Wednesday, August 30, 2006

FCC Pursues New (Yawn) Ownership Rules. Does Anyone Who Matters Care?

As the FCC gears up for a new stab at concocting media ownership limits, the big media companies are continuing to downsize, resize, divest and diversify. To a great extent they look out over the highly competitive media landscape and do not see the FCC being as relevant to their future as many of the high profile media bashing critics seem to believe.

The break up of Knight-Ridder, the second largest newspaper group, is now history. Its newspapers were split up among McClatchy, MediaNews and some individual private buyers.

The Tribune Company, owner of 26 television stations and 11 large city newspapers—including the LA Times, Chicago Tribune and New York’s Newsday—is trying to sell its television holdings. This is not being forced on it by some government regulation. Rather it is the product of the same market forces that lead to Knight-Ridder’s disaggregation— stockholders who see greater value in the parts than in the sum.

Dow Jones, publisher of The Wall Street Journal and Barrons is looking to sell (sub. required) six of its small city daily newspapers “as the publisher aims to push deeper into electronic media.” And the Journal Register Co. has announced its plan to divest its daily and weekly newspapers in New England, also with the objective of focusing on their “growing online operation.”

These are just a few of the developments by large and smaller media groups. They are adjusting to the changing media landscape. Newspapers are maintaining profitability only by down sizing. Owners know that no amount of investment in the print product can meaningfully reverse the macro trends undercutting reader and advertiser interest. The television business has been splintering, as viewership of networks and broadcast stations declines, eroded by the proliferation of channels.

Even local television stations, still lucrative, are starting to squirm (sub. required) as local cable providers compete for spot advertising more than ever. Surprisingly, perhaps, the rather staid billboard industry is poaching increasingly on the advertising pie that subsidizes so much of the cost of our content media. Of all media, only the Internet is growing faster than the billboard industry, which grew at twice the pace of advertising generally in the first quarter of 2006. It is being driven by—guess what?—digital technology that is making it possible for new displays to change the message without having to glue up new sheets and can beam additional content to cell phones. Every ad dollar spent there is a dollar (or Euro) not spent on the news or entertainment media.

The cable providers recognize that the regional telephone companies are serious about providing direct competition for the ultra broadband to the home that is needed for high definition video, even as the switch to DBS has slowed down. Still, nearly one third of households get their multi-channels television from satellite, a share that has come from the hide of local cable competitors.

As we all know News Corp. spent $580 million in 2005 to buy MySpace and some smaller Web sites. What would that treasure chest have been used for pre-Web? Likely it would have been invested in television. And if regulations had prevented that, News Corp. would have been on the front lines lobbying hard at the FCC. But today, there are plenty of other opportunities and News Corp and others are pursuing them, along with hordes of MySpace and Google and Facebook wannabes who see that this frontier is still open to two entrepreneurs with a few hundred dollars a month for a server and some bandwidth.

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