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FCC ruling unlikely to affect Cleveland for now

June 8, 2003

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Want to buy a TV station? How about a newspaper?

If you have a couple hundred million dollars stuffed under the mattress, the government has made it easier to own broadcast and print properties in the same market.

The Federal Communications Commission's decision last Monday to ease ownership rules is being hotly debated. Proponents see it as a long overdue boon to the free market; opponents call it another nail in the coffin of those radio and television stations carrying local programming and independent voices.

But how will it play out in Greater Cleveland? Will there be a buying blitz and flurry of mergers and acquisitions?

Industry observers say no. At least not yet.

"I don't see the FCC decision having a dramatic impact in Northeast Ohio," said Ric Harris, general manager of WEWS Channel 5.

Most of the major media properties here are owned by large out-of-town companies with deep pockets.

On the television side, Scripps Howard owns Channel 5; Gannett owns WKYC Channel 3; Rupert Murdoch's News Corp. owns WJW Channel 8; and Raycom owns WOIO Channel 19 and WUAB Channel 43.

Cleveland is the 15th-largest TV market in the country, according to Nielsen Media Research. For Nielsen's ratings purposes, the nation is divided into 210 Designated Market Areas. Cleveland's DMA includes Akron and Canton, and has more than 1.5 million TV households. Radio markets are largely determined by Arbitron ratings, which ranks Cleveland 25th (and separate from Akron and Canton).

The predominant radio power here is Clear Channel, with nine Greater Cleveland stations.

Infinity, Radio One and Salem Communications each own four stations.

"Nothing is going to change in Cleveland in terms of radio," said Tom Taylor, editor of the media newsletter MStreet Daily. "The players you have aren't going anywhere. So you have to look at TV and newspapers."

The Plain Dealer is owned by Advance Publications, which owns 23 other newspapers and Conde Nast magazines, including The New Yorker and Vanity Fair. The Akron Beacon Journal is owned by Knight Ridder, which owns 31 newspapers, including the Philadelphia Inquirer.

If anything, Cleveland's media executives look for the possible sale of two TV stations: Raycom's Channel 19 (the CBS affiliate) and Channel 43 (the UPN affiliate). One potential buyer would be Viacom, which already owns CBS and UPN, as well as Infinity Radio, which has four FM stations in Cleveland.

"I would be surprised if Viacom didn't come in and buy 'OIO and 'UAB," said Harris. "It makes sense for them to partner with the four Infinity radio stations here." The TV and radio stations could cross-promote and possibly combine staffs.

Chris Maduri, senior vice president and market manager for Infinity Radio Cleveland, agrees that the major early moves are likely to come on the TV side.

"I'm sure that Viacom-Infinity would be interested in the CBS affiliate," said Maduri. "But it's owned by Raycom. They're a big media company, and this is a great market for them."

Raycom has announced no plans to sell the stations. A Raycom spokeswoman in Montgomery, Ala., did not return telephone and e-mail messages.

Under the old FCC rules, an owner could not have a TV station and a major newspaper in the same market. Except for some waivers and "grandfathered" cases, most companies were forced to sell off either the same-city paper or the TV station to comply with the FCC's cross-ownership regulations.

Now newspaper powerhouses can buy TV and radio stations down the block, and broadcast companies can expand their print holdings. For example, Murdoch's News Corp., owner of Channel 8, or Clear Channel, owner of nine Northeast Ohio radio stations and more than 1,200 nationwide, could bid for The Plain Dealer.

Except its owners say it's not for sale.

"I can say quite forcefully that we are not interested now, or in the future, in selling any of our newspapers," said Donald Newhouse, president of Advance Publications. As for Advance buying broadcasting outlets here, Newhouse said, "No consideration at all has been given to any purchases in the market."

The main fallout of the FCC decision may not be newspaper companies acquiring TV stations. It may be larger media-company mergers down the road.

But it's a long road. The FCC decision met with heated opposition last week. A Senate bill aimed at curtailing the changes could be introduced as early as this month. There could be any number of court challenges.

Clear Channel, which is also the country's largest producer of live entertainment and owns 39 TV stations, would seemingly benefit from a loosening of the reins. But the company objected strongly to the FCC ruling last week, saying it didn't go far enough. Clear Channel wanted limits raised on the number of radio stations an owner could have in a market (eight in large cities).

"That tells you that Clear Channel doesn't think much of its TV division," said Robert Unmacht, a Nashville-based media consultant with iN3 Partners. "It's like McDonald's owning Boston Market. To you and me, Boston Market is a big company. But to McDonald's, it's the little office down the hall."

As for Clear Channel's potential expansion plans in Greater Cleveland, Andy Levin, the company's senior vice president for government affairs in Washington, D.C., said they would have to await the FCC's finalized decision. Until then, Levin wrote in an e-mail, "it's not possible to predict the effect on individual markets."

Instead of witnessing frantic buying, we may see studied swapping.

"Newspaper companies will most likely swap properties to get a TV-newspaper arrangement in one market, and maybe a few radio stations," said Taylor.

That would allow the station and paper to cross-promote, combine advertising sales and possibly merge newsrooms. "It's also better for tax purposes to swap older, long-owned stations," said Taylor.

But owning a TV station and newspaper in the same city may not appeal to everyone. "The efficiencies of doing that have not yet been proven," said Brooke Spectorsky, general manager of Gannett-owned Channel 3. Through a waiver, Gannett owns both newspaper and TV properties in Phoenix. "The financial model is not something that has a very strong record," Spectorsky said.

Gannett is one of the few companies that has said it will be shopping once the FCC decision becomes law. It already owns 22 TV stations and 100 newspapers, including the nation's No. 1 circulation daily, USA Today.

But how soon that shopping will begin is a mystery. The FCC still has to release its Final Report and Order, filled with a multitude of intricacies that will delight only media lawyers. There is the opposition in the Senate, and the possible lawsuits. It may not clear up until the fall, or next year.

"The short term is a mess," said Unmacht. "The market definitions are not clearly spelled out. The FCC is still working on that."

For the new regulations to work, markets must be clearly defined and are supposed to mesh for TV, radio, newspapers, cable companies and DSL Internet providers. That's quite a spectrum. And with more radio stations and newspapers online, how do you define the parameters of the World Wide Web?

The net result for local viewers, listeners and readers is a big zero right now (unless you own stock in Clear Channel, Cox, Fox, Radio One or any of the other publicly traded media companies who saw gains after the decision was announced last week.)

But that's the short term.

Long term, the playing field expands significantly.

"It's not really about a TV station buying a newspaper or a newspaper owning a TV station," said Unmacht. "It's about it all coming down to even fewer companies in control. Imagine what Clear Channel-Gannett would look like."

To reach this Plain Dealer reporter:

coconnor@plaind.com, 216-999-4456

© 2003 The Plain Dealer. Used with permission.

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