Kill Newspaper-TV Crossownership Rule, Now

Since 1975, the FCC’s restriction on owning a television station and a newspaper in the same market has generated considerable debate in Washington — ranging from a slow simmer to white hot depending upon the state of the economy; the pace of the merger and acquisition market; and the growing number of media outlets. Last November, the FCC proposed relaxing the crossownership regulations in the 20 largest markets, feeding fresh fuel to the controversy.

One side of the debate, espoused most vocally by a number of public interest groups and former FCC Commissioner Michael Copps, states that newspaper-television crossownership threatens the diversity of voices and reduces journalistic quality. They further argue that such crossownership may diminish localism, result in layoffs of news staff and simply pump up the profit margins of media conglomerates. There is a concern, this argument goes, that relaxation of the crossownership rule will simply ignite another wave of media consolidation to the detriment of local consumers.

The opposing view, articulated by industry participants like Tribune (which is periodically required to petition for a waiver in its crossownership markets) and several trade associations, is that in a world with hundreds of cable channels, Internet sites, blogs and satellite services that did not exist in 1975, the threat to diversity posed by newspaper-television crossownership — if it ever existed at all — has completely evaporated. They point to studies demonstrating that co-owned print and television outlets in the same market often take opposing views regarding community issues, and that combining resources greatly enhances the ability to produce quality, in-depth investigative reporting.

Additionally, with television stations and especially newspapers buffeted by the forces of new technologies, increased competition, and a protracted economic recession, proponents of relaxing the regulations argue that the liberalization would be far from a quick fix to inflate profits, but rather a rational opportunity that might give some television stations and many newspapers the opportunity to simply survive.

One way of evaluating this debate is to look at how the permitted crossownership situations have fared over the years. The first point of view is seriously undermined because a large proportion of the legacy newspaper-television crossownership operations have not survived.

I have identified the 26 crossownership situations that reportedly existed in 2001. (Surprisingly, the FCC, despite the high profile of this issue, does not supply a definitive list of just how many grandfathered and waivered crossownership situations exist today; nor do the primary trade associations representing the newspaper and broadcasting industries.)  Strikingly, eight of the 26 crossownership situations, almost one-third of the 2001 total, have perished for one reason or another over the years, which is hardly symptomatic of an arrangement that produces either extraordinary influence or extraordinary profits. This attrition cuts across markets of all sizes. (See chart at end of story.)

In New York, Tribune, owner of WPIX, sold Newsday to Cablevision in 2008, just as the nation was sliding into recession, for $650 million. (This also raises questions as to why a cable system with 3 million subscribers and a local news operation is not subject to crossownership regulation but a television station is, whether it carries news or not.)  Belo Corp, which owned WFAA and the Dallas Morning News, was divided into two separate publicly-traded entities in 2008. Media General has announced that The Tampa Tribune is for sale, effectively ending the crossownership in the same market. In Cincinnati, the Cincinnati Post simply went out of business in 2007, despite its co-ownership with WCPO.

The attrition has been no less profound in smaller markets. This year, Media General sold The Bristol Herald Courier in the Tri-Cities, Tenn.-Va., DMA, as part of a group newspaper sale to Berkshire Hathaway, despite co-ownership with WJHL in that market. Frank Mayborn Enterprises sold KCEN in Waco, Texas, to London Broadcasting in 2009 even though it enjoyed a grandfathered crossownership with The Temple Daily Telegram.

In the Columbus-Tupelo-West Point, Miss., DMA, the Imes family sold WCBJ to Morris Media in 2003 even though it also owned The Commercial Dispatch. In Idaho Falls-Pocatello, the Post Company sold KIFI to the News-Press in 2005, terminating the grandfathered co-ownership with The Post Herald.

The destruction of almost one-third of the legacy crossownerships leads to some interesting conclusions:

• Ownership of both a newspaper and a television station in the same market is no guarantee of financial survival, much less extraordinary profits or market power.

• The “iron fist of the marketplace,” by incentivizing operators to either divest holdings or terminate them, appears to be much more effective at ordering the competitive landscape than regulations do.

• That the regulations even exist is somewhat mystifying — restrictive regulations typically exist to control economic arrangements that are growing to create unfair market power, not those which seem to be in a process of self-destruction.

This is not to say that the crossownership concept is totally undermined, just that it is not so easy. Market managers at companies with both television and newspaper interests, as well as associated Web platforms, indicate that with careful planning and management, they have been able to add low single digit percentages to revenue growth and to reduce expenses by low single digits as well. This is hardly a windfall, but possibly enough to maintain the viability of both media in some markets.

Indeed, operating both a newspaper and a television station in the same market is no slam dunk, and likely it never was. The cultures of a newspaper newsroom, which focuses on in-depth stories, and a television newsroom, which focusses on short-form treatments of breaking stories, do not easily meld. While combining operations can yield moderate back-office savings in areas like accounting, human resources and facilities, developing additional operational benefits requires a disciplined approach to developing a common culture, new brands and incentives for a sales force that sells a more complex product mix.

The crossownership debate has been hot and emotional over the years, but the facts demonstrate that these businesses are having a challenging enough time without the restrictions. If they are eliminated, regardless of market size, some crossownership entities will likely continue to fail based upon the pressures of the marketplace. Others might find a way to participate more productively in the market and in their communities, but it is important to give them a chance to succeed or fail in all situations, not just those with grandfathered or waiver positions.

Unfortunately, the liberalization of the newspaper-television crossownership restrictions has been a festering, unresolved issue for decades and the continued intransigence resembles Nero fiddling while Rome burned — and it may be too late for deregulation to do much good. But at a time when the traditional media is under profound economic, technological and competitive pressure, television stations and, to a greater degree, newspapers need more room to breathe, not less. Repealing the crossownership restriction will be an important step in this process.

John S. Sanders is a principal with Bond & Pecaro Inc., Washington. This article was based on a panel on crossownership at the Media Financial Management Association conference in May 2012.

TV-Newspaper Crossownership Attrition Since 2001

Source: McGannon Communication Research Center, Newspaper Association of America, Bond & Pecaro Inc. data.