Harry Jessell

It’s 2024 … except at the FCC where it’s still 1964 and regulating broadcasting is all the rage.

Drawing on the prevailing belief of that time that broadcasting was too powerful and concentrated not to be constrained and managed by the federal government, the agency — by a vote of its three-person Democratic majority — last week bucked the decades-long trend of loosening TV regs by affirming and tightening its Top-Four TV duopoly rule.

The rule says that broadcasters can’t own and operate more than one ABC, CBS, Fox or NBC affiliate in a market. In recent years, with the tacit blessing of the FCC staff, broadcasters have been able to circumvent the rule, mostly in 100-plus markets, by airing one or more stations on an LPTV station or multicast channel.

No more. The rule stays and the “loophole” is closed, the FCC Chair Jessica Rosenworcel and other FCC Dems proclaimed. Existing so-called virtual duopolies will be grandfathered, but they can’t be sold to another broadcaster without official FCC dispensation, which will cause all kinds of M&A complications.

The FCC says it will continue to consider Top-Four duopolies on a case-by-case basis, but we learned that’s a tease earlier this year when the FCC killed a proposed combo of two affils in Fargo, N.D., through one of Rosenworcel’s favorite tactics, bureaucratic indifference. Like the parties involved, I could see nothing wrong with the deal when I plugged in the FCC’s own criteria for granting them.

The ruling is a blow to broadcasters who see ownership of multiple affiliates as an effective way of achieving news economies of scale and preserving, and sometimes expanding, local news in the market.

It’s also a loss for the NAB, which argued for relief. Cable and satellite operators, organized under the banner of the American TV Alliance, pushed long and hard for keeping the lid on Top-Four duopolies, contending they gave broadcasters undue leverage in retrans negotiations that would result in higher fees for cable subs.

“We applaud the FCC’s efforts to help consumers by closing loopholes in its broadcast ownership rules,” the ATVA said in a statement following the vote. “For too long, these loopholes have allowed broadcasters to control distribution of two, three, or even all four major networks in markets throughout the country…. Today’s action promises some long-awaited relief for consumers and their pocketbooks.”

The FCC order swallows the ATVA argument whole, saying the tougher duopoly rule advances its long-standing goal of ensuring robust competition not only in retrans negotiations, but also in the local advertising market.

“Promoting competition among local television stations prevents local broadcasters from demanding higher retransmission consent fees and charging higher rates for local businesses seeking to purchase advertising time on local stations, costs that may be passed on to consumers,” the order says.

I concede that the ATVA had the higher ground in the battle since rising retrans fees no doubt put upward pressure on what consumers (i.e., constituents) have to pay for cable and satellite service. However, NAB should be able to fight uphill and win. The scores of cable networks that also demand fees from operators also drive up consumer prices.

In addition to preserving competition, the FCC also cites its long-standing goals of ensuring local programming (localism) and diversity of viewpoints or voices (separately owned stations) in justifying the duopoly rule. On paper, these are laudable, but they no longer make sense in today’s media ecosystem where there are literally hundreds of TV channels vying for attention and dollars, not to mention traditional media like newspapers as well as other relative newcomers like social media.

The FCC’s misguided obsession with broadcasters’ competitive clout may be detrimental to localism. Broadcasters need retrans dollars, as many as they can get, if they are to maintain and expand their news and offer other local programming. As I have argued here many times before, the FCC needs to get out of the way and let the market set the retrans fees.

And, of course, broadcasters also need advertising dollars to fuel their newsrooms. Is it really the job of the FCC to structure markets so that auto dealers, PI lawyers and home improvement outfits don’t pay too much for spots and pass the cost on to their customers and clients?

For the record, TV stations’ share of the local ad market shouldn’t sound alarms. According to BIA Advisory Services’ forecast, stations will reap just 13% of the $175.6 billion in local advertising spending this year, a presidential election year in which stations’ share is greater than in other years.

Intense competition, by the way, is not necessarily the path to better journalism. In fact, less of it can enhance it, producing fat profits and extra resources for newsrooms. I would say the Golden Age of Newspapers stretched from 1970 to the early 2000s when single papers emerged to dominate markets and did great things. The Times in Los Angeles, the Tribune in Chicago, the Globe in Boston, the Post in Washington all come to mind.

Newspaper publishing offers another lesson. Hundreds have withered or died over the past two decades from the onslaught of digital media. TV stations have been suffering from the same heat. That they have been holding their own so far does not mean they will continue to do so. Think what would happen if political media buyers discover a better way to reach likely voters.

Yes, the FCC is right to be concerned about the loss of a voice in the market, which is the natural consequence of duopolies, but losing a voice is better than losing an entire news operation because of regulatory hobbles.

Some markets simply can’t sustain three or four independent news operations anymore. Last spring, Sinclair shut down its local news operations in five small markets. (Here in Pittsburgh, DMA 28, where I live, Sinclair doesn’t even bother with producing its own news, although it carries newscasts of Cox’s crosstown WPXI.)

Broadcasters may be able to overturn the FCC action in the courts, but that is a long, costly and laborious process with no guarantees. Their best hope now for relief is the return of a Republican chairperson, one with faith in the marketplace and a belief that regulation is not the default, but the last resort.

Both FCC Republicans, Brendan Carr and Nathan Simington, voted against the measure. “The FCC has every reason to update this outdated set of broadcast radio and television rules,” said Carr in his dissenting statement. “The law compels us to do so. The facts tell us to do so. And the public interest in promoting local news and information counsel in favor of doing so. Yet the rules will remain in place — impervious to those compelling forces.”

I should caution that a Republican FCC might come with a lot of baggage, namely Donald Trump. He is no friend of news media that criticize him, and the FCC is a perfect tool to punish any outlet under its jurisdiction that does.

Carr, a likely FCC chairman in a Trump second term, is just the guy to wield that tool on Trump’s behalf. In May 2020, after Twitter tagged one of his posts as possibly misleading, Trump urged the FCC to look into regulating social media just as it used to regulate broadcasting via the Fairness Doctrine. Carr enthusiastically embraced the idea, First Amendment be damned. As far as I know, he is still a member of the Trump politicult.

The FCC needs a major attitude adjustment. It has to stop thinking of TV as indestructible and dominating players that must be controlled by wise heads in Washington, lest the broadcasters turn their newsroom over to AI-driven avatars, crush local economies with incessant spot increases and spawn a cable-deprived underclass.

If the FCC is truly interested in broadcast localism, the FCC needs to get its head out of ’60s and into the ’20s. I can suggest a few ways: give stations the right to negotiate directly with vMVPDs rather than having to rely on the sticky-fingered networks; facilitate ATSC 3.0 where it can; and, most important, lighten up, don’t tighten up, on the duopoly rule and other anachronistic structural regulations.

Harry A. Jessell is editor at large of TVNewsCheck. He can be contacted here. You can read earlier columns here.

The post Hey FCC, It’s Not The 1960s Anymore appeared first on TV News Check.

Hank Price

In a ruling that would be more at home in the 1960s than the third decade of the 21st century, the FCC last week reaffirmed its commitment to long out-of-date regulations that threaten the long-term viability of local television service.

Specifically, the FCC slammed the door on the idea of combining any two ABC, CBS, Fox or NBC affiliations in a single market. Adding insult to injury, the FCC broadened the prohibition to include secondary channels and low-power TV stations.

Pretending that America still lives in the era of LPs and 45s and console radios, the FCC’s three Democratic commissioners proclaimed that musty, typewritten rules formulated in the days before word processors are still valid because all is well with local television station competition.

One can’t help but think of Lt. Frank Drebin from the Police Squad movies standing in front of a raging fire yelling into a microphone: “Nothing to see here! Please disperse!”

Never mind the fact that consumers now spend more time viewing streaming content than watching network television.

Never mind the fact that network owners have gutted their primetime television schedules to feed their insatiable streaming platforms.

Never mind the fact that Google, Facebook and now Amazon, as well as dozens of other national players, are sucking revenue from local television markets at a record pace.

Never mind the fact that local television news viewing continues to decline, due in part to a massive oversupply.

And perhaps most importantly, never mind the fact that none of local television’s new competitors are regulated.

None of this seems to matter to the FCC. Instead, and this is hard to believe, the commission actually said combining any two networks would “result in the remaining networks paying less attention to viewer demand for innovative, high-quality programming.”

The FCC also claims that keeping the current rules “increases the bargaining power of local broadcast affiliates and enables them to influence Big Four broadcast network programming decisions in ways that better serve the interests of their local communities.”

What innovative, high-quality programming is the FCC talking about? What local station influence on network programming? It has been a long time since any network expressed interest in what local general managers thought about network programming. Quite the opposite is true.

As for innovative programming, all of that is at the station or group level these days, not at the networks.

The FCC’s decision is hard to understand because it reaches illogical conclusions that fly in the face of reality. It’s as if the FCC believes nothing in the world of local media has changed since 1980. Do these commissioners own smartphones? Do their cars have cruise control and airbags?

Not content with making a specious argument, FCC Chair Jessica Rosenworcel even added a red herring by saying: “No entity can own all the television stations in a single market.”

To my knowledge, no group owner has suggested there should only be one owner per market. There is a small market where one company is affiliated with all four networks, but that is an outlier and not the norm.

All stations want is reasonable consolidation that would allow fewer, but stronger, stations to compete against each other. A market that now has five or six separately owned stations might end up with three or four.

Some station consolidation is essential because the current business model is unsustainable. Continuing threats to advertising revenue and retransmission payments, combined with an explosion of competitors, means the alternative to consolidation will be the eventual demise of weaker players, leading to a last-man-standing scenario. In other words, chaos.

Strengthening and ensuring the viability of over-the-air television is critical to the well-being of our nation. At a time when the FCC should be encouraging innovation, it is instead throwing up roadblocks from a long-past era.

The current FCC majority is entrenched in the past. Let’s hope either Congress, or a more enlightened future commission, is willing to take a more constructive approach to today’s broadcast issues than simply saying “no” to the future.

Hank Price spent 30 years leading television stations for Hearst, CBS and Gannett while concurrently building a career in executive education. He is the author of Leading Local Television and two other books.

The post FCC Gives Broadcasters A Lump Of Coal For The New Year appeared first on TV News Check.

Mike Meara, president of broadcasting at the 70-year-old, family-owned company, says it has no plans of exiting the business and is keeping an eye out for strategic acquisitions in the right markets.

In an interview with TVNewsCheck Editor Michael Depp, Meara says spot advertising has been recovering more quickly than anticipated, net retrans isn’t likely to decline in the next few years and the company has already launched OTT apps for many of its stations, with the rest to follow by year’s end.

As president of the ABC Affiliate Board, he adds that broadcasters made out well in the recent NFL deal, retaining a good amount of exclusivity. And while primetime has taken a significant pandemic hit, it’s “still the biggest reach vehicle out there.”

An edited transcript.

