The two companies want to join forces to better compete with Comcast, Time Warner Cable and DirecTV for local ad dollars
Media General's announcement Friday that it had agreed to buy competitor LIN Media for $1.6 billion sent shock waves through local television stations around the country.
LIN currently operates 43 small and medium market stations, including CBS affiliate KRQE in Albuquerque, NBC affiliate KXAN in Austin and Fox affiliate WALA in Mobile, Alabama. Media General has 31 stations including MyNetworkTV affiliate KRON in San Francisco, NBC affiliate WFLA in Tampa and CBS affiliate WKRG in Mobile.
“It certainly wouldn't surprise me to see job losses and other ‘efficiencies’ from this merger,” former news director Steve Kraycik, who's now Director of Student Television at Penn State University and a talent agent with MediaStars, told TheWrap. “It's happened after other deals and I think there's a good chance it will here too.”
The problem is in cities where both companies already operate a local station, such as in Mobile, there will almost certainly be job cuts once the merger is approved.
“From the corporate perspective, many times it makes sense — consolidate, save money and increase the profit margin for shareholders,” Kraycik said.
The merger would make the combined company the second largest pure-play broadcast business in the United States. The move would also give it more leverage to compete with media giants such as Comcast, Time Warner Cable and DirecTV for local TV advertising revenue.
“They're merging because they're seeing some of their competitors in the pay TV arena that are getting a lot larger in terms of scale,” Dennis Wharton, Executive V.P. of Communications for the National Association of Broadcasters told TheWrap. “Broadcasters, I think, believe that they have to have scale to compete against providers who are not giving away their programming for free.”
This is particularly true after the recent announcement that Comcast and Time Warner Cable planned to merge.
However, Wharton played down the possibility of newsroom layoffs. “If there are, potentially there will be job losses in the back offices – in the areas of finance, human resources and IT,” he said.
But history shows big media mergers also lead to newsroom layoffs.
In 2001, when News Corporation, which owns the Fox Television Stations group acquired Chris-Craft Industries, there were widespread layoffs at Chris-Craft shops in cities where News Corp. already had stations, including WWOR-TV in New York and KCOP-TV in Los Angeles. In L.A., writers, producers, reporters, anchors, editors and photographers were shown the door.
Since then, the same scenario has played out countless times as more media companies join forces.
In the case of Media General and LIN, the media giants could also be forced to sell off some of their assets in markets where the individual companies already operate more than one TV station, like in Indianapolis, where LIN owns WISH and WNDY.
“There are issues surrounding cross-ownership rules that likely will come into play,” Kraycik said. “Duopolies can help station ownership groups extend their reach and programming in a market. And there are efficiencies you can create with those stations too, leading to better profitability.”
Unfortunately, layoffs also lead to increased profitability for local television station owners.