TV Consolidation - Coming to a market near you: duopolies

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A federal court decision last week ordering the Federal Communications Commission to review its local TV station "duopoly" restrictions raises the possibility of sweeping consolidation in TV station ownership. And that raises the question of whether fewer choices would lead to higher prices for advertisers.

Station ownership consolidation could be more dramatic than the swift changes that occurred after Congress in 1996 allowed radio broadcasters to hold multiple stations in one market, some observers say.

"It does have the potential of changing the media landscape over the next two or three years," said Blair Levin, a former FCC official and now an analyst at Legg Mason. "Each decision makes it tougher and tougher for the rules to be upheld."

"It's a freight train on its way to an accident," said Kathy Crawford, exec VP-director of local broadcast at Interpublic Group of Cos.' Initiative Media, Los Angeles. "They are going to fly in the face of many rulings that attempt to protect fair marketplace competition."

In last week's decision, the U.S. Appellate Court for the District of Columbia ordered the FCC to review TV station duopoly restrictions, or rules limiting rights to own multiple stations in a market (AdAge.com QwikFIND: aan34c).

decisions, decisions

In another decision that will be appealed, the same three-judge panel Feb. 19 struck down FCC cross-ownership rules that block local cable companies from buying local TV stations and ordered the FCC to review rules that bar any single over-the-air broadcaster from owning stations reaching more than 35% of homes.

That leaves only one TV ownership rule formally unchallenged in court: A rule preventing newspapers from buying TV stations in their market. The FCC is re-evaluating that amidst strong indications its constitutionality is dubious.

Advertising executives, in particular, are concerned about competition, saying duopolies in smaller markets with few stations would allow owners to set prices. "Any of these companies that have owned several stations talk among themselves [about pricing] because they are all part of the same company," said Amy Nizich, exec VP director of local broadcast negotiations at Initiative.

However, Ms. Crawford and Ms. Nizich feel such pricing problems can be mitigated by having different sales departments for each subsidiary station. That is not likely, as one of the results of such acquisitions is that back office functions are merged to create efficiencies."The environment is Wall Street driven," said Ms. Crawford. "Everybody is so hell-bent on making efficiencies for the stockholder that they have lost sight of the fact that the stockholder is [also] the chairman of the board of a company that has to pay money for advertising."

Some ad executives see a silver lining in duopolies. "We've seen it act in our benefit to have a couple of stations in one market owned by one company because manipulation of prices goes both ways," said Bonita LaFlore, exec VP-director of local broadcast at Zenith Media, jointly owned by Publicis Groupe and Cordiant Communications Group.

Even the FCC said there are benefits to single ownership. "It's our contention that duopolies for smaller markets are necessary given their financial situation and also the need for expanded news and public affairs," said FCC spokesman David Fisk.

Yet the FCC has some questions on how far things should go. While giving approval to a series of radio deals that dramatically consolidate station ownership in a number of markets recently, the FCC set for hearing one deal that in Charlottesville, Va., would give two companies 94.2% of the market.

"The pendulum is going in a direction that will have to be pulled back," said Ms. Crawford. "My concern is that the FCC needs to really hear all the concerns. Not just the lobbying that is going to be done by broadcasters. I would ask the FCC to hear from all sides."

Will media agencies do some lobbying of their own?

"With a corporate viewpoint and client interests being served," said Ms. Crawford, "if I was asked to [go to Washington], I would be more than happy to do that."

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