As FCC Digs Into Ownership, Big Media No Longer Cares

By Frank Ahrens
Washington Post Staff Writer
Thursday, June 29, 2006

When the government's attempt to relax media ownership rules was defeated in court two years ago, some hailed it as a victory against putting too much power in the hands of too few media lords.

Now, the government is taking up the issue again, but the media landscape is radically different.

Since 2003, the media giants have greatly expanded their presence on the Internet, buying successful Web sites or redoubling their own efforts. The continued rollout of high-speed Internet, the improvement in online content and an explosion of handheld devices have combined to give Big Media much greater reach and potentially greater influence than it would have had, were companies allowed to buy a few more television stations each.

Last week, the Federal Communications Commission voted to re-tackle the sticky issue of media ownership. This time, the agency plans to loosen some rules, allowing big media companies to expand. For instance, a newspaper will -- for the first time since 1975 -- probably be allowed to buy the most popular television station in the same city.

But the times, technology and media marketplace have changed so much since the FCC began its ownership review last time, in 2002, that some of the same media giants that lobbied for changes before -- such as Tribune Co. -- may take little advantage of changes this time.

In 2002, the media giants had already been burned by the Internet. The newly merged AOL Time Warner Inc. took a $10 billion write-down, thanks to bad deals and falling revenue at America Online. Walt Disney Co. lost millions on its Internet portal.

IPods were still on the drawing board at Apple Computer Inc. Almost all Internet users had dial-up connections, which made online video about as watchable as the Zapruder film. Yahoo Inc. was not the multimedia powerhouse it is today. YouTube and its vault of 70 million videos did not exist. Neither did MySpace and its global community of users. And Google was merely the Internet's most popular search engine, not yet the revenue-generating monster whose advertising model is being emulated by everyone in traditional media.

In May 2003, Mel Karmazin told a Senate panel that his Viacom Inc. -- then the parent of CBS -- absolutely, positively had to be allowed to buy more television stations. It was essential to the company's future, he said.

Karmazin's pleas came to nothing. While the FCC relaxed ownership rules that year, the court struck those down in 2004, and Congress passed a law preventing CBS from buying any more stations.

As it turned out, CBS not only survived but became the top-rated network. The company sees its future not in owning more television stations but in expanding a revenue stream that was an afterthought in 2003: the Internet and its various iterations of digital downloading and streaming, channels that give CBS a far bigger footprint than local television stations.

"CBS's challenge is how to monetize its content, and since we are precluded from doing that through buying more stations, we're doing it in other ways," said Martin D. Franks, CBS Corp.'s executive vice president of government relations. "We have had to adapt to what the regulatory regime has dealt us."

To help spread out the enormous cost of the network's contract with the NCAA to carry the men's college basketball tournament each March ($6 billion over 11 years), CBS this year bought CSTV Networks Inc., which broadcasts live sports on the Internet and on cable television. The Web site averages more than 8 million monthly users, and the cable network is in more than 15 million households -- far more than any metropolitan television station reaches.

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