Tuesday, June 3, 2003

Q&A about rule changes


Blockbuster deals unlikely

By Seth Sutel
The Associated Press

The Federal Communications Commission issued sweeping changes Monday to rules that govern how many media properties can be owned by a single company and under what circumstances.

Some questions and answers about the rule changes, what they mean for the industry and for the American public:

Question: Aren't media companies already really big? Why do they need to get bigger?

Answer: While it's true that media companies have become much bigger over time, their businesses have changed tremendously since the ownership rules were adopted between 1941 and 1975. Cable TV and satellite weren't around when many of the rules were put in place, and the FCC says traditional over-the-air broadcasters shouldn't be limited by the old restraints on their growth since they now have serious competition.

Q: So does that mean there are going to be even more mergers between big media companies?

A: Not necessarily. Analysts believe many of the transactions now allowed under the new rules may occur among individual TV stations and newspapers, rather than all-at-once mergers like the one between such giants as AOL and Time Warner.

For instance, a local TV station can now own a newspaper in the same city in which it operates, but it's not clear that every station will want to do that. Ed Atorino, an analyst with Blaylock & Partners, says the pace of mergers is likely to be slow, due partly to the big differences between operating a TV station and a newspaper. "There are no real obvious home run deals here," Atorino said.

Q: What's the benefit of owning a newspaper and a television station in the same town, anyway?

A: Media companies that do operate a newspaper and TV station in the same town, under exceptions from the old FCC rules, say they can make more money by selling packages of deals to advertisers. They can also use each outlet to promote the other and share news stories among their broadcast and print reporters.

Q: So why won't every company do that?

A: In addition to having different cultures, TV news and newspapers have very different economics. Television stations tend to be extremely expensive, and they also operate in a lot of areas besides newsgathering. Atorino says it's more likely for a cash-rich television station to be interested in buying a local newspaper than the other way around.

Q: Why are some people upset about this?

A: Public interest groups are worried that an increasing concentration of media ownership in a few hands might lead to a further erosion in the quality of news and information that the public gets, especially local news on TV.




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