JESSELL AT LARGE

Details On Sinclair-Tribune Merger Overdue

The FCC has finally gotten around to asking Sinclair how it intends to comply with the national and local ownership rules. The merger puts it in nominal violation of the caps and it will have to do something to get below them. I applaud the FCC move as the public has the right to know just how Sinclair plans to proceed.

The FCC yesterday sent Sinclair a 10-page letter chock full of requests for information about its pending $3.9 billion merger with Tribune Media, including some about what it is doing to comply with the local and national ownership rules. It gave Sinclair until Oct. 5 to respond.

It’s about time.

I’ve been trying to keep up with the opposition to the merger as it pours into the FCC. For the most part, I have found it unconvincing and, in many cases, blatantly self-serving.

Cable and satellite operators don’t like the idea of a more powerful agent across the table on retrans negotiations and cable programmers don’t like the idea of another big company competing for channel space and carriage fees (Sinclair owns the Tennis Channel and has toyed with the idea of a cable news channel).

But there has been one complaint about the deal that I think has merit and it’s that Sinclair has not been forthcoming about its plans to comply with the national and local ownership limits.

As things now stand, the post-merger Sinclair would exceed those limits. But rather than telling the FCC (and the public) what stations it will spin off or swap to get under the caps, Sinclair has been mute.

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I’m not sure why. Maybe it just hasn’t cut any deals yet.

There are 10 markets where the Tribune-fattened Sinclair will own two Big Four network affiliates. That’s against the rules. The markets are Seattle; St. Louis; Portland, Ore.; Salt Lake City; Oklahoma City; Greensboro, N.C.; Grand Rapids, Mich.; Harrisburg, Pa.; Richmond, Va.; and Des Moines, Iowa.

I am hearing that in at least some of the markets Sinclair is actively looking for a swap, trading away one of the Big Four affiliate for an independent or affiliate of a minor network.

Another possibility is that Sinclair is dragging its feet, hoping that the FCC does away with the rule barring Big Four duopolies so that it can keep all the stations in the 10 markets.

That hope is not fanciful. FCC Chairman Ajit Pai is no fan of restrictive ownership caps and he has indicated that he may act sooner than later to ease them.

By the way, I’ve also heard that Sinclair is also seeking second stations in some of the big markets where Tribune has just one station. Sinclair’s intention is to use the stations as “lighthouses”– stations that would simulcast programming with the current ATSC 1.0 broadcast while it migrates the main stations to the new ATSC 3.0 standard.

Such an acquisition would not run afoul of the local rules since they would not involve two network affiliates and would be in markets with at least eight other station owners.

How Sinclair intends to comply with the national cap is more intriguing.

By its own reckoning, the Tribune deals puts Sinclair 6.5 points over the 39% on national TV household coverage. To come into compliance, it will have to exit several markets. (I am assuming that Sinclair will not give up the Tribune stations in New York, Los Angeles and Chicago under any circumstances.)

But Sinclair is showing no signs of doing that. On the contrary, I’m told that Sinclair is trying to buy stations in the six top 25 markets where, even after Tribune, it will not have any stations.

Sinclair badly wants a national footprint for its ATSC 3.0 ambitions. To get it post-Tribune, it will still need stations in San Francisco, Boston, Atlanta, Tampa, Phoenix and Detroit.

Again, Sinclair may be hoping — hoping that the FCC will also ease the national ownership cap to allow it to stay in all the markets it is getting in the Tribune deal as well the other top 25 markets it is snooping around.

I’m not sure this hope is realistic. Pai may be inclined to raise the national cap, but his fellow Republican Commissioner Michael O’Rielly, whose vote Pai would need, doesn’t believe the FCC has the authority to do it.

Also, even if O’Rielly yields, it would take the FCC at least until next summer to conduct a rulemaking and get to a final vote.

So, if Sinclair want to expand its national footprint beyond the allowable limits now, it may have to ask for a waiver or use its old dodge of finding friendly third parties to own the stations while continuing control of them through shared services and joint advertising agreements.

