KSFY-KDLT: A Model Of Top 4 Consolidation

Of all the ancient FCC regulations affecting television station ownership, one of the most contentious continues to be the prohibition against combining  two of the four highest rated stations in a market.

With roots going back to the 1960’s, even longer than the newspaper/television prohibition, the Top Four rule has become a touchstone for both broadcasters and anti-consolidation public interest groups.

Broadcasters make the case that in today’s fragmented world, where new players such as Google and Facebook have become genuine local competitors, it makes no sense to hamstring broadcasters’ ability to compete. Anti-consolidation groups claim multi-station ownership is nothing more than a power grab by big business.

The primary claims of anti-consolidation forces are that any elimination of “voices” equates to loss of market services and less attention to community interests — charges especially galling to broadcasters, who point to their track records of local news coverage and community service as rebuttal.

Shortly after confirmation in 2017, newly named FCC Chairman Ajit Pai waded into deregulation on several fronts. As an FCC commissioner, Pai had been a vocal advocate of deregulation, so it was no surprise that when he became chairman the FCC took a hard look at the newspaper/television/radio crossownership rules, as well as in-market television station consolidation. When new regulations were issued late that year, the FCC did not completely eliminate the Top Four rule but did offer to look at in-market television station consolidation on a case-by-case basis.

Using its regulatory authority for failing stations, the FCC had granted a number of Top Four duopoly waivers over the years, but there was no precedent for Top Four non-failing stations to merge. The new rules changed that.

Gray Applies To Combine KSFY And KDLT

Sioux Falls, S.D., is a sub-100 television market, but still large enough to provide a full range of stations and affiliations. Since signing on in the early 1950’s, CBS affiliate KELO (Nexstar) has dominated local news ratings. ABC affiliate KSFY (Gray) has been a secondary player, while NBC affiliate KDLT (Red River) struggled in third place. Fox affiliate KTTW, owned by a group of local investors, provides no local news programming.

In May of 2018, Gray Television, owner of KSFY, announced the purchase of KDLT and applied for approval under the new FCC regulations. Thus began one of the longest approval processes in FCC history. The FCC took 16 months to approve. Simultaneously, the Department of Justice took 13 months.

Why so long? The FCC never stated a reason, but legal challenges to the new FCC rules, as well as higher profile cases, such as the failed Sinclair acquisition of Tribune, may have taken attention away from Sioux Falls.

The process took so long that in August of 2019 Harry Jessell, TVNewsCheck co-founder and editor at large, took the FCC to task in an editorial saying FCC inaction was hurting both station owners. He cited the distress of the Kunin family, owners of KDLT, as well as their station’s entire staff that had been living in limbo for the past 15 months.

On Sept. 23, 2018, a three-judge panel of the U.S. Third Circuit Court of Appeals issued a 2-1 decision overturning the new FCC rules, saying the effect on minorities had not been adequately addressed. The next day the FCC, citing compelling public interest and their own authority rather than the overturned rules, approved Gray’s purchase of KDLT.

The approval was significant because even though KDLT’s news department was on the verge of elimination, the station’s NBC programming was doing well. KDLT did not qualify as a failing station.

Whether the FCC chooses to appeal to the Supreme Court or rewrite the regulations, it seems likely Top Four deregulation will eventually happen. The KSFY-KDLT case matters because it provides a window on what future approval standards might look like. Gray obviously achieved the new standard since the FCC took the extraordinary step of approving a precedent setting purchase under their existing authority.

Why KSFY/KDLT is Important

Whether the FCC chooses to appeal to the Supreme Court, or rewrite the regulations, it seems likely Top Four deregulation will eventually happen. The KSFY-KDLT case matters because it provides a window on what future approval standards might look like. Gray obviously achieved the new standard since the FCC took the extraordinary step of approving a precedent setting purchase under their existing authority.

What Gray Promised

In essence, Gray stood the multi-voice assumption on its head by arguing the public would be better served by single ownership of two stations than by separate voices. While every market is different, this concept, that community interest will be better served by a duopoly, goes to the heart of interest group objections. It is a bold claim, but one Gray backed with specific statistics and measurable promises.

Among other things, Gray promised to expand local news up to 35%, including expansion into new time periods; use the combined transmitter facilities of KSFY and KDLT to increase market coverage; offer new news content that had previously not been available and create a news organization that would serve as a genuine competitor to KELO.

New content included the building of a news bureau in Pierre, one of the few state capitols without a local news station. The bureau would also serve the Gray station in Rapid City.

Having approved the merger, the FCC will obviously be watching Sioux Falls to see how well Gray’s promises are kept and whether or not the duopoly will be in the public interest over time. How Gray performs will affect other approvals in the future, so it is worth taking a closer look at the KSFY-KDLT merger and how it is playing out.

The Takeover Process

Having waited 16 months for approval, KSFY General Manager Jim Berman was acutely aware of the toll an unsure future had taken on his staff, so he could imagine what KDLT employees had been going through. Most, no doubt, assumed they would be losing their jobs, so Berman’s first move after the transaction closed was to visit KDLT.

Calling the staff together, he told them that no personnel decisions had yet been made. “I am now your general manger, too. I’m going to move into the building and get to know each of you before deciding how to staff the new organization.”

This was an unusual way to start an acquisition, but Berman explains he wanted “the best” from both stations. KSFY had recently moved into new, modern facilities, including a newsroom with space for expansion. Fulfilling promises to the FCC would require a larger staff, so KDLT was a logical place to start looking. By temporarily taking an office in the KDLT building, Berman was able to calm the waters while evaluating employees.

