Sinclair Reups With Fox, Gets WUTB Option

Sinclair Broadcast Group said today it has extended for five more years Fox network affiliations for 19 stations that Sinclair owns or programs, including Sinclair’s Baltimore flagship, WBFF.

The new agreement goes into effect Jan. 1, 2013, upon the expiration of the existing agreements, and expire Dec. 31, 2017.

For the WBFF renewal and for an option to buy Fox’s WUTB Baltimore, Sinclair agreed to pay Fox “a maximum” of $52.7 million. Sinclair has nine months to exercise its option on WUTB, between July 1, 2012, and March 31, 2013.

Fox has been demanding that all of its affiliates pay fees or so-called reverse compensation when their agreements come up for renewal. Other than the $52.7 million payment, details of Sinclair’s reverse comp were not disclosed. Sinclair said only that the “rates and increases” were consistent with the marketplace for Fox stations

The agreement also gives Fox options to purchase at fair market value Sinclair MNT affiliates in three of four designated markets: Raleigh, N,C, (WRDC/MNT and WLFL/CW); Las Vegas (KVMY/MNT and KVCW/CW); Cincinnati (WSTR/MNT); and Norfolk, Va. (WTVZ/MNT). The options are exercisable between July 1, 2012, and March 31, 2013. If Fox exercises the options to buy any of the stations, the $52.7 million that Sinclair is paying Fox for a Baltimore affiliation falls to $25 million.

“We are very pleased to have reached agreement to renew all of our affiliations with Fox Broadcasting, allowing us to continue as the largest Fox affiliate group,” said David Smith, Sinclair CEO-president.

“For us, a pivotal aspect of the agreement was securing our affiliation on WBFF-TV…. Our Fox affiliate in Baltimore is one of our most important television assets, and over the years the station has built a strong local brand. We believe that this affiliation was at risk, and negotiated with Fox to acquire the option to purchase FTS’ station, WUTB, in Baltimore in hopes that acquiring this station would solidify WBFF’s position as a Fox affiliate in Baltimore in the long term.”

Smith continued: “In addition to securing the Baltimore affiliation, the terms of the agreement include the granting of options to FTS to purchase our CW and MNT affiliates in three of four markets at current valuation multiples. Any sales under the option agreement would be in line with our current focus to lessen our exposure to MNT and CW stations, particularly in markets where we do not have a duopoly structure with a ‘big four’ network.

“As expected, we agreed to continue to pay Fox annual program license fees, which increase annually. We believe that the current retransmission rates that are being paid to us by the multichannel video program distributor (MVPD) providers such as cable, telecom and satellite are significantly below market value based on the fees paid to cable channels and, as these contracts renew, we expect these revenues to provide us with the resources to pay those programming license fees.

“Our goal is to grow our share of MVPD programming payments to reflect more closely the audience share and appointment programming we bring to the MVPDs. We believe the best and quickest strategy to achieving that goal is by having our broadcast network partners’ and our interests aligned.”

KFXA, the Fox affiliate in Cedar Rapids, Iowa, to which Sinclair provides certain non-programming related services, is also renewing its affiliation agreement for the same term.

Sinclair Broadcast Group owns and operates, programs or provides sales services to 74 television stations in 45 markets. Sinclair’s television portfolio consists of 20 Fox, 18 MNT, 14 CW, 11 ABC, 9 CBS, 1 NBC and 1 Azteca station, in addition to 82 subchannels. Sinclair’s television group reaches approximately 26.3% of U.S. television households and is affiliated with all major networks.