Killing Of Tegna Deal Underscores Rosenworcel’s Misconception Of TV Broadcasting

Harry Jessell

Standard General, controlled by Soo Kim and operated by Deborah McDermott, is not the greatest TV broadcasting company in the land.

But it is most certainly a capable one. Together, Kim and McDermott have built a strong record of running TV stations. Having assembled the financing to make a $8.6-billion deal for Tegna, they should have had the opportunity to close the deal and join the top ranks of broadcasters.

But last week, after mulling the deal for a year, FCC Chairwoman Jessica Rosenworcel unilaterally and wrongly denied the opportunity by ordering the agency’s Media Bureau to hold a formal hearing on charges leveled by critics of the deal. Two broadcast unions alleged the deal would lead to the loss of newsroom jobs, and cable and consumer advocates claimed that it would push up retrans fees and, in turn, cable sububscription fees.

Such a hearing is tantamount to a denial. It’s already been a year since Standard submitted the deal for FCC approval and a hearing would stretch things out another several months. Its highly unlikely Standard would be able keep its complex financial package from unraveling for that long.

The action came even after Standard did all it could to placate the critics, promising not to cut newsroom staff for two years or to use so-called after-acquired retransmission consent contracts to wring fat new retrans fees out of the cable operators.

Such promises should have been unnecessary.

In what industry in what capitalistic country does a merger or acquisition not lead to some job losses? The new guys always thinks they can do the work better, cheaper and faster.

And it does not necessarily follow that higher retrans fees will push up cable bills. Cable operators pay broadcasters $13 billion in retrans fees each year, but they hand over far more than that for a slew of cheesy cable networks that spew reruns and movies cluttered with so many ads as to make them unwatchable and such reality gems as Cheaters, Catfish: The TV Show and Ghost Adventures.

The cable guys could absorb higher retrans fees without raising rates by jettisoning a bunch of those overpriced nets.

I’d also point out, as Standard did to the FCC, that consumers are by no means locked into cable for TV. If they don’t want to pay more for cable, they can opt for the one of the generally cheaper online cable-like offerings such as Fubo and YouTubeTV, or any number of ad-supported or pay streaming channels or buy a broadcast antenna and receive dozens of broadcast channels off air for FREE.

BTW, these after-acquired contracts have been around for a long while now. Why cablers ever agreed to them is beyond comprehension. But the FCC’s job is not to save cable from being snookered by broadcasters in retrans negotiations.

So, as I said, Rosenworcel got promises that would seem to mitigate any concerns, but she decided they were not good enough. I guess Kim and McDermott forgot to pinky swear.

Of course, there was no need for Rosenworcel to rely on promises. If she had wanted, she could have come up with her own language for regulating staff cuts and retrans practices and made them conditions of formal FCC approval. Standard would ignore or circumvent the conditions at the risk of impairing its station licenses.

Now to the irony.

In the hearing-designation order, the FCC explains that its concerns about post-merger news jobs cuts are due to larger concerns about their impact on localism — that is, stations’ tacit obligation to provide local news and public affairs programming.

“Localism, along with competition and diversity, is a longstanding core Commission broadcast policy objective, which together forms the cornerstone of broadcasting,” the order says.

But there is no localism, there is no broadcasting, without retrans. It’s absolutely vital to the financial health of TV stations and all they do.

Don’t believe me? Here’s what the FCC hearing order says: “Over the last decade, the fees obtained from retransmission consent agreements have become an increasingly significant source of revenue for broadcast stations even while revenue from the sale of advertising time has stagnated or declined.

“Such retransmission consent fees have been estimated to account for approximately 40% of broadcast station revenue, with the remainder derived primarily from the sale of advertising.”

Exactly.

Rather than undermining broadcasters’ ability to wrest retrans fees from cable, Rosenworcel and the FCC should be looking at ways of undergirding it as a means of preserving that “cornerstone” of broadcasting — localism.

Bottom line is Rosenworcel’s rationale for interfering with the legitimate working of the marketplace is weak and unjustified. This makes me think that more is going on than can be gleaned from reading FCC filings. In other words, politics.

During the course of the interminable deal review, then-House Speaker Nancy Pelosi and Sen. Elizabeth Warren (D-Mass.) wrote letters to Rosenworcel calling on her to kill the deal for basically the same reasons that showed up in the hearing order.

Those letters could have been prompted by the broadcast unions or the consumer advocates that maintain close ties to the Dems.

The New York Post suggested in January that Bryon Allen, another media entrepreneur with a small group and big ambitions, was pressing Democratic lawmakers to squash the Standard deal so he could make a play for Tegna.

The Post story was prompted by an earlier one in the Hollywood trade Deadline that said Allen hosted a fundraiser at his home that attracted Pelosi and other top Democratic House leaders.

Allen has been trying to make a big score in broadcasting for years. His name comes up whenever a big prize, including Tegna, goes on the block. None would be surprised if he remerges once final words are said over the Standard deal.

I have no complaint about Bryon Allen. I know his station management team and it is as experienced and as able as Standard’s. But, if Allen is lurking about, Rosenworcel should not be using her office to advantage him over another.

Standard is not without Washington allies, not that they will do it any good now. NAB President Curtis LeGeyt said Rosenworcel was out of line for using a hearing designation that effectively cut the two Republican commissioners, Brendan Carr and Nathan Simington, out of the process.

But the two Republicans were not silent. They blasted the hearing order in a joint statement shortly after it was issued: “At this moment, the FCC should be working to encourage more of the investment necessary for these local broadcasters to innovate and thrive. It does the opposite today.”

Well said.

Harry A. Jessell is editor at large of TVNewsCheck. He can be contacted here. You can read earlier columns here.