Being a broadcast television company, how did you handle the shift to remote production with the pandemic? Was it a more challenging transition than it might have been for a larger company?     

I don’t think it was. Our technology is great, our people are great and like most broadcasters, we moved quickly and effectively. Our first concern was safety for the employees — we were able to keep them all safe — and then getting our product on the air, which we did with virtually no disruption.

A year on, what if any parts of workflow do you see as more permanently virtualizable or hybridizable?

We are still finding the right mix to where it is going to end up. We have seen and learned things that we probably wouldn’t have thought of before. We have three to five positions that are working remotely from other cities, not even in the same market, so that is something before this we probably wouldn’t have entertained. I still think there is real value to people being back in the office and being together for maintaining the culture and camaraderie, the collaboration, just the speed of action and the energy that you get.

The Supreme Court has affirmed elimination of the crossownership ban. You have at least one converged newsroom with your flagship newspaper and Fox affiliate in St. Joseph, Mo. Are we going to see more converged newsrooms now from News Press & Gazette?

That one is unique in that we own the newspaper there. In the history of the company, that is how it started. This is a 70-year-old company this year, the fourth generation running it. It is a completely converged newsroom with the television station, the newspaper and obviously the digital assets, and it is going better now than it has ever been. It is not something that you flip a switch on that automatically works. There are different cultures that have to be worked through.

As we hire new people, the expectations of a converged newsroom coming in helps. We have people from the newspaper on TV, we have TV people writing columns in the newspaper, and it is really working well. It is an important model for a small market to protect local journalism to be able to do things like that. As you have seen around the country with small market newspapers, there’s a lot of them that have gone out of business, and this is a way to keep local journalism alive, especially in small markets.

You have been doing it long enough to have learned a few things then about how to make it work. What are some of those takeaways?

It starts with the company, the leadership at the top, and being committed and having a vision of serving the community. Then [it’s about] good leadership at the newspaper and the television and getting the right people in that believe in the concept — that all the platforms have a benefit, and we use them in the way they are best served.

Now there is a new administration, and all eyes are on the FCC and if any relief on ownership rules will be forthcoming. What are you looking for? Would you like to see a move on owning two network affiliates in the same market?

We certainly would like to see a relaxation of the current ownership rules [from] what is in place now. They don’t really reflect the current world with the video marketplace and the advertising marketplace. It would be nice to have [them] reflect the real world. And then the converged newsroom: Being able to own more than one station, being able to have crossownership with the newspaper is really the way to keep these small marketplaces alive and keep local journalism going.

This has been a dramatically consolidating industry. How does News Press & Gazette see itself on the M&A front? Everybody expects the smaller companies to sell and get out, but we have heard that you might be a buyer. Is that true?

Yes, I would say that the family is committed to the broadcast business for the foreseeable future. They think it is still a good business. As far as acquiring things, we like our current portfolio quite a bit. We have a special flavor of markets that we operate in. If we find some one-offs and some strategic acquisitions that can be had, we certainly are out there looking. We have made a run at some things in the past and been unsuccessful, but we will continue to do that if it is additive to our portfolio.

Where is News Press & Gazette on the streaming front right now?

We certainly haven’t been the industry leader on it, but we are doing OTT with our station apps. We are doing third-party partnerships to get our content out there. We are in the reselling business of OTT inventory. Like anything, it is important for us to get our content out to as many platforms as possible and then we have just got to find a way to collect data on it and monetize it.

You have station apps for all of your stations?

We have a handful now, and we will be launching the rest of them this year.

Are you selling advertising directly or is it predominantly programmitic?

Well, the third party is programmatic. Our station apps are sold more on a sponsorship share a voice-type model, and until we get some real scale in our markets that is probably where it will stay.

Spot advertising took a huge blow at the outset of the pandemic, while political helped the recovery last year. How did it play out for your company? And how is spot doing right now?

It played out for us like it did everybody in that the wheels came off in the middle of March and then it got really rough in April and May. June started to come out a bit and then stabilized by the fourth quarter.

I have been really optimistic and encouraged about what I have seen in the spot business this year. It was difficult to budget for this year, and we had planned on getting back to 2019 as our benchmark. I had anticipated it would be the last quarter of the year, but it has been a much quicker bounce-back than I had expected. In fact, in April we have a good shot of getting back to ’19 level, much sooner than I anticipated. If the supply issues of the automotive world were fixed, it would be even better. I am encouraged by what I have seen in the bounce back.

You are the incoming chair of the ABC Affiliate Board. ABC made out pretty well in the recent NFL deal with Super Bowls in 2026 and 2030. What is the deal with the regular season games? Do you know what you are getting?

My understanding is it doesn’t kick in till ’23. I think ’22 is the bridge year, which has not been announced in the plans. But I believe starting in ’23 there will be three Monday night games that are exclusive to ABC and then there will be a Saturday night in December that will be exclusive in addition to the Super Bowl. For an ABC affiliate it is great, and [ABC]  just got NHL, they have SEC football coming over in ’24, so we are excited about the moves they are making.

How much exclusivity do you have?

I still think we have pretty good exclusivity. The two outliers there are the Paramount+ lower-tier games and I haven’t heard what NBC is doing on the streaming, but my understanding from Fox and ABC is that those deals are protected with exclusivity. Disney+ isn’t streaming the games. My understanding is that ESPN+ will stream exclusively one game, maybe the London game. Fox is protecting it within their system on streaming and Paramount+ and Peacock are the two outliers.

To what extent is the loss of exclusivity with the NFL and network entertainment programming going to reduce your leverage in retransmission negotiations with the MVPDs and slow the growth of retransmission revenue?

I don’t think there is a substantial loss of exclusivity in this new deal. Over time — and this deal goes for 7-11 years — if that changes, that could be an issue, but for the most part it is a broadcast television NFL package except for Thursday night, which none of the networks could seem to figure out how to make work. Even those Amazon games are going to be on broadcast television in the home markets.

Do you see your net retransmission going flat or declining in the next three to five years?

We are modeling for flat to slow growth, but I don’t see it declining.

Are you concerned by what is happening in primetime TV? You’re paying all this money in reverse comp and the ratings in primetime have taken a huge hit since the pandemic.

Part of that was the streaming, but part of that too is that the product wasn’t there, and production shut down. You didn’t have the originals, and you couldn’t create any buzz around original programming. But I think it is still the biggest megaphone out there. It is still the biggest reach vehicle out there, still the greatest branding vehicle. So [we] are focused on news, sports and big events, and there is a place for that in the future.

Is primetime as important to you as it once was?

From a revenue standpoint it is a little less important, but it is still important for feeding people into the news and just getting the eyeballs to promote.

What else is on your mind as you look over the horizon line?

Everybody knows the challenges that are out there and keeping the retransmission model alive. We are very optimistic about political. I just think back to our regulatory issues, finding ways to make sure that we have a healthy core business in our markets — in small markets especially.

The post TVN Executive Session | NPG Still In The Hunt For More Stations appeared first on TV News Check.

The big new thrust comes in joining newspaper publishers in pushing legislation that would give local news creators an antitrust exemption in dealing with Big Tech so they can assert some control over how social media and search engines handle their content and be fairly compensated for it.

Smith says he will also press the FCC for further relaxation of its TV ownership rules but acknowledges that with the Democrats now in charge that may be a tall order. He adds that the highly anticipated Supreme Court ruling this summer may not only affirm the ownership reforms of the Ajit Pai FCC in 2017, but also provide legal “elbow room” for another eventual deregulatory step forward.

And, he says, with the country newly sensitized to the need for greater diversity and social equity, Democratic proponents of the so-called minority tax certificate may be able to overcome Republican resistance that has stalled action on the measure for the past two decades.

It’s unlikely that policymakers will require NexGen TV receivers in TV sets and mobile devices, he says, but if broadcasters can bring the new broadcast signals to more markets, demand for receivers may naturally follow.

An edited transcript.

How are things looking in Washington from the NAB’s perspective?

I think we are very well set in the new administration and in the new Congress. We continue to have friends and allies in both parties. We will play some defense when it comes to revenue pay-fors like a tax on advertising should it be under consideration. Right now, there are some who see the Fairness Doctrine coming back. I don’t. I don’t see any real oxygen for it in law right now or Supreme Court precedent.

It is a fact of history that Democratic-controlled FCCs tend to want to regulate us into yesteryear, and I understand that, but the bookend to that is the allowance that has been given to big tech to cannibalize the advertising of our business. I have a belief that if the FCC feels that it is their duty to keep us small, they also then have a duty to keep us alive to serve the purposes of localism and journalism, which remain very important public policies that underpin our democracy.

What about retransmission consent? The cable guys are always angling to undermine the ability of broadcasters to get fees out of them. What’s cooking on that front?

First of all, I would just simply note that we won a smashing victory in STELAR [the Satellite Television Extension and Localism Act Reauthorization] by making it permanent. I mean anybody with eyes to see saw that our friends in cable and satellite used the law’s renewal to create the illusion that there is a crisis and push for retrans reform provisions. Without STELAR now, for them to attack retrans, they have got to do it with a new bill that is not regarded as must pass. That changes the dynamics of legislation dramatically in our favor.

The big TV station groups want further relief on the TV ownership limits. What are the prospects for that?

We are going to get a lot of direction from the United States Supreme Court this summer when they issue their ruling on the 2017 FCC’s deregulatory order. I listened to the hearing and it did seem to me that there was something of a consensus to affirm the order. That will also tell us what kind of elbow room we will have for further relief. Democratic FCCs tend not to support relaxation of media rules, but I think a lot of Democratic senators understand that they can help us at the FCC by updating some of these rules.

So, you think the Democratic leadership will send some letters over to the FCC and otherwise tell them that we have to move broadcast regulation into the 21^st century?

In the past that is what we have done to influence fairly stiff resistance at the FCC. We have had the help of numerous Democratic senators who I think understand our case and will help us yet again. Part of our strategy is to bring other Democratic eyes to this question because we are operating in a telecommunications sector that has these big tech monopolies that have been allowed to develop at the expense of broadcasting that serves so many public policy interests. And so, again, my hope is that with the FCC’s desire to keep us small, they also feel a responsibility to keep us alive.

The so-called minority tax certificate would encourage owners of broadcast properties to sell to minorities and women by giving the sellers a tax break. Proponents have been talking about reviving the certificate almost since the day the Republican Congress spiked it 25 years ago, but they can’t seem to bring it back. Is this year going to be different?

I hope so because I think the whole country is shining a brighter and long overdue spotlight on the whole issue of diversity, and I think America is big-hearted and wanting to find more equity and inclusion for diversity and media ownership. It comes with a cost, but it also achieves a public value of having diversity on America’s airwaves through ownership.

It is a priority of [House Energy and Commerce Committee] Chairman [Frank] Pallone. I think it will find a good reception in the Senate, certainly on the Finance Committee. I know Ron Wyden [Democratic chairman of the committee] very well. We served together for many years, and I know he supports it and I believe there are a few Republicans who support it as well. So rather than look to the past, let’s look to the future to see what we can do on a bipartisan basis.

What is happening at the FCC? Are they going to get a fifth commissioner in there?

I think they will. I don’t know who that is going to be, and I don’t know who the chairperson is going to be, but I would bet on Jessica Rosenworcel moving from acting to permanent chair. I have a very good relationship with her. We have always spoken candidly and constructively. We don’t always agree, but she always gives me a shot to make the case and I don’t see any reason to expect different.

Do you see the Republicans making an effort to hold up the fifth commissioner to disrupt the any regulatory agenda the Dems might have?

I think there would have been had they won one of the Georgia senate race runoffs, but now I don’t think they can really hold it up. [Senate Minority Leader Mitch] McConnell], if he were inclined, could play with the timing of confirmations just as [Senate Majority Leader Chuck] Schumer did to President Trump and the Republicans, but I don’t think he is going to waste a lot of his time on that.

Getting down to specifics, what about the UHF discount on the ownership cap? Do you expect the FCC to eliminate the discount and restore the hard 39% cap on households reached?

We do know that a Democratic FCC is inclined to eliminate the discount and, if they do that, what we are going to insist is that they also increase the percentage of ownership.

In the new quadrennial review of the ownership rules?

Correct. I think we have a strong argument there. I will simply argue that that elimination must be paired with an increase in the media ownership cap otherwise it is just wholly unfair.

I know that your board went around and around and around on what this new cap should be. It landed on 78%, correct?

Yes.

One of the odd things I thought during the Trump administration was the Justice Department. The antitrust guys there were surprisingly resistant to local broadcast consolidation. Is that likely to change in the new administration?

We don’t have a new regime yet. Now that Merrick Garland has been confirmed as attorney general by the Senate, I expect they will announce the new head of the antitrust department pretty soon. It is an important spot. We made some progress with former antitrust chief Makan Delrahim. He is a good friend of mine and I am thankful to him that after a whole lot of work and time with him persuading him to look anew at allowing greater consolidation, he did not rule against us and he recommended our study to the FCC. So, I don’t expect a Democratic assistant attorney general to take this up in a way that is averse to us.

Two weeks ago, you put out a statement endorsing legislation [the Journalism Competition and Preservation Act] that would give newspaper publishers and broadcasters an antitrust exemption so they could negotiate jointly with the big social media platforms and search engines. Now what does that statement mean? Does that mean you are going to use all the influence and power of the NAB to make this measure happen or is that just a press release?

It does mean that the NAB board is for this debate to go forward and it does mean that NAB members are united that something must be done in terms of creating value for our localism, for our journalism. Our content currently is taken by Big Tech, used according to their whims to attract advertising that should be going to broadcasting and newspapers.

So, yes, we support the JCPA. It is one avenue for action that the Congress could take. I will not tell you that every television member is signed off on every potential outcome of the JCPA, but it would level the playing field for broadcasters and news producers so that we can negotiate a fair return when our local journalism runs on their Big Tech platforms.

I read your comments that you submitted to Congress last fall and one of your gripes was that they are not using enough content. You think the algorithms are ignoring broadcast content?

Yes, and they are abusing it in a way that they put our valuable news in with sensationalist things that may not be truthful, that may be fake news. The social media platforms especially run in sensationalist circles and they devalue our legitimate content in a way they position it sometimes.

From where I sit, the rollout of ATSC 3.0 has been slow. Maybe that is because of the pandemic, some groups have not put a capital behind it and the networks have been ambivalent towards it at best. Some have been hostile. What is your take?

I think the hostility is gone and I think the ambivalence is turned for the most part to constructive advocacy. I mean right now NextGen is in well over 20 markets, and I think it is true that the pandemic has slowed down the pace of the transition, but the estimate is that by the middle of next year it will be deployed in 60 markets and it will then reach 60%-70% of all viewers in the country. At that point it seems to me pretty much a fait accompli.

In retrospect, do you regret not getting some receiver mandates either for TVs or mobile phones?

The answer is, yeah, it would have been very, very helpful. It has been a bridge too far for radio and we tried in many ways to advance it for TV, and we will keep trying, but we have just simply not been successful in Republican congresses to mandate that. Will that change? I don’t know; we will find out. It would be helpful, but I also know part of my job is calibrating where to spend your resources, and I believe in spending them on the fields of the possible. Until now it has not seemed very possible that we could get a mandate and believe me I have tried for radio for a long time, and it is not easier for TV.

If that is not going to happen, it is going to have to be a private negotiation between the broadcasters and the equipment guys, the consumer electronics people?

Pretty much. You know, some of our members rightfully see this as incredibly important and are looking to even provide competition of chips in certain kinds of cellphones that will get a broadcast reception. So ultimately if that were possible and that came on the market, I believe it would have ready acceptance because video streaming just hogs up so much bandwidth and it is very costly. It would be an incredible contribution to public safety and consumer protection.

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In particular, the FCC’s economic study demonstrates that, given the high cost of producing local news, the current local ownership regulations for many television markets may be counterproductive by depressing the amount of local news programming that otherwise could be produced. This is especially true in small and mid-sized markets.

Government policies should not be making it harder for broadcasters to deliver quality local news to their communities. Hopefully, this research will cause federal regulators to rethink some of their long-held views.

The FCC economists analyzed local television news produced across the country in markets of different sizes. The FCC’s research follows up research by this author (supported by Gray Television and submitted to the FCC) on the provision of news programming by Gray’s stations in its local markets, including many markets where Gray has added stations or networks.

Taken together, the FCC’s research and my study highlight the high costs of providing local news programming and how the government could promote the production of more local news simply by relaxing its ownership rules.

The FCC economists, in a rigorous statistical analysis, successfully estimate the number of independent local news outlets that a market can realistically be expected to sustain based on market size (i.e., number of television households in the market). Not surprisingly, the authors find that “market size appears to be the key driver” when determining how many competing local news outlets are economically sustainable in a market.

A larger market has a larger advertising base that can support more competitors and more robust news operations. In particular, the FCC economists found that the top 50 markets are more likely to sustain four or more local news operations. The next 84 markets (DMAs 51-134), however, are likely to be able to sustain only three local news operations, and the remaining 76 markets (DMAs 135-210) likely can support only two or fewer local news operations.

Yet, despite the clear economic differences between large markets and small markets, FCC rules treat all markets the same — as if every market were as robust and healthy as Washington or New York. Current FCC rules prohibit any combination of two of the top four rated stations in every television market across the country from New York City to Glendive, Montana — regardless of whether those top-four rated stations can afford their own local news operation. The FCC’s economic study provides the clearest proof yet that it is time to rethink that approach.

The FCC’s findings are consistent with the results I found in the Gray Television analysis. Put simply, small and mid-sized markets do not produce enough revenue opportunities for multiple independent broadcasters to earn a profit and overcome the high costs (both capital and operating) associated with the provision of local news.

In my analysis, I found with capital equipment and operating expenditures of this magnitude, a station must generate significant annual operating revenue to recoup this investment. In many mid-size and small markets, the advertising base is not large enough to support multiple stations in the market providing a substantial number of hours of local news programming.

The FCC study also examines other variables that could affect the provision of local news in markets of various sizes. It shows that the percentage of Hispanic population affects the likelihood of market offering more local news options, suggesting that “news operations differentiate themselves to serve different segment of diverse markets.” In other words, when the marketplace provides enough incentive for more news operations, local television stations will deliver.

Surprisingly, the FCC economists find that higher average personal incomes in a local market have a negative effect on the number of local news operations. The authors attempt to explain this anomalous result by postulating that “high-income consumers do not watch local news on television at high rates and may instead get local news from other sources or may prefer national news.”

In other words, more competition makes it more challenging for local broadcasters to attract these higher-income viewers and maintain a profitable news operation. The availability of many other sources of news that local stations must compete has long been part of the argument for relaxing local television station ownership rules.

In my analysis of local news produced by Gray’s television stations, I found that Gray has overcome these challenges by consolidating local operations to increase the quantity of local news programming. I wrote at the time that in markets where Gray acquired a second television station or an additional major network affiliation, it increased its weekly local news production far greater than in markets without any in-market consolidation, and the increase in weekly local news production was more pronounced in small markets.

The chart below from that study shows the magnitude of the weekly change in the provision of local news programming with and without a consolidation event (e.g., acquiring another local television station or network affiliation).

Because of increased competition and the high costs of producing local news, the FCC study authors suggest that policymakers should reconsider how they evaluate proposed combinations of local television stations.

They write, “… a merger that eliminates a source of local news may be optimal, even though it reduces viewpoint diversity, if the merged entity improves the quality or increases the quantity of local news programming, strengthening localism.”

In other words, the FCC’s own economists are acknowledging that the existing local ownership rules might harm localism by constraining the amount of local news that can be produced in a market. The Gray Television news study reinforces this finding by showing the positive benefits that accrue from a combination of local television stations in small and mid-sized markets. Hopefully, the FCC has been mugged by reality and recognizes that it is time to loosen those rules.

Mark R. Fratrik, Ph.D., is SVP and chief economist of BIA Advisory Services.

The post FCC, Follow Your Own Economists’ Advice appeared first on TV News Check.

Gray said that over the last 15 years, the FCC has attempted repeatedly to update its regulations in light of today’s competitive media marketplace, as directed to do so by statute. “The FCC, however, has been stymied consistently by the U.S. Court of Appeals for the Third Circuit, which effectively has frozen the regulatory landscape as it existed in 1941 when the FCC first adopted a ‘one-to-market’ rule and when the media marketplace was enormously different than it is today,” the company said

Gray’s brief argues that the FCC’s modernized rules should finally be allowed to take effect because the agency issued them in full compliance with its obligations under Section 202(h) of the Telecommunications Act of 1996.

The appeal arises from the FCC’s most recent effort to update its broadcast ownership rules under Section 202(h), which provides that the FCC “shall review its rules” every four years, “shall determine whether” they are “necessary in the public interest as the result of competition,” and, if they are not, “shall repeal or modify” them.

Gray’s amicus brief contends that the proper interpretation of Section 202(h) is that it requires the FCC to consider — first and foremost — the effects of marketplace “competition” when modernizing its rules, and the Third Circuit’s ruling is incorrect because it requires the agency to elevate other policy considerations over the effects of “competition.”

At issue in this case are modernized regulations that the FCC issued in 2017 after considering the ever-increasing competition from low-cost digital media sources, which undercuts the development of high-quality local news and journalism.

Gray’s brief also argues that the Third Circuit’s decision harms small and mid-size communities around the nation by depriving them of the benefits of the FCC’s updated broadcast ownership rules. “These communities,” Gray said, “require substantial investment in order to receive high-quality local news and community programming. Gray’s business model and experience in developing and delivering award-winning local news and community programming illustrate firsthand that the FCC’s modernized regulations would facilitate those necessary and important investments.”

