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9 FCC Red No. 7 Federal Communications Commission Record FCC 94-54

action, as well as further comments, and responded Before the only to the QVC comments. Shortly after more than 50.1 Federal Communications Commission percent of Paramount shareholders tendered their stock to Washington, D.C. 20554 Viacom on February 14, 1993, QVC terminated its tender offer, requested that the Commission dismiss its pending long-form applications, and indicated that it would not In re Applications of pursue its opposition to Viacom©s application.3

VIACOM INC. File Nos. BTCCT-930921KG BACKGROUND through KM 2. Revised several times since the Commission granted an STA to trustee Robinson, Viacom©s tender offer for For Commission Consent to purchase of 50.1 percent of Paramount common stock at the Transfer of Control of $107 per share constitutes the first step in a two-tiered Paramount Communications Inc. process for acquiring the entire common stock interest in Paramount. The "second step merger" involves the conver sion of the remaining 49.9 percent of Paramount common MEMORANDUM OPINION AND ORDER stock issued and outstanding into the right to receive a package of Viacom securities.4 Upon completion of the Adopted: March 8, 1994; Released: March 8, 1994 merger, , Inc. (NAI), which currently is the single majority shareholder of Viacom, will hold 62 By the Commission: percent of the merged entity©s voting stock.5 NAI, in turn, is, and will continue to be, controlled by Sumner M. 1. On November 23, 1993, the Commission granted a Redstone, in his capacity as trustee of the Sumner M. special temporary authorization (STA) to Glen O. Robin Redstone Trust. son as trustee on behalf of Viacom Inc. (Viacom), which has since prevailed in a tender offer contest for control of Paramount Communications Inc. (Paramount). See Viacom MULTIPLE OWNERSHIP/ Inc., 8 F.C.C. Red 8439 (1993).) 1 Now before the Commis CROSS-INTEREST MATTERS sion are long-form applications, FCC Form 315, seeking a 3. Background. The merger of Viacom and Paramount transfer of control of Paramount from trustee Robinson to will result in the common ownership of Paramount©s seven Viacom. Because Viacom holds, either directly or through UHF stations6 and Viacom©s five television7 and wholly owned subsidiaries, the licenses of radio stations 14 radio stations.8 Also attributable to the merged entity located in the same markets as two of the Paramount will be three television stations licensed to Combined television stations, it also seeks unopposed waivers of the Broadcasting, Inc. (Combined), in which Paramount holds one-to-a-market rule, Section 73.3555(c). 2 QVC Network, a 6.4565 percent interest, obtained in a bankruptcy pro Inc. (QVC) filed a petition to deny or defer Commission ceeding.9 See Paramount Communications, Inc., 1 F.C.C.

