Who The Supreme Court's `Must Carry' Rule Helps Most

The broadcast winners are...

For Lowell "Bud" Paxson, chairman and chief executive of Paxson Communications Corp., it was a Supreme Court decision worth celebrating. The night after the high court upheld so-called must-carry broadcast rules on Mar. 31, Paxson, who controls 49 independent television stations, rented a ballroom at the posh Four Seasons Hotel in New York, hired a band, and flew in from Florida to party with 150 broadcasters and programmers. "I'm the happiest man in America," he says with a laugh.

Paxson has plenty of company. The Supreme Court's decision--a stunning reversal of what experts had expected--upheld a provision of a 1992 cable law that requires cable operators to carry local broadcast stations. That's good for the big networks. But for smaller fry, such as Paxson and Barry Diller's HSN Inc.--as well as fledgling broadcast networks such as UPN, a joint venture of Viacom and Chris-Craft Industries, and Time Warner's WB--it's a spectacular victory. Without the rule, these smaller operators could have seen their signals bumped. It's also a big relief to the nation's 351 public television stations, which will now be guaranteed cable slots.

BOLDER STRATEGIES. No sooner did the ruling come down than Paxson's stock soared 19%, to 10 3/4. Gabelli & Co. analyst Laura Salerno Linehan predicts that Paxson's annual revenues, $165 million in 1996, could jump by $70 million over the next year.

With the must-carry ruling in place, Paxson can now undertake much bolder growth strategies. Today, his stations, which reach nearly 64% of U.S. households, mostly carry infomercials. But Paxson says the company is talking to movie studios, syndicators, and cable and broadcast networks about buying new programming. Paxson could also sell his stations, which are now instantly more valuable, though he says he isn't interested in doing so.

Diller, on the other hand, has concrete plans for developing his collection of stations. His team has long been hoping to move away from home-shopping programs on HSN's 12 broadcast outlets and instead launch shows focusing on local news, personalities, and culture. Says Doug Binzak, executive vice-president for Silver King Communications Inc., HSN's broadcast unit: "It's like ending up with a beachfront lot. And we can build whatever house we want."

Must-carry could also turn out to be a key factor in the looming battle with Rupert Murdoch's News Corp., which could be forced to carry all local channels on its new satellite system. Murdoch would be likely to fight that. But for now, small broadcasters have reason to celebrate.

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