David Mills, Elizabeth Prelogar, Robert McDowell and Barrett Anderson of Cooley LLP prepared and filed the amicus brief on Gray’s behalf. Gray said it anticipates a ruling by the Supreme Court by June 2021.

The post Gray Files Supreme Court Brief Supporting Modernized TV Station Ownership Rules appeared first on TV News Check.

If all of that were not enough, the loss of spot advertising has made profits a disaster. With no political in 2021, many fear next year could be even worse.

Into all of this, we are offered some hope by the U.S. Supreme Court’s decision to hear an appeal of the Third Circuit’s latest rejection of the FCC’s reform efforts. Putting a stake in heart of the 45-year-old newspaper-TV crossownership rule may come too late to save most newspapers, but elimination of the eight-voice rule offers a path (though not necessarily an easy one) forward for limited in-market consolidation.

Unfortunately, broadcasters’ biggest issue, elimination of the Top 4 rule, is not addressed. The FCC still must take action for that to happen.

To understand the broader regulatory picture, I consulted a highly respected communications attorney deeply involved in the issues. To protect his anonymity, and location of his parking garage, we shall call him “Lawyer Throat.” 

Looking beyond the Supreme Court, Lawyer Throat believes two current issues are paramount in our industry. Both threaten profitability, not just in the future, but right now.

In-Market Consolidation

This has been a terrible revenue year and next year could be even worse. That means some stations are struggling to maintain profitability right now. As time goes on, that list will grow. Those that do remain viable will find it more and more difficult to fund the level of news and community service required to compete in a fully connected world.

With consumers now spending more combined time on news and information apps, websites and cable channels than on local television, the claim that ownership of two TV stations in a market would somehow result in control of local news and information is ludicrous. We no longer live in 1975’s world of rotary phones, record players and three commercial TV signals.

The urgently needed solution is ownership reform. Most markets simply cannot continue to support the number of newscasts now being aired. Combining two top 4 affiliates, something we have already seen work well in dozens of small markets, allows for more robust news organizations, stronger competition and better service to communities. In Sioux Falls, for instance, powerhouse KELO finally has real competition from combined NBC-ABC affiliate KSFY.

We also have a few larger market examples. In Raleigh, N.C., Capitol Broadcasting’s combined NBC-Fox operation offers a powerful array of local services, competing head-to-head with an also powerful ABC O&O.

If we are to maintain local television’s ability to serve local consumers, both day-to-day and during times of disaster, the FCC must allow in-market consolidation now.

Online Video Distributors Must Be Classified As MVPDs

A general manager recently remarked to me: “Every month my retransmission fees drop. Most subscribers are replaced by internet distributors, but the revenue is so much less, it’s killing me.”

Because virtual MPVDs (vMPVDs) such as YouTube, Hulu and Fubo are not regulated as cable or satellite systems, they are free to make private deals directly with the networks. The networks then share a portion of that revenue with the stations, but the dollars are much smaller than those from retrans deals. They’re so small that they don’t come close to replacing lost retransmission fees.

Broadcasters would welcome reformation of the outdated newspaper-TV crossownership rule, but the Supreme Court’s decision to hear an appeal of the Third Circuit decision doesn’t solve all the industry’s COVID-induced woes. The FCC…
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Because they are not classified as MVPDs, vMPVDs are also not required to grant program exclusivity to stations. That means a vMPVD could make a separate deal for network or syndicated programming without having to carry the local affiliate at all.

Closing the vMPVD loophole would allow stations to negotiate with cable-light internet services the same way they negotiate with traditional cable and satellite systems. That would ensure a symmetrical and fair marketplace across all linear systems that carry station program streams. The FCC has had this proceeding tied up since 2015. As with market consolidation, we need action now.

Just how urgent are these issues? Here are Lawyer Throat’s words: “It’s time for the FCC to ignore the ‘Luddites of the Left’ that have no problem with Google and Facebook taking 50% of the video ad revenues from every TV market in the country, but whine that allowing one company to own two top four rated TV stations in a market is a threat to the continued existence of the Republic. “

I think that says it all.

Hank Price is a media consultant and leadership coach. He is the author of Leading Local Television, a guide to leadership for television general managers, as well as those who aspire to top leadership. Price spent 30 years managing TV stations for Hearst, CBS and Gannett, including WBBM Chicago and KARE Minneapolis, as well as three other stations. Earlier, he was a consultant for Frank N. Magid Associates. Price also served as senior director of Northwestern University’s Media Management Center and is currently director of leadership development for the School of Journalism and New Media at Ole Miss. He is the author of two other books.

The post The Price Point | The Supreme Court Offers Station Groups Hope. The FCC Could Give More appeared first on TV News Check.

The same Third Circuit has struck down two other attempts by the FCC to deregulate ownership since 2002, the affiliates said in their amicus brief.

If the Supreme Court doesn’t intervene now, they said, the question of easing broadcasting’s structural regulation will continue to bounce back and forth between the FCC and the Third Circuit for many more years with no resolution as competition from other TV media continue to eat away at broadcasting and the services it provides.

“The FCC’s anachronistic ownership rules place local broadcasters at a decided disadvantage against other competitors in the complex, fast-evolving, highly competitive video marketplace,” the affiliates said.

At issue is a November 2017 decision by the FCC to eliminate the ban against common ownership of broadcast stations and newspapers in the same market and against owning two TV stations in small markets.

If allowed to stand, the action would also have allowed the FCC to consider common ownership of Big 4 network affiliates in a market on a case-by-case basis.

Petitioned by groups opposed to excessive media consolidation, the Philadelphia court vacated the FCC action last fall, saying it had failed to consider its impact on media ownership by women and minorities.

Broadcasters led by NAB asked the Supreme Court to intervene on the matter in April.

Broadcast deregulation is one of national importance, and prompt relief is critical, the affiliates said in support.

“The way must be cleared for the FCC to discharge its statutory responsibility to modernize its local media ownership rules, without further delay, in order to allow television stations to achieve efficiencies and economies of scale made possible by consolidation.

“If it is not, many broadcasters, particularly those in smaller media markets, will be unable to maintain competitively viable businesses.

“Many will suffer the same fate as local newspapers, and the losses will be felt by viewers in communities across the country who rely on local television to provide essential news, weather, sports, public affairs and emergency programming.”

Mark Prak, one of the attorneys representing the affiliates, said one problem is that the appeals keep going to the same court and a panel with two or the same judges.

“As a result, there was no percolation of the issues by different appeals courts, as is customarily the case,” he said. “I also think that two judges on the Third Circuit lacked the humility so essential to the judicial role and arrogated to themselves the ability to attempt to substitute their own policy choices for those of the expert agency charged with making such public policy line drawing decisions.”

The high court rarely takes cases that do not involve conflicting opinions by multiple circuit courts as in this case. But because the U.S. solicitor general weighed in on this case (on the side of the broadcasters), Prak said, the chances are as great as 35%.

The post Affils Join Call For SCOTUS To Consider Dereg appeared first on TV News Check.

The tax certificate program addresses the issue that appears to be at the heart of the decision by the three-judge panel of the U.S. Court of Appeals for the Third Circuit to set aside the FCC’s 2017 decision to relax broadcast ownership rules. The court has been focused on data surrounding female and minority station ownership.

Most recent statistics, which are admittedly at least five years old, show that women in the United States own fewer than 6% of radio and television stations. Data collected at about the same time show that African Americans own only 10 (or fewer) TV stations, less than 1% of the total, and 1.2% of commercial FM radio stations. Of course, these numbers do not include the 11 television stations recently acquired by Byron Allen’s Entertainment Studios.

This 17-year saga between the FCC and the Third Circuit was examined by two of our experts for the January/February 2020 issue of MFM’s member magazine, The Financial Manager. Sally Buckman and Meredith Senter, both from the law firm Lerman Senter looked more closely into the standoff between the two, as the commission considers taking the issue to the Supreme Court.

Senter offers some of the history behind the contretemps, saying it goes back to 2003 when the Prometheus Radio Project, a public interest group, filed an appeal in the Third Circuit seeking a review of the FCC’s reevaluation of its ownership rules. In 2004, two of the judges set aside the FCC’s 2003 decision telling them they required a better explanation of why the ownership rules should be relaxed.

While Senter says it is not unusual for the U.S. Court of Appeals to set aside a rule adopted by a federal agency, in this case it was “remarkable because the court said that it retained jurisdiction over the case.” In other words, moving forward Judges Ambro, Scirica, and Fuentes would be the ones considering all appeals. Senter says: “Two of the three have consistently thwarted the FCC’s ownership-relaxation efforts.” This despite the FCC’s composition having changed three times, under the Bush, Obama and Trump administrations.

The court’s decision upset the plans of many media companies for acquisitions based on the 2017 changes. That 2017 FCC decision, says Lerman Senter’s Buckman, repealed a rule that prohibited the common ownership of a daily newspaper and a radio or television station in the same market, and limited the number of radio and TV stations that an entity can own in the same market.

The same decision also relaxed the local television ownership rules by eliminating the prohibition on one company owning two stations in a market only if eight independently owned stations would remain in the market after the acquisition.

Senter believes that the court’s decision ignores the current realities in the media business, citing for instance the newspaper-broadcast crossownership ban as one that has lost relevance. In analyzing the reasons behind it, he says that the rulings “appear to be based more upon the policy considerations the two judges believe are of paramount importance than upon whether the rules adopted by the FCC are unlawful.”

The law, he goes on to say, requires the FCC to review its rules every four years. The review is of current ownership rules; the FCC is directed to repeal or modify those that are no longer in the public interest as determined by market competition. The judges, however, have focused primarily on whether the FCC adequately analyzed the impact of the rule changes on women and minorities.

In her “Dear Expert” column, Buckman wrote that it does not appear that the FCC will be changing its ownership rules anytime soon. “The FCC has signaled that it’s unlikely to approve transactions that don’t comply with pre-2017 rules.” She also finds it unlikely the agency will move forward with further changes.

As she points out, the 2017 ownership rules decision was the catalyst for some of the industry’s major acquisitions, including the Nexstar Media Group’s acquisition of Tribune Media, which included “two top-four ranked stations in the Indianapolis and Norfolk markets.”

The FCC was in the process of conducting its quadrennial review of ownership rules when the court issued its September 2019 decision. That decision instructed the FCC to provide additional data about how the relaxed ownership rules would affect minority and female ownership. The commission’s position is that the information sought by the panel simply might not exist, and the delays have held up their attempts to modernize its media ownership rules for a decade and a half.

They say the same judges keep rejecting the FCC attempts to justify its ownership decisions and the full Court should step in and conduct a rehearing. Not surprisingly says Senter the Third Circuit denied the request.

According to David Oxenford’s Broadcast Law Blog, industry groups have emphasized that the decision was overbroad — overturning all aspects of the FCC’s decision — even parts that had not been challenged by the petitioning parties. Industry participants also say that real hardships are being imposed on media companies, as the FCC had not been able make changes in its ownership rules to reflect the changes in the industry that had occurred in what may have been the most dynamic 15 years in the history of the mass media.