1 G. William Miller, the trustee-designate of QVC Network, its separate merger with Blockbuster Entertainment Corpora Inc., the competing bidder for Paramount, was also granted a tion, with which it entered a definitive merger agreement on STA on November 23, 1993. QVC Network. Inc., X F.C.C. Red January 7, 1994. 8485 (1993), reconsideration dismissed as moot, by staff letter of 6 Paramount, through its seven wholly owned subsidiaries, March 2, 1994. holds Commission licenses for: WKBD, Channel 50 (Fox), De 2 The one-to-a-market rule generally proscribes common own troit, Michigan; KTXH, Channel 20 (Ind.), , Texas; ership of a television station and a radio station in the same KRRT, Channel 35 (Fox), Kerrville, Texas: WDCA, Channel 20 market. (Ind.), Washington, D.C; KTXA, Channel 21 (Ind.), Arlington, 3 Once a petition to deny is filed, we are obligated to consider Texas; WTXF, Channel 29 (Fox), , Pennsylvania; its merits, regardless of the fact that it is subsequently dis and WLFL, Channel 22 (Fox), Raleigh, North Carolina. missed. Booth American Company, 58 F.C.C. 2d 553, 554 (1976). 7 The Viacom-controlled television stations are: WHEC-TV, We have reviewed QVC©s allegations and find that they do not Channel 10 (NBC), Rochester, New York; KSLA-TV, Channel raise a substantial and material question as to Viacom©s quali 12 (CBS), Shreveport, Louisiana; KMOV-TV, Channel 4 (CBS), fications. St. Louis, Missouri: WNYT-TV, Channel 13 (NBC), Albany, 4 According to Amendment No. 35 to Viacom©s Schedule New York; and WVIT, Channel 30 (NBC), New Britain. Con 14D-1 tender offer statement, submitted under Securities and necticut. Exchange Commission rules, each remaining share of Para 8 The Viacom-controlled radio stations are: KXEZ(FM), Los mount stock will be converted into: 0.93065 shares of Viacom Angeles, California; WLTI(FM), , Michigan; WLIT(FM), Class B, non-voting common stock; $17.50 in principal amount , Illinois; KBSG(AM), Auburn, Washington; KBSG-FM, of Viacom eight-percent, exchangeable subordinated debentures; Tacoma, Washington; WMZO(AM), Arlington, Virginia; 0.93065 of Viacom contingent value right; 0.5 of a three-year WMZQ-FM. Washington, D.C.; WCPT(AM), Alexandria, Vir warrant to purchase an additional share of Viacom Class B ginia; WCXR-FM, Woodbridge, Virginia; WLTW(AM), New common stock at $60 per share; and 0.3 of a five-year warrant York, New York; KYSR(FM), , California; to purchase an additional share of Class B common stock at $70 KNDD(FM), , Washington; KSRY(FM), , per share. California; KSRI(FM), Santa Cruz, California. * NAI, according to Viacom©s February 10, 1994 application 9 Through its wholly owned Corporation, amendment, will continue to be the single majority shareholder, Paramount holds the attributable interest in Combined, which with 62 percent of the voting stock, even after consummation of

1577 FCC 94-54 Federal Communications Commission Record 9 FCC Red No. 7

Red 1390 (1992). Because holding attributable interests in 6. In support of its permanent waiver request for the more than twelve television stations is generally prohibited Detroit market, where Paramount©s WKBD(TV) and by the Commission©s national multiple ownership rule, Viacom©s WLTI(FM) will be commonly owned, Viacom Sections 73.3555(e)(l) and (2), 10 Viacom has pledged that states, based upon the 1992-93 Arbitron Television Markets in the event the three Combined stations have not been and Ranking Guide, as reported in Television & Cable divested prior to completion of the Paramount-Viacom Factbook 1993, that Detroit, with its nine television stations merger, it will either sell the Paramount interest in Com and 48 AM and FM radio stations, is the ninth largest bined to a third party or place the entire interest into an television market. Of these 57 broadcast stations, Viacom irrevocable voting trust, insulated in accordance with Com notes, at least 44 will remain separately owned, operated mission rules and