Sinclair selling off WPIX, WGN to win approval? Meet the Shell Answer Man.
During the eight years I worked at the Better Business Bureau, yours truly has seen plenty of scams perpetrated onto by the public the organization had to warn about.
But even those can’t compare to what Sinclair and the FCC are pulling.
In a filing revealed on Wednesday regarding its acquisition of Tribune Media, Sinclair said it would sell off WGN-TV in Chicago and two other stations – WPIX in New York and KSWB in San Diego – in order to get under the FCC’s ownership cap rules of 39 percent.
But before you break out the Korbel and celebrate, there is a catch – a huge catch. Sinclair is proposing spinning off those three stations to other companies -while maintaining control of them. In other words, Sinclair would be running the stations instead of owning them.
This plan is already in place in a few markets where Sinclair is operating. For example in Nashville, Sinclair owns Fox affiliate WZTV and My Network TV’s WUXP in a duopoly, as CW affiliate WNAB is owned by “Cunningham Broadcasting”. In Baltimore, Sinclair owns Fox affiliate WBFF and “Cunningham” owns CW affiliate WNUV as a few years ago, Fox sold My Network TV’s WUTB to an outfit called “Deerfield Media”. In San Antonio, “Deerfield” owns CW affiliate KMYS (a former My Network TV station, hence its call letters) as Sinclair owns NBC affiliate WOAI and Fox affiliate KABB.
While Deerfield and Cunningham look like legitimate broadcasters, you might not want to inquire about employment opportunities at those firms. Both are really “sidecar” or “shell” companies created by Sinclair to get around the broadcast ownership rules. And by “shell”, I don’t mean a service station selling octane gas, Fritos, and Polar Freezes.
A “shell” or “sidecar” corporation is basically a “virtual company” with no office, legitimate address, or employees. Instead it is used to basically serve as a vehicle for business transactions. It has been often used for illegal means, such as tax evasion.
WNAB, WUXP, and KMYS are owned by these companies but operated by Sinclair as the law prevents them from owning three stations in a market, in what we call a “shared services agreement” or “joint sales agreement” – something the FCC banned under former chairman Tom Wheeler but reinstated under the current administration led by Ajit Pai – the same FCC Chairman who eliminated net neutrality rules last December.
In retrospect, Sinclair controls at least nearly half the ad revenue in Baltimore, Nashville, and a few other markets through these “shell” corporations.
As for who would own WPIX and WGN, the name of the “sellers” were not disclosed in the FCC filing, but there was strong speculation Cunningham would purchase the two stations and become the license holders, but it would be similar to the setup in Baltimore, Nashville, Syracuse, and a few other markets. Ironically, Cunningham owns Fox affiliate WYZZ in downstate Peoria, but is operated instead by Nexstar.
Meanwhile, Variety reported Sinclair was considering selling six Tribune Fox affiliates to 21st Century Fox in order to get under the cap. Of the six, four of these – Seattle, Denver, Cleveland, and Miami are in NFL markets as Fox recently scored a five-year Thursday Night Football deal and would want to keep all local ad revenue sold during those games. All involved are AFC markets (excluding Seattle, which was an AFC market until 2002.)
In the case of Cleveland, Denver, and Salt Lake City, ownership would revert back to Fox, as they sold those three and others to Local TV LLC in 2007, only to be swallowed up by Tribune in 2013. As part of the deal, Sinclair and Fox would have a new affiliation agreement – squashing plans to hook up with Ion for possible Fox affiliations in some Sinclair markets.
In Miami, Fox’s acquisition of Tribune’s WSFL could put current affiliate WSVN out the door as the CW affiliation would likely shift to CBS’ WBFS as the network is part-owner in CW. WSVN lost its NBC affiliation in January 1989 when the network bought then-CBS affiliate WTVJ two years earlier.
The backdrop of this of course is the newly modified station ownership rules, where the FCC under Pai reinstated the “UHF discount” last April, one yours truly called a scam. Originally intended for the analog era, broadcast groups were given an “UHF Discount”, meaning the UHF station they owned would count as only half their coverage toward the ownership cap, given the frequency – channels 14 to 69 – reach less viewers and had poorer reception than their VHF counterparts (channels 2-13.) Now with most channels being on equal footing more or less, the UHF discount isn’t needed. But Pai and the Republicans on the FCC want to bring back the rules so companies can own more stations.
Two weeks ago, the FCC’s inspector general David Hunt announced an investigation into whether or not Chairman Pai was too cozy with Sinclair and showed favoritism toward the Hunt Valley Md.-based broadcaster. The request was made on the behalf of a few Democratic Congressmen.
The collusion between the FCC and Sinclair wouldn’t surprise yours truly. Scammers of a feather do flock together.