2014 In Biz, D.C., Programming, New Media

If 2013 was the year of TV station deals, 2014 goes down as the year of digesting those deals.

Much of that was FCC induced, as the crackdown on JSAs and SSAs required a number of groups — Sinclair, Gray, Media General, Nexstar and Gannett among them — to shed stations.

While it would have been hard to match 2013’s $8.7 billion deal total, it was still an active year in M&A, with nearly $5 billion in transactions announced.

Two noteworthy big deals: The $1.6 billion Media General-LIN merger, announced in March, and the E.W. Scripps-Journal Communications merger, announced in July.

As Wells Fargo analyst Marci Ryvicker notes, the market’s still open to blockbuster deals and there will continue to be smaller transactions as groups look to rationalize their portfolios and abide by the FCC’s tougher stance on JSAs and SSAs.

The FCC spectrum auction may have been delayed, but the Greenhill & Co. report the agency issued on potential spectrum value generated a lot of buzz. Meredith, Tribune,  CBS and Fox are among those keeping their options open.

While M&A continues as an overarching theme, retransmission issues were a hot topic in 2014 as sometimes rancorous negotiations led to short-term blackouts.

CBS went dark on Dish, as did Hearst,  Raycom on DirecTV, while Nexstar and Dish managed to broker a deal in triple overtime.

CBS boss Les Moonves galvanized attention in February when he said that the network expects to collect $2 billion in retrans by 2020.

Even as station groups continue to ratchet up retrans payments from MVPDs, the networks themselves are collecting an ever-increasing chunk of that in the form of reverse compensation.

Wells Fargo’s Ryvicker projects that retrans revenues could hit $12 billion by 2019, with networks taking 65% of that.

The flip side, at least where affiliates are concerned, is that reverse compensation to top networks looks to increase from about $1.5 billion in 2015 to just under $3.5 billion in 2019.

That’s putting pressure on station groups.

The wild card in all of this is the accelerating digital development. Everyone’s still trying to figure out the calculus, but one thing is clear: Cord cutting is increasing, broadcast and cable networks are pushing streaming and station groups are grappling with an uncertain future.

Streaming is a key catalyst in broadcast television’s transition to … something else. It’s not just Netflix, Hulu, Amazon and other non-traditional players altering the landscape.

Whether linear live streaming of a station is the holy grail remains to be seen. Nonetheless, ABC, CBS and Fox — so far NBC is behind the curve — are moving in that direction.

CBS All Access is that network’s initial foray. However, at $5.99 a month and lacking NFL football for the time being, that service presents challenging economics to station groups, though they’re in line to share some portion of that subscription fee.

Meanwhile, ad dollars continue to migrate to digital, core advertising revenue growth in broadcast is tepid at best and absent the cyclical political ad bonanza, the outlook verges on grim.

What’s a station group to do?

Raycom Media has been growing its own proprietary programming for several years and intends to expand that. 

At Sinclair, the largest publicly held station group, vertical integration and ATSC 3.0 are key components of a solution. By adding proprietary programming, including NewsChannel 8, American Sports Network and other elements to its stable, Sinclair takes a firmer grip on the reins of its destiny.

Sinclair, through ONE Media, also is pushing hard for new broadcast technical standards that would help level the playing field with wireless, MVPD and telecoms.

WASHINGTON

Citing uncertainties raised by broadcast industry lawsuits and other complications, the FCC late this year postponed its planned incentive auction from 2015 until 2016.

The auction, which an FCC-sponsored report by Greenhill & Co. predicted could generate an eye-popping $45 billion, is intended to repurpose  broadcast spectrum for smartphones and other wireless services. The FCC auction regs are being challenged in lawsuits filed by the National Association of Broadcasters and Sinclair Broadcast Group.

An FCC official said the agency believed the auction rules would ultimately be upheld by the courts but that the auction had to be put on at least temporary hold to accommodate the court review and other factors.

After stepping in as FCC chairman in 2013, Tom Wheeler previously postponed the auction from 2014 until 2015.

FCC officials are hoping that the Greenhill report’s forecasts of generous payouts will encourage station participation.

Still, some industry sources are concerned that new auction regulations under consideration by the FCC could put a damper on auction payouts, discouraging broadcasters from putting their channels up for bid.

In its lawsuit against the FCC, the NAB alleges that the agency’s auction regulations fail to provide adequate protection to the many broadcasters who are expected to refuse to participate in the auction and could be forced to move to new channels in the auction’s wake.

