2 Sides of the Coin

Buyers were split on the implications of last week’s ruling by a federal court in Washington that knocked down many Federal Communications Commission curbs on cross-media ownership.

Many hailed the decision because it will en courage economies of scale and spur local-market versions of the big cross-platform deals nego tiated by the nation’s largest advertisers and media companies. Others ex pressed concern over consolidating power on the selling side and the threat of increased prices.

The court ordered the FCC to allow companies to own cable systems and TV stations in the same markets. It also directed the FCC to review its policy of limiting the reach of any company to 35 percent of the national TV audience.

Some buyers saw the decision as an opportunity for sellers to consolidate backroom operations and sales forces. “[That] might improve the bottom line, and they wouldn’t have to raise prices,” said Kathy Crawford, evp/director of local broadcast for Los Angeles-based Initiative Media North America.

Besides, added some experts, there is historical precedent to believe that rates will not rise. “We saw consolidation in the radio business, and all the buyers feared prices would be fixed,” said Jim Surmanek, CEO of Denver-based media-audit and consulting firm Media Ana lysisPlus. “Yet that hasn’t hap pened.”

Carolyn Bivens, president and COO of Initiative, noted that if consolidation realizes cost efficiencies for sellers, “they might put the savings into better local programming.”

One consequence that both those who favor and those who oppose the decision agree on is that there will be more packaging of conglomerates’ various media properties in local markets. “It creates tremendous opportunities for cross-platform selling,” agreed an other media exec. “Media agencies are also consolidating at every turn and winning larger assignments. So doesn’t that then put us in a position where we can be in a symbi otic relationship … with media sellers?”

While agreeing that the prospect of more effective cross-media programs will result from the court’s ruling, Allen Banks, evp/national media director for Saat chi & Saatchi North Amer ica, said the decision will “diminish the ability to negotiate and do marketing plans with any kind of security that we will get a reasonable rate.”

“You can’t find a buyer who thinks that any single company that owns six radio stations in the New York market is a good thing for negotiations,” said Rich Hamilton, CEO of Zenith Optimedia Group, Americas.

The court’s directive to the FCC to review its cap on reach also worried some media executives. Paul Wool mington, chairman and CEO of Media Kitchen, New York, predicted “the cap will be raised to 50 percent market share … or in the worst case, no cap—and that would be disastrous. Even at the big-holding-company level, it will be difficult to marshal the forces and buying clout needed to counteract the potential monopolies.”

“On one hand, prices are inflated with a monopoly,” said Jon Mandel, chief negotiating officer for Grey Global Group’s Media Com. “On the other, if two or three guys are competing in a market for the same audience, it’s actually more expensive, because they have to go out and serve all the different segments of the audience. … You have to make it so there’s more concentration or none.”

In any case, the decision reaffirms the inevitability of consolidation. Ado nis Hoffman, evp and counsel for the 4A’s, said, “All barriers, artificial or not, between broadcast and cable [have] come tumbling down with this.”—with David Kaplan and Katy Bachma