In its letter to Sinclair, the FCC demands “a complete list of stations that would be divested to comply [with the ownership rules]…and any attempts to market those stations, including, but not limited to, contacts with station brokers and/or potential buyers, any plans to place stations in divestiture trusts, and/or any plans to seek a waiver.”

Sinclair’s Oct. 5 reply should make for interesting reading.

P.S. While I agree that Sinclair should divulge its intentions regarding ownership, I think the agency goes too far in some of its other demands.

For instance, it asks Sinclair to “describe in detail” any plans it may have to increase local news, sports and public affairs programming at the Tribune stations or to “increase or decrease” the investigative reporters and other journalists at the stations.

Such questions suggest that the FCC is looking to judge the deal with a public interest standard based on producing a certain amount of news and other local programming. With Pai in charge, I thought those bad old days were behind us.


Comments (8)

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Don Thompson says:

September 15, 2017 at 5:01 pm

It’s a not so small point that has been annoying me for some time. In its FCC filing, Sinclair-Tribune said the combined firm would be 6.5 percent over the 39% cap. In this fine article in TV NewsCheck, it says 6.5 points over — meaning 6.5 percentage points, not percent. The difference between being 6.5 percent over the cap and 6.5 percentage points over is, like, the size of the Chicago DMA … Please Follow Me On Twitter: @TedatACA or @AmericanCable

Dan Levitt says:

September 15, 2017 at 7:38 pm

Funny that Sinclair just submitted their interview with Jessell form the B&C article in the FCC Filing yesterday. deal looks like it may fall apart – Tribune scheduling an impromptu Shareholder meeting for Oct. all the way over in L.A., far-far away from the majority of it’s shareholders in Chicago and Wall Street

    John Bagwell says:

    September 18, 2017 at 5:38 pm

    For what it is worth, most of Tribune’s board of directors is based in LA and they often have board meetings out there, so I am not sure that really means anything. Because we have a Trump/Pai White House/FCC, I just don’t see this deal falling apart, but who knows.

Dan Levitt says:

September 15, 2017 at 7:47 pm

Correction: SEC filing yesterday. both a Jessell article in B&C and a TVnewscheck article

John Livingston says:

September 17, 2017 at 7:47 pm

It will be interesting what Sinclair will have to say on Oct 5TH letter is due. Not surprise that The FCC wants more info from Sinclair and they will have to divest 6 to 10 stations which they need to either divest Fox17 which is more likely than WWMT just my opinion.

Veronica Serrano Padilla says:

September 17, 2017 at 7:54 pm

Not sure why it’s unreasonable to think that the FCC would relax ownership rules under this current administration. Look at how the UHF Discount rule got reinstated despite being extremely outdated and unnecessary – and consider who’s going to benefit…

    Mike Henry says:

    September 18, 2017 at 2:53 pm

    Yeah, but the Trump administration as a whole hasn’t had a lot of legislative wins… and the FCC is one of a few areas in the government where deregulation pledges have yet to pan out. It’s not unreasonable to think it, but it is reasonable to think it won’t happen as fast as Sinclair wants it to. Keep in mind that modifications to the FCC’s ownership rules have been slow to take place since the Dubya Bush administration, so Sinclair will have to attempt to come into compliance with the rules somehow. Let’s hope that they do so how they should do it, by selling the standalone Big Four affiliates and duopolies it plans to divest to independent buyers with no existing presence in the affected markets and the few standalone CW and MyNetworkTV affiliates to either indie buyers or, in markets where a new duopoly can legally be formed, a competing station owner.

Kaylor Blakley says:

March 9, 2018 at 4:55 pm

Pai’s Swiss bank account has gotten a lot bigger and Sinclair (and others) is the reason why. As for your remark, “It was a heavy handed regulatory solution to a problem that doesn’t yet exist – discriminatory access to the internet by the ISPs”. How about you see it from the point of reality – It was a regulatory solution to a problem that WILL exist – discriminatory access to the internet by the ISPs. Come on, you really don’t believe this will happen if it’s not turned back? Seriously?


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