While a number of broadcasters made some big bucks in the incentive auction and almost 1,000 will have to change frequencies in the spectrum repack, when the dust settles the industry probably won’t look much different than it does today.
Praise the lord.
Trinity Broadcasting earned more from the sale of a single station in the FCC incentive than any other broadcaster. Its WWTO Chicago brought in a whopping $304.3 million.
And as a group, the religious broadcaster was No. 2 in auction loot, selling seven stations for a total of $634.3 million. Only spectrum speculator NRJ TV, at $640.5 million for seven stations, earned more.
Trinity benefitted from having stations in two other large markets. WTBY New York went for $162.4 million; WGTW Philadelphia for $80.8 million.
Trinity should say a prayer of thanks, especially in light of the fact that the FCC nearly stripped it of all its licenses two decades ago for skirting national ownership limits. Two-thirds of a billion dollars is better than nothing. Amen.
How Trinity and other broadcasters made out in the auction was all revealed yesterday in Appendix A of the FCC’s much anticipated public notice on the auction, which not only lists the “winners” of the reverse and forward auctions — the 175 broadcast sellers and 50 wireless buyers, respectively — but also the new channel assignments of the nearly 1,000 stations that will have to move to new channels in the repack of the TV band.
The winners have known who they are for a couple of months, but only a dozen or so revealed themselves. As publicly traded companies, Fox, Sinclair and Gray probably felt they had to.
To put that in dollar terms, broadcasters made just over $10 billion in the auction, but before the release of the notice yesterday only around a quarter of that money was accounted for.
The best place to go to see the winners yourself is here. The FCC has conveniently provided a way to download the list into an Excel file where you can sort it anyway you wish.
My spreadsheet came up with the top five group winners. As I said, NRJ was tops and Trinity was second. They were followed by NBC ($481.6 million), Nexstar/Media General ($479 million) and speculator OTA Broadcasting ($440.7 million). Under their merger agreement, you will recall, the Media General shareholders get the auction proceeds, not the surviving Nexstar.
And here are the five markets that drew the most cash: New York ($1.42 billion), Los Angeles ($1.33 billion), Philadelphia ($1 billion), San Francisco ($825.7 million) and Boston ($803.4 million).
No real surprises in that list. It tells you where wireless demand as expressed in dollars.
Picking over Appendix A, I find some other auction sales worth noting.
I feel less sorry for Ed Ansin. His WHDH Boston lost its NBC affiliation in January when the network moved into the market, but he sold his sidecar in the market, WLVI, for $162.1 million.
Hearst Television got $15.8 million for WNNE Burlington, Vt.-Plattsburgh, N.Y, while Bert Ellis got $66.6 million just for moving his independent KDOC from a UHF channel to a high VHF position. Weigel scored in Milwaukee, garnering $69.7 million for independent WMLW. And Raycom picked up $32.3 million for WUAB Cleveland, a companion to its CBS affiliate WOIO.
Tribune Media received $172.1 million from the sale of WDCW Washington ($122 million) and WPMT Harrisburg, Pa., ($50.1 million). And according to spokesman it expects to make another $18 million through channel sharing deals.
Ion Media, which I think once saw the incentive auction as an exit strategy for its investors, sold only two stations for a combined $84.6 million.
But the overall takeaway from Appendix A is just how little the incentive auction will affect commercial broadcasting as we know it today.
I didn’t find many network affiliate stations on the list and they are the blood and guts on the business.
What’s more, most of the stations that were “sold” have indicated that they are not going out of business. Rather, they will continue broadcasting through channel sharing arrangement with other stations in the market. In some cases, they own the other station. In some, they don’t.
NBC is the prime example. It sold its WNBC New York, but the flagship isn’t sailing way. It will simply share the spectrum of NBC’s New York Telemundo outlet. Viewers should hardly notice.
I’m not sure how much of the channel sharing will actually occur. Trinity indicated to the FCC that it has channel sharing plans for all the stations it sold, but will it actually bother to find new outlets for its programming in those markets. I’m awaiting a call from Colby Mays, who holds one-third of the voting interest of Trinity and doubles as its communications attorney, so I can ask him.
As we reported last month, the auction has spawned scores of zombie stations — that is, stations without spectrum. Zombies that don’t wish for rebirth on another station’s subchannel can opt to sell off its other assets — towers, transmitters, programming rights, studios, goodwill and even must-carry rights.
The must-carry rights alone in large market might be worth a small fortune.
Broadcasters are left with a big chore. To make the bought spectrum suitable for wireless use, the FCC has to repack the old TV band, segregating the remaining TV spectrum from the newly reallocated wireless spectrum.
That means 987 stations will be subject to a forced migration from their current UHF channels to new UHF channels lower in the band or to VHF channels.
Congress and the FCC are giving the broadcasters 39 months and $1.75 billion to make the move.
Broadcasters have already been complaining that that that is not enough time or money to do the job, and they are also expressing concern that coverage on their new channels may not be as good as it is on their existing ones. Making sure broadcasters don’t come up short in the repack will be the defining issue for the TV side of the NAB for the next year or so.
Pushing back on the broadcasters’ demands for more repack time will be the wireless buyers. Having spent billions for 70 MHz of primo spectrum, they are eager to get their hands on it and put it to work.
The repack is not unmitigated misery for broadcasters.
As it happens, the mandate to move comes at the very same time many broadcasters are planning to upgrade their RF facilities so that they can implement ATSC 3.0, the Next Gen TV system. If broadcasters are smart, they will buy equipment for the repack with their needs for 3.0 in mind. In effect, they will get the government to subsidize the move to 3.0.
As I said before, when all is said and done, broadcasting will remain pretty much as is. The “winning” broadcasters that don’t reemerge on other channels are generally the same ones that didn’t have much of an audience anyway. Few will miss them.
And if all parties give a little on the repack, broadcasters will get through it without much harm and perhaps some benefit to their 3.0 ambitions. Some OTA viewers may lose track of their favorite stations for a time, but they will eventually learn how to rescan and find them again.
According to the FCC’s timetable, migrating TV stations must complete their moves by the Fourth of July 2020. Many things will happen to reshape the broadcasting business between now and then — the pace of change in TV, as we all know, is ferocious — but the fallout from the incentive auction and repack may not be among the most significant.