TV Stations Tie The Knot

Broadcasters are pushing back against the Justice Department’s effort to rein in deals that allow competing local TV stations to pool their resources in order to sell advertising time.

FCC chairman Tom Wheeler is also looking to place limits on agreements in which station groups jointly sell advertising time, in an effort to make the process more efficient for smaller stations and to give the sales entity more clout with advertisers. The broadcast lobby is  defending such arrangements as “vital” to the health of stations and for providing local and diverse programming.

In a filing with the FCC on Tuesday, the National Assn. of Broadcasters chided the Justice Department for attacking so-called joint sales agreements as a way for station groups to avoid media ownership caps, which prohibit ownership of more than one station in small- and medium-sized markets. Broadcasters have argued that the feds’ focus on private transactions among TV stations in mid-size markets s is misplaced at a time when MVPD giants Comcast and Time Warner Cable are attempting to merge.

NAB said that a Justice Department filing last month was “based entirely on the false and dated assumption that local broadcasting is a relevant antitrust product market. If the Department acknowledged that broadcast television stations face a host of non-broadcast competitors (as they plainly do), it would dismantle the Department’s rationale for its proposed rule change.”

In a March 6 blog post, Wheeler agreed with the Justice Department and criticized such joint sales agreements as a “loophole” that has allowed station groups to essentially control more than one station and avoid ownership caps. He has proposed a revision in which a station that sells more than 15% of another station’s advertising time is deemed to have “effective control” over that station, similar to rules that govern radio stations. The FCC will take up the proposal at the next commission meeting on March 31.

Such joint sales agreements have become the target of public interest groups, particularly as large station owners like Gannett and Sinclair Broadcast Group have expand their holdings dramatically through acquisitions during the past two years.

But NAB argues that the Justice Department is prioritizing the “narrow focus” of antitrust laws to benefit large corporate advertisers and cable companies, and “deemphasize the Commission’s broader charge to protect the public interest.” It contends that joint sales agreements have allowed stations to achieve “substantial economies of both scale and scope,” freeing up money to invest in equipment, production facilities and programming.

The broadcasters also said that the joint sales agreement do not give them an advantage in pricing power, given the growth in satellite, cable and online competition. “And in clinging to its narrow twentieth-century market definition, the Department ignores one of the few facts that it includes in its submission — a majority of Americans get their television content from sources other than free, over-the-air broadcast television,” the NAB said.

Nevertheless, Wheeler wrote that it is simply “recognizing reality” to close the loophole. “At a time of unprecedented change in the video business, the FCC should deal with facts, not reality-obscuring legal fictions,” he said, echoing what the Justice Department argued.

He also is proposing that the FCC prohibit two of more of the big four local broadcasters from “banding together” in retransmission consent negotiations with cable operators.

“This action will return retransmission consent to one-on-one negotiations as intended by Congress, rather than many against one – with potential consequences for the consumer as one who ultimately pays the price,” Wheeler wrote.

Wheeler also is proposing that the FCC seek comment on the value of share-services agreements, in which stations share the costs of such things as newsgathering and administrative functions.

Broadcasters also have pushed back against Wheeler’s proposal that the FCC allow waivers but only on a case-by-case basis. In a filing to the FCC last week, Jane Mago, NAB’s exec VP and general counsel, proposed an alternative in which the commission would set standards to ensure that stations in joint sales arrangements retain independent control. She wrote that could include requirements that a station retain control over at least 85% of programming, retain at least 70% of advertising revenue, and maintain at least 20% of station value in the license itself. Stations also would be required to file sharing agreements with the FCC to “ensure transparency.”

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