Kevin Martin's Misguided Missile

I don't think Kevin Martin got enough attention when he was a kid. He seems to have a penchant for blowing things up -- newspaper/TV cross-ownership, the cable industry brotherhood -- to get attention, and he's getting plenty from Congress, irate Republicans upset about new regulatin' and irate Democrats sending out petition letters by the millions in the name of "diversity."

So Martin should get some kind of award (if those pesky writers weren't striking the awards shows; maybe he can take on that controversy next) for getting some new conversation going about media's place in this ever-digitizing world. That'll have to wait though.

Most immediately, those in the newspaper and local broadcast industries and their customers will try to figure out what today's relaxation of cross-ownership in top 20 cities means. The short story is that it probably won't mean much for at least one to two years as the political winds work to erode the decision and court challenges are worked through.

Martin's move to relax cross-ownership at first seems like a smart idea. I've noted that his justification seems right on to me:

“Consumers have benefited from the explosion of new sources of news and information. But according to almost every measure newspapers are struggling. At least 300 daily papers have stopped publishing over the past thirty years. Their circulation is down, their advertising revenue is shrinking and their stock prices are falling. Permitting cross-ownership can preserve the viability of newspapers by allowing them to share their operational costs across multiple media platforms."

Newspapers are struggling, not yet failing because they entered the time of troubles with 20% margins that are now fading. But some are failing -- note yesterday's draconian cuts at the Çhicago Sun-Times. And more will fail, given the print ad and circulation revenue trends. Much of the business that's gone away ain't coming back. And he's right that future successful media need to adopt multiple media platforms -- for both news creation and ad selling -- to be successful. That's what the start-ups of 2007 have done. Ironically, he's ahead of both newspaper publishers and local broadcast execs in getting this.

Martin's argument, supported by news publishers, is that the cross-ownership prohibition no longer makes sense in the digital world. Intellectually, I've got some sympathy for that argument. Removing it though has a very practical consequence. Those that own local broadcast stations and daily newspapers have a great leg-up on anyone trying to enter the business fresh -- tens of billions in ad revenue. So practically, taking out the prohibition lets them use that combined cash flow to build a new business.

If Martin's missile has a smart warhead, it's one the FCC has no business firing. It's not the job of the FCC to help out struggling publishers. Rather the FCC's role here has something to do with the public airwaves and about fostering the diversity of newsgathering and opinion.

The cross-ownership relaxation likely will do little in support of promoting more journalism, more reporting or more diversity in the voices heard or subjects covered. It would, if it worked, help journalism producers -- newspaper publishers or broadcast companies -- reduce costs. Think one management, one production system, one newsroom, one ad sales staff. Reducing costs certainly would allow news companies to hire more staff and produce more news, but most would more likely first and foremost increase profits.

That's especially true because I think today's newspaper and station owners may not be tomorrow's.

Martin is plainly in front of flailing legacy media, who even when given the chance to combine operations (with grandfathered cross-ownership properties) haven't done it. He's saying to them: "Boys, get with it."

They still think TV, they think newspapers, they think Internet. They don't think journalism and the digital news business, distributed via print, TV/cable and the Web. But there are others out there who do and will go to town with the ability to own single, cost-effective companies that can distribute their product over the public airwaves, on cable systems, in print, online and via mobile. A guy like Rupert Murdoch, who understands just that concept in paying a 65% premium for Dow Jones.

So expect that if the FCC rule holds in the political and judicial courts, we'll see lots of roll-ups and mergers. The smart guys with the smart money will move in and the legacy guys will be able to sell out at a higher price than previously possible, given the increased value of the legacy assets.

If Martin really wanted to increase local journalism, he'd think harder. What is it that would help outfits -- large, small and start-up -- to hire more reporters, writers, on-air staff? What would incent angels to put money into such businesses? The government's own legal ads used to be a major support of the print press in the early days, as government had to publish public meeting notices and the like, which amounted to a subsidy of these fledging newspaper operations. Is there an equivalent in our digital age?

We don't really want Government involved in the press, and we prize the fact that the Internet, unlike those TV airwaves, are free and unregulated. But we do want more journalism; we need it. Let's just not look to the FCC as a way to get it.

Sam Zell: FCC-Anointed Prince of "Multi-Media" City, here

FCC Rule Change Paves Way for Mergers, Roll-Ups, here