One needn't be an economist, or the former director of a university's school of journalism and electronic media -- both of which describe my own goofy background -- to understand that we're in the midst of a sea change in the way people receive and process news. We have some ideas about that change, but unfortunately, we collectively lack a real understanding of its implications.
Now, with many traditional media companies backpedaling faster than a freshman basketball guard, the Federal Communications Commission will attempt to determine whether the array of rules that it enforces on communications companies remain relevant. The primary rule in question is the so-called cross-ownership ban, which prevents companies from owning a newspaper and a broadcast facility in the same market. As media companies have weakened, several, including Tribune (NYSE:TRB), Media General (NYSE:MEG), and Gannett (NYSE:GCI), have made it known that they believe a current analysis of the cross-ownership ban would be appropriate.
Last week, the five-commissioner FCC announced, over objections from its two Democratic members, that it would conduct 10 economic studies in an attempt to better understand the nature of competition in television, radio, newspapers, and the Internet. The studies will include one by Nielsen Media Research, which will survey consumers regarding how they obtain news and whether their sources change depending upon the day or the time of day. Another study will look at the current ownership structure of broadcast, cable, newspapers, and the Internet.
These studies seem to me to be both appropriate and timely, since the lion's share of traditional media companies are attempting to deal with their deteriorating circumstances through sales of assets or major restructurings. Unfortunately, their efforts are all too often thwarted by federal ownership restrictions.
I would also point to Belo Corporation (NYSE:BLC), which, because its assets received grandfather protection from the 1975 implementation of the cross-ownership ban, both publishes The Dallas Morning News and operates ABC affiliate WFAA-TV in Dallas. Although I once followed Belo as an analyst, I've seen no evidence that local media competition has been curtailed through its ownership arrangement.
Fools with an interest in media investments would be well advised to follow the FCC's efforts closely. An eventual relaxation of the cross-ownership ban could have profound effects on media structure -- and consequently values -- in the U.S.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments .
