“You can’t just suddenly change the rules, you have to go through a whole notice and comment procedure, then rule-making. You have to propose the rules,” said T. Barton Carter, a journalism law professor at Boston University.
As part of the merger announced yesterday, Entercom will have to sell 15 radio stations around the country — including two in Boston — to comply with current rules that limit broadcast companies to five FM stations in each market. New Federal Communications Commission chairman Ajit Pai has already signaled he will look to eliminate some of the agency’s regulations, including relaxing how many radio stations a company can own in a single market.
Carter said any effort to change the market limit rules will have to go through the standard rule-making process, which includes a 30-day public comment period and specific requirements for notifying and creating the rules. “That’s not going to affect this particular merger. They’re going to go under the current rules,” Carter said.
A combined CBS/Entercom would put the new company over the government limit in Boston (9 FMs and 4 AMs), Los Angeles (6 FMs and 1 AM), Sacramento (9 FMs and 2 AMs), San Diego (6 FMs), San Francisco (9 FMs, 1 AM), Seattle (7 FMs and 1 AM).
“Swaps are a very likely outcome here,” Entercom CEO David Field told investors during a Thursday morning conference call after the deal was announced. According to InsideRadio, trading rather than selling avoids tax penalties and Entercom can use the beachfront radio real estate to bolster its presence in other market where it doesn’t have a full boat. “They could do swaps with iHeart or Cumulus or Emmis,” said Justin Nielson, senior research analyst, Media & Communications at SNL Kagan.
The merger and subsequent spinoffs came as welcome news to brokers and analysts. “It definitely puts a positive spin on the radio deal market,” Nielson said. “We’re actually going to have some real comps and real metrics on what radio values are going to be.”
Field promised the company would “move quickly” to make the required divestitures