The outstanding question, when Buckman prepared her column, was whether these “now non-compliant acquisitions would be ‘grandfathered.’ ”

In late December, David Oxenford’s  Broadcast Law Blog reported that “the FCC issued an order reinstating the FCC’s 2016 ownership rules, recognizing that the changes made to those rules in 2017 were no longer effective because the Third Circuit Court of Appeals had thrown out the 2017 decision.” As part of this action, the FCC issued two Public Notices, which place additional requirements on license renewals as well as for assignments or transfers. In both cases, parties involved must report on whether the applications comply with the 2016 rules.

Senter closes his column by saying that the FCC’s next step is to ask the U.S. Supreme Court to intervene, although it is not required to take the case. But unless it does, he says the commission’s decade-long efforts to liberalize the broadcast ownership rules may continue to be “stymied by the two judges.”

The columns by Sally Buckman and Meredith Senter appear in the January/February 2020 issue of TFM. Non-MFM members may view the column on the association’s website until early March when we move it to our members-only area.

This is an issue that has the potential to affect the P&Ls and balance sheets of both broadcast and newspaper businesses. As such, it is one we at MFM will continue to watch. It’s certainly going to be one of the topics discussed during our March CFO Summit in Fort Lauderdale and in May when we meet in Los Angeles for Media Finance Focus 2020.

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. She can be reached at mary.collins@mediafinance.org and via the association’s LinkedIn, Facebook, Instagram, and Twitter accounts.

The post Collins | Boosting Minority Ownership Hits Roadblock appeared first on TV News Check.

That was the consensus outlook for broadcasting of three top station group executives at TVNewsCheck’s TV2020 conference in New York last week.

The executives were Perry Sook, CEO of Nexstar Media Group, the nation’s largest group since closing on its merger with Tribune last month; Pat LaPlatney, co-CEO of Gray Television; and Patrick McCreery, president of the Meredith Local Media Group. TVNewsCheck Editor Harry A. Jessell moderated the discussion.

In part one of a two-part record of that discussion, the executives agreed that M&A activity is uncertain with Congress and the FCC is unlikely to loosen ownership restrictions any more than they have. They also concurred that the ability to target advertising and selling other third-party media may be ways to stem the slight erosion in broadcasting’s share of political advertising.

An edited transcript.

At the TVB Forward Conference last month, Marci Ryvicker [an analyst with Wolfe Research] talked about net retrans — that is, retransmission consent revenue minus the reverse comp payments you make to the networks. She figured that would grow at a compound annual rate of 5% a year for the next four years and then go flat. Is that the way you see it, Perry?

Sook: No. We see double-digit growth in the top line and in the contribution dollars. As an industry, we get maybe 18% of the [MVPD’s] distribution fees now with roughly 35% of it viewing so there is a big gap still to be closed until we are at parity.

LaPlatney: Perry’s second point is really important. We are not getting paid for audience right now. We are in 18% of the revenue pool and 35% of the audience. Those numbers are rough, so we think there is some runway there.

The other point that Ryvicker made is that if there was parity, the MVPDs would have to charge $28 a month per sub per month. She thought that was unattainable. What do you say to that?

LaPlatney: Well, we might not get there, but there are probably a fair number of networks out there right now that are getting paid that don’t have viewership commensurate with what they are getting paid.

Cable networks?

LaPlatney: Yes. So, if there were some way to kind of balance that out it would be a good thing.

Sook: I agree with that. We don’t give two minutes an hour to the local MVPDs to sell as WGN America does and all other basic cable networks do. The point is, revenue could almost double and we still wouldn’t be at parity.

Have we hit a plateau on station trading or are we going to see more happening over the next year?

Sook: It’s hard to say. In 2011 there were 36 companies in local television that had a national reach of 2% or greater. That number now is down to about a dozen. There are fewer companies left to buy perhaps.

M&A is not as easy as hitting a button and buying a stock. It takes social issues, a lot of diligence, a lot of dealing with regulatory concerns. I have just seen that movie twice in the last three years. It is complicated. So, do I know what is on the horizon? No.

Well, Patrick, do you anticipate more outside money coming in into the business? Do you see another big equity group like Apollo coming in and trying to make a play in broadcasting? [Editor’s note: Apollo’s acquisition of the Cox Media Group is awaiting regulatory approval.]

McCreery: We are not new and we are not sexy, but we are profitable. So, yes, I see outside money coming in because we spin off a lot of cash and I think that looks sexy to a bottom line. I am the only guy up here who has not bought anything recently and we would like to, but that becomes harder and harder in the space.

So you see yourself as a buyer now, not a seller?

McCreery: We are a buyer, yes. I did dress up in case I got any offers today. Is anybody buying? That is always the rumor.

Well you are sort of just the right size.

McCreery: We are perfect, are you kidding? Look, we would love to buy more stations. I was going to make a comment when you said we were the 13th largest broadcaster. I remember the days when we were 30th and we have not added anything and we have still gone up the list. Pretty amazing, right?

Mr. LaPlatney, any comment?

LaPlatney: I will give you a boring answer. What we have said publicly is that we are going to work on the integration of legacy Raycom and Gray and pay down debt and that is what we are going to do.

As you know, Pat [LaPlatney], it took a long while for the FCC to finally approve Gray’s duopoly of two Big Four network affiliates in Sioux Falls, S.D. It required a waiver of the local ownership rules. Does that waiver set a precedent that will allow the formation of other network affiliate duopolies?

LaPlatney: Well, it is going to be handled on a case-by-case basis at the FCC. There are a number of markets out there where it makes sense, particularly in smaller markets. I hope that the FCC, as they have done with Sioux Falls, will look at those and evaluate them on their merits. There are a number of them out there that would make sense, but I can’t speak for the commission.

Perry, do you see the Sioux Falls approval as precedent to double up with affiliates in some of your markets?

Sook: The simple answer is no. I mean [Sioux Falls] was so highly conditioned and so specifically written that I do not see a broad endorsement or approval of creating more duopolies or combinations of top four stations.

What about the national ownership cap? Perry, this is something you have said you would like to modify in the law to allow groups to reach 100% of TV homes because you are at 63% and have gone as far as the current rules allow. Seriously, do you think Congress or the FCC will relax the rules anymore than they have?

Sook: Seriously, probably not. I mean we are even willing to compromise at codifying the current statute [which allows some groups to go as high as 78%.] That is kind of maintaining the status quo.

It is in the national interest for us to be able to reach a 100% of the country. It has implications on our democracy. And so the way I usually start the conversation on the Hill is what if only 39% of the country could get on Google this morning. Do you think you would hear from constituents? Well, I would say it is almost a First Amendment issue that we are being legislatively and regulatorily kept small. We will continue to press the point, but we are about to enter an election year so progress pretty much grinds to a halt.

If you believe Kantar, broadcasting is anticipating $3.2 billion in political advertising next year. But if you look at the numbers closely it also shows that broadcasting’s share of all the political dollars will fall a bit from 66% to 57%. Are you taking any steps to stem that erosion?

McCreery: We have, yes. We made an acquisition as part of the Time Inc. deal for a digital company, and that gives us the ability to compete outside of our local markets for political dollars. Now we are taking money from a Kentucky race and a Texas race and I don’t own TV stations there. So, we have been able to expand our political footprint from an advertising perspective.

How do you do that?

McCreery: We have local sellers in 50 markets and I only own TV stations in 12. We have digital network opportunities and we are targeting those resources now towards political advertising.

The other thing is the number one category in most local markets is direct mail. That is a place where our company has 42 million subscribers and I can put direct mail in people’s mailboxes for politicians. So that is a space that we are expanding into, not on the broadcast side, but on the mail side.

Anyone else on political and things you can do to stem the erosion or just to grow the space?

LaPlatney:  I think political falls into the same general group as all other major categories. If we can target better, we will be able to grow our share of a very high share right now. That is where we need to focus our energy.

The greater portion of advertising is everything else: the non-political, so-called core. That is not growing, and auto has been soft for most companies. What is the good news in core going forward?

Sook: What usually drives growth in television advertising or spot television is the emergence of a new category, and we haven’t really had that. Some think it might be sports betting. It is early days there. The fastest growing category for us right now is attorneys and it is now our number two category behind automotive, supplanting QSR [quick service restaurants].

Automotive dealers are less profitable today than they were three years ago. So they necessarily have less money to spend on everything including advertising. We are a part of that, a systemic change in automotive. Do I think it is going to drop to 15% of our revenue from 28% of our revenue like it did in ’08 and ’09 when we had no credit to finance or lease vehicles? No. But might it lose a share point or two of our core pie? That is entirely possible.

We look out on the horizon for what could be the new category. A lot of these digital companies are using television for reach extension. A lot of that has been on the networks, but there are some folks buying time locally because they realize we are a reach medium. In a bad quarter, we are down 1% or 2% in core. In a good quarter, we are up 1% or 2% in core. That is the business.

When I started Nexstar in ’96, we were 97% advertising supported. Three percent was something called network compensation. Look at the business now and we are probably about 45% ad supported. The rest is digital distribution, retransmission and digital. The industry has shown in the market a remarkable ability to pivot and adapt and change and grow.

Let’s say auto is a secular problem and that it will bounce back once they start selling more cars. Do you see any emerging categories other than sports gambling?

LaPlatney: The legal category for us is really strong. In fact, we have some of our markets where legal is our number one category now. In some ways that makes the business stronger when you have a more diversified revenue base.

This also happens to be a good year for the financial category. Maybe that sticks around, but it is a remarkably resilient business and if auto, for whatever reason, continues to deteriorate, there will be other categories that end up filling that gap.

McCreery: I would just add that historically, professional services, for calendar Q1 and calendar Q2, were, for the first time ever in the history of our company, on par with auto. That has never happened before.

To Perry’s point, we are not as auto dependent these days. And another category that with legislative changes could be big for our business is cannabis. None of us want to touch it with a 10-foot pole right now because of the law, but that that is an area where there is a pot of money and I would like to get my hands into it.

What about that category? Have you been approached by advertisers? Are you trying to exploit that at all?

Sook: We have been approached absolutely, and we have said, listen we are a federally-regulated entity just like the banks. Until it’s deemed OK to do business with these folks we have got a lot at risk. I can tell you that in doing our Tribune diligence, I walked into three or four markets and the No. 1 question was what is your position on CBDs. There is money out there just waiting at the door, but we have actually refused buys that have been put forth.

I wonder if politically it would be good thing for NAB to jump on that because what you are saying is we need the federal government to say it’s OK.

McCreery: Yeah. When I got the keys to my first station I was told not to lose the license and this is one of those issues. We are not going to lose the license, but we could use some relief on it.

To read more TV2020 stories, click here.

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By a 2-1 vote, the three-judge panel remanded the rules to the FCC, giving the agency another chance to relax its rules, but not without fully considering women and minority ownership.

