Company Town: Disney’s Mega-Merger : STATIONS : Fate of Disney’s KCAL-TV Up in the Air, Eisner Says

The merger of Walt Disney Co. and Capital Cities/ABC Inc. is almost a sure thing. The future of Disney-owned KCAL-TV Channel 9 in Los Angeles is not.

While executives at KCAL were trying Monday to downplay the possibility that the independent station may have to be sold because of Federal Communications Commission rules, Disney Chairman Michael Eisner expressed doubt that the company would be able to hang on to it.

At a news conference with Capital Cities chief Thomas S. Murphy, Eisner said the combination of the two giants may spell trouble for KCAL, which is noted for its three-hour prime-time newscast. Under current federal regulations, a company cannot own two television stations in the same market.

In that case, the newly merged company would probably choose to keep ABC owned-and-operated KABC-TV Channel 7. Analysts said KCAL might fetch $500 million.

Whether new owners would want to retain the three-hour newscast, along with rights to hockey games featuring Disney’s Anaheim Mighty Ducks and the morning block of Disney cartoons, is unknown.

“KCAL may, in fact, be a problem in the combination of these companies,” Eisner said. “And if it is such a problem, [it] will be put in a trust or will be dealt with separately, or be put up for sale.”

New KCAL owners may welcome the Ducks programming, or Disney may opt to show the hockey games on KABC or ESPN, another Capital Cities jewel. In addition, baseball’s California Angels, currently seen on KTLA Channel 5, may also find a new home as a result of the merger. Disney is in the process of acquiring the team.

At the news conference and in later interviews, Eisner praised KCAL, repeating his longstanding support of the station, which Disney bought from RKO General in 1988 for $324 million. Disney pumped millions of dollars into the operation, and the station has won more awards for excellence in local broadcasting than any other station.

Despite the accolades, the newscast has not been a dominant one, and ratings for its 10 p.m. segment have come in behind two other competing local newscasts.

Although the FCC is considering policy changes that might allow a company to own two TV stations in the same market, Eisner indicated that that scenario is unlikely, and that he would probably not be able to get a waiver to keep KCAL.

KCAL representatives were hopeful that Disney would find a way to retain ownership.

“Many of the elements of this merger are still unfolding,” station executives said in a statement. “The Walt Disney company has expressed the desire to retain KCAL-TV, but will await the final decision of the FCC.”

Station brokers and analysts predicted, however, that KCAL would soon be on the market.

“We’re looking easily at $500 million,” said David Schutz, vice president of Hoffman Schutz Media Capitol Inc. in New York. “KCAL is a rare entity. With over 600 commercial stations in the country, fewer than 75 are VHF commercial stations. It will be a prized commodity because it’s located in a very large market. In the last three years, there has been a tremendous rise in value of all broadcast stations, particularly independent stations.”

Richard Frank, a former Disney executive who is currently president of the Academy of Television Arts & Sciences, said: “It’s a gigantically valuable station. If it could somehow be paired up with another station in New York, that would really be something.”

The fate of the news operation is more uncertain, analysts said.

“Syndicated programs are more difficult to come by, so a new owner would have to think long and hard about dropping news,” Schutz said. “What would you replace it with?”