Finance community: Bring on some dereg


The prognosis for large-market broadcasting from representatives of the financial community is not good, but the prescription was unanimous – grant another round of ownership deregulation so the broadcasters still standing have as many options available as possible to find a workable business model.

The general consensus was that the lessons of the last round of consolidation have been learned and would not be repeated. Well-known broadcast analyst Marci Ryvicker in particular made the point that nobody would try to get big just to get bigger; nobody would take on massive debt to get bigger – indeed, no lenders would buy into such a scheme in the current environment. Instead, operators would be looking at ways to combine properties that made sense, and that the rules should be relaxed to allow that.

The call was to open the rules so that if a serious local operator was able to see a way to combine traditional media properties in a way that created cost synergies and at the same time opened up new and sustainable revenue streams, it would be possible. That ability might generate some interest in the financial community.

The problem of distant owners failing to invest sufficient attention to a local market was acknowledged, but in general the financial execs believed that it was a question of allowing broadcast survivors the opportunity to try to find a new model, or have diminished or almost no local product.

It was suggested that there is a market for local information, and therefore a viable motive to be the best at providing it; and that perhaps it was better to have two or three strong local news competitors, rather than many small, weaker ones.

It was strongly underscored that the internet takes national and international information everywhere, and means that the natural local focus of broadcasters is more important then ever and must be emphasized.

Kicking off the session, ION Media Networks CEO Brandon Burgess made a plea for the regulatory flexibility to compete in the rapidly-changing media environment. He said his network was pursuing a three-pronged business model going forward – maintaining its traditional television operation, building its digital side channel networks (one focusing on children, the other on health) and developing wireless and mobile business streams.

James Cotter of Sun Trust Bank noted that financing for the broadcast sector went over the cliff in 2007 and has gone even further downhill from there. He said there is no appetite in the financial sector for broadcasting, meaning less money available and higher cost for that which is. He suggested that deregulation would at least allow business people to seek business models that might have the potential to turn things around.

Brian Rich of Catalyst Investors said that advertising as a percentage of GDP is down, permanently in his opinion, and that new media are eroding the share of broadcast and newspaper and will continue to do so. He noted the coming invasion of broadband into the automobile space, other consumer distractions such as Netflix and iPods. He suggested broadcasters need to do more than cut cost, they need to develop new revenue streams. The focus must be on local, and deregulation that allows broadcasters to fund quality local programming would be desirable.

Marci Ryvicker of Wells Fargo repeated the same general litany. New competitors are here to say, and traditional media has been bleeding share by almost any measure. She said the broadcast industry has been buffeted by both cyclical and secular change, and while she described the cyclical portion as in the tailwind phase, she said the secular changes are permanent. She also suggested deregulation to allow operators to explore workable models to restore financial health to the business.