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Chris-Craft in News Corp. fold

Jul 30, 2001  •  Post A Comment

The Federal Communications Commission last week conditioned its approval of News Corp.’s $4.35 billion acquisition of Chris-Craft Industries’ 10 TV stations on the media giant’s divesting enough of its new properties to come into compliance with agency ownership restrictions.
But industry sources said the series of temporary waivers the agency included in the package should give the FCC sufficient time to change its ownership rules to allow News Corp. to avoid key divestitures.
“The solemn assurances … that this is a temporary waiver rings hollow, because it’s quite clear that substantial revisions [of the FCC ownership rules] are under way,” said Andrew Schwartzman, president of the activist Media Access Project.
Without any divestitures, the transaction would give News Corp. interests in TV stations reaching 41 percent of the nation’s TV homes. That’s a problem because the FCC’s existing rules cap ownership at 35 percent.
But according to the agency’s 3-2 order (with the FCC’s two Democrats dissenting), News Corp. won’t have to limbo under the 35 percent cap until one year after a pending network lawsuit seeking to ax the caps is finally resolved in the federal courts.
Oral argument before a federal appeals court in that case is slated for Sept. 7. But sources said it could be another year or more before final court appeals are exhausted in the case. And the FCC’s Mr. Powell has made clear that he wants to consider relaxing the cap.
The FCC majority also gave News Corp. two years to hold the New York Post, its WNYW-TV and Chris-Craft’s WWOR-TV in New York. That combination is a concern because the FCC’s rules generally bar broadcasters from buying a daily newspaper in their station service areas-and News Corp. already has a waiver to own the Post and WNYW.
News Corp. has said it would prefer to keep the Post. In its order last week, the FCC majority made clear that the company might have to sell one of the stations or the newspaper to comply with the broadcast-newspaper cross-ownership prohibition. (The FCC said combined ownership of the two TV stations would be OK under the agency’s new duopoly regulations.) But News Corp.’s ace in the hole is that Mr. Powell has also made clear he wants to relax the cross-ownership rule.
“The two-year period is a clear invitation to [News Corp. Chief Rupert] Murdoch to lobby hard,” Mr. Schwartzman said.
“We certainly hope to keep the Post, and we’ve long held the view that the cross-ownership restrictions will change,” said Andrew Butcher, a News Corp. spokesman.
“We were very happy with the decision,” Mr. Butcher said. “It was both fair and consistent with the FCC’s previous decisions and the way they treated other companies.”
But the FCC’s two Democrats made clear their disagreement. Commissioner Michael Copps said the deal was “deafeningly silent when it comes to laying out the benefits to the American people of this proposed transaction.”
Democrat Gloria Tristani said the decision effectively eliminates a requirement that merger applicants demonstrate to the FCC why a deal would serve the public interest. “This decision also shows the lengths the commission will go to avoid standing in the way of media mergers,” Ms. Tristani said.
But Mr. Powell, a Republican, said Ms. Tristani’s suggestion was offensive and absurd. “Consistent with long-standing commission precedent, the order gives the licensee a reasonable amount of time to divest assets in order to comply with our rules,” Mr. Powell said.
News Corp., Fox Television Stations and Clear Channel Communications also announced a binding agreement last week under which Clear Channel will swap its Fox-affiliated WFTC-TV in Minneapolis for KTVX-TV in Salt Lake City and KMOL-TV in San Antonio. KTVX and KMOL are two of the Chris-Craft Industries stations that are coming to Fox in the $4.4 billion deal expected to close Tuesday.
With the addition of WFTC and the acquisition of Chris-Craft’s UPN affiliate, KMSP-TV, Fox Television Stations will have a duopoly in Minneapolis. Applications for the transfer of licenses have been filed with the FCC and approval is expected by the end of 2001. The asset exchange also is subject to approvals from the Department of Justice, the Federal Trade Commission and the FCC, but the swap had been expected.