Many predictions are that the new ownership rules adopted by the FCC this week will result in a quick wave of media consolidation between newspapers and broadcast stations. FCC member Jonathan Adelstein recently predicted (link to story)“a tsunami of mergers.”
However, a New York Times article published May 26, predicted that fewer media companies than are expected will go on immediate cross-media spending sprees after the rule changes go into effect.
After recent interviews with senior executives and investment bankers of the media companies, the Times predicted short-term restraint on cross-ownership deals. Exceptions are Media General and the Tribune Company, who the Times said intend to pursue new deals aggressively.
The newspaper reported that Gannett and the Belo Corporation are expressing caution, while the News Corporation, Walt Disney Company and Viacom are not expected to buy newspapers in markets where they already own stations.
“I don't think there will be an avalanche of deals immediately,” said Gary B. Pruitt, chairman and chief executive of the McClatchy Company, which owns 11 daily newspapers, including The Sacramento Bee and The Star Tribune in Minneapolis. “We're not sure empirically if it’s been proven that there are substantial operating advantages or economies of scale.”
Media General of Richmond, Va., however, told the Times that it has bolder plans. “Any of the places where we have a newspaper, we’d like to have a TV station,” said J. Stewart Bryan III, the chairman and chief executive of Media General, which owns more than four dozen newspapers and television stations, including The Tampa Tribune and that city’s WFLA-TV. “Any of the places where we have a TV station, we'd like to have a newspaper.”
Some believe that newspapers and television stations will be combined due to the financial incentives of consolidating newsgathering costs. “What it is going to do is enable them to cut their costs — their newsroom costs,” said Jon Mandel, co-chief executive officer of MediaCom, the media services company of the Grey Global Group, which buys advertising on behalf of Warner Brothers films and Subway Restaurants.
The Times reported that many analysts and bankers predict that rather than buy newspapers, companies such as Viacom and Disney will be more likely to buy additional television stations in markets in which they already have holdings or to swap stations, primarily for tax purposes.
“The most practical outcome in the near term is station swapping,” Douglas M. Arthur, an analyst at Morgan Stanley, told the newspaper.
For more information visit www.fcc.gov.
