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TV Takeover

A startegic arrangement between two broadcasting companies could gobble up your local news coverage

By Michael Summers

michael_summers@fortwaynereader.com

Fort Wayne Reader

2004-05-17

Several weeks ago, something happened that could end up drastically narrowing your local news coverage, and nobody blinked an eye.

Granite Broadcasting, the owner of Fort Wayne’s ABC affiliate WPTA Channel 21, announced it was selling the station to a company called Malara Broadcasting, and purchasing Fort Wayne’s NBC affiliate WISE 33 from New Vision Television. In the dry language of Granite’s press release, Granite Broadcasting states it will provide advertising sales, promotion, administrative services and programming to both WPTA and WISE 33.

Everyone in Fort Wayne not involved in television greeted the announcement with a collective yawn. A statement was released, the media conscientiously reported it, and that seemed to be that. All-in-all, the coming Cicada infestation on the East coast got more coverage. News of the strategic arrangement would probably have met with a similar reaction at the Fort Wayne Reader had we not just crawled out from under a sizeable pile of research about media consolidation in the radio industry.

What happens in the radio industry is that one company will own multiple radio stations in a single market. In order to cut costs and make money, they’ll put different departments under one umbrella; where each station used to have its own news or marketing department, now one news department or one marketing department or one programming department handles duties for several stations. This can result in less coverage of local news, as well as higher advertising rates for local business.

The same thing is happening in the television industry, and the strategic arrangement between Granite Broadcasting and Malara appears to be an example. Granite will own one station and have control over another, providing advertising sales, promotion, administrative services and programming to WPTA and WISE 33. What does Malara Broadcasting bring to the table? No one is willing to say exactly. Emotional support, maybe? The official statement says that Malara Broadcasting would have some programming control over WPTA, presumably in addition to the programming it already receives from Granite. That’s two media corporations lending their programming expertise to a single TV network affiliate in a mid-sized market. This must be an example of the “substantial operating efficiencies” mentioned in their official statement.

Granite Broadcasting is a prominent media company based in New York that owns and operates nine network-affiliated television stations in medium-sized markets across the country, including NBC affiliate KBJR-TV serving Duluth, Minnesota and Superior, Wisconsin. Malara Broadcasting is also buying the CBS station (KDHL) in the Duluth/Superior market, where there will be a similar arrangement between the two companies.

The other company in the partnership, Malara Broadcasting, was founded this year by former CBS executive Tony Malara, at one time one of the biggest of big-wigs at CBS. He served as president of that network from 1982 to 1987, and President of CBS Affiliate Relations until 1995. Malara Broadcasting will pay $45.9 million for WPTA. Malara arranged for institutional financing to buy WPTA, with financing expected to be guaranteed by Granite.

We tried to get in touch with Tony Malara in Sarasota, Florida, but were told that he’d rather not comment on the arrangement until the FCC is finished examining it. The official statement on the deal names Ed Novotny of Novotny & Associates, based in New York, as a contact for Malara Broadcasting, so we called and asked Novotny for details about the arrangement. Were Granite or Malara calling their strategic arrangement a Local Management Agreement (an LMA)? If Granite was going to provide advertising sales, promotion, administrative services, and selected programming to WPTA, what was Malara’s role?

Novotny told us that all we needed to know about the purchase was in their press statement. It wasn’t, so we called Brainerd Communicators, Inc, a consulting firm and PR agency given as a contact for Granite Broadcasting. We were told to talk to… Ed Novotny. Once again, Novotny told us that “everything you to know is in their press release.” This phrase was repeated more times than the chorus of “We Will Rock You” at a college basketball game.

But reading the press release, the “strategic arrangement” between Granite Broadcasting and Malara Broadcasting seems to tip-toe close to violating a few FCC rules and regulations. The FCC says a company can’t own two television stations in a Designated Marketing Area (or DMA) where less than eight independently owned, full power stations would exist after the purchase. The DMA is determined by Nielsen Media Research, the renowned TV ratings company that provides television audience estimates for the entire television industry. Fort Wayne doesn’t even have eight television stations in its DMA; according to Nielsen, we have seven.

The FCC also says that a company can’t own more than one of the four top-rated stations in any market. So, even if we had eight television stations in Fort Wayne’s DMA, both WPTA and WISE 33 are in the top four. The FCC allows for something called a Local Management Agreement, or LMA, where one station supplies certain operations to another. LMAs are very common, and usually happen when one station is floundering and would go under unless it got some help. But the key word there is “floundering.” WISE 33’s news ratings aren’t any great shakes, according to Nielsen, but the station couldn’t be considered a failing TV station by the definition of the FCC.

But, supposedly, there are no rules actually being violated here, because even though Malara Broadcasting’s ownership of WPTA is the equivalent of setting up a shell company and naming your mother-in-law as the president, Malara Broadcasting will be the owners of WPTA on paper; Granite will probably just run every aspect of it, from its marketing to its programming.

