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The federal appeals court decision that blocked several media ownership rule changes adopted by the Federal Communications Commission is likely to face an appeal. But the ruling is already having an impact on the proposed sale of a majority stake in Cox Media Group to private equity funds managed by affiliates of Apollo Global Management. That’s largely because the Third Circuit blocked the FCC’s decision to end the decades-old prohibition on broadcast-newspaper cross-ownership.

In a reworked agreement Cox will own a smaller share in Terrier Media, the company Apollo and Cox have created to operate the portfolio that included radio, television and newspapers. The companies also warn they may be forced to reduce the number of days three newspapers publish so that they are no longer considered daily papers subject to the ban on cross-ownership.

Terrier Media President David Sambur, who is also a Senior Partner of Apollo, told the FCC this week that the company is considering ending the seven days a week publication schedule for the Dayton Daily News, Journal-News and Springfield News-Sun to just three times per week. In a filing with the agency he acknowledged the current cross-ownership limits would prevent the new entity from owning both broadcast stations and daily newspapers in the same markets.

“That is just one potential scenario we are considering,” Cox Media Group President Kim Guthrie said in a statement. “However, to plan for this contingency, we are working on a strategy to move quickly to ensure the Ohio papers return to daily print publication as soon as possible post-closing.”

Insiders had already been signaling Apollo would be willing to give up the newspaper assets in favor of buying radio and television. And that’s how the revisions are playing out. Terrier has told the FCC that it is exploring an “alternative structure” to their deal that would give Cox the option of reacquiring the newspapers and restoring them to a daily basis. “The parties first would need to develop a plan to separate the newspapers from the currently integrated media operations in Ohio,” said Sambur. Cox could also seek a waiver to the cross-ownership ban similar to the arrangement struck by News Corp. which allowed it to own both WNYW-TV and the New York Post since 1993.

In a $500 million deal announced in June, Apollo seeks to buy 50 radio stations from Cox Media Group across 11 markets, including Atlanta, Miami, Houston, Tampa, Jacksonville, San Antonio, Tulsa, and Nassau-Suffolk, NY. The deal also includes Cox’s national TV rep firm CoxReps and Cox’s Washington, D.C. news bureau operations. Apollo previously struck a $3.1 billion deal to buy Cox’s television station group, including the radio-TV-newspaper combination in Dayton, OH. In order to comply with limits on radio ownership, two stations—alternative “97X” WSUN in Tampa and CHR “Power 95.3” WPYO in Orlando—will be placed in a trust for sale.

Cox Gives Up Board Seat

The reworked deal structure also has Cox shrinking its voting interest in Terrier to 19.9%. That’s less than the 23% minority stake first announced in June in what is described as a business decision unrelated to the FCC issues. However, Cox’s ownership interest in Terrier would become non-attributable since it will no longer appoint an active member to Terrier’s board. Instead, whomever Cox puts in the board room will be considered “non-attributable observers” rather than actually voting directors.

“My team is working diligently to ensure our operations fully comply with the court’s decision, while working hard to plan for any scenario. We hope to not have to reduce days of printing,” said Cox Media Group Ohio Market VP Rob Rohr, who is also the publisher of the three newspapers.

The ruling also potentially impacts the Atlanta market, where Cox Enterprises now plans to retain full control of the Atlanta Journal Constitution. But because Cox will no longer have an attributable interest in Terrier under FCC guidelines, Sambur told the agency it believes that no cross-ownership issues impact the Atlanta market.

Beyond newspapers, the appeals court decision blocking the FCC’s move allowing a company to own up to two of the big four network television stations in the same market could mean fewer stations for viewers in the Syracuse, NY and Yuma, AZ-El Centro, CA markets. Northwest Broadcasting still plans to sell TV stations in those two markets to Terrier.  But in order to comply with ownership limits, Terrier says that Northwest plans to surrender the licenses for either WSYT-TV or WNYS-TV in Syracuse and for either KSWT-TV or KYMA-TV in Yuma.

Appeal Fight Brewing

The Third Circuit Court of Appeals in September ruled the changes adopted by the FCC in Nov. 2017 – which included abolishing the newspaper-broadcast and TV-radio cross-ownership bans and relaxing several television ownership restrictions – were not adequately justified in the rulemaking process that spanned two administrations. Judge Thomas Ambro said the agency’s analysis that led to the regulatory rollback was “so insubstantial” that it failed to provide to the Philadelphia court a “reliable foundation” supporting the conclusions.

FCC Chair Ajit Pai has said the Commission plans to appeal the Third Circuit’s decision, slamming the judges for once again putting a roadblock in front of change. And in an interview with C-Span earlier this month, FCC Commissioner Michael O’Rielly said he feels the agency should take its appeal to the Supreme Court, if necessary. “There is no amount of evidence or data we can give them,” he said. “Multiple administrations, Republican and Democrat, have not been able to get past the threshold the Third Circuit has set.”