With only about two months to seek a waiver from federal rules that prohibit it from owning both the Daily News in Van Nuys and KTLA-Channel 5 in Los Angeles, Tribune Co. said Friday that it will meet with Federal Communications Commission officials before the end of May to discuss its options.
"We have verbally informed the commission of our agreement (announced Thursday) to purchase KTLA," said Joseph K. Hays, a Tribune Co. vice president. "We plan to sit down with the FCC and talk to them about the purchase."
But Hays refused to say whether the Tribune will ask for a waiver, commenting, "We'll limit our dialogue to our discussions with the commission."
Although more than two dozen companies have applied for permanent exemptions from the commission's cross-ownership rule in the past decade, no requests have been granted, said Clay Pendarvis, chief of the FCC television branch. The FCC has granted only temporary waivers to give a company extra time to comply with the cross-ownership rule, which was adopted by the FCC in 1975 in an effort to promote diversity in media ownership.
However, Tribune Co., which owns both the Chicago Tribune newspaper and WGN-TV in Chicago as well as four other television stations, is one of several media conglomerates allowed to retain ownership of two or more media outlets in the same city following a June, 1978, Supreme Court decision that held that the FCC could not retroactively ban cross-ownership in the same community.
In a unanimous vote, the court said the commission's cross-ownership rules could only be applied to those properties that were formed after the commission adopted its cross-ownership rule. Tribune Co. purchased both the Chicago paper and the city's WGN-TV prior to 1975.
Since the proposed purchase of KTLA is governed by the 1975 rule, Tribune Co. must divest itself of the Daily News, Pendarvis said, unless it can "demonstrate there is some public-interest reason that the rule should not apply." Such a showing might be made, Pendarvis said, if an owner is unable to find a buyer for his newspaper or broadcast property.
That is not expected to be a problem with the Daily News, analysts said.
"There's no shortage of interested parties out there for the Daily News," said Norbert W. Truderung, a media analyst at the Chicago-based investment house of Northern Trust Co., echoing most other analysts contacted Friday.
"Good papers in good markets are a little like rare art: There's not enough of them to go around, and everybody wants in," said Edward Atorino, an analyst with the investment firm of Smith Barney, Harris Upham in New York.
The 145,000-circulation Daily News, purchased by Tribune Co. in 1973 for an estimated $25 million, is considered to have good market location.
Situated in the affluent and fast-growing San Fernando Valley, the paper could fetch "upwards of $100 million" based on its estimated pretax profit of $10 million on revenue of $75 million last year, Atorino said.
Although Rochester, N.Y.-based Gannett Co., the largest newspaper group in the country, and some other chains have indicated that they are not interested in buying the Daily News, industry sources said several smaller companies are likely to vie for the paper. The chains themselves said little Friday about their intentions.
- Atlanta-based Cox Communications was mentioned as a contender by some analysts Friday despite the company's insistence Thursday that it is not interested in purchasing the Daily News.
- Hearst Newspapers, which owns the Los Angeles Herald Examiner, was also mentioned by many analysts, although some experts speculated that Hearst may already have its hands full trying to bolster a string of weekly newspapers that it purchased in the San Fernando Valley several years ago.
- Freedom Newspapers, owner of the Orange County Register, was considered a possibility because of the similarities in market area and circulation between the Daily News and the Register.
- La Jolla-based Copley Press, which owns a string of Southern California daily newspapers, including the San Diego Union, the South Bay Daily Breeze and the Santa Monica Evening Outlook, was mentioned as an outside possibility. Hubert Kaltenbach, president of Copley Press, said that, "if the price was right, it certainly would be an attractive acquisition."
- Also mentioned was San Antonio-based Harte-Hanks Communications Inc., which owns a subsidiary in Orange County that publishes a free shoppers guide similar to the Valley News and Green Sheet, the free-circulation newspaper that the Daily News evolved from.
But mustering the $100 million it may take to buy the Daily News could prove to be too expensive for Copley and Harte-Hanks, analysts say.
What's more, any new owner is likely to face substantial additional investments to keep the paper healthy, industry analysts and former Daily News executives said.
Among the areas needing attention are the paper's aging presses and its more than 10-year-old editorial computer system, sources close to the paper said.
Although the Daily News has apparently purchased property to build a new production facility, it could cost about $40 million just to replace presses and purchase a new computer system, according to one estimate.