policies. Either one of these actions and controlled after the Paramount-Viacom merger. Ac would eliminate all attributable interest in the Combined cordingly, Viacom contends, the proposed television-radio stations, rendering Paramount in compliance with the combination in Detroit falls within the presumptive waiver twelve-station rule. Because neither has been implemented, standard established in the Second Report and Order for however, we shall condition any grant of these applications "top 25 markets/30 voices" cases. We have reviewed the upon Paramount©s divestiture or appropriate insulation of showing submitted by Viacom and. based upon the in its interest in Combined. We reiterate that, until one of formation before us, find that permanent waiver of the these measures is effectuated, control of Paramount©s li one-to-a-market rule in the Detroit market is in the public censed facilities rests with, and must be exercised solely by, interest. See, e.g., Malrite Communications Group, Inc., 8 Viacom trustee Robinson, who alone is authorized to vote, F.C.C. Red 4212, 4213 (1993): Susquehanna Radio Corp., 6 subject to certain restrictions, the shares obtained via the F.C.C. Red 6547(1991). tender offer. 7. As for the Washington, D.C. television market, since 4. The Paramount-Viacom merger will create, in con the November 1, 1993 consummation of a purchase agree travention of the Commission©s "one-to-a-market" rule," ment for WCPT(AM), Alexandria, Virginia, and WCXR- Section 73.3555(c), a radio-television combination in De FM, Woodbridge, Virginia, 13 Viacom has held the licenses troit and a TV/2 AM/2 FM combination in Washington, of four radio stations, including its WMZO(AM), Arling D.C. Accordingly, Viacom requests permanent waivers for ton, Virginia, and WMZO-FM, Washington. D.C. Common its TV/AM/FM combination in the Detroit market and for ownership of two AM stations and two FM stations, as what will ultimately be a TV/AM/FM combination in the Viacom asserts, is permissible in markets with more than Washington, D.C. market, as well as a temporary waiver to 15 commercial radio stations, provided that the proposed allow orderly divestiture of an AM and FM in the Wash radio combination has a combined audience share of 25 ington, D.C. market. 12 percent or less. See 47 C.F.R. §73.3555(a)(l)(ii); Revision of 5. One-to-a-market waiver requests. In Second Report and Radio Rules and Policies, 1 F.C.C. Red 2755, recon. granted Order in MM Docket No. 87-7, 4 F.C.C. Red 1741, 1751 in part and denied in part, 7 F.C.C. Red 6387 (1992). Those reconsidered in part, 4 F.C.C. Red 6489 (1989). the Com criteria, as Viacom demonstrated in its recent applications mission concluded that it will "look favorably" upon waiv to acquire the two Washington. D.C.-area radio stations, er requests involving radio and television station have been satisfied. See FCC File Nos. BAL-930811EA and combinations in the top 25 markets, as defined by Arbitron BALH-930811HZ, granted on October 21, 1993. But, the Ratings Company, where at least 30 separately owned, op proposed merger, which will result in Viacom©s additional erated and controlled broadcast licensees, or "voices," will ownership of Paramount©s television station, WDCA, Wash remain after the proposed combination. The number of ington, D.C., implicates the Commission©s one-to-a-market voices in a particular market is determined by counting all rule. Viacom, which entered into a purchase agreement for commercial and noncommercial full-power television li the two radio stations prior to its takeover bid for Para censees in the relevant area of dominant influence (ADI) mount, states that it intends to divest one of the AM television market and all operating AM and FM radio stations and one of the FM stations in the Washington, licensees in the relevant television metropolitan market. D.C. market. Therefore, Viacom seeks, for its TV/2 AM/2 FM combination, only a temporary waiver of 18 months.

