Murdoch Faces Hurdle in TV Deal : Deregulation-Minded FCC Retains at Least One Stricture

Australian media baron Rupert Murdoch has amassed an American empire of newspapers, magazines and even a movie studio seemingly without effort, but his plan to add seven U.S. television stations faces at least one legal hurdle in Washington.

The hurdle, a Federal Communications Commission rule barring cross-ownership of TV outlets and daily newspapers in a single city, apparently will force Murdoch to sell two of the nation’s biggest newspapers--the New York Post and the Chicago Sun-Times--before he and Denver oilman Marvin Davis can acquire two lucrative TV stations in those cities.

Murdoch seems unlikely to let the newspapers stand in the way of his and Davis’ $2-billion TV deal with Metromedia Inc., a broadcasting acquisition second in size only to last month’s purchase of American Broadcasting Cos. by Capital Cities Communications.

Howard J. Rubenstein, a Murdoch spokesman, says no decision on the sale of the Post or Sun-Times has been made.

May Seek Waivers

But Washington broadcast experts already are speculating that Murdoch will seek waivers from the cross-ownership rule to allow his continued control of one or both papers. Sun-Times Publisher Robert Page hinted at such a move in a note to his employees, and experts here say that Murdoch might argue that the financially ailing Post cannot survive--much less be sold--outside the Murdoch media conglomerate.

The cross-ownership regulations are among the few broadcast strictures in favor at the deregulation-minded FCC. “But that doesn’t mean that, if there was a public-interest reason for waiving the rules, they wouldn’t grant a waiver,” Bill Johnson, deputy chief of the commission’s mass media bureau, said Tuesday in an interview.

The TV deal--also including outlets in Los Angeles, Houston, Dallas, Boston and Washington--could spawn a fourth television network in alliance with 20th Century Fox Film Corp., the movie maker that Murdoch and Davis already own. Together, the TV outlets could reach nearly one in five Americans.

The Boston station will be sold to Hearst Corp. for $450 million, averting a third cross-ownership problem for Murdoch, who also owns the Boston Herald newspaper.

Waivers from cross-ownership rules in New York and Chicago would give Murdoch almost unparalleled sway in two of the nation’s biggest and most influential markets--almost, because Murdoch’s Chicago archrival, Tribune Co., owns the Chicago Tribune and TV station WGN, a “superstation” that reaches a nationwide audience via cable-TV systems. Tribune Co. acquired WGN before the FCC banned cross-ownership in 1975.

3 N.Y. Publications

In New York, Murdoch owns the Post, the Village Voice and New York, a profitable magazine. The Voice and New York, which are weeklies, are not subject to the FCC cross-ownership rules.

Experts say that Murdoch will be hard pressed in any case to persuade the FCC that he is entitled to cross-ownership waivers. The rules, which generally bar common ownership of broadcast, cable and newspaper properties, were issued to prevent concentration of ownership in local markets.

The FCC cited the rules as a linchpin of its policies as recently as last winter. Moreover, the agency has granted only one major exception to the regulations in a decade, allowing businessman Joseph L. Allbritton to keep both a Washington TV station and the fiscally ailing Washington Star newspaper until the Star could be sold. Allbritton eventually sold the Star to Time Inc., which later folded it.

No such case can be made in Chicago, said Henry Geller, a Washington media scholar and former general counsel at the FCC.

“In my opinion, he (Murdoch) doesn’t have a chance at all to retain both a Chicago TV station and the Sun-Times,” Geller said. “It’s a viable newspaper operating in the black, and he purchased it for $100 million” only 18 months ago after a fierce bidding war. The Sun-Times reportedly cleared several million dollars in profit last year.

Lost Many Readers

The New York Post may be another story, however. Under pressure from the competing Daily News, New York Times and Newsday, it has lost nearly 100,000 readers and an estimated $10 million in the last year. While the Daily News and Newsday are considered potential buyers of the Post, it is unlikely either would keep its competitor in operation.

Given the likelihood that the Post would not survive outside Murdoch’s control, the FCC could view a waiver as the best of a poor set of options. But Roy Stewart, chief of the FCC’s video services division, said that Murdoch would have to present a “compelling public-interest argument” to win an exemption.

The TV deal in this country also could affect Murdoch’s Australian broadcast holdings.

The FCC bars ownership of a broadcast outlet by any firm whose stock is more than one-fifth controlled by foreigners or by a holding company that is more than 25% foreign-owned. Murdoch says he will clear that barrier by becoming a U.S. citizen.

But Australia also bans ownership of that country’s TV stations by foreigners. Murdoch owns TV outlets in Sydney and Melbourne. The Australian government had no comment on whether it would require sale of the stations should Murdoch renounce his Australian citizenship.

METROMEDIA’S TV STATIONS

Los Angeles: KTTV Channel 5. Independent. Began operations

in 1949, acquired from Times Mirror in 1963.

New York: WNEW Channel 5. Independent. Began operations in 1944,

acquired from Dumont Broadcasting in 1955.

Chicago: WFLD Channel 32. Independent. Began operations in 1966,

acquired from Field Communications in 1983.

Boston: WCVB Channel 5. ABC-TV. Began operations in 1972,

acquired from Boston Broadcasters in 1982.

Washington: WTTG Channel 5. Independent. Began operations

in 1947.

Dallas-Fort Worth: KRLD Channel 33. Independent. Began operations

in 1980, acquired from Sheldon Turner and Nolanda Turner Hill

in 1983.

Houston: KRIV Channel 26. Independent. Began operations in 1971,

acquired from Crest Broadcasting in 1978.