‘Virtual Duopolies’ Attracting Interest

Oct 20, 2003  •  Post A Comment

As the uncertainty over the Federal Communication Commission’s rules regarding television station ownership drags on, some in the industry are beginning to think about how they might create duopolies without flouting the rules that limit how many stations a single owner can have in a single market.
The ideas are being spawned due to the lack of activity among buyers and sellers of TV stations. Many players in the station business have stayed on the sidelines as Congress and the courts weigh in on the new FCC ownership rules that were passed in June-and were slated to take effect in early September, before a judge issued a stay on the rules.
Sales activity has been light for most of the year. The expectation has been that, once rules went into effect related to ownership of newspapers and TV stations in a single market and ownership of more than one station in a television market, a wave of deals would follow. Sellers anxious to get out of the broadcasting business were expected to get matched up with buyers sitting on piles of cash, as larger players swapped stations among themselves to create clusters of multiple properties.
However, the lack of clarity about the rules’ future has left many in the marketplace champing at the bit to do deals.
“There is a lot of uncertainty,” said Anthony Hoffman, a partner in the media brokerage firm of Hoffman Schutz Media Capital in San Diego. “No one wants to work out the details of a transaction if it’s not going to be approved.”
Enter the concept of “virtual duopolies.”
Sources said one idea being bandied about involves a station group owning stations in two separate but adjacent designated market areas in an attempt to operate the stations much like a duopoly. The stations in a virtual might have a single general manager and sales force as well as a single programming feed.
A similar opportunity, albeit on a smaller scale, might present itself to Raycom Media, sources said. The Montgomery, Ala.-based station group is awaiting FCC approval for its $25.7 million purchase of Waitt Broadcasting, which owns three Fox affiliates, WFXL-TV in Albany, Ga., WDFX-TV in Dothan, Ala., and WPGX-TV in Panama City, Fla. With Dothan and Panama City a little more than an hour’s drive from each other, sources said Raycom could realize the same sort of benefits and efficiencies that exist if both stations are in the same market.
Officials at Raycom did not return repeated calls for comment.
Another option is to replicate what The WB 100+ Station Group did, with cable operators partnering with local broadcasters. Young Broadcasting and cable operator Insight Communications did just that in September, when the companies launched UPN 16 in Rockford, Ill., providing the ABC affiliate there, WTVO-TV, with a secondary revenue stream without having to consider any duopoly rules.
To be sure, the discussions are in their nascent stage and could be abandoned if the new rules hold. Furthermore, no one expects these options to be adopted by every station owner whose hands are tied by the uncertainly of the ownership rules.
But sources said that given the moribund state of most buyers and sellers of TV stations, there are some discussions being held among buyers and sellers unwilling to wait until well into 2004 before the rules take effect.
“There are potential efficiencies by bringing operations together and the possibility of having one general manager, which is a big line item,” said Mark Fratrik, a VP at BIA Financial Network.
“I don’t know if a large company that has the pockets to wait may not want to wait [for the final ownership rules],” said Kathy McCoy, an analyst at Kagan World Media in Carmel, Calif.