holds, directly or through its wholly owned subsidiaries, the station, the 1 mV/m contour of an FM station, or the Grade A licenses of WGBS-TV, Philadelphia, WBFS-TV, Miami, and contour of a television station encompasses the entire commu WGBO-TV, Joliet, Illinois. nity of license of the television or radio station.47 C.F.R. 10 The national multiple ownership rule generally proscribes §73.3555(c). ownership of more than 12 television stations or the ownership 12 Viacom also requested in its long-form application waiver of of television stations whose aggregate national audience reach the one-to-a-market rule for the Houston, Texas market, where exceeds 25 percent. In calculating the audience reach, UHF Paramount©s KTXH(TV) is located and where Viacom recently television stations are attributed with only 50 percent of the held the licenses for KIKK-FM, Houston, and KIKK(AM). Pasa television households in their markets. 47 C.F.R. dena, Texas. The transfer of control of those Texas radio sta §73.3555(e)(3)(i). The reach of the seven Paramount UHF tele tions from Viacom to Group W Radio, Inc. was consummated vision stations, according to Viacom, which obtained its figures on November 1, 1993, thereby obviating Viacom©s need for the from Arbitron©s 1991-1992 estimated ADI household figures, is originally requested waiver. See FCC File Nos. BTCH-930811EF approximately 5.8 percent after the 50-percent multiplier is and BTC-930811EE, granted on October 20, 1993. applied, while the reach of Viacom television stations, is 13 The Commission granted the transfer-of-control applications 3.1 percent after the multiplier is applied to its two UHFs. for the two Washington, D.C.-area stations, from Group W Thus, the aggregate national audience reach of Paramount- Radio, Inc. to Viacom, on October 21, 1993. See FCC File Nos. Viacom, 8.9 percent, will be well below the Commission©s BAL-930811EA and BALH-930811HZ. 25-percent ceiling. 11 A television station and a radio station are deemed to be in the same market if the 2 mV/m groundwave contour of an AM

