government relations at Gannett Co.

TV, RADIO RULES RELAXED

The sore spot for publishers arose, last August when the FCC significantly eased restrictions on TV and radio ownership. The commission overturned rules providing certain conditions pertaining to other stations' ownership were met. That prevented companies from owning more than one TV station in the same market. In addition, the commission eased the radio-TV cross-ownership rule to let broadcasters own up to six radio stations in one market as long as 20 separate station owners exist in the market.

An FCC report now pending is expected to recommend relaxing rules prohibiting one major network from owning another. The change is of prime interest to UPN owner Viacom and CBS, the company it is in the process of acquiring.

Newspaper industry executives, to their mounting dismay, say they do not hear similar signals of imminent relief from the FCC.

REGULATORY RELICS

Publishers and other industry insiders insist the existing rules are regulatory relics from a time when cable lacked the broad reach it has today and Internet access was not available to the masses.

"We see the world consolidating around us in Chicago," says Tribune Co. Senior VP Dennis FitzSimons, citing what Tribune sees as a stranglehold by AT&T Corp. over area cable systems and "radio consolidation, where two owners [CBS Corp.'s Infinity and AMFM] each have better than 30% of revenues in radio."

Although Tribune boasts a strong radio station in WGN, cross-ownership regulation means the company can't "surround that with other stations."

Cross-ownership regulation "really has had an impact on us as to what acquisitions we could consider," Mr. FitzSimons says.

The advantages of owning several sizable media properties in one market, of course, give its owner the ability to entice advertisers with cross-media packages.

"You can run ads on TV and support them with print," says Karen Hardison, VP-marketing for McClatchy Co.'s Newspaper Network, a national print insert company. "It is better for the client."

Cross-selling over various media "is clearly a tremendous advantage. Look at what Mel Karmazin [president-CEO of CBS] has done with radio, TV and outdoor advertising," says Ed Atorino, an analyst with Wasserstein Perella & Co.

CBS has a dedicated department, CBS Plus, to sell package deals across radio, TV and out-of-home media properties.

What rankles publishers is that heady cross-selling opportunities are open to their broadcast competitors, but not to them.

"I think a lot of us are frustrated," says Mr. Singleton. But "the fact that everyone else is getting relief just makes it more likely we will, either legislatively or judicially."

QUESTIONS REASONING

John Sturm, president-CEO of NAA, is blunter.

"Especially after the FCC modified the [radio and TV ownership] rules last year, there is no rational legal or public policy reason why newspaper publishers should be treated differently than virtually all other entities" that wish to own broadcast stations.

So far, the newspaper industry has challenged the rules mainly through lobbying efforts. In 1998, however, Tribune lost a court case in Florida but still managed a minor victory when the FCC granted it a waiver in the Miami market. Tribune, which owns the Orlando Sun-Sentinel, purchased a group of TV stations from Renaissance in '95, including Miami station WDZL, now WBZL. The FCC rule was upheld. But, in the end, the FCC granted a waiver with the stipulation that Tribune hold the paper and TV station as separate businesses.

"It really pointed out how ridiculous the rule had become," Mr. FitzSimons says. He notes the Sun-Sentinel was not the dominant newspaper in Miami and the TV station ranked No. 7 there without a news operation. "This is an extremely competitive market, and this combination had no cause or potential for harm. In fact, it had potential to be in the consumers' interest, because with a strong owner, you could see them putting on another news operation."

REVIEW NOT FINISHED

The provisions of the Telecommunications Act of 1996 stipulate the FCC must conduct a biennial review of all broadcast-related rules. At present, the FCC has not yet completed its '98 review.

"We are not optimistic that the report on the biennial review" will have good news for publishers, Mr. Sturm says.

"They just refuse to engage the issue of cross-ownership," says Shaun Sheehan, VP for Tribune, which has lobbied hard to eliminate the cross-ownership rule.

According to an FCC spokes-man, the commissioners are considering the rule, and it will be an unspecified number of weeks before the '98 review will be completed.

ADDS TIMES MIRROR

Undaunted, Tribune went ahead with the largest newspaper acquisition of all time: its $8 billion deal to become parent of Times Mirror Corp., which would give the publishing company newspapers and broadcast properties in Los Angeles; Fort Lauderdale, Fla.; Hartford, Conn.; and New York. However, running afoul of the cross-ownership rule isn't an issue until 2006, when the first of its broadcast licenses in those markets expire.

"Under FCC policy, we don't really have an issue of cross-ownership until then," Mr. FitzSimons says. "In the meantime, we're going to try to do as much as we can to cross-promote and cross-sell cross-media packages and all that because we think there's a benefit to advertisers and to us."

"We are taking chances that by 2006, the [newspaper-broadcast cross-ownership rule] will be weakened," says Mr. Sheehan. But he makes it clear that Tribune would welcome the opportunity to challenge the FCC on the rules.

"If they want to engage us, that's fine by us," he says. "We rather firmly believe market conditions have changed since 1975."

GEARING UP FOR CHANGES

Another industry executive has been gearing up for changes in cross-ownership regulations.

"We have been teeing up radio and TV for some time in our market" by purchasing options in broadcast stations that activate when the regulations are removed, says Mr. Singleton.

"We're hoping that something comes down from the '98 review that is challengeable" in court, he says. "I think before it ever gets to the courts [relief will come] politically."

MediaNews counts properties in Denver, Los Angeles and Oakland, Calif., among its 57 daily newspapers. Sen. John McCain (R., Ariz.) and Rep. Billy Tauzin (R., La.) have sponsored legislation in their respective houses that would remove newspaper-broadcast cross-ownership regulations. But observers see little likelihood for action.

"It is obviously something he believes in," says Mark Buse, who works for Sen. McCain as staff director of the Senate Commerce Committee, but "prospects this year are low. It is not one of his top priorities."

SOME SUPPORT THE RULE

Industry watchdogs and public policy groups such as the Center for Media Education and media watch group FAIR say they'll fight to support the rule.

"You need to assure effective competition, diverse editorial voices and a choice for marketers and consumers," says Jeff Chester, director of the Center for Media Education. "Right now, the daily newspapers and broadcast stations still dominate public consciousness and we want to preserve that market."

"We're trying to explore the potential of various media, how you aggregate information and spread it out through different media and become more efficient," Mr. Sheehan says. "That's the theory. Whether or not it works, God only knows."

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