Viacom stay puts swap on hold

Apr 9, 2001  •  Post A Comment

The federal appeals court in Washington has granted Viacom a stay of a Federal Communications Commission order for the company to comply with federal ownership-cap rules by May 4.
The stay from the U.S. Court of Appeals for the District of Columbia, where Viacom, News Corp. and NBC are jointly suing for the loosening or abolition of station ownership caps, eliminates the need for station swaps and trades by Viacom until further order.
A lawyer familiar with the case indicated that all briefs in the ownership-cap case are due by late May, and oral arguments are expected to be heard soon after.
The stay was issued late Friday afternoon in a dramatic twist that capped a week of escalating speculation about News Corp. and Viacom’s negotiations to swap TV stations so both companies could be in compliance with the 35 percent station cap.
The networks, citing the appeals court’s recent ruling that cable-ownership caps are illegal, hope they will win the right to expand the reach of their owned-and-operated stations. If the court leaves the federal rules intact, News Corp. and Viacom may once again find themselves talking about how to create duopolies through trades.
The most likely scenario would create duopolies for CBS in San Francisco, where Viacom owns KPIX-TV and would add Chris-Craft Industries station KBHK-TV, and Minneapolis, where it owns WCCO-TV and would add Chris-Craft’s KMSP-TV.
Duopolies for Fox seem likely in Washington, where it owns WTTG-TV and would add Viacom’s UPN station WDCA-TV; in Atlanta, where Fox owns WAGA-TV and would add Viacom’s UPN affiliate WUPA-TV; and in Tampa, Fla., where Fox owns WTVT-TV and would add Viacom’s UPN station WTOG-TV.
There has also been talk about a Fox duopoly in Houston, where Fox owns KRIV-TV, but Viacom is described as reluctant to fork over its UPN affiliate KTXH-TV.
The situation is harder to call in Baltimore, where Viacom’s CBS owns WJZ-TV and Fox is set to acquire Chris-Craft’s WUTB-TV.
The speculation also turns less assured on the subject of Phoenix. A recent Bear Stearns report said a likely scenario would be Fox, owner of KSAZ-TV, gaining a duopoly by picking up Chris-Craft’s KUTP-TV.
The Bear Stearns report also suggested Viacom could help itself reach the 35 percent cap by divesting itself of UPN stations in a handful of cities in which it owns no other stations: Seattle/Tacoma (KSTW-TV), Columbus, Ohio (WWHO-TV), New Orleans (WUPL-TV), Oklahoma City (KAUT-TV) and Providence, R.I. (WLWC-TV).
Fox can make its own duopoly in Salt Lake City, where it owns KSTU-TV and will acquire ABC affiliate KTVX-TV in the Chris-Craft deal.
The Bear Stearns scenario suggests Fox would help itself in three cities in which it currently owns no stations by dealing off Chris-Craft UPN affiliates WRBW-TV in Orlando, Fla. and KPTV-TV in Portland, Ore., as well as Chris-Craft NBC affiliate KMOL-TV in San Antonio.
If these myriad deals are consummated, Viacom would end up owning stations reaching 34.92 percent of the country and News Corp. would end up owning stations reaching 35.04 percent, according to the Bear Stearns report.
Moreover, six of Viacom’s seven duopolies would be in top 20 markets, which is where the company prefers to have broadcast properties, Mr. Karmazin reiterated last week.
Four of the five Fox duopolies, including New York and Los Angeles, would be in the top 20 markets. In addition, there’s further duopoly-efficiency potential for Fox and its Fox Sports Net regional operations in some cities.
While News Corp. does not burst the ownership cap until its $5.3 billion acquisition of 10 Chris-Craft stations is complete later this year, neither does it benefit by sitting and watching attractive stations get dealt to others.
As the odds were improving on achieving a station swap that suits both sides’ strategies, so was the talk that Viacom and Fox were giving serious consideration to a 50-50 partnership in UPN.
While one source confirmed an equal partnership was indeed “a possibility,” others saw the unraveling of the founding UPN relationship between Viacom’s Paramount and Chris-Craft as a cautionary tale in which the crucial chapter would be about who does the day-to-day running of the network, which now is not expected to reach profitability until at least the 2002-03 season.
A News Corp. spokesman would not comment except to say, “We’ve chatted with Viacom about UPN, but [the talks have] been very preliminary.”