As it turned out, KDLT staffers from numerous departments were invited to join the KSFY team. Dannette Tobin, a former KDLT sales manager who is now KSFY’s local sales manager, found the experience positive, saying: “It has been nothing less than amazing to watch sales and news mold themselves into each other’s worlds. We have something so unique … and tools no one else can offer.”

Meteorologist Tyler Roney, another former KDLT employee, said: “They never once made me feel like the new kid on the block. Everyone was incredibly welcoming.”

Part of the reason for KDLT staff enthusiasm was Berman’s leadership in molding two different cultures, neither with a history of winning, into an entirely new one prepared to take on KELO. Berman’s infectious belief that KELO can be eventually beaten, backed up with added people, new facilities and news expansion, has created staff energy.

But what about KDLT staffers not chosen to be part of the new organization? As a major group owner, Gray opened the door for KDLT employees not chosen to apply for openings at other Gray stations, including those stations in larger markets.

Displaced Sioux Falls employees willing to move were given priority. This was not an FCC promise, so the company was under no obligation to do so. It happened after Gray’s corporate H.R. group informed its other stations that high quality candidates were available.

Gray says station managers throughout the company snapped many of them up. Hannah Messier, a former KDLT weekend meteorologist, for instance, is now a weekend meteorologist at Gray’s WCTV in Tallahassee.

As Gray continues to expand news services over this year and next, Berman expects the final news staff to equal the combined pre-merged KSFY-KDLT news departments.

Dakota News Now

There are currently three active models around the country where one news department serves two stations. The first retains separate call letters. The second combines all newscasts under the stronger station’s call letters. The third model, first pioneered in Jacksonville, creates a new, all-encompassing brand. Berman chose the third model, branding all newscasts Dakota News Now.

Dakota News Now was chosen because it emphasized both regional coverage and immediacy to viewers, while giving the combined staffs something fresh to rally around.

Since KSFY had just moved to a new facility, including a modern newsroom, the new branding and facilities helped bring the new staff together, injecting excitement into the combined team.

News Dayparts

Before the combination, both KSFY and KDLT were airing traditional news blocks. The new afternoon schedule offers continuous local news from 4 until 7 pm.

4:00 – 5:00 pm        KSFY   Ellen

                                KDLT  Dakota News Now

5:00 – 5:30 pm        KSFY   Dakota News Now

                               KDLT  Jeopardy!

5:30 – 6:00 PM        KSFY   ABC News David Muir

                                KDLT  Dakota News Now

6:00 – 6:30               KSFY   Dakota News Now

                                KDLT  NBC News Lester Holt

6:30 – 7:00               KSFY   Wheel of Fortune

                                KDLT  Dakota News Now

Significant additional news expansion is planned for other time periods, as well as weekend news. For competitive reasons, Gray has not yet publicly released details.

Broader News Coverage

A larger news staff means Dakota News Now is able to offer both a wider range of news coverage and more in-depth stories. Berman emphasizes this would not have been possible using only KSFY’s original staff. Moreover, the additional newscasts allow Dakota News Now to better compete against market leader KELO, which prior to the merger broadcast 12 more hours per week of local news than either KSFY or KDLT.

The station’s new news bureau in Pierre will bring state coverage previously not available to either station. Shortly after the KSFY-KDLT merger was approved, KELO announced it would be hiring a full-time reporter dedicated to covering the state capital. The competitive response had begun.

Technical Facilities

Because South Dakota is sparsely populated outside its cities, the Sioux Falls DMA is quite large. It’s so large that neither KSFY nor KDLT fully covered the market prior to the merger. One third of the market, over 200,000 people, could not receive both stations over the air.

Gray was able to use subchannels on both facilities, as well as a number of translators, to cover the entire market. As a result, more than 150,000 people who could not receive either ABC or NBC over the air can now receive both signals. This also brings KSFY and KDLT up to par with KELO whose two full-power satellite stations allowed it to be the only station (until the KSFY-KDLT merger) that blanketed the entire market with an over-the-air signal.

In addition to improving over-the-air coverage for both stations, Gray will soon install a generator at the main KDLT transmitter site, for the first time ensuring uninterrupted service during a power outage.

Where Things Stand

Six months into the merger, morale at the combined stations appears to be high. The hiring of a number of KDLT employees and placement of others within the company avoided what could have been a serious blow to staff attitude. Instead, Berman’s leadership, along with a new facility, combined newsroom and new newscast branding have all contributed to an energized work force.

Employees have also been given reason to believe the company is serious about finally competing head-to-head with KELO. By its nature, increased competition is always beneficial to viewers. KELO’s effort to make a preemptive move in Pierre shows that Nexstar is prepared to also up its game, evidence that market competition has clearly increased.

The key question, of course, is whether the public will be better served by a duopoly than two separate television station owners over the long term. Competition is the lifeblood of American enterprise. By showing the FCC how competition could be increased by a top four duopoly, Gray has set a new precedent. Its success will be judged, as it should be, by Sioux Falls viewers.

Time will tell if the KSFY-KDLT combination achieves its goals, but according to Carleen Wild, a Dakota News Now anchor and former KDLT employee: “We’ve got such a great mix now that we didn’t have the resources for before, I believe on so many levels our teams and our viewers are better off for it.”

Hank Price is a media consultant, author and speaker. He is the author of Leading Local Television, a handbook for general managers. He spent 30 years managing TV stations for Hearst, CBS and Gannett, including WBBM Chicago and KARE Minneapolis. He also served as senior director of Northwestern University’s Media Management Center and is currently director of leadership development for the School of Journalism and New Media at Ole Miss.