Buy 4 Media Stocks As FCC Relaxes Media Ownership Rules

Yesterday, in a landmark 3-2 vote, the Federal Communications Commission (FCC) approved a sweeping rollback of rules that were stumbling blocks to consolidation in the media and entertainment industry. FCC’s new proposals will bring an end to several longstanding rules designed to limit the monopoly of local broadcasters.

U.S. media accounts for a staggering one third of the global media market. Nevertheless, this industry is lately going through severe fluctuations. One of the key reasons for volatile growth is stringent regulatory norms across all segments of the industry and high barriers to entry.

A New Look Less-Restrictive FCC

In January 2017, President Donald Trump elected the existing Republican commissioner Ajit Pai as the new Chairman of the FCC. The appointment of Pai, who appears to have exercised lesser restrictions, at the helm of the regulatory body, is likely to bode well for media companies. Relaxation of ownership rules may increase consolidation within media and lead to increased competition to the online digital platform.

The FCC’s decision will bring to an end of longstanding rules like restriction on cross-ownership of radio, newspaper and TV assets in a market and counting each station involved in joint sales agreements in owners’ ownership tallies. It will also end the rule of eight-voice which called for at least eight other independently owned outlets in the coverage area, after any ownership consolidation.

Earlier this year, the FCC took two major decisions to ease media ownership rules. On April 20, the regulatory body voted 2-1 to restore the “UHF-discount” that has allowed station groups to fall within media ownership limits. The rule allows media companies to count only half the coverage areas reach of their UHF (ultra-high frequency) stations.

On Oct. 24, the FCC voted 3-2 to eliminate the so-called “Main Studio Rule,” which requires local TV and radio broadcasters to maintain studios in the communities where they are licensed.

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