1578 9 FCC Red No. 7 Federal Communications Commission Record FCC 94-54 commencing from the date of consummation of the Para which purchased $1.2 billion of Viacom Series B cumula mount merger. Because subsequent to disposition of those tive convertible preferred stock, and one independent di stations the merged Paramount-Viacom company will still rector. One of the NYNEX-nominated directors, elected to hold a TV/AM/FM combination, a permanent waiver of the the Viacom board in January 1994, see Amendment No. 36 one-to-a-market rule is also required. to Viacom©s Schedule 14D-1, is Frederic V. Salerno, who is 8. As justification for the separate waivers, Viacom in also a director of Avnet, Inc. (Avnet). A subsidiary of dicates that Washington, D.C. is the nation©s seventh largest Avnet, Channel Master Satellite Systems, Inc. (Channel television market, with thirteen television stations and 51 Master), which is primarily engaged in the business of radio stations. Of these 64 broadcast stations, Viacom has receive-antenna manufacturing, owns and operates a single demonstrated that at least 44 will remain separately owned, system. That system serves areas within the operated and controlled after the Paramount-Viacom merg Grade B contour of Paramount©s WLFL(TV), Raleigh, er. Based upon the information before us. we find that North Carolina. Viacom contends that Salerno should be Viacom has satisfied the top 25 markets/30 voices standard relieved from attribution of the cable system, thereby and demonstrated that permanent waiver of the one-to- avoiding implication of the Commission©s cable-television a-market rule for its proposed TV/AM/FM combination in cross-ownership rule, Section 76.501, because Avnet is a the Washington, D.C. market would be in the public inter multi-faceted corporation, primarily engaged in electronics est. and semiconductors, and because Salerno©s duties and re 9. With regard to the temporary TV/2 AM/2 FM com sponsibilities as a director are "wholly unrelated" to the bination, Viacom maintains that Commission grant of an Avnet subsidiary-operated cable system. The staff has pre 18-month waiver will not undermine the principles viously been confronted with a similarly situated Para underlying the Commission©s rules, but instead will serve mount director, George Weissman, who also sits on the the public interest by permitting an orderly disposition of board of Avnet, and has permitted his recusal with regard the two radio stations. We agree. Indeed, we have on more to all matters involving the Channel Master cable television than one occasion permitted applicants seeking waiver of system as sufficient to relieve him of a cable-broadcast our multiple ownership rules an 18-month period to come ownership conflict. See FCC File No. BALCT-930621KE, into compliance with those rules in an "orderly" manner, assignment of license for WKBD(TV). Detroit, Michigan. especially where a "forced" sale could unnecessarily restrict We agree that such limited recusal of a director of a parent the value of a station and artificially limit the range of corporation whose subsidiary is primarily engaged in a potential buyers, to the exclusion of minorities. E.g., Mid business distinct from its one and only cable television west Communications, Inc., 7 F.C.C. Red 159. 160 (1991); system is appropriate. Accordingly, we will require Citadel Communications Company, Ltd., 5 F.C.C. Red 3842 Salerno©s recusal from all Channel Master matters that (1990). Here, Viacom has pledged that in marketing the involve and/or implicate its cable television business. two radio stations, it will "undertake an affirmative action 11. In addition to serving on the boards of Viacom and effort to increase the possibility of purchase of one or both Avnet, Salerno is a director of Bear Stearns Companies Inc. of the stations by a minority-controlled entity." To identify (Bear Stearns), whose subsidiary recently acquired a 5.2 such potential purchasers, Viacom represents that it will percent interest in Group Inc. (Telemundo), sponsor an informational meeting for interested minority which controls seven television stations. 14 Viacom states buyers to discuss station facilities and assets, terms of the that the Telemundo stations are not attributable to Salerno, sale, sources of funds for broadcast station acquisitions, and because Telemundo, which currently operates as a debtor the operation and application of the Commission©s minor in possession under bankruptcy law, is controlled by a ity ownership policies. Additionally, Viacom represents single majority shareholder, Reliance Capital Group. L.P.© 5 that it will make its senior management available to meet However, if the Commission deems necessary, according to with potential minority purchasers who have demonstrated the Viacom application, Salerno will agree to recuse him the capacity to finance the purchase and operation of the self from all Telemundo matters. While we recognize the stations. We believe that Viacom©s proposal to seek out nonattributable status of Salerno©s interest in Telemundo minority buyers for the two radio stations would be impos for purposes of the Commission©s multiple ownership sible for it to administer we to require an immediate rules, we note that that interest nevertheless implicates our divestiture and we find that an 18-month period will spawn cross-interest policy, which was initially developed to scru public benefits warranting grant of a temporary waiver. tinize relationships not proscribed by the multiple owner 10. Other media interests of Paramount-Viacom directors. ship rules but which nevertheless triggered the After Viacom©s separate mergers with Paramount and Commission©s concerns for full competition and diversity Blockbuster Entertainment Corporation (Blockbuster), ac of viewpoint. See Minnesota Broadcasting Corp., 13 F.C.C. cording to Viacom©s amended application, the merged en 672 (1949); United Community Enterprises, Inc., 37 F.C.C. tity©s board of directors ultimately will be increased to a 2d 953 (Rev. Bd. 1972). That policy is currently the subject maximum of 20 members. Initially, however, Viacom notes of a rule making proceeding, Notice of Inquiry, 2 F.C.C. that the merged entity will have a twelve-member board Red 3699 (1987), Further Notice of Inquirvl Notice of Pro consisting of six directors nominated by Viacom, three by posed Rule Making, 4 F.C.C. Red 2035 (1989), but until Blockbuster, two by NYNEX Corporation (NYNEX), modified, we shall abide by our case-by-case approach for addressing cross-interest situations. Based upon the infor-

