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Editorial: Spinoff Wheels Whirl

Gannett last week became the latest TV station owner to suggest it will spin off its newspaper properties to shareholders. Gannett said a factor was the opportunity to “pursue valueenhancing acquisitions in each company with fewer regulatory obstacles.”

Those obstacles occur because without the split, the company potentially runs into FCC rules that prevent co-ownership of TV stations and newspapers.

The main reason for these spinoffs is probably not because Gannett and other station owners want to rush out and buy a lot more newspapers; it’s more likely because newspapers can be a drag on stock price. A veteran broadcast attorney points out that Washington Post Co. stock went up when the newspaper was sold, and Gannett stock soared after it bought Belo because Wall Street started looking at Gannett as a TV company with newspapers rather than a newspaper company with stations. Belo spun off its own newspaper unit in 2007.

So, yes, Gannett’s move likely unlocks shareholder value in broadcast and digital media, which suggests there is life in the broadcast businesses yet.

But Gannett’s point about easing regulatory burdens can’t be ignored in all the noise. With the FCC unlikely to do anything about loosening cross-ownership rules for a couple of years (and likely not even then if chair Tom Wheeler remains in charge), broadcasters have to find ways to work around that inaction.

The problem remains—the FCC has signaled that trying to work around its failure to recognize the competitive landscape may not work. Look at its joint sales agreements crackdown, where the agency suggested that being within the rules wasn’t good enough. The FCC needs to take note of the lengths broadcasters have to go to remain competitive and relevant and at least do no harm.