In a filing at the FCC late this year, the NAB also said that $1.75 billion that Congress provided to reimburse broadcasters for auction-related moving expenses could leave broadcasters on the hook with $850 million of moving expenses to pick up on their own — unless the agency changes its existing channel repacking plan.

Also this year, broadcasters blocked some ambitious retransmission consent reforms being promoted by the pay TV industry.

Nonetheless, the Satellite Television Extension and Localism Act reauthorization, or STELA, signed into law by President Barack Obama on Dec. 4 included some reforms, including a provision that bars independently owned stations in a market from coordinating their retrans negotiations.

STELA, among other things, also directs the FCC to review a key standard the agency uses to determine whether to intervene in retrans negotiations.

The FCC also nibbled away at broadcast retrans rights on its own, including through a vote in March to bar two or more separately owned Top 4 broadcasters in the same market from negotiating retransmission consent deals together.

The FCC subsequently eliminated its sports blackout rule — a regulation that has barred cable and satellite TV operations from airing sports events that have been blacked out on a local TV station.

Communications attorneys said that the vote could be seen as yet another step in an agency effort to undermine broadcast programming exclusivity — a linchpin of the broadcast industry’s retransmission consent rights.

The FCC has also sought comment on whether to eliminate two agency rules that make it easier for broadcasters to protect the exclusivity of their syndicated and network programming.

Like the sports blackout rule, the syndicated exclusivity and network nonduplication rules effectively bar pay TV operators from importing broadcast signals into a market with the same programming as local stations.

Without the rules, broadcasters would still be able to protect the exclusivity of their programming, but would have to rely on the courts, instead of the FCC to enforce the protections, adding to the hassle and expense for broadcasters.

Also this year, the FCC voted to eliminate joint sales agreements in which one station sells 15% or more of the advertising time of another separately owned station in the same market.

The new rule also requires existing JSAs generally to unwind within two years, unless the broadcasters involved can persuade the FCC that a particular arrangement genuinely serves the public interest.

However, a key STELA provision gives broadcasters with JSAs six additional months to unwind the deals than allowed under the FCC’s rules.

On a related front, the FCC is seeking comment on whether to relax other agency regulations limiting broadcast ownership rights. In addition, the agency is seeking comment on whether broadcasters should be required to fully disclose details about shared services agreements and whether additional regulations should be imposed on SSAs.

SYNDICATED PROGRAMMING

The year 2014 is ending for first-run broadcast syndication quite unlike it began, with an underdog court show outshining and outlasting its heavily hyped competitors.

Judge Judy spinoff Hot Bench (CTD) from creator Judge Judy Sheindlin, which just about no one had guessed would be this year’s rookie hit, debuted strong in September and has continued to do well with a 1.5 household rating this season through November and a 0.8 women 25-54 rating, based on Nielsen data.

The show is outperforming every other rookie, despite largely airing on lower rated stations like CBS-owned duopoly WLNY New York. For 2015, the show has been renewed and is securing upgrades, including to WCBS New York.

Meantime, the Meredith Vieira Show from NBCUniversal debuted in the fall with hopes it would be a solid lead-in for NBCU’s Steve Harvey. It’s a modest performer so far with a 1.2 household rating and 0.6 women 25-54 rating. Still, it has been renewed for a second season by launch group NBC Owned Television Stations.

The jury is still out for a second season of Debmar-Mercury game show Celebrity Name Game with Craig Ferguson, who is expected to launch a half-hour syndicated talk show in 2015. Celebrity has a 1.2 and a 0.7 so far this season.

Warner Bros.’ panel talk show The Real (1.0, 0.7) has not yet been renewed and neither has Trifecta Entertainment court show Judge Faith (0.7, 0.3).

Rohrs Media Group’s The Pinkertons, which has brought back one-hour original dramas to broadcast syndication, hasn’t been renewed yet.

The year was notable for a few hoped-for successes that stumbled. Queen Latifah (SPT) started its second season in the fall with a new executive producer. But, in November, the show was canceled. Earlier in the year, Bethenny (WBDTD) was canceled and, after having been initially renewed, so was late night show Arsenio Hall (CTD).

The year also had false starts, like a Star Jones panel talk show that E.W. Scripps was developing. And, last January, CTD tested conflict show Serch with MC Serch on Tribune stations. But it didn’t move forward.

The syndicated TV business also lost its ad sales association, the Syndicated Network Television Association, which closed down in February.

Meantime, 2015 is going to be a pretty low-key year, at least in first-run syndication, with only a handful of shows expected to move forward.