“The commission might well be within its rights to adopt a new deregulatory framework (even if the rule changes would have some adverse effect on ownership diversity) if it gave a meaningful evaluation of that effect and then explained why it believed the trade-off was justified for other policy reasons,” said Judge Thomas Ambro, writing for the majority.

“But it has not done so. Instead it has proceeded on the basis that consolidation will not harm ownership diversity. This may be so; perhaps a more sophisticated analysis would strengthen, not weaken, the FCC’s position. But based on the evidence and reasoning the commission has given us, we simply cannot say one way or the other.”

What impact the ruling will have on TV station trading remains to be seen. The only immediate effect on the market may be the restoration of the local duopoly rule, which prohibits common ownership of two full power stations in small markets — that is, markets with eight or fewer different TV licensees.

The ruling is a setback for FCC Chairman Ajit Pai’s deregulatory agenda and he is not happy about it.

“For more than 20 years, Congress has instructed the Federal Communications Commission to review its media ownership regulations and revise or repeal those rules that are no longer necessary,” he said in a statement.

“But for the last 15 years, a majority of the same Third Circuit panel has taken that authority for themselves, blocking any attempt to modernize these regulations to match the obvious realities of the modern media marketplace.

“It’s become quite clear that there is no evidence or reasoning — newspapers going out of business, broadcast radio struggling, broadcast TV facing stiffer competition than ever — that will persuade them to change their minds.

”We intend to seek further review of today’s decision and are optimistic that the views set forth today in Judge [Anthony] Scirica’s well-reasoned opinion ultimately will carry the day.”

Andrew Schwartzman, of the Benton Institute for Broadband and Society, who was among the challengers of the FCC action, said the ruling, at first glance, looked like a “huge victory for the listening and viewing public.

“The Court of Appeals has found that the FCC has yet again failed to assess how changing its ownership limits affect people of color and women. Diverse ownership benefits everyone, and rejection of the FCC’s deregulation is a small step in restoring a system that promotes such diversity.”

NAB EVP of Communications Dennis Wharton commented: “NAB is disappointed with the appellate court’s 2-1 decision vacating the FCC’s measured decision reforming outdated media ownership rules. It’s shocking that the same panel of judges has supplanted Congress’s and an expert federal agency’s views with its own for more than 15 years.

“The media marketplace has undergone massive changes over the past few decades, let alone since 2004. We strongly encourage the FCC to appeal this misguided decision so that broadcasters can compete on an even playing field with tech giants and pay TV conglomerates.”

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The decisions they make — or don’t make — not only affect mighty corporations, but also small concerns — not just Wall Street, but Main Street.

The FCC regulators have been considering whether to allow Gray Television to own two network affiliated TV stations in Sioux Falls, S.D. Action is long overdue.

Gray already owns ABC affiliate KSFY there, but wants the economies that would come from owning a second affiliate. To that end, it cut a deal to buy NBC affiliate KDLT from Red River Broadcast for $32.5 million. In May 2018, it submitted the paperwork seeking FCC approval.

Technically, the deal violates the FCC’s local ownership rules banning common ownership of two affiliates in the same market. But, in easing the rules in 2017, the agency said it would consider such combinations on a case-by-case basis.

Gray was first in line with a case, and, 15 months later, it is still waiting.

And it is annoyed. It has responded promptly to FCC requests for more information, it has repeatedly pressed its case in meetings and calls with FCC officials, and it has even gotten friendly and powerful pols to write Chairman Ajit Pai on its behalf.

But, so far, nada. For reasons known only to himself and his lieutenants, Pai is refusing to move on the case.

Last February, I suggested that it was because the Justice Department was taking a look at the antitrust implications of the deal and the FCC didn’t want to get ahead of Justice. But as we reported, Justice cleared the deal a month ago.

My guess now is that the FCC is hung up on the big picture.

Admittedly, the case is important as it will set a precedent for other broadcasters seeking to double up with affiliates. It will set the terms and market conditions under which the FCC will grant affiliate combos from here on out. It will go far in reshaping the business.

Plus, the buyer is Gray. It’s one of the big, publicly traded station consolidators. It’s not Nexstar or Sinclair, but, like them, its appetite for stations seems to have no bounds. Anything it does is a big deal, even in DMA 115.

What Pai is missing is how his inaction is impacting small station owners and the people who work for them.

Let me tell you something about Red River, the seller of KDLT. It’s owned by the Kunin family of Minneapolis, which is also the licensee of two other small-market Fox affiliates, KVRR Fargo, N.D., and KQDS Duluth, Minn. It had a string of small-market radio stations in Minnesota and Wisconsin, but sold them over the past few years.

The Kunin family is not hurting. Starting around the same time as radio in the 1920s, it made a fortune by building a hair salon empire that grew into the publicly traded Regis Corp. with thousands of storefronts across America.

But the Kunins are small players in broadcasting. They have no ambitions to bulk up, to own a station or two in every market like the bog consolidators do if only the FCC would allow them.

In fact, with the selling of their radio stations and KDLT, they appear to be easing out of the business, waiting for the right offers like the one it got from Gray in Sioux Falls.

Despite their low broadcasting profile, the Kunins deserve prompt regulatory action and so do the managers, anchors, reporters, account executives and techs who work at the KDLT. Their jobs have been in limbo for 15 months.

“Morale has been tough,” says John Exline, who manages the Kunin business interests. “I have to tip my cap to the station leadership there because they have tried to keep a stiff upper lip through all of this unknown period of time, not only as they are concerned about what may happen as being of a part of a new organization, but also just how long things are taking. They have held it together remarkably well.”

According to BIA Advisory, Nexstar’s CBS affiliate KELO is, by far, the dominant station in Sioux Falls with 55% of the ad revenue. Gray’s KSFY and KDLT are a distant No. 2 and No. 3 in ad share, respectively. Together, their share amounts to just 33.7%. (Fox affiliate KTTW, which has no news, is a non-factor as the No. 4.)

In broadcasting today, you don’t want to find yourself in third or fourth place, especially in small markets and especially if you are part of a small group without much leverage in MVPD and network negotiations. And as every GM and ND knows, it’s nearly impossible to move up in the rankings without a massive investment in news, and even then there is no guarantee.

At some point, the only real play for the No. 3 and the No. 4 owners is to sell, to get out while the getting is good. But here’s the catch: The only buyers are broadcasters who have another station in the market. Nobody wants a standalone market laggard. But combining a No. 1 or a No. 2 with a No. 3 or a No. 4 makes economic sense.

That is why it is imperative for the FCC to think small and set simple, clear-cut criteria for affiliate duopolies in the context of its KDLT approval so that sellers and buyers can find each other to their mutual benefit and, I would argue, to the public’s. Fewer stronger stations are better than a lot of weak ones.

For the past 40 years, through Democratic and Republican administrations, the FCC has been gradually loosening its ownership restrictions on TV stations, recognizing that their margins are shrinking in the face of competition from cable, satellite and, of late, the internet.

Permitting certain combinations like a No. 1 and No. 4 or a No. 2 and a No. 3 when there is a dominant No. 1 as there is in Sioux Falls is the modest next step that will help station owners, big and small.

The FCC should take it without further ado.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here.

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“In today’s increasingly consolidated broadcasting marketplace, such protections are necessary to ensure that the commission’s rules are effective in preventing broadcasters from exercising undue leverage in negotiating retransmission consent agreements to the detriment of consumers,” NCTA says in comments in the FCC’s congressionally mandated review of its ownership rules.

“Although LPTV stations and multicast streams by themselves do not raise ownership concerns, these increasingly popular outlets are now being used by broadcasters to circumvent the top-four prohibition, and thus such arrangements should be considered subject to the rule.”

“Top-four rated” and “top four” are a bureaucrat’s phrases. In practice, the rule targets ownership of Big Four network affiliates, which is what worries NCTA.

“Even in today’s marketplace … the four top-rated television stations in a market retain a unique position because they are typically affiliated with the most popular broadcast networks that provide access to marquee programming, such as sporting events,” NCTA says.

Broadcasters already have too much leverage in retransmission consent negotiations, the NCTA says, and allowing combinations of network affiliates to proliferate would allow them to increase it.

“Despite denials by broadcasters, the harms from top-four combinations on retransmission consent fees are evident from the recent public statements of broadcasters themselves. Indeed, the commission itself recently found that ‘[f]rom 2015 to 2016, total retransmission consent fees paid by cable systems to television broadcast stations increased, on average, by 31.8% per year,’ ” the NCTA says.

“Without the backstop of the top-four prohibition, consumers inevitably will face unending and ever-higher price increases as a result of the excessive retransmission consent fee demands that this repeal would make more likely.”

The FCC has said that it will consider waivers of the top-four ban on a case-by-case basis, although it has failed to act on the only waiver request, by Gray Television in Sioux Falls, S.D., now before it.

The NCTA says the FCC should grant such waivers only under “exceptional” or “truly unique” circumstances.

“Given the harms the commission itself has recognized result from the joint negotiation of retransmission consent agreements, applicants should not be able to obtain a waiver of the Top-Four Prohibition simply by demonstrating that the joint ownership of two top-four stations would result in cost savings, increased revenues, and economies of scale.”

The low-power/multicast loophole is already a problem, the NCTA says. According to its count, it says there were as of 2018 103 instances across 85 markets of broadcasters airing a second Big Four affiliate using either a low-power station or multicast stream.

“While broadcasters of all sizes use this practice, the biggest beneficiaries of the current loopholes are the largest broadcasters in the country. For example, Gray accounts for more than a quarter of these instances, broadcasting one or more top-four affiliations using an LPTV station or multicast stream in 29 markets, over 30% of its total footprint.”

The NAB and a handful of individual broadcasters also commented in the proceeding. They called for a lifting of the top-four ban in all markets or, says News-Press & Gazette, at least in markets 75 and higher.

And perhaps anticipating the NCTA’s position, NAB argued against expanding the scope of the local ownership rule. “Treating multicast streams, satellites and LPTVs as stations subject to the local TV rule generally, or the top-four stricture specifically, also would be arbitrary and capricious because they are not equivalent to the full-service TV stations regulated under the FCC’s ownership rules.”

NAB and Meredith said the FCC should permit broadcasters to own more than two stations in a market.

“The current across-the-board rule is divorced from competitive reality in two important ways,” the NAB says. “First, the restriction is based on the premise that TV stations only compete for audiences and advertisers against other TV stations in the same market…. Second, [it] fails to take account of actual competitive conditions in any local market.”

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Harry Jessell

Broadcasters are finally getting their day in court — two actually.

This Thursday and Friday, at a “workshop” in Washington, they get to make the case to the antitrust division of the Justice Department that TV stations compete not only with each other, but also with cable and digital media like Facebook and Google.

Right now, the antitrust lawyers don’t believe stations face real outside competition. They have convinced themselves that the top four stations — network affiliates — dwell in their own little world and that what they charge advertisers is unconstrained by all the other places businesses can spend their marketing dollars.

