Media megamergers can be good for the local news

Local news is in steep decline. A recent report from Pen America finds that the US has lost more than 1,800 newspapers since 2004. The consequences include a decline in civic engagement and an increase in corruption. The report mentions how government officials in Bell, California, a city without a newspaper, were able to get rid of caps on their salaries and loot the public treasury.
The report offers recommendations for philanthropists, tech companies, news outlets, governments and consumers who want to reverse the trend. But it cautions that there is no panacea. One of its ideas, though, may inadvertently move in the wrong direction.
Pen America’s first suggestion for the government is that the Federal Communications Commission “restore pre-2017 regulations governing the ownership of TV stations, radio stations, and newspapers to prevent further consolidation and homogenization in local news media.” This move could backfire – and in one recent case, it already has backfired.
Under its deregulation-minded commissioner Ajit Pai, the FCC in 2017 ended its restrictions on cross-ownership of broadcast outlets and newspapers in the same locality. In September, two judges in the Third Circuit Court of Appeals struck down the FCC’s rules changes on the ground that the commission “did not adequately consider the effect its sweeping rule changes will have on ownership of broadcast media by women and racial minorities.”
That decision put a pending media deal on hold. Apollo Global Management Inc., a private-equity firm, recently formed Terrier Media to purchase media properties from Cox Enterprises Inc. and Northwest Broadcasting Inc. The new company would own 25 full-power TV stations covering roughly 13% of households with televisions.
The Justice Department gave a go-ahead to the deal this spring. Since the deal complied with the FCC’s new ownership rules, it seemed to be only a matter of time before it could be consummated. Then came the September court decision, which goes into effect. The rationale of the decision did not apply to the deal: Even opponents of the deal, such as Common Cause, have not alleged that it would reduce media ownership by women or racial minorities.
Rather, the deal simply didn’t comply with the pre-2017 rules. In Ohio, for example, Cox owns three newspapers in places it also owns TV broadcasters. The FCC’s rules, both before and after 2017, allow this cross-ownership. But the old rules, coming back into effect, forbid the transfer of these properties to a new cross-owner.
The FCC is appealing the court decision, but instead of waiting, Terrier decided to change the terms of the deal to fit the old rules. Among the changes: Terrier said it was willing to change the publication schedule for the three newspapers so that they would appear in print only three times a week.
It may not be possible to bring local news back to its former health, and how to revive it is not clear. But government regulation doesn’t have to contribute to the problem.
—Bloomberg