A blessing in disguise? FCC’s failure to lift cross-ownership rules may have saved many media companies from committing suicide 11/23/07Posted by Steve Boriss in Local affiliates.
There is trouble ahead for media companies like the Washington Post and Belo who tried to protect their stock values from their declining newspaper businesses by diversifying into local TV station ownership. According to TheStreet.com’s Nat Worden, their stock prices had been artificially inflated by investors’ expectations that the FCC would ultimately eliminate “cross-ownership” rules banning them from owning newspapers and TV stations in the same local markets. Such a move, now unlikely, might have launched a new era of acquisitions and consolidations, providing these companies’ local TV operations with new opportunities for revenue growth and higher profits from greater efficiencies.
But if these media companies had been allowed to go on such TV station acquisition binges, they would likely have suffered a similar hangover as the McClatchy newspaper chain. In 2006 McClatchy bought the Knight-Ridder chain, blinded by the gleam in its eyes of revenue and profit growth, unable to see the imminent hit newspapers would take from the Internet. The impact on McClatchy’s stock price, shown to the right, speaks for itself. Similarly, local TV stations will soon be taking a big hit from the Internet as their networks move to betray and bypass them. The TV networks are now pushing for us to download their programming, then wirelessly stream it to our TV’s using Microsoft & partners’ new “media extender” technology. Viewers will get programming on demand that is better and more convenient than using TiVo. The networks will keep all the advertising revenues from embedded advertising. But, local TV stations will ultimately be cut-out of the supply chain, losing the ad revenues they have been receiving for broadcasting the networks’ content that last 50 miles to our homes. By fumbling its proposal, the FCC just might have saved the media companies from themselves.