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Fox TV's strategy: Two by two

Fox Television is embarking on plans to become a dominant presence in local TV, following government approval last week of its $5.4 billion takeover of Chris-Craft's 10 TV stations.

The company is in the early stages of establishing duopolies in many of the markets served by its 21 regional sports networks. Fox's strategy is aimed at giving the company multiple outlets for locally oriented programming, including sports and news, according to sources familiar with the company's thinking. As digital transmission rolls out across the country, the added capability of sending multiple channels from one station will greatly boost the amount of local programming Fox can air.

After winning government approval to buy Chris-Craft's 10 TV outlets, Fox Television enjoys the powerful position of controlling two TV stations in New York and Los Angeles, the country's leading markets, as well as in two other cities.

Fox gained three duopolies with the Chris-Craft acquisition, and company executives are gearing up to take advantage of the combinations' profit-boosting potential. The company took the next step in its duopoly strategy last week by agreeing to swap KTVX-TV Salt Lake City and KMOL-TV San Antonio for Clear Channel's WFTC(TV) Minneapolis. The exchange enables Fox to establish a duopoly in the Twin Cities with KMSP-TV, which it acquired with Chris-Craft. The market is served by Fox Sports Net North.

More combos could be on the way. Fox and Viacom have acknowledged privately that they are in talks to swap stations that would allow each company to grow their stable of two-station tandems.

Duopolies, which were forbidden until federal regulators dropped their ban two years ago, allow TV groups to boost the bottom line by enticing advertisers with in-market cross-promotions, repurposing programming and sharing administrative and news expenses.

No company officials would identify stations likely to be exchanged. But Fox sports networks serve at least three markets—Atlanta, Houston and Washington—where there is potential for new duopolies through swaps with Viacom.

Even more swaps could be possible if an ongoing court challenge eliminates the FCC's 35% cap on one company's TV-household reach. Fox has challenged the limit in the federal appeals court, and a decision could be handed down next year.

Even if the FCC's ownership cap is retained, though, duopolies will be particularly attractive to both station groups because a pair of stations in the same market does not count any more than one toward the ownership tally. Each company currently reaches 41% of the country's TV households, and the duopoly swap will help them maintain the number of stations in their stables if the court case goes against them.

Company officials have made no secret of their desire to make duopolies a bigger part of their business. Last week, Viacom President Mel Karmazin told financial analysts he plans to pursue more combos. "In a perfect world, we could have two TV stations in every one of the top-20 markets," he said. Currently, Viacom has six duopolies, four of them in top-10 markets—Philadelphia, Boston, Dallas and Detroit. The two others are in Miami and Pittsburgh.

Two weeks ago, Karmazin urged lawmakers to relax duopoly restrictions further by allowing a company to own more than one market-leading station. Currently, duopolies may contain only one of a market's top-four stations.

A Fox spokesman acknowledged that his company also plans to establish more duopolies. Fox already is adjusting programming decisions to coordinate between duopoly stations.

In Los Angeles, there's talk that Fox will yank the low-rated 10 p.m. newscast on KCOP-TV, formerly with Chris-Craft. Take awhile for that to execute, one source cautioned, because "you don't want to look like the bad guy to the FCC by whacking news."

Also, Fox folks are already negotiating with syndicators to get programming to run on both their stations in Los Angeles and New York to lure advertisers with the power to plug in spots across multiple platforms. In-house Twentieth Television, which distributes Divorce Court, is said to be on board, as is NBC Enterprises (The Other Half).

Fox Kids, the network's animation block, could shift over to Chris-Craft stations, which currently air a lot of children's content in the mornings. Fox executives say, however, it will stay put for at least a year.

Viacom has been putting its duopolies to use, too. Last week, CBS O&O WBZ-TV Boston reported that it will be producing a new morning newscast for local UPN station WSBK-TV.
—Additional reporting by Joe Schlosser