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.

Filed Under: ajit pai, fcc, media ownership, merger, ownership
Companies: sinclair, sinclair broadcasting, tribune, tribune media

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  1. identicon
    carlb, 9 Aug 2018 @ 10:41pm

    Re: 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"

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