Only Congress would rescind a rule that would save countless jobs and publications in the media industry in the name of diversity and competition.
- Today a committee in the House of Representatives voted to nullify a reform to the media cross ownership rule that would have given a little regulatory relief to an industry desperately in need. Thus several major metropolitan newspapers are now one step closer to the graveyard because partisans from both parties fail to realize that the Internet has leveled the playing field in the media industry and opened the door for unlimited competition.
- One structural problem in the media industry is the significant barriers to M&A activity which has resulted in less competition (not more as the super geniuses representing us in the Congress had intended). Thus emerging media oligopolies like the AP, Reuters, Google and Yahoo have undermined the health of the US media industry. The preferred regulatory treatment the oligopolies enjoy has lead to the downsizing and closing of newspapers. Just recently both Media General and McClatchy announced layoffs of over 1500 employees -many of which work in newsrooms.
- Sharp Trader expects this decision will eventually be nullified and that cross-ownership reform will happen by the end of 2009.
- While MEG and MNI are down on this news we do not view this move as a trading opportunity as both companies face larger challenges owing to depressing housing markets in Florida and California. (more to follow)
