Ruling could alter local TV landscape; Sales or swaps involving stations appear more likely

Last June, the owner of WDAF-TV reportedly was about to sell the station. But thanks to a U.S. Court of Appeals ruling this week, that sale isn't likely to occur. On the other hand, most of Fox 4's competitors in Kansas City could be sold or swapped in the coming year or two. That's because the court's ruling is expected to trigger yet another round of billion-dollar media mergers. The appeals court in Washington, D.C., on Tuesday ordered the Federal Communications Commission, which regulates the media business, to justify the limit on how many stations a company can own. Under that law, a company's combined signals cannot reach more than 35 percent of the U.S. population. News Corp., parent company of the Fox network and WDAF, was prepared to unload WDAF and three other stations to an independent group last June, according to sources interviewed at the time. News Corp. had just bought another station group that raised its overall reach to 40 percent of the United States, well over the ownership cap. The appeals court did not strike down the 35 percent rule Tuesday, but instead remanded it to the FCC. The commission's chairman, Michael Powell, has made clear his opposition to the 35 percent rule. Most industry observers think Powell will either throw out the rule or raise the ownership cap to 50 percent. Either way, Fox would be allowed to keep its stations. Stan Knott, general manager of WDAF, said this week: "We've heard nothing official, but our sense is that (talk of selling the station) has really cooled off." It may well be a different story for other local stations. That's because they are owned by medium-size broadcast groups, which Wall Street analysts this week predicted will be the most likely to be involved in any deals should the federal government do away with the 35 percent ownership cap. They are: Hearst-Argyle Television, owner of ABC affiliate KMBC-TV and operator of UPN affiliate KCWE-TV. Meredith Corp., owner of CBS affiliate KCTV. E.W. Scripps Co., owner of NBC affiliate KSHB-TV and "38 Family Greats" station KMCI-TV. Sinclair Broadcast Group, owner of WB affiliate KSMO-TV. Paxson Communications Corp., owner of Pax affiliate KPXE-TV. "A lot of industry experts have said the ownership cap will probably increase to 50 percent," said Meredith spokesman Jody Judge. "This doesn't surprise anyone in the broadcast industry. It's been anticipated for some while." What will happen next, however - and what impact it will have on viewers - is anybody's guess. For instance, a company such as Hearst-Argyle, one of the largest owners of both NBC and ABC affiliates, could be an attractive target for either of those two networks. On the other hand, Hearst-Argyle could decide to be the acquirer instead of the acquired, and fatten up on other ownership groups. "Anything's possible," UBS Warburg analyst Chris Dixon told the New York Post. "There's no doubt that a new regulatory climate will let the merry band of brothers move in to make more money for themselves and their shareholders." Many times a station changes hands and the viewers are none the wiser. But such was not the case this month in the San Francisco Bay area, where more than 100,000 viewers were unable to watch the Winter Olympics because of an ownership battle between the NBC network and KRON-TV, that area's longtime NBC affiliate. NBC had aggressively sought to buy KRON when its previous owner put it up for sale. But NBC lost out in the bidding and, in retaliation, stripped KRON of its network affiliation and awarded it to a station whose signal did not cover the entire Bay area. "From a very personal point of view, I don't think allowing the networks to acquire more local stations is necessarily in the best interest of the industry or the public," said KMBC general manager C. Wayne Godsey. "It may be good for stockholders, but I don't think greater concentration of the media is in the public interest." Be that as it may, it appears to be the wave of the future. In addition to its ruling on the ownership cap, the appeals court struck down the ban on cable companies owning local television stations. Either the courts or the FCC also is expected to rescind the ban on newspapers owning TV stations in the same area. That is likely to lead to still more mergers as media conglomerates seek to improve their efficiency in reaching customers with movies, TV shows and other content. "The wave of consolidation is where our business is right now," said WDAF's Knott. To reach Aaron Barnhart, call (816) 234-4790 or visit the TV Barn Web site at www.tvbarn.com.