Sinclair Redrafts Tribune Deal to Fit in FCC’s Ownership Cap

Sinclair
Sinclair

HUNT VALLEY, Md. – Sinclair Broadcasting Group has resubmitted its $3.9 billion deal to buy Tribune Media’s stations to the Federal Communications Commission (FCC), even as it continued to negotiate some of the proposed spinoffs with the Justice Department, adjusted to reflect the media deregulation it pushed for. 

Sinclair is now seeking to own two of the top four stations in the Greensboro-High Point Winston Salem, N.C., Harrisburg-Lancaster-Lebanon-York, Penn., and Indianapolis markets. The company also wants to retain both of its stations in Portland, Ore.

The FCC last year adjusted its rules governing broadcast ownership including the elimination of the Newspaper/Broadcast Cross-Ownership Rule, the Radio/Television Cross-Ownership Rule, and the Television Joint Sales Agreement Attribution Rule. Also, the FCC voted to get rid of the eight-voices rule, which bars an entity from owning two stations in one market unless eight independent broadcasters would remain.

The FCC will review the potential duopolies on a case-by-case basis.

The original deal, proposed last May, would have given Sinclair control of Tribune’s 42 stations, in addition to the 193 stations Sinclair already owns or operates, with some tweaking necessary under old and new FCC rules.

Last month, the FCC halted its review of the deal – and its informal 180-day shot clock – expecting the refiled transaction.

John Eggerton, a reporter with Broadcastingcable.com, says Sinclair wants to own two of the top four stations in three of its markets, something that would have been off limits before the FCC’s deregulation took effect earlier this month.

Sinclair also is looking to spin off Tribune’s WPIX New York and WGN Chicago (as well as KSWB San Diego) to get under the FCC’s ownership cap, which bans a single broadcaster from reaching more than 39 percent of all U.S. television households (though Eggerton says the FCC is considering raising the 39-percent cap). Sinclair, though, wants to continue to provide services to the New York and Chicago stations. Critics say not owning a station in markets No. 1 and No. 3, respectively, is a way to skirt the ownership rules. 

Analysts say Sinclair will park all the stations that it has signaled it is willing to spin off into a trust, though it may not wind up selling all of them, depending on whether the FCC does any more deregulating and on which specific stations the Justice Department or FCC might want in other hands.

Adonis Hoffman, Business in the Public Interest chairman and CEO and formerly a top FCC staffer, said he believes the FCC should raise the 39-percent cap. “When any number of companies outside the broadcast sector can reach the entire country with the same programming, the national cap becomes a fiction that limits, and applies only to, broadcasters,” he said. “What remains to be seen is how well DOJ and FCC can harmonize their approach to meet the limit.”

Insiders says Sinclair’s filing indicates that the deal will not be closing in the near term, given that the DOJ is still vetting it and the FCC will now have to put the new deal out for public comment and consider that feedback before it decides.

That signoff, if it comes as expected, won’t be until April at the earliest, Equity Research told its clients.