Broadcast consolidation bulldozer speeds up

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Imminent rulings may concentrate decision making

A court decision, an imminent Federal Communications Commission ruling and a media purchase nearing final FCC approval could dramatically alter the media landscape, threatening to concentrate decisions on programming with a few people and drive up ad costs.

Yet marketers and media buyers have done little to get their worries across to the current White House or FCC. Agency buyers suggest the media industry's current desperation for ad dollars makes it hard to show marketers are getting hurt, and the current environment in Congress and the FCC makes it unlikely complaining would help. Moreover, the combinations have also offered some opportunities for cross-media deals.

"If anyone had documented a price hike we'd be back [before the Department of Justice]," said Alec Gerster, chairman of Grey Global Group's MediaCom.

George Hayes, chief operating officer of Interpublic Group of Cos.' LCI, said it's not that media buyers don't have suspicions. It's just that it is hard to prove the consolidation is hurting.

"We look at this and know the [station] general managers are meeting with each other. You've got to assume they are not just talking about stock prices. Have people tried to insist we buy one station when we want another? Sure. But I don't think anyone is blatant enough in this economy that they won't do business."

That's not to say that he isn't concerned. "It's of great concern if you are going to the same people and a handful of people control all the outlets."

The bulldozer pushing consolidation has seemed to move especially fast lately.

On April 13, the U.S. Court of Appeals for the District of Columbia temporarily stopped the FCC from enforcing a cap on broadcasters buying stations that reach more than 35% of households. The immediate impact of the decision was that Viacom was allowed to keep some UPN stations it otherwise would have had to sell off. The decision has TV networks eyeing the purchase of more of their affiliates.

Then last week, the Justice Department approved News Corp.'s purchase of Chris-Craft's TV stations and the UPN Network, after the companies agreed to sell off a Salt Lake City station. Current FCC rules bar one company from owning two broadcast TV networks, but the curb could be dropped as soon as this week. The FCC has to approve News Corp.'s deal for Chris-Craft's nine other TV stations and has asked News Corp. for financial information about the New York Post.

Earlier this month, new FCC Chairman Michael Powell said he had abandoned, at least for the moment, any attempt to look at market competition or diversity issues in radio station sales, saying he believed that a 1996 decision by Congress to raise the number of licenses any one company could own in a market left the FCC's only duty as defining the market and certifying compliance.

Finally Mr. Powell has acknowledged the current FCC newspaper cross ownership rules are on shaky ground and need review. The rules bar newspapers in a city from buying a local broadcaster and vice versa and could face a court challenge in the News Corp. case.

Media executives who regularly met with the Justice Department during the Clinton administration have had few similar discussions with the Bush administration. But while they say the Justice Department is aware of their concern, they are frustrated that the political tide has turned toward media owners.

"The government right now is hell bent to change things. The media owners are very strong. And there is a sense [in government] that they should have more latitude than in the past," said Allen Banks, exec VP-North American media director for Publicis Groupe's Saatchi & Saatchi, and chairman of the media-policy committee of the American Association of Advertising Agencies. "That argument has resonated and people are buying it hook, line and sinker. We aren't going to get anything out of these guys."

Other media buyers point to the ease with which advertisers can buy in the soft market and suggest the fight may not be worth it for other reasons as well. Sean Cunningham, exec VP-managing director for Interpublic's Universal McCann, said combinations present some cross-platform sales that he has been able to use.

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