Tribune Kills Merger, Sues Sinclair For Its 'Unnecessarily Aggressive' Merger Sales Pitch

from the you-did-it-to-yourself dept

Sinclair Broadcast Group’s $3.9 billion merger with Tribune Media has reached an inauspicious end. Tribune has formally announced that it’s not only terminating the planned merger, but will be filing a lawsuit (pdf) against Sinclair for what the company states was an “unnecessarily aggressive” sales pitch to FCC regulators and the DOJ. According to Tribune, it’s hoping to recoup its losses and “hold Sinclair accountable” for causing the companies’ controversial merger to implode:

“In light of the FCC?s unanimous decision, referring the issue of Sinclair?s conduct for a hearing before an administrative law judge, our merger cannot be completed within an acceptable timeframe, if ever,? said Peter Kern, Tribune Media?s Chief Executive Officer. ?This uncertainty and delay would be detrimental to our company and our shareholders. Accordingly, we have exercised our right to terminate the Merger Agreement, and, by way of our lawsuit, intend to hold Sinclair accountable.”

If you recall, the merger was on life support after the FCC shoveled the merger off to an administrative law judge for review, a move traditionally seen as a death knell for such deals. The FCC was prompted, in part, by allegations from numerous critics on both sides of the partisan aisle alleging that the company had tried to use “sham” transactions to pretend the merger fell within media ownership limits.

As it stands, law prohibits any one broadcaster from reaching more than 38% of U.S. homes, a rule designed to protect local reporting, competition and opinion diversity from monopoly power. The Sinclair deal would have given the company ownership of more than 230 stations, extending its reach to 72% of U.S. households. Critics charge Sinclair attempted to skirt around this limit by trying to offload numerous stations to Sinclair-linked companies and allies, some of which had absolutely no broadcast experience, with an eye on simply re-acquiring them later at bargain-basement prices.

If you’ve watched the viral Deadspin video or John Oliver segment on Sinclair’s creepy, facts-optional “news” reporting, you should have a pretty good idea why the merger was so controversial. It was, effectively, an attempt to dominate local broadcasting and fill the airwaves with what many have argued is little more than Trump-friendly disinformation.

Sinclair’s efforts were buoyed by Ajit Pai’s FCC, which had spent the better part of the last year attempting to neuter media consolidation rules in order to grease the skids for the deal. That included eliminating rules requiring a broadcaster have a physical local office, restoring obscure, un-needed regulations specifically to aid Sinclair’s bid to limbo under media ownership rules (odd for a guy that endlessly whines about “unnecessary, burdensome regulations”), and even contemplating elimination of the media ownership cap entirely, authority the FCC doesn’t actually have.

While the FCC tried to claim that the carefully-coordinated and times skid greasing was all just quirky happenstance, the effort was so blatant that it resulted in an ongoing FCC investigation into potential corruption and coordination by Pai. That investigation, in turn, likely helped contribute to Pai’s about face on the deal, given it’s abundantly clear that the agency head has post-FCC political ambitions (though his attacks on net neutrality may have something to say about that).

Granted while the deal is dead, the regulatory and market dysfunction that birthed it remains. And the massive FCC erosion of decades-old media consolidation rules also remains, paving the way to potentially even worse deals waiting just over the horizon.

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Companies: sinclair, sinclair broadcasting, tribune, tribune media

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Comments on “Tribune Kills Merger, Sues Sinclair For Its 'Unnecessarily Aggressive' Merger Sales Pitch”

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Mason Wheeler (profile) says:

As it stands, law prohibits any one broadcaster from reaching more than 38% of U.S. homes, a rule designed to protect local reporting, competition and opinion diversity from monopoly power. The Sinclair deal would have given the company ownership of more than 230 stations, extending its reach to 72% of U.S. households.

I still don’t see how this makes any sense. Who cares if one brodacaster can reach more than 38% of US homes? That doesn’t make them a monopolist; being the only broadcaster would make them a monopolist, which isn’t happening.

I say, let Sinclair reach 100% of US homes, and let all the other broadcasters do so as well! As Techdirt has said several times in the past, the correct response to bad speech is more, better speech, not censorship and restrictions on speech.

ShadowNinja (profile) says:

Re: Re: Re: Re:

The problem is the national corporations just have local news run a bunch of national news. Just look at Sinclair’s ‘Must Run’ of Trump and conservative propaganda.

It literally gives a national company the power to push a political agenda mascaraing as a local issue.

For example, what if a national company decided to bury all the stories on police brutality because they like the police. Or the opposite, hype up or even make up stories of police misbehavior to demonize them across the country in local news.

That’s why there’s rules in place to limit ownership of local media.

Anonymous Coward says:

Re: Re: Re:2 Re:

I tried to find it but I could not in casual surfing, but I thought I remember a rule about local network ownership of TV stations. That a single network was not allowed to own more than XX% of the broadcast signals in a single metro (separate from the 38% national rule).

Or am I thinking of Radio?

carlb (profile) says:

Re: Re: Re:3 twinsticks in same market?

It is possible for one company to own two full-power TV stations in the same market, but yes, there are restrictions. In the US, it’s generally not permitted for the same company to own two or more of the top four commercial network affiliates in the same town.

So if one station is Fox and the other is sixth-ranked “My Network TV” or some such rubbish, odds are no one cares.

Of course there are a ton of loopholes. For instance:

* Instead of one company owning both stations, it can own one and rent the other from another broadcaster (who acts as absentee landlord, circumventing the limits).
* Another variant of the same scheme is for one broadcaster to own the station and pay another to run it.
* It’s also possible to get around the limit by using two different digital subchannels on the same station/same channel to carry two networks – but two HDTV feeds won’t fit on a single channel this way without some loss in quality.
* There’s also no limit on the number of commonly-owned low-power TV transmitters.
* It’s sometimes possible to use a station in an adjacent market to get a “rimshot” signal into a large city from just outside the market boundary.
* There may be more loopholes if the commonly-owned stations are broadcasting ethnic-language content at least half the time, and there seems to be nothing much protecting non-commercial stations from concentration of ownership (so WNET controls both WLIW and WNJN in seeming impunity).

Some of the shenanigans that ensue include:
* Sinclair owns WSTM (NBC3.1) Syracuse and also owns a low-power TV station (The CW, 14). That means they can’t buy WTVH (CBS 5.1) as NBC/CBS are both top-four networks, but someone else can own it and have Sinclair run it… in return for WTVH’s corporate owners running Sinclair’s owned station in some other market.
* Rogers owns two FM radio stations in Kingston, Ontario – the limit for common ownership on the same band in that city. Using tiny WLYK FM in Cape Vincent NY (directly across the river, but across a market boundary) would be a way to circumvent the limit, but Canadians can’t own US stations (or vice versa). Renting WLYK from an absentee landlord circumvents this nicely.
* Rogers is also already at the limit for Ottawa FM stations. This can be circumvented by using allocations in the next county (Smiths Falls is in Lanark) and, as these are in the same country, Rogers can own this directly – installing the transmitters in some other town midway between the community of licence and the big city.

Where Sinclair got into trouble was an ongoing pattern – which has been going on for years – of using related companies to end-run the regulations, ie: Daddy owns Sinclair, he’s already at the limit for common ownership in some random town, no problem, Grandma can buy the other station under some other company name (ie: Cunningham) and pay Daddy to run it. That’s happened in a few markets. An employee or a family member would be the nominal owner, but Sinclair would use broadcast automation to run both stations. And yes, putting one station in Grandma’s name probably gets some preferential treatment for having a girl on your team. All smoke and mirrors.

US radio is a joke, in a large city (presumably at least any of the top 100 markets) one company can own 6FM + 2AM stations in the same market. After a while, it all sounds the same. Clear Channel (I [heart] radio) was infamous for this. In the words of Billy Joel, “there’s a new band in town but you can’t get the sound ’cause it’s only in a magazine… hey that’s your average scene”

Anonymous Coward says:

Re: Re: Re: Re:

Mason, but the issue is those multiple local channels are all owned by these giant networks. None are independent.

More frequently that giant megacorp owns multiple of those networks. For example, the same company owning both the ABC and NBC news stations in your local district.

They completely control the message, including the political reporting. Like Sinclair has been challenged with multiple times – that could mean a significant slant in the reporting with no mention of that intentional bias.

For all the hate that FOX and MSNBC get from either side of the political divide, at least they are both extremely open about their political slant. That does not happen locally.

Anonymous Coward says:

Re: Re: Re:3 Re:

For example, the same company owning both the ABC and NBC news stations in your local district.

But that’s a distinct issue from the one being discussed here.

Wrong again. The whole purpose of the 38% rule is to address this very problem. You can’t repeal the rule without making the political messaging issue worse, unless you also re-address the political messaging issue at the same time.

Thad (profile) says:

Re: Re: Re: Re:

But that’s not what happens. There have always been multiple local channels, with their own news.

And historically, they’ve been affiliates, not fully-owned subsidiaries. Comcast might control the national news that airs on NBC affiliates, and Fox might control the national news that airs on Fox affiliates, but they historically haven’t interfered in local news, dictated editorial policy, or forced them to run particular news segments.

carlb (profile) says:

Re: Re: Re:2 affiliates vs. owned-and-operated stations

re: “Comcast might control the national news that airs on NBC affiliates, and Fox might control the national news that airs on Fox affiliates, but they historically haven’t interfered in local news, dictated editorial policy, or forced them to run particular news segments.”

