Everybody in and around broadcasting believes that there will be another wave of consolidation over this year and next triggered by FCC Chairman Ajit Pai loosening the ownership restrictions. I’ve talked about it several times here since Donald Trump’s election.
But who will be the buyers? And who will be the sellers?
Atop the seller column is Tribune. A year ago, the troubled company began a top-to-bottom “strategic review.” So far, that has led to the spinoff of real estate and some non-broadcast assets like Gracenote.
Now, the expectation is that it will take advantage of the Trump-inspired deregulation to start selling its vast collection of TV assets that include news-producing stations in seven of the top eight markets, although none are Big Four affiliates.
On the buy side, most of the talk has focused on Sinclair, Nexstar and Gray. They led the last round of consolidation that ran from 2011 until the FCC shut down the station trading market early last year so it could conduct the incentive auction.
The only thing holding back Sinclair and Nexstar right now are the ownership rules that have effectively limited them to a household reach of 39%. Speculation is running high that Sinclair will make a play for as many of the Tribune stations as the rules and its finances allow.
Gray has plenty of headroom under the rules, but targets top stations in smaller markets.
In a note to her clients this week, Wells Fargo analyst Marci Ryvicker also includes Tegna on the list of possible buyers.
But what about the Big Four networks?
With the possible exception of CBS, I don’t see them as ready to pounce on the shopping opportunity that Pai may hand them.
When ABC passed on buying Allbritton’s WJLA Washington and its other ABC affiliates in 2013, it effectively declared to the world that it wasn’t interested in expanding in broadcasting anymore. Unlike CBS, NBC and Fox, ABC has had plenty of room under the FCC cap to grow if it wanted to. It just doesn’t want to.
NBC has shown few signs that it wants to buy.
It did push into Boston in January, stripping Ed Ansin’s WHDH of its affiliation. But it did so out of whole cloth. Because there was no full-power station available in the market (the combative Ansin surely wasn’t going to sell), NBC created an O&O by stitching together its regional cable channel with a couple of low-power stations. It’s going to be a while before we can gauge the wisdom of the move.
21st Century Fox CEO James Murdoch told analysts last month that Fox was not interested in more stations. “We really like the shape of our station business right now.”
But he also gave the company a little wiggle room. “There always may be affiliation swaps or other little bits and pieces around the edges.”
I wonder if that is enough wiggle room for Fox Televisions Stations President Jack Abernethy to try for some of Tribune’s large-market Fox affiliates. Those in Seattle and Milwaukee would be particularly appealing.
Over the past few years, Abernethy has gone after markets with teams in the NFL’s National Football Conference so that he can take full advantage of the Fox network rights to those teams’ Sunday games. Seattle and Milwaukee (Green Bay Packers) are two of the three AFC markets he doesn’t have.
So maybe Fox picks up “little bits and pieces around the edges.”
That leaves CBS.
When I interviewed CEO Les Moonves just before NAB last year, he reconfirmed his interest in expanding the CBS station portfolio.
“I think the station business is a terrific business,” he said. “We believe in it. We like running our owned-and-operated stations that are doing extremely well. If there wasn’t a limit by the FCC, we would own more stations.
“Frankly, it’s sort of ironic that a number of our station owners who were against us getting bigger are now sort of running up against some of the same [regulatory] walls as we did.”
I once thought such pronouncements were Moonves’ way of telling analysts he loves his TV stations and that they should, too.
But I have heard them so often now that I am beginning to think Moonves actually means it.
If we presume that he does, the question becomes what stations.
As much as Moonves talks about his love of TV stations, he talks about his love of the NFL and how vital it is to the well-being of his network. CBS holds the rights to the Sunday games of the NFL’s American Football Conference as well as Thursday night games.
So, given Fox’s buying strategy, CBS might look first at the AFC markets where it doesn’t already have an O&O. There are eight of those, and four are in top 30 markets where CBS likes to play — Houston, Cleveland, Indianapolis and Nashville.
Of course, there are nine other top 30 markets where CBS doesn’t have O&Os. I’m sure CBS would like the prestige and news synergies that would come from owning Tegna’s CBS affiliate in Washington, WUSA.
In addition to the current ownership cap, what restrains CBS, NBC and Fox is that collecting new O&Os is a messy affair. It can generate a lot of bad blood within the affiliate ranks.
To gain a new O&O, the network has to buy out an existing affiliate who may not want to sell. And if rebuffed, it has to buy another station in the market and snatch away the affiliation — affiliation contracts permitting, of course.
The CBS affiliates in those four AFC market I mentioned before — Houston, Cleveland, Indianapolis and Nashville — are owned by Tegna, Raycom, Tribune and Scripps, respectively.
Tribune may welcome a call from CBS about Indianapolis. I’m not sure how the others would react. I don’t see any of them as willing sellers, although they may sell if the deal is sweet enough or they thought CBS was going to run them over if they refused.
I’ve indulged in a bit of speculation here and it’s all based on the notion that Ajit Pai will follow through and restore the UHF discount in calculating groups’ reach under the national cap. I’m not entirely sure he will, despite the high expectations.
For all the dereg talk out of Chairman Pai since he joined the FCC in 2012, I just can’t believe he would make a move that would allow groups like Sinclair, Nexstar, Fox, NBC and CBS that are now stuck just below the current 39% cap to expand beyond 60%.That’s what restoration of the discount would do.If they were careful to buy only UHF stations going forward, Sinclair could go to 68% and CBS could go to 66.5%. Those percentages would shrink a bit for every market they entered by buying a VHF station whose coverage is fully counted rather than a discounted UHF station.
Restoring the discount is a radical move in a regulatory arena where incrementalism has prevailed for decades. But Pai may make the leap.
It’s been done before. The Telecommunications Act of 1996 took the national lid off radio, allowing groups to move into as many markets as they want and spawning super groups with hundreds of stations. I’ll leave others to decide whether that was a good idea.
Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here. You can read earlier columns here.
1. the radio deregulation act along with the repeal of the fairness doctrine are well on their way to destroying our American democracy. in my town, you cannot get a traffic report without having to listen to ultra right wing drivel. It’s like being a Christian in Saudi Arabia. we have at least 4 am stations bashing progressives 24/7. to counter that we get what 2 -3 hours a day of progressive opinion and one of those is a repeat?. We are a top five radio market. This is unconstitutional. It also motivates lunatics to shoot up pizza parlors. On another note, are we even sure some of the big TV groups actually plan on being TV broadcasters or glorified cable nets?? . If they don’t want to be in broadcasting they need to give up their licenses to someone that does.
lack of Fairness Doctrine doctrine destroying democracy; top 5 radio market with Traffic reports only on AM radio? This is easily the DUMBEST comment i”ve seen on TVNewscheck
That was a good thing to get rid of the fairness doctrine let the market handle what the listeners want on the radio. The left has failed on the radio guess no one wants to near smearing and the lies 24/7 I don’t listen to talk radio don’t want to near doom & gloom 24/7 if I do it’s sports talk radio that I listen to in talk.
I was surprise that FOX doesn’t want Sinclair to buy Tribune whole that was interesting although I think it will be just some TV stations not the whole thing as being reported. I feel FOX17 is going to be sold it isn’t matter of if it’s matter of when.