Consequentially, they have made it clear that they are going to block new affiliate duopolies, whether by ownership or through joint sales and shared services agreements.

Antitrust chief Makan Delrahim has been promising this workshop since last fall, and in doing so has spoken of it mostly in terms of how digital advertising may be affecting the local advertising market, but the workshop agenda, fortunately, also includes cable.

The DOJ has organized the workshop around four panels, two on Thursday afternoon and two on Friday morning. You can see the whole lineup here and register to attend by emailing to atr.advreginfo@usdoj.gov. Seating is on a first-come, first-served basis.

The key session is on Friday morning: “Competition Dynamics in Advertising: Does Local Broadcast Compete with Cable Spot and Online Advertising?”

The moderator will be Lee Berger, one of the antitrust lawyers who has been giving broadcasters no quarter in merger reviews.

Representing broadcasters will be Tegna CEO Dave Lougee and NAB top lawyer Rick Kaplan. Representing the advertisers: Ty Ahmad-Taylor, business product marketing, Facebook, and Marcien Jenckes, president, advertising, Comcast Cable.

I have no doubt that Lougee and Kaplan will make strong, if not convincing, arguments that TV stations are knocking heads with digital and cable in their pursuit of ad revenue.

I’ll be more interested in seeing whether Ahmad-Taylor and Jenckes play into the antitrust division’s narrow view of the local market or whether they concede that they are competing for the same finite pool of dollars as broadcasters.

Two other broadcasters are schedule to speak. On Thursday, Gray Television Co-CEO Pat LaPlatney will appear on a panel about the “nuts and bolts of broadcast and cable.” As one of the industry’s leading consolidators, Gray has been pushing for the opportunity to pair affiliates and it feels wronged, having had to spin off a bunch of top-four duopolies to win Justice’s blessing for its merger with Raycom last year. It also partially blames Justice for the FCC’s inaction on its proposal to own two top fours in Sioux Falls, S.D.

With its strict and narrow view of the local market, DOJ is protecting advertisers and their agencies from being gouged by broadcasters, and they will have their say, too. Representing the buy side on Thursday will be Marc Pritchard, chief brand officer at Procter & Gamble, and Joshua Lowcock, an EVP at Universal McCann.

What’s lacking is a slot from somebody at Justice to explain its current policy, to lay out in clear terms why its model of the local broadcast marketplace is so constricted and to respond to broadcasters’ arguments.

But this is Justice’s show and it will be in listening mode. I suspect it’s going to be like attending oral arguments before an appeals court panel or the Supreme Court, where you will have to try to infer Justice’s thinking from the questions the moderators ask.

The other broadcaster is Sinclair CEO Chris Ripley, a somewhat surprising choice given the group’s contentious relationship with Justice when it was trying to win approval of the ill-fated merger with Tribune last year. But Ripley has been assigned to the final panel on the future of advertising and Sinclair has been at the forefront of broadcasting’s next-gen advertising efforts.

(The agenda has one oddity: Larry Solov, CEO of the conservative Breitbart News Network. Of all the ad-supported digital media in all of cyberspace, why would you select a relatively minor player like Breitbart that doesn’t even sell advertising locally?)

Rick Ducey, managing director of BIA Advertising Services, is not a broadcaster, but he will offer evidence on Thursday that will undergird their arguments.

Among the insights he will share are three about the Washington ad market this year:

• Nearly $300 million will be spent by auto dealers and manufacturers.
• Of the $300 million, more than 40% will go to digital media.
• Google alone will capture more of the money than all the TV stations combined.

It’s nice that Justice is giving broadcasters this opportunity to air their grievances, but I’m doubtful it will trigger a change in policy, at least not in the short term.

Not on this week’s agenda is Owen Kendler, the Delrahim lieutenant who oversees media. However, he appeared on a NAB Show panel earlier this month.

From listening to him there, I would say that Justice’s attitudes about the local advertising marketplace are well entrenched and that the burden of proof this week will fall heavily on the broadcasters.

Kendler spoke mostly in generalities, but what came through in his comments is that Justice has heard it all already — from advertisers and their agencies, the non-broadcast media and the broadcasters themselves — in the course of reviewing broadcast mergers like Sinclair-Tribune and Gray-Raycom. He seemed confident, smug almost, that Justice has it right.

More disturbing, Kendler seemed not to care how Justice’s policy affect the media it is, in effect, regulating. In reviewing a merger, he said, its only concern is for the buyers of the product — in this case the advertisers. “Do they feel they have no outside alternative to defeat a price rise.”

I wasn’t sure I fully understood what he was saying until another panelist spoke up. He was David Kully. He is now in private at Holland & Knight, but he used to be an antitrust litigator at Justice.

Yes, he confirmed, the financial health of the merging media companies is not a factor in Justice’s antitrust calculations. Under its “prevailing approach,” he said, flat or declining revenue by the companies would not be “particularly relevant, even in dying industries.”

While at Justice in 2016, Kully said Justice sued Tribune’s Los Angeles Times to block it from buying the Orange County Register out of bankruptcy, forcing the paper’s sale to a weaker publisher, Digital First.

I was stunned by the admission. And I was not the only one. So was the only broadcaster on the panel, Beth Neuhoff, CEO of Neuhoff Communications, a radio group facing the same antitrust issues as its TV counterparts.

“But that does not make common sense,” she said in response to Kully, prompting applause from the audience. She said she doesn’t understand how it “doesn’t matter” that radio is “market constrained” especially when it is burdened with public interest obligations.

This is just some of what Lougee, Ripley, LaPlatney and Kaplan will be dealing with this week.

To be blocked from operating top-four duopolies is not in the long-term best interest of the industry.

At some point, the net retrans revenue that is now driving industry growth is going to level off as a result of the stiffening of MVPDs in retrans negotiations and the networks’ demand for ever more of their affiliates’ retrans dollars. When that happens, the top line flat lines and TV broadcasting starts to look like radio broadcasting.

Station groups are going to need the cost savings and other synergies that come from operating two affiliates in a market to preserve their margins.

That broadcasting competes with cable and digital and needs antitrust relief is not an argument that broadcasters have to win this week, but it is one that they will have to win soon.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here.

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Speaking to a friendly audience at the NAB Show here Tuesday, Pai said the ownership rules are being reviewed in a congressional mandated proceeding it launched last December.

“Rest assured, we will not be deterred by those whose regulatory views are not guided by facts and reasons, but instead were set in stone in the era of Laverne & Shirley, Starsky & Hutch and The Captain and Tennille.

Pai noted that the public comment period in the rulemaking runs through the end of May.

Pai made a case for dereg. Broadcasting stands out in an increasingly crowded media landscape, he said. “The trust that broadcasters have built over the years is real. And Americans’ personal connections with you are your greatest competitive edge.”

By contrast, most Americans remain dubious about social media, even though they count on it for much of their news diet.

Citing a 2018 Pew survey, he said two-thirds of Americans say they get their news from social media. “The only problem: they don’t trust it.”

Sixty percent said they see the platforms as “largely inaccurate.”

What’s more, he said, an NBC News-Wall Street Journal survey found that social media “do more to divide the country than unite it and spread falsehoods rather than news.”

Pai packed his speech with other stats in discussing the FCC’s role some other commission initiatives.

• His “modernization” initiative to repeal or reform outdated and burdensome rules has so far produce 14 rulings and 11 orders with more on the way. An order on relaxing the kidvid rules should be ripe for a final vote “in the coming months.”
• The post-incentive auction repack of the TV band is proceeding smoothly. More than 300 stations have transitioned off their pre-auction channels, including 130 that are now sharing channels and about 200 of 987 that have to move to new channels. By the end of this week — the end of the second phase of the FCC’s 10-phase repack plan — 350 stations will have found new homes.
• The FCC has reimbursed stations that have to move to new channels in the repack a total of $450 million of the $2.7 billion Congress set aside for that purpose and for consumer education. He noted that checks are not only going to full-power TV stations, but also to affected LPTV stations and FMs.

For more NAB Show coverage, click here.

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Harry Jessell

As we’re all looking forward to the Final Four, let me start with a basketball analogy to illustrate FCC Chairman Ajit Pai’s handling of the local broadcast ownership rules.

It’s Nov. 20, 2017.

Pai’s Cinderella team is down two with seconds left. Pai grabs a loose ball, races up the court and brakes at the three-point line with such force his sneakers almost explode. He shot goes up as the buzzer sounds. No good! But, wait, there’s a whistle.

Coolly, Pai makes the first two to tie, but the third rims out. We go into overtime.

That’s how I see the FCC meeting of that day. No longer a Republican backbencher, but the chairman by virtue of Donald Trump’s improbable ascension to the presidency, Pai leads the FCC in allowing duopolies (ownership of two stations in a market) and in reversing the Wheeler commission’s outlawing of joint sales agreements (a back-door means of operating two stations in a market).

Two points.

But then he chokes on the question of whether the newly permitted duopolies may comprise two top-four rated stations — almost always two Big Four network affiliates. He retains the ban, although he gives a little. He says the FCC will consider allowing top-four duops on a case-by-case basis.

Overtime.

Without the overly long hoops analogy, I made much the same point in this space a year ago.

At that time, I fully expected that by now the FCC would have considered case-by-case waiver requests and slowly established which  duopolies were acceptable and which were not. Perhaps you could own a No. 2 and a No. 3 rated station or a No. 1 and a No. 4, but not a No. 1 and a No. 2.

But 16 months later, we remain in overtime, still not fully certain under what — if any — conditions broadcasters may own two affiliates in a market.

Pai has had a chance to at least get started on settling things.

Last May, Gray Television submitted an application seeking approval to purchase NBC affiliate KDLT as a companion to its ABC affiliate KSFY in Sioux Fall, S.D., a proposed combination of a No. 2 and a No. 3.

In keeping with the FCC’s new policy, Gray made a strong case for why the duopoly deserved a waiver.

It explained that Sioux Falls is dominated by Nexstar’s CBS affiliate KELO, which gobbles up 55% of the market’s spot revenue compared to 34% for KDLT and KSFY combined.

What’s more, Gray promised to produce 28 hours of additional news programming each week, making room for 285 additional advertising spots. The increase in the supply of spots would put downward pressure on rates, Gray said.

Sounds like a slam dunk to me. (I’m working hard to stick with basketball metaphors.)

Because Sioux Falls would be an important precedent, because it would begin to define limits of local consolidation, the FCC should have taken some time with it.

But it’s now been almost a year and nothing. Among other things, the FCC inaction makes a mockery out of its 180-day shot clock, its promise to resolve transfer applications in six months.

I can think of two reasons for the FCC torpor.

The first is that it is bending to pressure from the cable and satellite interests. They hate duopolies, believing that they endow their owners with too much retrans negotiating power. They seize every opportunity to attack the combos.

