Sinclair thought a change in administration would enable to get what they wanted. They thought wrong, but botched deal might not stop more consolidation
While Sinclair Broadcasting is in trouble with the FCC with how its misrepresented itself in its proposed merger with Tribune Media, it won’t slow down the merger and acquisition activity expected.
That’s because an appeals court Wednesday dismissed a challenge from two activist groups regarding the UHF discount. The FCC voted earlier this year to bring the discount back after it was eliminated by his predecessor, which many thought he had no legal right to do so. Observers noted the FCC discount – meant to help UHF stations in the analog era halving their coverage area – was an advantage Sinclair wanted to use to get bigger. This blog noted the UHF discount and the way it was used in the digital era was a scam.
The news comes as a victory for broadcasters, who are looking to scale up to better compete with the likes of Big Tech: Amazon, Apple, Facebook, Google, and Netflix. Already, Atlanta-based Cox Communications – one of the last multi-medium media companies in the business (TV, radio, newspaper, and cable) and home to top-rated dominant ABC affiliate WSB-TV – is putting its TV group up for sale.
And this is just the beginning. In addition to advocating loosening caps, The National Association of Broadcasters also wants looser regulation for radio as two of the largest operators of stations (Cumulus and iHeartMedia) have either exited or looking to exit bankruptcy and may be ready to buy again.
Returning to Sinclair, the FCC’s decision to refer the merger to an administrative law judge was slammed Tuesday night by President Trump – who may – or may not (likely not) understand how television stations are sold:
So sad and unfair that the FCC wouldn’t approve the Sinclair Broadcast merger with Tribune. This would have been a great and much needed Conservative voice for and of the People. Liberal Fake News NBC and Comcast gets approved, much bigger, but not Sinclair. Disgraceful!
— Donald J. Trump (@realDonaldTrump) July 25, 2018
Pai defended his actions Wednesday, stating Sinclair misrepresented themselves in how Sinclair was acquiring three stations – and their plan to buy them and reselling them below market value. It centered on their decision to sell WGN-TV to a third-party operator named Steve Fader, a Maryland automobile dealer with close ties to Sinclair chairman David Smith for only $60 million to try to circulate around the national ownership cap, now standing at 39 percent. Sinclair would operate the station as if it were its owner in a shared services agreement.
But the transaction seemed to be a sweetheart deal – given News Corp. (now 21st Century Fox) paid Newsweb $425 million to acquire WPWR-TV in 2002 – the most expensive deal for a Chicago station in history at the time. Pai also had problems with Sinclair making the same kind of deal with Tribune’s CW affiliates in Dallas (KDAF) and Houston (KIAH), this time with Cunningham Broadcasting, another group with ties to David Smith – this time, the estate of his mother, Carolyn.
Currently, Tribune and Sinclair are mulling what to do. The hearing could drag on for months and months, delaying the deal further and perhaps nullifying it. Tribune has the right to walk away from the deal after August 8 if it chooses to do so – and likely would. 21st Century Fox – who is unloading its entertainment assets to Disney, may try to revisit the idea of purchasing Tribune. Problem is, they would own three stations each in the top markets including Chicago, and federal regulators do not allow outright ownership of more than two in the same market.
If the Sinclair-Tribune deal falls apart, they could go after Cox’s fourteen stations and enter markets where they don’t have a presence, including Atlanta and Charlotte. But there would be some overlap in a few markets such as Pittsburgh and Dayton, where Sinclair already owns and/or operates two stations.
The end result is, there will be more consolidation in the marketplace. But whether if it would be good for consumers remains to be seen. Given what we’ve seen so far – mindless reboots of TV shows (Roseanne, Magnum, P.I., etc), reboots of executives (Marv Nyren and Jimmy Decastro), less local content, fewer people of color in key positions, more and more job losses, and possible labor turmoil, I wouldn’t count on it.