Warner Bros. is just about finished clearing Crime Watch Daily, including on launch group Tribune Media stations. The show, which focuses on local crime stories, is being developed as a news lead-in.

Disney-ABC’s panel talk show The FAB with co-host and executive producer Tyra Banks is also securing clearances. Launch group ABC Owned Television Stations in October cleared it in about one-fourth of TV homes. Its prospects got better in November when CTD shuttered its panel talk show Man in the Middle with Jerry O’Connell, which the distributor had been selling to stations.

The Craig Ferguson talk show has not been confirmed yet by Tribune Media, which is expected to be the show’s launch group if it moves forward.

And NBCUniversal is out selling Crazy Talk with co-hosts Ben Aaron and Tanisha Thomas. It is being developed as a lead-out for conflict talk shows like NBCU’s Maury. No clearances have been announced. 

BROADCAST NETWORK PROGRAMMING

On primetime TV, the broadcast networks are having a rough year, due in part to increasing competition from streaming services like Netflix and cable competitors such as AMC’s The Walking Dead, one of the year’s most-watched TV shows.

NBC is No. 1 thanks in part to its Sunday Night Football. The network has a 2.9 adult 18-49 rating so far this season. But it’s down 7.5% from the same time last year. NBC’s singing competition The Voice, which wrapped its season on Tuesday, continues to do well. However, its Peter Pan Live! special in December was a disappointment with half the viewers of last year’s Sound of Music Live!.

CBS, which launched Thursday Night Football this season, is No. 2 with a 2.5 demo rating. It’s down 5.7% year to year.

ABC is No. 3 with a 2.4 rating, up 1%. The network has the season’s No.1 rookie drama, How To Get Away With Murder. ABC stumbled with a number of other newcomers, like the short-lived Manhattan Love Story.

Fox has been suffering the decline of reality franchise American Idol. So far this season, it has a 2.1, down 15.1% year to year.

The CW is having a good year on the strength of ongoing shows such as The Vampire Diaries and new hits Jane the Virgin and The Flash. It has a 0.9 adult 18-49 rating this season, up 3.6%.

NEW MEDIA

The threat to broadcasters from online streaming services led by Aereo looked to turn in broadcasters’ favor this year after the Supreme Court in June rejected Aereo’s claim that it is an antenna rental service, saying that Aereo is “substantially similar” to a cable system and any differences are “not adequate” to excuse it from traditional cable regulation — in other words it can’t air station signals without compensation.

In the wake of the decision, Aereo revamped its strategy, saying that if the court says it’s a cable system, then that means it’s entitled to the compulsory license just like any conventional cable system. That didn’t work, as appeals courts and the Copyright Office said in July that it “does not believe Aereo qualifies” to be categorized as a cable system “and will not process Aereo’s filings at this time.

Aereo made various appeals and lost, then asked the FCC to change its definition of a multichannel video program distributor to help it find a way to resume operations. In October, A federal judge barred Aereo from streaming over-the-air TV shows in real time to subscribers’ smartphones and tablets, but cleared the way for the company to resume offering its remote DVR service.

In November Aereo shut down its Boston office and later filed for voluntary Chapter 11 reorganization at the U.S. Bankruptcy Court in New York due to “the uncertain regulatory and legal climate” following the Supreme Court’s decision.

Broadcasters still doubling as newspaper publishers began distancing themselves from that troubled industry in 2014, beginning with The E.W. Scripps Co. in July. The Cincinnati-based company announced a merger with Journal Communications that would see its combined 34 TV stations operating under the Scripps name, while spinning off the companies’ respective newspapers into a new company, Journal Media Group. Scripps’ aggressively entrepreneurial digital team will remain with the broadcast side after the merger, slated for approval in early 2015.

Gannett Co. followed in August with news that it was reorganizing into two publicly traded companies and also spinning off publishing from its broadcast and digital divisions (and at the same time acquiring full ownership of the lucrative Cars.com). Tribune Co. also spun off its embattled papers as the Tribune Publishing Co. in August, none of which emboldened hopes for a print industry still unable to staunch its heavy post-recession losses with sufficient digital revenue.

In another Scripps milestone, the company launched a TV news site’s first-ever digital paywall in January at WCPO, its Cincinnati station. Taking a page from newspapers’ playbook, the reframed “WCPO Insider” experience offered paying subscribers access to exclusive digital content, including interactive packages, deeper business and cultural reporting and member benefits including gift certificates for local businesses. No word from Scripps as to how many subscribers have taken the $79.99 plunge for annual access, however. 

This is Part 2 of our four-part 2014 Year In Review special report. Read the other parts here.