Sinclair Also Targeting DOJ Ownership Cap

Even if the FCC relaxes its ownership rules, Sinclair and other broadcasters would still be blocked from owning two network affiliates in many cases by Justice Department antitrust regulators who have a cap of their own. It limits a broadcaster to controlling no more than 40% of the market's broadcast TV revenue. So, Sinclair is waging a campaign to increase that percentage by changing the way regulators define the local market.

If Sinclair Broadcast Group gets its wish, the Department of Justice will not only greenlight the broadcaster’s $3.9 billion pending merger with Tribune Media, but also clear the way for the Baltimore-based media giant to keep some TV station combos from that deal — and perhaps form new ones — that current department policy would not allow.

That’s the case because, along with seeking DOJ’s blessing for the Tribune merger, Sinclair is also urging the agency to expand the department’s local advertising market competition guidelines to increase the number of TV stations that broadcasters can buy in a market.

“We’ve obviously presented a very strong case that, at the very least, cable should be included in the market definition,” said Sinclair CEO Chris Ripley, during the company’s Nov. 1 third-quarter earnings call.

What Sinclair essentially wants the DOJ to do is expand its definition of the local advertising market — which now focuses solely on broadcast TV ad revenue — to include local radio, cable and internet ads.

The effect of the industry-backed change would be to permit broadcasters to buy more stations in a market.

If the DOJ agrees to make the changes Sinclair is seeking, the Baltimore-based broadcaster also may be able to avoid some of the station divestitures that otherwise might be required in the Tribune deal.


In addition, Sinclair, and all other TV broadcasters, would be able to form additional new combos that the existing DOJ guidelines would not currently allow.

The DOJ merger guidelines are an issue for broadcast industry mergers because they currently bar common ownership of TV stations where a broadcaster would get more than about a 40% combined share of the local broadcast TV market ad revenue.

The Justice Department has required station spinoffs in markets where that threshold would have been passed.

In the Sinclair conference call, Ripley said that Sinclair believes that “it’s sort of un-defendable” for DOJ “not to at least look at” cable TV’s share in the local TV advertising mix.

Added Sinclair COO Steven Marks: “Sooner or later, the Justice Department, it seems to us, is going to have to get aligned with the reality of the marketplace.”

During the conference call, Ripley also said Sinclair’s average broadcast TV market share is currently in the “low” 20s, which suggests that the company already has room to grow.

Sinclair believes that its growth opportunity will be “significant” after the FCC acts on its pending proposals to relax its own ownership rules and the DOJ adopts a “more flexible” market definition, Ripley said.

Ripley also said the company’s Tribune-related divestitures would be “driven by the DOJ’s result,” not the FCC’s pending deregulatory proposals.

“At the end of the day, the FCC rules are helpful, and certainly we’re very pleased but that’s more of a long-term — a longer-term impact in terms of what we can do subsequent to Tribune,” Ripley said.

Sinclair representatives declined to provide additional details about its pitch for DOJ relief, including on how it was presented.

DOJ also declined comment.

The National Association of Broadcasters, and other broadcast station groups, though not participants in DOJ’s ongoing review of Sinclair’s Tribune deal, support relaxation of the department’s guidelines.

“NAB has long been on record asking the DOJ to expand the local advertising definition,” said Dennis Wharton, an NAB spokesman. “Broadcasters don’t just compete with broadcasters. In the real world, it’s fairly obvious local TV and radio stations compete for advertising dollars with cable, satellite and multiple other content delivery platforms.”

Industry research firm BIA/Kelsey divides the local $147.8 billion local advertising pie as so: broadcast TV, 13.4%, cable, 4.5%; digital and mobile’s 22.2%; radio, 9.6%; print newspaper, 8.3%; direct mail, 25.5%; and other, 16.5%

Industry sources said that if DOJ grants Sinclair’s wish, how much broadcasters will be able to grow will vary from market to market and depend on how large of a share of local advertising the TV station, cable, and any other competitors whose market shares are included in an expanded definition, have in a particular market.

Key broadcast industry attorneys said DOJ staffers have long supported focusing reviews of TV station mergers on reviews of broadcast TV’s local ad share alone, so it’s far from clear that Sinclair will get its way.

One media industry attorney with DOJ expertise said it was possible that the DOJ staffers could change their minds about the issue or that Trump administration DOJ appointees, including Makan Delrahim, the department’s new antitrust chief, might be persuaded to revise the longtime policy in the broadcast industry’s favor from the top down.

