Bloomberg News

Sinclair to Tribune Deals Said to See Limits From FCC Change (1)

August 08, 2013

A U.S. regulator has proposed tightening limits on ownership of television stations that could apply to pending acquisitions by Gannett Co., Tribune Co. (TRBAA:US) and Sinclair Broadcast Group Inc. (SBGI:US)

Mignon Clyburn, the acting chairwoman of the Federal Communications Commission, wants to do away with a provision that calculates audience reach of some TV stations at 50 percent of others when assessing compliance with ownership limits, said three FCC officials who asked not to be identified because the proposal isn’t yet public.

Clyburn’s change could take effect when the agency releases the proposal and push some pending TV acquisitions closer to a congressionally set limit that no company can exceed 39 percent of the national TV audience, two of the officials said.

To release the proposal, Clyburn needs assent from a fellow Democrat and the FCC’s third member, a Republican, the officials said. Neil Grace, an FCC spokesman, in an e-mail declined to comment.

Buyers seeking profit at broadcast TV stations, which are collecting more fees from cable systems, proposed deals totaling more than $3 billion in the second quarter, more than any comparable period since 2007, according to data compiled by Bloomberg.

Regulatory Relic

Deals needing FCC approval include those from Tribune, which wants to almost double its holdings to 42 stations by buying 19 outlets from Local TV Holdings LLC. Gannett, based in McLean, Virginia, has proposed buying Belo Corp. (BLC:US) to bring its holdings to 42 stations from 23. Meanwhile, Sinclair is to raise its station total to 149 after deals with the Allbritton family, Fisher Communications Inc. (FSCI:US) and two others.

Clyburn’s proposal, issued to her two fellow commissioners on Aug. 1, would eliminate the so-called UHF discount, a regulatory relic from the era when TV stations that now send digital signals broadcast via old-fashioned analog transmitters.

The proposal needs to win an FCC vote after public comment to become final.

With the old technology UHF stations -- those on channels 14-to-51 -- couldn’t send their signals as far as those on lower channels. To compensate, the FCC cut by 50 percent each UHF station’s audience reach, compared with a lower-channel station in the same location. The numbers are used to make sure an owner doesn’t exceed the congressionally set limit of stations that reach 39 percent of the national TV audience.

The discount means owners can buy more UHF stations without hitting the cap.

Tribune Deal

With the UHF discount, Tribune would remain “well under 30 percent” after its purchase of Local TV, Eddie Lazarus, general counsel of Chicago-based Tribune, said in a July 1 conference call.

“We don’t know whether the commission will decide to review the UHF discount, but we fully expect that the commission will deal fairly and promptly with a transaction undertaken and filed at the commission in reliance on the current rule,” Gary Weitman, a Tribune spokesman, said in an e-mailed statement.

Gannett will reach about 30 percent of the U.S. TV audience once its Belo deal closes, a figure that drops to 23 percent or 24 percent once the UHF discount is considered, Chief Executive Officer Gracia Martore said in a July 22 earnings call.

The proposed change wouldn’t affect Gannett’s deal, Jeremy Gaines, a spokesman, said in an e-mail.

‘Not Concerned’

After the Allbritton deal closes Sinclair will own stations reaching about 38.2 percent of U.S. television households, or 21.9 percent with the UHF discount, the company based in Hunt Valley, Maryland, said in its statement announcing the deal.

Asked by analysts on an earnings call Aug. 7 about possible FCC action to eliminate the discount, Sinclair Chief Executive Officer David Smith said, “I’m not concerned about it right now.

‘‘It’s going to take some time to do something” at the FCC, Smith said.

Broadcasters face competition from large cable, telephone and satellite companies, Smith said.

“The idea that you would want to constrain a broadcaster to me is nonsensical,” Smith said. “And I think we just have to go try and make those points to the FCC.”

Barry Faber, a spokesman for Sinclair, didn’t return telephone calls.

Media Consolidation

Clyburn, who took joined the commission in 2009, is leading the agency that’s short two seats due to resignations as the Senate considers President Barack Obama’s nominee for FCC chairman, Tom Wheeler. In a February statement welcoming an examination of minority ownership in media, Clyburn said the study “could shed greater light on any potential harms that may result from increased media consolidation.”

A Republican-majority FCC in 2007 loosened media-ownership rules over Democratic objections. After a court threw out that change, a Democratic FCC chairman in 2011 proposed relaxing the rules and the agency is still considering the measure.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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Companies Mentioned

  • TRBAA
    (Tribune Media Co)
    • $74.86 USD
    • -0.28
    • -0.37%
  • SBGI
    (Sinclair Broadcast Group Inc)
    • $25.98 USD
    • -1.12
    • -4.31%
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