Nexstar’s Sook To FCC: Set Cap At 78% ASAP

Nexstar Media CEO Perry Sook on Tuesday called on the FCC to move on its stalled review of the national TV station ownership rules and “codify” the cap at 78% of TV homes “as soon as possible.”

“The 78% represents the compromise position that the NAB and the members of its television board have endorsed unanimously to the FCC,” Sook said at a Media Institute luncheon in Washington.

“It also represents the status quo, as this has effectively been the law of the land since 2004, except for about 14 months of the Wheeler administration at the FCC.”

To help illustrate his point, Sook brought along a baseball cap with “78%” on the front.

Today, the cap is actually 39%, but with the UHF discount that was in effect before the Wheeler FCC repealed it and that the Pai FCC reinstated, it can go as high as 78%.

That’s because the UHF discount allows a stations group, in calculating its aggregate coverage, to cut in half the coverage it gets from markets served only by UHF stations.

Although the effective cap is, as Sook said, 78%, broadcasters would like the Pai FCC to lock it in at that level so that some future FCC with a Democratic majority cannot easily reset it at 39% by once again repealing the UHF discount. What’s more, because most station groups have fully counted VHF stations is some markets, they cannot actually reach the 78% mark. Most would max out in the 60%-70% range.

The FCC launched its rulemaking on the national cap in December 2017, but for reasons only FCC Chairman Ajit Pai understands it has not yet brought it to fruition.

Sook is taking advantage of the “status quo” with his pending deal to buy Tribune Broadcasting for $4.1 billion. If it closes as planned this fall, Nexstar will swell to 216 TV stations in 118 markets covering 62.9% of TV homes. That is Nexstar’s maximum coverage under the current rule. It cannot get any bigger that it is now unless the FCC acts.

In the speech, Sook went on to make the case for a 78% cap for all.

“I would argue that it is in the national interest to foster and promote the local television industry and our local journalism and allow us to effectively compete against the unregulated behemoths that have unfettered access to 100% of the households in the U.S., not just 39% or even 78%.”

With sufficient size, Sook said, station groups can continue to provide two essential services. The first is local news and information, he said.

“The second … is helping local businesses grow. Whether we are using over-the-air, online, a D-1, D-2 or mobile, social or the other local media assets in which we have invested, these are all tools in our toolbox to provide solutions and facilitate B to C communications for local advertisers in the markets we serve.”

Sook suggested that it is unfair that TV stations have to labor under structural and content regulations while digital competitors that are siphoning off more and more local advertising dollars do not.

“When a woman committed suicide in a live stream on Facebook two years ago, the excuse was ‘it was the weekend and we didn’t have staff.’ We, as local television broadcasters, don’t get that pass, and neither should they.”

According to BIA Advisory, he said, local broadcast TV will reap just 13% of local marketing dollars, while digital media gets 30%. And, according to Nexstar’s own research, he said, 47% of the group’s advertisers are also buying ads on Facebook.

Sook noted that there is a side benefit to allowing at least Nexstar to get bigger.

“With the last four companies we have bought, we have sold a total of 10 television stations to minority buyers, becoming the largest source of ‘deal flow’ to minority owners in television over the last 10 years.

“As I committed to the MMTC [Multicultural Media, Telecom and Internet Council] two years ago, and made good on that promise, if our industry is deregulated and our company can continue to grow, I again publicly commit to you that I will continue to create more opportunities for minority buyers as part of our future processes.”