The FCC’s proposed ownership rule changes, which have been slated for a Nov. 16 agency vote, would permit a broadcaster to own two stations in every market, regardless of size, by eliminating the so-called eight-voice test.

In addition, the changes would ease the prohibition against owning two top-four stations in a market.

The FCC said it will consider allowing the combinations on a case-by-case basis.

The FCC’s changes also would affirm the ability of broadcasters to use joint sales agreements, often in combination with shared services agreements, to operate more stations in a market than they can own under the rules.

Broadcasters have been using JSAs to get around the FCC’s local ownership rule limits for many years.

Comments (11)

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Shenee Howard says:

November 9, 2017 at 9:07 am

If Trump and DOJ really are concerned about media consolidation, then this deal should be turned down. If it is allowed to proceed but AT&T/TW is not, the legal process will be interesting to watch.

Brian Bussey says:

November 9, 2017 at 9:57 am

counting cable dollars are a double edged sword because many cable advertisers are “zoned” to specific head ends.
Those advertisers have no interest in DMA wide distribution of their ads even knowing they are paying ten times the CPM for their zoned distribution. I have sold both. A big chuck of those cable dollars will never be available to broadcast. And they really don’t work all that well.

    Erik Stone says:

    November 9, 2017 at 9:59 am

    ATSC 3.0 allows to not only target by a geo location but by household, broadcasters not cable are the only ones that can utilize this tech……. this around the corner

    Veronica Serrano Padilla says:

    November 9, 2017 at 2:31 pm

    You seem to be a bit behind…cable is already doing this.

Julien Devereux says:

November 9, 2017 at 10:28 am

Sinclair wants the ownership limits to go away. As “Gomer Pyle” would say, “Surprise surprise surprise.”

kendra campbell says:

November 9, 2017 at 10:49 am

It’s time for DOJ and FCC to kick Sinclair to the curb. Enough is enough!

Sean Smith says:

November 9, 2017 at 11:25 am

C’mon guys.. television is an evolving business. Each process is a higher level, that is better than the prevous one. From cathode rays and a vacuum tube, to Philo T. Farnsworth and Vladimir Zworykin’s experiments, to RCA & Westinghouse’s competition to perfect the system, to CBS the first TV network, to WRGB-TV, to the first network link from NY to Schenectady, then to Philly and DC, to NTSC and 525 lines, to WCBW-TV & WNBT-TV, to the FCC Freeze of 1952, to the “7-7-7 rule”, to the UHF spectrum, to color TV, to film, to videotape, to microwave, to stereo TV sound, to satellite, to the internet, to mobile phones, to JSA’s, to DTV, to the spectrum auction, to ATSC… everything in television is an evolution. I’ve looked over the proposed rule making, and Sinclair’s Tribune proposal. I see it as a process where the weak cannot survive anymore, and there is nothing anybody can do about that. Viewer preferences are changing and the industry has to change to meet that. The rules change all the time, and this seems to be part of that evolution. The smaller companies cannot survive, because there is not enough slices of the pie. I see nothing inherently wrong with Sinclair-Tribune. If I were Tribute and could make a ton of money by selling to Sinclair, sorry boys… I’d cut bait and run. And you would too, if in that situation. You cannot take it with you.

alan britton says:

November 9, 2017 at 12:02 pm

Newsoldie, nice engineering perspective but the issue here isn’t about transmission technology but rather it’s about content, whom controls it, and the affect that control has on democracy.

Snead Hearn says:

November 9, 2017 at 12:14 pm

I don’t think I would use content as the left leaning media have tried to control content for years. We are allowing China to buy most of America and our production however the concern over Sinclair reporting through a conservative lens in lieu of a liberal lens seems to be causing more anxiety. Sinclair is trying to survive and position their company for the future. The FCC needs to approve with the divestures needed and move on to the AT&T/TW which has a lens of a different angle.

Debra Rein says:

November 9, 2017 at 3:50 pm

If Sinclair buys Tribune all our pets heads are going to fall off right? We will all be transformed into Orange Faced, Crazy Haired nutty President worshipers. I got it.

John Livingston says:

November 9, 2017 at 11:17 pm

I believe DOJ shouldn’t give Sinclair everything on a sliver platter they should tell Sinclair they have to divest in the 10 overlap markets meaning in West Michigan selling Fox17 and no sidecars and other places as well.

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