Copyright 2002 St. Louis Post-Dispatch, Inc.  
St. Louis Post-Dispatch (Missouri)
February 22, 2002 Friday Three Star Edition
SECTION: BUSINESS; Pg. C1

LENGTH: 1010 words

HEADLINE: TV RULING COULD CHANGE LOCAL MEDIA PICTURE;
OWNERS OF TV STATIONS HERE, PULITZER ARE ON LISTS

BYLINE: Christopher Carey Of The Post-Dispatch

BODY:
Media companies emboldened by two appellate court rulings this week might embark soon on a new round of industry consolidation.

"This will likely lead to an explosion of mergers among huge companies, mergers that would have been unthinkable just a few years ago," said David Butler, a spokesman for Consumers Union, a public-interest group worried about the impact of such deals.

On Tuesday, the U.S. Court of Appeals for the District of Columbia struck down a Federal Communications Commission rule that barred one company from owning a cable TV system and a local TV station in the same market.

The same court ordered the FCC to reconsider another rule limiting broadcasters to a 35 percent share of the U.S. television audience, saying that cap appeared "arbitrary and capricious."

Both decisions have implications for the St. Louis market.

No sooner had the appeals court issued its rulings than industry experts began playing out scenarios for deals among cable companies, broadcasters and newspaper companies.

Some of that speculation involved Sinclair Broadcast Group Inc., which owns KDNL (Channel 30) in St. Louis, and Acme Communications Inc., which owns KPLR (Channel 11).

Sinclair is under financial pressure and is looking to sell or swap some of its 63 stations. To cut costs, the Baltimore-based chain eliminated local newscasts at its stations in St. Louis and other cities.

Sinclair's stock has risen 15.7 percent since Tuesday on anticipation that it could be acquired. The shares closed at $11.58 Thursday, after touching a 52-week high earlier in the session.

Acme's stock has jumped 24.8 percent since the rulings, closing at $8.60 Thursday.

Acme owns nine stations affiliated with the WB Network. Acme's biggest shareholder, Jamie Kellner, is an executive with AOL Time Warner, which could give that company the inside track on a buyout.

The FCC, under new Chairman Michael Powell, has been looking at whether ownership restrictions adopted years ago in an effort to preserve competition and a diversity of viewpoints have outlived their usefulness.

Media companies have forced the issue by challenging those restrictions in court, hence Tuesday's rulings.

Another ownership restriction being reviewed by the FCC and challenged in court prohibits broadcasters from owning television stations and newspapers in the same market.

Some of those combinations exist, through grandfather clauses or temporary waivers.

Industry observers predict a proliferation of broadcast-print combinations if that FCC rule falls by the wayside.

Editor & Publisher, a media trade publication, speculated in this week's edition on the fate of numerous newspaper companies. So did Forbes magazine, on its Internet site.

Both listed Pulitzer Inc., which owns the St. Louis Post-Dispatch and the Suburban Journals of Greater St. Louis, among the buyout candidates.

Editor & Publisher suggested that Pulitzer would be a good fit for Gannett Inc., which owns KSDK (Channel 5) in St. Louis. The two companies also have overlapping or complementary operations in Tucson and Flagstaff, Ariz.

Forbes did not suggest a buyer but said Pulitzer could be one of the next family-controlled media companies to sell out.

Alan G. Silverglat, Pulitzer's senior vice president for finance, discounted the speculation. "The company's clearly not for sale," he said. "The ownership's very happy."

The FCC probably will not reach any conclusions on the broadcast and newspaper cross-ownership rule until later this year, said Jeff Chester, executive director of the Center for Digital Democracy.

His group is part of a coalition that is fighting Powell's deregulation-oriented agenda at the FCC, arguing that competition and democracy could be undermined if too many broadcast and newspaper properties end up in too few hands.

"This is how people receive news and information," Chester said. "It's how we participate in civic discourse."

Jim Helenthal, owner of the Tri-State Shopper in Quincy, Ill., is in the middle of the debate.

His experiences establishing the weekly circular figured prominently in the objections that the Consumers Union, the Center for Digital Democracy and their partners filed this week with the FCC on the cross-ownership issue.

Helenthal filed an antitrust suit Jan. 31 against the company that owns Quincy's daily newspaper, hometown TV station and two radio stations, claiming that it tried to use its power to monopolize the local advertising market.

In the suit, in U.S. District Court in Springfield, Helenthal complained that Quincy Newspapers Inc. sold advertising below cost to hinder his paper and used threats and intimidation to keep customers from using the publication.

Quincy Newspapers, whose properties include the Quincy Herald-Whig, the Quincy Merchant and KGEM (Channel 10) denies the allegations.

"We think the lawsuit's without merit, and the company intends to vigorously defend itself," said Vice President Ralph Oakley.

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Cross-ownership rules

Three rules from the Federal Communications Commission are subject to revisions that could produce changes in the broadcast and newspaper industries:

Cable ownership rule: An appeals court struck down an FCC rule this week that prohibited cable companies from owning television stations in the markets they serve. Cable giants such as AOL Time Warner Inc. could become able to buy local TV outlets or even national networks.

Broadcast ownership cap: The court also ordered the FCC to reconsider its rule barring broadcasters from owning stations that reach more than 35 percent of the national audience. If the agency can't justify that cap, it will have to set a new one or will have to scrap the concept.

Broadcast-newspaper ban: The FCC is reviewing a rule that, with some exceptions, prohibits broadcast companies from owning newspapers in the same markets as TV stations. If the agency drops the ban, media companies are likely to join forces or are likely to swap properties to create synergies in markets they serve.

NOTES:
Reporter Christopher Carey:; E-mail: ccarey@post-dispatch.com; Phone: 314-340-8291

LOAD-DATE: February 22, 2002