An intrepid reporter from Variety has an important story today on how equity firms–such as Michael Powell’s Providence Equity Partners–are buying up TV stations as if they were mere hog belly futures. One focus of such investment, notes Variety, are broadcast television stations in rural markets. It seems that these communities are not totally yet part of the rapidly emerging broadband new media economy. Broadcast special interest lobbying has given these stations lucrative placement on cable system. Hence, these local TV stations still reap decent ad dollars. Here’s a key excerpt from Cynthia Littletonâ€™s article:
“Small-market stations are one of the best-kept secrets in TV,” Yager says [Yager is CEO and pres. of Barrington Broadcasting].
Madison Avenue is abuzz with talk of how newspapers and phone books are bleeding classified advertising dollars to Web and digital platforms. But in small town U.S.A., the migration of classified dollars is from print to local TV, Yager says. As over-the-air network entities, broadcast TV stations are guaranteed a channel position on the local cable operator’s channel lineup — at a price that is rising as broadcasters become more militant about demanding high retransmission consent fees than in the past.
Some in the industry are skeptical that the newly minted broadcast station owners will do much if any investing from afar in their stations, or have the secret sauce to boost the margins of what is already a 15%-20% margin business.”
Variety explains that Cerberus Capital Management, which also owns Mervyn’s department stores and the Alamo and National rental car firms, just acquired seven small market stations from CBS. Congress, the FCC, the mainstream press and media reform advocates should investigate these private equity investment sales. Stations should not be owned by companies principally concerned with profit maximization. Congress should require major investment in news, local programming and community affairs as television stations get sold. New buyers should be required to pay-out for community service or be ineligible for acquiring licenses.
source: “Private Investors go Rural: Equity Investors Reel in Big Fish in Small Ponds.” Cynthia Littleton. Variety. April 27, 2007 [sub required].