14 The Telemundo-controlled television stations are: WKAO, 15 The Ownership Report of Telemundo Group, Inc., filed Channel 2, San Juan, Puerto Rico; WSCV, Channel 51, Fort with the Commission on February 1, 1094, indicates that Reli Lauderdale, Florida; KSTS, Channel 48, San Jose, California; ance Capital Group, L.P. directly owns approximately 42 WNJU, Channel 47, Linden, New Jersey; KTMD, Channel 48, percent of the stock of Telemundo and holds the exclusive and Galveston, Texas; KVEA, Channel 52, Corona, California; and irrevocable power to vote and/or dispose of another approxi KVDA, Channel 60, San Antonio, Texas. mately eleven percent of the Telemundo stock.

1579 FCC 94-54 Federal Communications Commission Record 9 FCC Red No. 7

mation in this proceeding, we observe that Salerno, as CONCLUSION director of both Paramount-Viacom and Bear Stearns, will 13. In conclusion, we have reviewed the proposed merg hold interests in the parent companies of licensees operat er, the petition to deny, the further comments and ing in four of the same markets: (1) Los Angeles, where response and find that grant of the transfer of control of Telemundo©s KVEA(TV), Viacom©s KXEZ(FM) and the seven stations to Viacom will KYSR(FM) are located; (2) New York, where Telemundo©s serve the public interest, convenience and necessity. WNJU(TV) and Viacom©s WLTW(AM) are located; (3) Gal- 14. Accordingly, IT IS ORDERED, that the petition to veston, Texas, where Telemundo©s KTMD(TV) and Para- deny and further comments filed by QVC ARE DIS mount©s KTXH(TV) are located; and (4) San Antonio, MISSED. Texas, where Telemundo©s KVDA(TV) and Paramount©s KRRT(TV) are located. However, in view of the existence 15. IT IS FURTHER ORDERED, that the applications of a single majority shareholder and Bear Stearns© small for transfer of control of the seven Paramount television minority holding, we believe that Salerno©s potential influ stations, BTCCT-930921KG through KM, to Viacom ARE ence over, and ability to exert control of, Telemundo. via GRANTED, as set forth above and subject to the condition his directorship at Bear Stearns, is attenuated and unlikely that Viacom not assume control of Paramount until: to diminish arm©s length competition or diversity, the gov erning concerns of our cross-interest policy. See, e.g., Paramount and/or Viacom divest its interest in Com Metromedia Broadcasting Corp., 1 F.C.C. Red 1022 (1986). bined Broadcasting, Inc. or insulate it in a trust Accordingly, we will require no further action by Salerno approved by the Commission. with respect to his interests in Telemundo. 12. Finally, current Paramount director, and potential 16. IT IS FURTHER ORDERED, that the request of Paramount-Viacom director, Lester Pollack is also the di Viacom for permanent waiver of the one-to-a-market rule, rector of Continental , Inc. (Continental) and Section 73.3555(c) of the Commission©s Rules, to permit the chairman of LFCP Corp., the sole general partner of an common ownership of stations WKBD(TV), Detroit, Michi investment manager which controls the voting and disposi gan, and WLTI(FM), Detroit, Michigan, IS GRANTED. tion of an attributable amount of Continental©s voting secu 17. IT IS FURTHER ORDERED, that the request of rities. 16 Continental owns numerous cable television sys Viacom for temporary waiver of the one-to-a-market rule, tems, one whose service area is within the Grade B con Section 73.3555(c) of the Commission©s Rules, to permit tour of Viacom©s KMOV(TV), St. Louis, Missouri, one common ownership of WDCA(TV), Washington, D.C., serving the area within the Grade B contour of Viacom©s WCPT(AM), Alexandria, Virginia, WCXR-FM, WVIT(TV), New Britain, Connecticut, and another serving Woodbridge, Virginia, WMZQ(AM), Arlington, Virginia, the area within the Grade B contour of Paramount©s and WMZQ-FM, Washington, D.C., for a period not to WKBD(TV), Detroit, Michigan. 17 Viacom contends that exceed 18 months from the date of consummation of the these television stations represent "only a small part" of the Paramount merger IS GRANTED. business activities of Paramount-Viacom 18 and notes that, 18. IT IS FURTHER ORDERED, that the request of should he become director, Pollack will recuse himself Viacom for permanent waiver of the one-to-a-market rule, from all board matters relating to all Paramount and Section 73.3555(c) of the Commission©s Rules, to permit Viacom television stations. A director of a multi-faceted common ownership of WDCA(TV), Washington, D.C. and corporation may be relieved of an attributable interest an AM and an FM radio station, subsequent to its where that director©s duties and responsibilities "are nei divestiture of one of the AMs and one of the FMs in ther directly nor indirectly related to the activities" of any paragraph 17, above, IS GRANTED. broadcast licensee in which the corporation has a cog nizable interest. Attribution, 97 F.C.C. 2d at 1025. We 19. The Mass Media Bureau will send copies of this believe that Pollack©s recusal from all subjects pertaining to Memorandum Opinion and Order to the parties to this all Paramount-Viacom television stations comports with proceeding by certified mail, return receipt requested. this standard. Accordingly, we will require Pollack to recuse himself from all matters that involve and/or im plicate the merged entity©s television business.

16 LFCP Corp., according to the October 29. 1993 Viacom 930621KE, granted August 27, 1993. It was represented in that application amendment, is the sole general partner of Corporate application that Pollack would recuse himself from all Advisors, L.P., which serves as investment manager for an in WKBD(TV)-related matters confronting the Paramount board. vestment management account maintained by the State Board 18 Viacom and its subsidiaries, Viacom contends, comprise a of Administration of Florida (State Board), which holds Con "multi-faceted media company" which control: cable television tinental voting stock, and controls the voting and disposition of systems serving approximately one million subscribers; premi Continental securities owned by ContCable Co-Investors, L.P. um program services such as Showtime, (ContCable), Vencap Holdings (1992) Pte Ltd. (Vencap) and, and Flix; advertiser-supported program services such as MTV, under most circumstances, by First Plaza Group Trust (First VH-1, and ; Showtime Satellite Networks, Inc., Plaza). LFCP, therefore, has an attributable interest in approxi which distributes programming to home television receive-only mately 20.1 percent of the outstanding voting securities of Con earth stations; and radio and television broadcast stations. tinental, the aggregate amount of Continental voting securities Viacom subsidiaries also hold partnership interests in other reportedly owned by State Board, ContCable, Vencap and First cable television programming networks, such as Comedy Cen Plaza. tral, Lifetime and . 17 Pollack©s interest in Continental was previously disclosed to the Commission, in Paramount©s 1993 application for the ac quisition of WKBD(TV), Detroit. See FCC File No. BALCT-

1580 9 FCC Red NO. 7 Federal Communications Commission Record FCC 94-54

FEDERAL COMMUNICATIONS COMMISSION

William F. Caton Acting Secretary

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