That depends on the market. The NBC network owns WNBC TV, the CBS network owns WCBS TV, the Fox network owns WLIW, the ABC network owns WABC TV… and more of the same with KNBC, KCBS, KABC in California. They’re owned-and-operated stations under full corporate control of the parent network.

(WPBS and KPBS are an exception, as PBS has “member stations” and the stations collectively own the network – so an exactly reversed pattern)

In smaller markets, the networks depend on affiliate stations which the network does not own. CBS doesn’t own KXGN-TV in tiny Glendive, Montana, some guy named Steve owns it. 🙂

That could have consequences if some key station were to change sides, for instance 2 Détroit leaving CBS for Fox. Networks hate that, but what can they do? As long as there are still limits on the number of commonly-owned stations, there will be affiliates which the network does not own.

Anonymous Coward says:

Re: Re: Re: Re:

Bottom Line with Boris is on Youtube so you can get a first hand impression instead of that headless third-handing of opinions as that source and so many others do today:

Watching his segments, if you get past his mob-boss intonation and accent, would certainly give a one-sided reality. He rides the “media bias” with reckless abandon seemingly without reflecting on his own act and the “fourth pillar”.
Some specifics: He is running a clear false equivalence of “good economy = national pride”, a funny “indecent language is a democratic issue that requires condemnation” and “Scott Pruits following of Trumps agenda and a promise of future improvement is good enough. The loyalty over integrity decree so common in autocracies! And those are just a few of the guys hillarious segments I looked at.

Don’t get me wrong, Bottom Line with Boris is a clearly marked segments and isn’t the enslavement of local journalists like the Deadspin-time.

But the quote from him is beautyful: “I know that I would want someone giving opinions about medicine only if they were an actual doctor” Well, as far as his opinions on media, he certainly doesn’t want to be judged! Mic dropped

Christenson says:

Re: Market Concentration

In the day before the internet, local news markets had an approximately fixed size in most cities:
Two major daily newspapers
Three TV stations, generally 3 network stations.
Radio stations, but these didn’t do much news; they did music.

In such a market with high fixed costs and barriers to entry, market concentration was to be avoided. Recall also that part of the bargain with the FCC to use the limited radio spectrum was a certain amount of public service, too.

When they expanded that with UHF, we got PBS and independent stations that didn’t bother with the nightly news.

As to reaching 100% of the population, that’s not the problem, it’s crowding out everyone else. You want them to reach 100% of the population, that’s simple enough: eliminate re-broadcast fees and stream it on the internet!

stderric (profile) says:

So… earlier this week, Pai was throwing many of his coworkers (old & current alike) under the bus in order to avoid taking any responsibility for the fake DDoS attack. Now, the ALJ move he made to look good in the face of the corruption investigation not only resulted in his buddies at Sinclair losing out on the merger, but also getting their asses sued.

I don’t imagine these actions are a comfort to others who, up to this point, have been counting on Pai to be their ‘go-to guy’ when they need him.

stderric (profile) says:

Re: Re: Re:

True, Pai’s willing to get pretty deep in the muck if he thinks there’s a way he can profit. But…

  1. When it came to the DDoS being exposed as a sham, instead of trotting out some sort of "bureaucratic miscommunication" non-explanation explanation for the mess he started shouting "It was them! Everybody but me was lying!". While I agree with some commenters that this might be an excuse/opportunity to unload a few underlings that he’s not fond of by placing the blame on them, it still doesn’t seem like it’d instill faith in the next person he asks to do something sleazy: who’s gonna trust him when he says "I’ve got your back"?
  2. He cost Sinclair a merger and probably some money that’ll be going to Tribune. Given the current political climate, Pai will probably come thru the corruption investigation with a little cosmetic scuffing but none the worse for wear, and would have done the same without tanking the merger by handing it over to an ALJ; he just panicked and covered his own ass. He wasn’t willing to risk taking even a small beat-down for the Sinclair team, and I’d imagine that sorta thing sticks with a guy.

I’m probably reading way too much into a couple of minor events, but I’ve got some sort of weird "optimism" thing going on today…

Zippy says:

A better way to deal with the problems of mergers and acquisitions would be to outlaw them entirely and rescind the rights of personhood from corporations. Each company stands alone. Shell companies and other such shenanigans are not possible without those rights of person because they depend on the ability to own or merge with another company. Take that way and it becomes much more difficult to manipulate the market. Also outlaw any form of corporate influence on government of any kind, including all forms of lobbying, with actual enforcement of consequences against company heads and officials for their misdeeds the same as if they were done by an average citizen.

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