Remember, in 2014, they stuck a provision in the STELAR home satellite act banning two stations that were not commonly owned from jointly negotiating for retrans. The provision was aimed at broadcasters who operate second stations through joint sales and shared services agreements.

More recently, they asked the FCC to condition approval of the Nexstar-Tribune merger on Nexstar’s giving up Tribune’s pre-existing top four duopoly in Indianapolis.

That request takes some gall in light of the fact that Nexstar, to appease regulators, is giving up what would have been newly created top four duopolies in 10 markets.

The other reason is the Department of Justice. I’ve used this space several time to rail against its heavy-handed and misguided intrusion into the structural regulation of broadcasting.

Suffice it to say here, the DOJ doesn’t believe one company should own two stations in a market because they do believe that TV broadcasting is a closed market in which stations compete only with one another.

It’s an absolutely ludicrous view of the marketplace. FCC Commissioner Michael O’Rielly agrees, by the way. He told a group of cable operators in Washington two weeks ago that the DOJ’s antitrust standards for evaluating broadcast deals “stink.”

So, it’s possible that Pai doesn’t want to approve deals for fear they will be trumped by the DOJ or that they will trigger an inter-agency turf fight.

To me, these are exactly the reasons why the FCC should act, to assert its authority over broadcast media mergers.

If the DOJ wants to overrule an FCC approval on anti-trust grounds, so be it. But the FCC will have spoken and if the case ever goes to court, the judge will have the testimony of the expert agency in media matters to weigh against whatever the DOJ is arguing.

This issue of top four duopolies has become a blemish on Pai’s otherwise deregulatory and pro-broadcasting record. Based on all he has said and written on the subject before and after he assumed the chairmanship, he supports further local ownership deregulation. He just has to act.

Look, if Virginia and Auburn can pull it out in overtime, so can he.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here.

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Harry Jessell

Since the beginning of time, the FCC has been the principal arbiter of how many broadcast stations you may own and where you may own them.

Its decisions were based on laws. Every once in a while, Congress would step in to change those laws, but it was left to the FCC to figure out exactly what the laws meant and how to implement them. Through a process of rulemakings and precedents, it created a body of evolving structural regulations that all lived by.

If broadcasters didn’t like the FCC’s interpretation of the laws or how it was administrating them, they could appeal to Congress or the courts.

All was right with the world.

But lately an interloper has appeared, undermining the FCC — and perhaps even Congress — and disrupting the broadcasting business in its existential struggle to ward off rivals for viewers and ad dollars on multiple fronts.

This interloper is the Antitrust Division of the Department of Justice headed by Makan Delrahim.

Of course, as the nation’s insurer of healthy competition, it has always had a role in media affairs. But for the most part it has restricted itself to the antitrust review of large mergers and acquisitions.

Most often, it OKs the deals as it did Comcast’s takeover of NBCU eight years ago. But every once in a while, it moves to block deals as it did with the DirecTV-Dish merger (successfully in 2002) and the AT&T-Warner Media combination (unsuccessfully last year).

But I cannot remember a time when Justice has plunged so deeply into the nitty gritty of the broadcasting advertising marketplace and what kind of local station combinations should be allowed. And it has done so in a way that is out of sync with the FCC.

This started last year after the collapse of the Sinclair-Tribune merger. DOJ began investigating possible collusion among broadcasters on the setting of ad rates. So far, it has led to consent decrees under which several station groups have agreed to avoid sharing ad info with rivals. It should be noted that the DOJ has not produced any evidence of wrongdoing.

At around the same time, DOJ started scrutinizing station deals that it felt might give the broadcasters excess market power in negotiating ad prices and retransmission consent fees. This has been a real problem for Gray Television.

A year ago, Gray agreed to buy a tiny group of small-market stations, including CBS affiliate KGWC in Casper, Wyo. It planned to run KGWC in tandem with its NBC affiliate KCWY. Because of the FCC prohibition against owning two top four full-power TV stations in a market, Gray said it would give up KGWC’s full-power facilitates, but hang on to the CBS affiliation by shifting it to a low-power station.

The deal caught the attention of the DOJ, which started burying Gray with requests for information. Those requests became so onerous that, two weeks ago, Gray threw up its hands and said it would give up on the CBS affiliation.

It said it would shut down KGWC’s separate news operations and merge it into that of KGWN’s in the adjacent market of Cheyenne. It would mean just one Casper-focused newscast each day and fewer news reporters and producers in Casper.

“As we told DOJ, unless we acquire the CBS affiliation and thereby trigger a second retransmission revenue stream to offset our losses, we would be forced to eliminate most local news in Casper,” Gray said.

In Sioux Falls, S.D., Gray wanted to make a duopoly by buying NBC affiliate KDLT to go along with KSFY. It thought it could make use of the FCC’s newly relaxed ownership rules that said the FCC would consider waivers of the top four station prohibition on a case-by-case basis.

Gray made what it believes is a strong case, but its proposal is festering at the FCC, and the word is that it’s because the DOJ has made it clear that it opposes the deal and would trump an FCC grant.

The latest DOJ intrusion is coming in the form of investigatory letters to station groups asking about shared services and joint sales agreements, which broadcasters have used for years to set up sidecars and operate top four duopolies, all with the blessing of the FCC.

I am also hearing that it’s not just local concentration that is bugging Justice, that it is also taking a harder than usual look at any deal that significantly increases a station group’s reach out of concern that bigness gives groups too much leverage in retrans. This does not bode well for Nexstar’s takeover of Tribune or for the imminent merger of Cox Media into a larger group.

The DOJ does not set its policy by rulemaking. It does so by litigating.

DOJ didn’t just approve the Gray-Raycom merger last December. It wanted to make a statement so it sued to block Gray from forming duopolies in nine markets where there would be overlapping Gray and Raycom stations, even though Gray said on the day the deal was announced that it had no intention of forming any duopolies and would divest stations in the overlap markets.

DOJ’s approval came in the form of settlement of that suit in which Gray promised that it would divest stations in the nine markets just as it said it would. It’s a little absurd, but it made for a swell DOJ press release in which Delrahim gets to declare a victory. Yay, Makan.

That aside, the settlement underscores that the DOJ will  not allow combinations of Big Four affiliates in the belief that they would give the owner of such duopolies unfair market power over local advertisers and cable systems. So much for the FCC’s case-by-case promise.

The prohibition is justified because there is no market alternative to the affiliates, the DOJ’s thinking goes. If advertisers and cable systems don’t do a deal with them, they are screwed. That’s flattering to affiliates, but highly dubious.

It’s one thing, I think, for the DOJ to meddle in the prerogatives of the FCC, another for it to monkey around with Congress, which is what it is doing by asking questions about SSAs and JSAs.

When the Wheeler FCC tried to phase out the JSAs, Congress intervened, countermanding the FCC actions and, in effect, giving its blessing to JSAs. So, now you have a division of the DOJ in direct conflict not only with the FCC, but with the Congress.

So, what’s got the DOJ so wound up?

Well, there was Sinclair’s arrogance in trying to push through its mega deal for Tribune. With its ridiculous sidecar deals and unwillingness to compromise, it dissed the DOJ, although it was the FCC that finally couldn’t take any more of Sinclair’s nonsense and derailed the deal.

But I think the big factor is cable. Having failed to rein in broadcasters’ retrans clout in Congress and the FCC, the MVPDs are working the DOJ hard and getting heard. They have convinced a group of lawyers there that industry consolidation is causing ad rates, retrans fees and subscriber fees to go up.

When Gray blasted the DOJ for wrecking its duopoly in Casper, the American Cable Association, which has been leading the charge for the MVPDs on retrans, didn’t miss a beat. It issued a press release rolling its eye at the idea that DOJ was to blame for the news cutback.

“The fact is that DOJ took the appropriate step in stopping Gray’s ‘Casper Caper,’ ” said ACA CEO Matt Polka. “As Gray surely knows, the establishment of Big Four duopolies produces market leverage that results in pay-TV providers and their customers paying above-market rates for retransmission consent, and other harms.”

I’m sure there is more to this. There is always a political dimension for why things happen in Washington, but I haven’t yet been able to suss it out.

Not all broadcasters believe the industry needs to consolidate further, but those that do have a serious obstacle in the form of the DOJ.

But there are some positive signs.

Delrahim promised last September (and again last week) to hold a “workshop” to air out issues surrounding broadcasting and the local ad market. Broadcasters could use the session to explain once again that they need relief because the local ad market is far more competitive than the DOJ apparently fathoms.

Unfortunately, I haven’t found anybody on the broadcast side who has been asked to participate, which makes me think it’s not much of a priority. The DOJ PR office provides no information.

I would also point out that Delrahim will soon be getting a new boss, which could lead to a fresh look at broadcasting. This will be William Barr’s second turn as attorney general. He held the post in the final year of the Bush I administration, and is considered a mainstream Republican — deregulatory and pro-business.

After he left government, he was general counsel of GTE Corp. for six years. When it merged with Bell Atlantic to form Verizon in 2000, he stayed on eight more years as its top lawyer. So, we can presume he knows his way around the FCC and won’t be shy about tackling communications issues.

Let’s hope that Barr recognizes that when it comes to broadcasting regulation at the granular level, the DOJ involvement is neither needed nor wanted.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here.

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Nexstar said that it will show the FCC that the duopoly of two top four stations — WXIN (Fox) and WTTV (CBS) — would “serve the public interest.”

And if it is allowed to own the two stations, it said, it will divest the two other stations it already has there, CW affiliate WISH and MNT affiliate WNDY.

Tribune put together the top 4 duopoly by the back door in 2014 when, as part of a broader agreement with CBS, it acquired the CBS affiliation for WTTV, then a CW affiliate.

WISH, which had been the CBS outlet, then became the new home of the CW. At the time, WISH was owned by LIN Media.

FCC rules prohibit common ownership of two top 4 stations in a market, but the agency has said it would consider exceptions or waivers on a case-by-case basis.

Nexstar will have to do more than just convince the FCC it deserves an exception or waiver of the rule. The Justice Department is closely scrutinizing duopolies and could nix the Indianapolis combo on antitrust grounds even if the FCC OKs it.

According to the application, the merger involves 13 markets with overlapping Nexstar and Tribune stations. Two would create permissible duopolies of one top four station and one non-top four station.

Eleven would create impermissible top four combos. In 10 of the 11, the filing says, Nexstar will divest one of the stations to comply with the top four prohibition.  But in one — Indianapolis — it will take a stab at the case-by-case waiver.

Earlier this week, in a separate filing, Nexstar revealed plans for three markets, saying it would sell WTKR Norfolk, Va.; WGNT Portsmouth, Va.; and WNEP Scranton/Wilkes-Barre, Pa.

The application also acknowledges that the merger would swell Nexstar’s TV household coverage to 47.1% — way over the 39% national ownership cap.

To get below the cap, Nexstar said that it would sell all of its stations in certain markets, but did not say which ones. It said it would file its divestiture plans for compliance as soon as they are finalized.

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