Lenders made a pitch to the FCC Tuesday Jan. 12 to loosen media ownership rules, saying that it was just about the only way to make broadcasters more attractive to the capital they will need to be competitive in the marketplace.
They had a cheerleader in Ion Networks Chairman Brandon Burgess, the only broadcaster on a morning FCC panel on "financial and marketplace issues."
The workshop is part of the FCC's data-collection for its quadrennial review of media ownership rules.
Burgess pitched hard for the value of allowing broadcasters the "R&D platform" of digital to develop a "triple play" of HD, multicast channels and mobile TV/broadband -- Burgess is chairman of the Open Mobile Video Coalition.
Lenders on the panel point to the "perfect storm" of a down economy that hammered overleveraged broadcasters and Internet competition that continues to drain advertising dollars away from the sector.
James Cotter, head of M&A at Sun Trust Bank, said that while the financial sector used to lend on double-digit multiples to an industry with strong cash flow and the insurance policy of a recoverable "stick" value in the broadcast license, the multiple is down to between zero and four, the being no interest in lending to broadcasters.
He said the FCC needed to consider letting broadcasters combine in new ways to figure out a business model that will draw investment back to the sector.
He said the explosion of digital media means the public policy threat of concentration of ownership or monopolization of voices is greatly diminished. The bigger threat to a healthy media, he suggested, is just the opposite, the availability of free material that threatens the business model.
He asked the FCC to at least consider allowing media businesses to combine to survive.
Burgess argued that even if under other circumstances the FCC might believe continued ownership regulations might be warranted, it should look at that perfect storm and not further encumber broadcasters as they try to recover from the biggest slump since the depression.
Burgess said he was mostly looking for regulatory parity, saying it was "absurd" for the cable or satellite industry to be able to dominate a local market and two TV stations or one company to control 70% of online search, but broadcasters in smaller markets prevented from cross-ownership.
Bugess also took the opportunity to complain that the FCC had not helped it get wider carriage for the digital multicast channels he said represent important new voices in the market. Burgess had sought mandatory carriage of Ion's digital kids and lifestyle channels.
Joining in the call for loosened ownership regulations were Brian Rich, managing partner of Catalyst Investors.
He said that while he had concerns about consolidation and its impact on localism, he was also worried that if the FCC didn't do something to help out broadcasters, some will go out of business, and others will no longer be able to do local news because it is to expensive and they will have to "put on Seinfeld or something else."
Arguably the strongest proponent for deregulating broadcasters was Marci Ryvicker, broadcast and cable analyst for Wells Fargo Securities. She talked about the massive changes in the marketplace, the rise of broadband, cell phones, PDAs, cable and the Web that have remade the competitive marketplace in the past 10 years and said ownership rules must change along with that marketplace.
She said that broadcasters can't catch a break because of rules that don't allow them to use their licenses for the most public good. Relaxing the rules, she said, could lead to crucial investment in mobile TV, high-definition and other technologies.