Wheeler’s Diversity Claim Is A Fantasy

FCC Chairman Tom Wheeler this week told Congress why he is so gung-ho about outlawing the joint sales agreements that let broadcasters operate second stations or so-called sidecars in markets where FCC rules say they cannot outright own them.

The JSAs and companion shared services agreements undermine ownership of stations by minorities and women, he said. Such new entrants can’t outbid big established broadcasters who enjoy great efficiencies in running multiple stations in markets.

“One of the results [of his proposed JSA crackdown] … will be the opening up of broadcast licenses for minorities, women, small entrepreneurs, because they’re currently being sucked off the market,” the chairman said.

Wheeler is expected to make his move on Monday with the support of the two other FCC Democrats, Mignon Clyburn and Jessica Rosenworcel.

The minority angle sounds good and gives Wheeler’s initiative an ennobling quality. Who wouldn’t want to see more TV stations in the hands of women and minorities? They were shut out in the old days when the FCC was handing out licenses to white men for free.

Right now, I don’t believe African Americans own more than a handful (half a handful?) of the nation’s full-power commercial TV stations. But the notion that tightening up the ownership rules will free up stations that minorities and women will rush to buy and that broadcasting will experience a era of true programming diversity is pure fantasy.

TV broadcasting is no longer a business for small operators, regardless of their gender or color. It’s a business for behemoths with dozens of stations and hundreds of millions in revenue. To deal with the MVPDs and the broadcast networks, you need muscle.

The industry is consolidating rapidly. Just last week, Media General and LIN Media announced they were getting together in a $1.6 billion deal. In a  conference call with security analysts, LIN CEO Vincent Sadusky emphasize the need for scale. The “industrial logic” is compelling, he said.

One of the stories behind the consolidation wave is that private equity firms are clearing out, making way for the strategic buyers — that is, the mega-groups like Sinclair that know a thing or two about broadcasting and have sufficient weight.

The business is rife with rumors of more deals to come, despite the hurdles that changes to the JSA rules may erect.

There may be no better-run station group than the Post-Newsweek Stations. But owner Graham Holdings spun off one station (WPLG Miami) two weeks ago and station trading insiders anticipate that Graham will eventually give in to the importuning of the bigger groups and sell its remaining five.

Why? Because it is just too small to sit at the negotiating table with programmers and cable distributors 10 times its size and compete with other TV groups three or four times its size.

Granted, if Wheeler wrecks all the existing JSA/SSA duopolies, the one-time sidecar stations might become available and some minority and women may take a shot at them. But such deals will be few and far between and they will be mostly in small markets.

The real obstacle to entering the broadcasting business is not the lack of stations to buy, but money. And I just don’t see investors and banks lining up to back new small entrants who think they can make a go of it. The business had gotten too tough.

Sidecar stations make a lot of business sense as sidecar stations. But as standalone operations, many are marginal at best.

Wheeler has suggested that the FCC may approve sharing arrangements going forward, if the parties can show that they contribute to “the diversity of voices” in some fashion. That’s a fine idea.

I suppose that one way that a broadcaster could demonstrate a commitment to diversity is to bring in minorities and women and set them up as owners of sidecar stations while preserving their say over programming matters.

Sinclair set up just such a deal with Armstrong Williams, an African-American entrepreneur and broadcaster. As part of its deal to acquire Allbritton Communications, Sinclair said it would spin off WMMP Charleston, S.C., to Williams, but keep it in the Sinclair family though a JSA and SSA.

Ironically, in any effort to save the Allbritton deal, Sinclair last week said it was terminating its deal with Williams and would sell the MNT affiliate to a completely independent party. So much for that little bit of diversity.

By the way, if Wheeler really believes that the availability of more stations would lead to greater diversity in ownership, he ought to rethink the incentive auction.

That policy’s goal is to eliminate as many TV stations as possible by encouraging their owners to sell their spectrum to wireless broadband carriers, which the FCC concluded five years ago will put the spectrum to better use.

Speculators like NRJ, OTA Broadcasting and Lotus have been going around buying up stations — most in or around big markets — and waiting for the day they can sell them for a fat profit in the FCC auction.

It’s safe to say that other broadcasters are keeping their stations off the trading block in hopes of an incentive auction payday.

If Wheeler called off the incentive auction tomorrow, stations now heading for auction would become available to all kinds of buyers, including minorities and women.

It doesn’t seem right, does it?

For the sake of diversity, Wheeler is willing to disrupt broadcast operations in dozens of markets, upset carefully drafted business and financial plans and devalue broadcast stocks. But diversity counts for nothing when weighed against his pet project.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.