Will Channel 6 ever get it together? (continued)

IN A HISTORY on its corporate Web site, Freedom Communications, the owner of WLNE-TV, etches its humble roots. It describes how family patriarch Raymond Cyrus Hoiles began working after college as a printer’s apprentice at a newspaper, the Alliance Review in Ohio, owned by his brother. Hoiles, who became known for his fierce libertarian views (a grandson, Tim Hoiles, told the New York Times in 2003 that his grandfather divested the company of its radio holdings because "he did not want to be in a business licensed by the government."), later moved to California. By 1970, the year that he died, Freedom Newspapers had expanded to include 16 dailies in seven states, including the flagship Orange County Register.

Like a number of newspaper businesses, including the Providence Journal Company — which effectively set the stage for its acquisition by Belo in 1997 by buying a string of nine television stations — Hoiles’ heirs recognized the greater profitability offered by broadcasting, and they bought five TV stations in the 1980s. Today, Freedom Communications is a privately owned company encompassing 28 daily and 37 weekly newspapers, with a combined circulation of more than 1.2 million subscribers. The broadcast component includes eight stations — three ABC and five CBS network affiliates.

As part of a trend in which some members of family-owned media properties have wanted to get out of the business, Tim Hoiles launched an effort in 2002 to solicit bids for Freedom, and a thin margin of his relatives backed the concept of exploring a merger or sale. Not surprisingly, given how Freedom is one of the largest newspaper publishers in the US — its value was reported at about $2 billion — the offer attracted interest from a number of mega-companies, including Gannett and the MediaNews Group. In the end, however, Freedom formed a partnership to recapitalize with Blackstone Communication Partners and Providence Equity Partners — a move, the company said, that provided "liquidity to certain family shareholders while at the same allowing others to maintain their ownership in the business."

In an October 2003 news release, Alan J. Bell, Freedom’s president and chief operating officer, hailed the move. "It is that rare solution to a dispute in which everyone wins — including the 7000 employees of the company coast to coast who have followed every chapter of this widely discussed process," he said. "I can speak for all of our Freedom family, soon to include Blackstone and Providence, in saying this is truly a happy day."

The effects of Freedom’s recapitalization haven’t been entirely positive, however. Adeszko acknowledges that the financial restructuring was a primary factor in the recent 10 percent cut in the broadcast division, including WLNE, although he notes that many stations are streamlining operations to cut costs.

To critics, however, the broader trends in the media industry — in which huge corporations get steadily bigger and family-owned media properties are fast experiencing their final days — are contrary to the public interest. "Journalism and the public are the ultimate victims here, as greed and consolidation have an impact," says Jeff Chester, executive director of the Center for Digital Democracy, a Washington, DC-based media advocacy group.

Chester notes that family-owned media companies experience ownership changes

"not just because of feuding siblings or relatives [fighting] over profits. The valuation of these companies is so high now that they face a great deal of pressure." Meanwhile, the TV stations in such portfolios typically "still bring in an extraordinary return on investment," he says. "They are literal cash cows and it is not unusual for broadcast stations to generate returns of 30 percent or more," compared with the 20 percent standard for newspapers. "It’s not a question that these outlets are hurting. Corporate bottom-line pressure simply wants to extract all the profits that can go into shareholders’ or into families’ pocketbooks."

It’s difficult to get a good handle on WLNE’s financial condition. Doreen Wade, the president of Freedom Broadcasting, who began her career in sales at WLNE and is said to keep a close eye on the station, did not return a call seeking comment. It’s clear, though, that as the third-rated TV station in the area, ABC6’s advertising time is far less valuable than that of its competitors.

Ironically, an attempt by the Republican majority on the Federal Communications Commission to deregulate media ownership rules in 2003 — essentially allowing companies to own more than one TV station in the same market, and to own a newspaper and television station in the same market — could work to WLNE’s benefit. After an outpouring of public opposition, the Third US Circuit Court of Appeals in Philadelphia blocked the deregulation in June 2004, sending the matter back to the FCC for review. It might just be a matter of time before the FCC revisits the issue.

For his part, Adeszko is an enthusiastic proponent of deregulation. Relaxing the cross-ownership ban, he predicts, would result in "tremendous swapping." "Tribune, Gannett — all those guys are waiting for this to happen," he says, adding that the synergy of additional resources and revenues is "very exciting."

If the deregulation ultimately goes forward, it’s hardly a stretch to think that Freedom — a tempting target for takeover itself — might sell its broadcast division or even just an individual station like ABC6. A prospective owner like Belo, which would likely welcome the marketing strength of owning the ProJo and a local TV station, could reasonably be expected to invest in the latter. The only catch is how such a transaction would result in an utterly unbalanced local media landscape.