Looser Foreign Investment Cap Could Be Good for Foreign Language Broadcasters, say Brokers

An FCC open to more foreign investment in broadcasting could be a boon for foreign language stations, media brokers, broadcast attorneys and investment analysts told us in interviews last week. Broadcasters from Spanish-speaking countries have long shown an interest in acquiring U.S. Spanish-language TV and radio stations, and were barred from doing so by the 25 percent cap on foreign ownership, several brokers said. There’s also been interest from Asia in Chinese-language stations, said the brokers. With a draft declaratory ruling in the works that could lead to deals over the cap being approved on case-by-case basis (CD Oct 25 p5), those broadcasters would “absolutely” be interested in buying bigger portions in such stations, said Media Services Group-Chicago Director Robert Heymann. “There are just many cities where there’s a sizable, substantial market of people who want information in their own language,” said Minority Media and Telecommunications Council President David Honig.

If the barriers to foreign ownership rules are eased, foreign broadcasters may view having a U.S. footprint as a worthwhile move for their company, said SNL Kagan analyst Robin Flynn, who drew a comparison to Al-Jazeera’s purchase of Current TV. She said foreign companies that buy up U.S. broadcasters will do so only if it serves “the strategic goals” of their companies, as in Mexican broadcasters buying up U.S. Spanish-language stations.

Such transactions could potentially involve large market stations, because of the concentration of large ethnic populations in cities, said Honig. The MMTC also is a media broker, and Honig -- a longtime opponent of the foreign ownership cap -- said he has often been approached by foreign interests about buying foreign-language stations. He said the loosening of the cap will lead to more capital for both large and small stations. “This isn’t a zero-sum game,” he said.

Along with those looking to invest in foreign-language stations, a loosening of foreign ownership policy will likely lead to foreign equity investors taking an interest in U.S. broadcasters. “Private broadcasters aren’t as common in other countries as they are here,” said Fletcher Heald broadcast attorney Peter Tannenwald, who suggested foreign investors may see U.S. broadcasting as a better opportunity than a domestic venture capitalist would.

If the U.S. broadcasting market became more open to foreign investors, it could lead to more opportunity for U.S. investors as well, said Honig. As restrictions here ease, other countries may loosen up their own barriers to U.S. investment in their own broadcasting, under the principle of “reciprocity.” “I would expect it will be much easier for American broadcasters to expand overseas,” said Honig.

Although he agreed more foreign investment would inject more money into broadcasting, Brian Cobb, president of media broker CobbCorp, said it seemed to be coming too late. Cobb said the wave of consolidation in recent years might have gone differently if foreign investors had been involved, and that opportunities for them to invest now are more limited. Heymann disagreed. “There is a tremendous opportunity with foreign capital coming into the market.” Tannenwald said the rule’s loosening is due to politics, and acting Chairwoman Mignon Clyburn coming into power at the commission. “You have to strike while you have a hot idea,” he said.