As shifty as these joint management agreements might sound, they’re frequently employed to skirt the FCC regulations mentioned above. Dr Mark Cooper, Director of Research on Media Ownership for the Consumer Federation of America, is blunt about what he thinks is going on here. “I call it irresponsible capitalism,” he says. “They’re going to hold the note, and they’re going to operate the station, but the other guy owns it. AT & T did that for years and years in their cable businesses to let the FCC approve all their mergers. They just make this stuff up so that they can break the law.”

“It’s a very typical scenario for people who are trying to avoid rules to have shell corporations,” say Cheryl Leanza, the deputy director of the Media Access Project, a non-profit law firm which represents the public’s interests in telecommunications and media issues. “The FCC has a whole pile of very particular rules where they require the applicant to list the board of directors, whether anyone is related to anyone who sits on a board or owns a broadcast license, because they’ve been burned so many times.”

If in the past the FCC has been burned, these days many critics think they’re all too willing to let these mergers go through. W. Don Cornwell, Granite’s chief executive and chairman, has said in an interview with another paper, “we’re not the owner of two stations, and that will be eminently clear because the FCC will say that it’s clear.” This seems circular logic, akin to saying doughnuts must be good for you because people eat them. But he’s right about one thing: the FCC will probably approve it. Everyone we talked to said they fully expect the sale to go through. In fact, the third most-used phrase we heard while researching this article — right after “it’s all in the press release” and “I’ll talk to you if you promise not to quote me” — was “it happens all the time.” Even Ed Novotny ended his mantra long enough to tell us he expected the FCC to approve the arrangement.

But what’s right and what gets approved by the FCC are two completely different things, according to Dr. Cooper. “From the FCC’s point of view, anything that lets a merger happen is okay.” he says. “The Chairman (Michael Powell) has made it clear: he doesn’t think these huge media corporations have undue influence or economic power. He’s wrong, but he completely rejects that notion. He gives blanket approval to mergers in which the #1 TV station, with a 50 – 60% share of the market, could merge with the # 1 newspaper with a 50 – 60% share of the market, creating, in a local market, a complete giant. He doesn’t want to hear it. From his point of view, he just believes there’s no problem with these mergers.”

Of course, none of this answers the question anyone not directly involved in local television might be asking: why should I care?

Because having one company in charge of two local TV news outlets in an already limited market could drastically change the diversity and quality of your news coverage for the worse.

Angelica St. John, once a reporter for WANE-TV in Fort Wayne and now at WLEX in Lexington, Kentucky, says she worked in a market in California where a similar strategic arrangement between two stations took place. “The first thing that suffered was news product,” she says. “Both the NBC and CBS affiliates are now broadcasting the exact same news program, so you basically end up getting less variety, fewer viewpoints.”

The CBS affiliate was the #1 rated station in the market, but after the sale, ratings plummeted. The morning news shows were turned into “pseudo-infomercials” for the local mall. The situation in Fort Wayne may not be exactly analogous to St John’s experience, but she expects the two stations will probably pool resources. “I don’t think they (the companies) enter into these arrangements to make stations stronger, I think they do it to increase the bottom line,” she says. “They’ll pool resources, certainly. I don’t know where they draw the line. But otherwise, how else would they make money?”

WPTA’s news director Don Bradley is waiting for FCC approval before making any predictions, but he doesn’t mince words when I suggest that in arrangements like the one between Granite and Malara, what happens historically is that stations cut staff and consolidate their news departments. “There is no historically where this situation is concerned,” he says. “There are as many ways to do this kind of thing as there are stations doing it. There are a ton of possibilities, and we haven’t even begun to discuss that, because we don’t have a take-over yet. There’s been an agreement for us to run both stations, but we have no idea at this point. There are any one of a dozen ways this could be done and until we officially take over, we can’t even begin talking about this. Frankly, I‘ve got my hands full running this department right now.”

Like everyone else we talked to, Bradley fully expects the sale to go through, though it may take a while. “The FCC has a lot on their plate right now,” he says. “They’re busy telling Janet Jackson what not to wear on TV.”

What Bradley says is true: it’s very early days yet, and there are a dozen different ways the partnership between Malara and Granite could work out. Sources say that there are no plans right now to consolidate the stations newsrooms, that WPTA and WISE will remain two separate news entities.

But consolidation seems like the next step. WISE 33’s news ratings are the lowest of all the three network affiliates in Fort Wayne; it is doubtful that a company like Granite, with no real ties to Fort Wayne and no real commitment to television journalism, would spend money and effort trying to shore up or improve a station with poor ratings when it already has control over a solid ratings performer like WPTA. Consolidation seems logical, but does anyone who depends on our TV affiliates to deliver professional coverage of local news and events want less of a choice?