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Potential Bidding War for Tribune Triggered by FCC Action

When news broke that 21st Century Fox and Blackstone Group are teaming up for a prospective bid for Tribune Media, it wasn’t much of a surprise that there would be a potential bidding war for the station group.

That’s because of a move that the FCC made just weeks ago, when it decided, on a 2-1 party line vote, to reinstate the so-called “UHF discount.” The regulation has allowed major station groups to bulk up without the fear of exceeding a 39% national ownership cap, and the FCC’s action was widely predicted to trigger another wave of consolidation among broadcasters.

Sources described the potential Blackstone-21st Century Fox bid as one in which Blackstone would provide the cash to acquire Tribune, and Fox would provide its 28 owned-and-operated stations to a joint venture. A bid has not yet been submitted, with a deadline at the end of this week.

Sinclair Broadcast Group, with 173 stations, reportedly also is interested in Tribune Media, with 42 stations.

The research firm MoffettNathanson said that a Fox-Blackstone bid would, for Fox, “defend against the formation of a long-term rival.”

Among other things, Sinclair may decide to start a competing news channel, or a new national network by buying up NFL rights. A combined Tribune and Sinclair would own 68 Fox affiliates, giving them leverage in retransmission negotiations. The deal also could benefit Fox because it would gain exposure to additional markets with NFL teams, like Seattle and Milwaukee.

Another potential bidder that has been mentioned is Nexstar, which has 170 stations.

Analysts say that the interest in Tribune from major rivals is made possible by the FCC’s move last month. The UHF discount allows station groups to count each UHF station as 50% of its coverage area. That has given more leeway to major media companies which would be near the 39% ownership cap without the discount. Sinclair, for instance, is at 24% of the country with the discount, and 38% without, according to MoffettNathanson and other research sources.

Broadcasters have argued that the current media ownership restrictions don’t make sense given the competition they face from major cable and the Internet companies. They were particularly irked when the Obama-era FCC decided to get rid of the discount — a move that prevented media groups from acquiring more stations as they would exceed the ownership cap. After Trump was elected and Republicans gained a majority at the agency, station groups lobbied FCC officials to reinstate the discount.

Andrew Jay Schwartzman of Georgetown Law’s Institute for Public Representation, said that “there is a sense that it is open season for acquisitions.”

He thinks that 21st Century Fox’s move is a defensive move on their part — as the alternative is to face a much bigger Sinclair in carriage and affiliate negotiations.

“They prefer to own those stations rather than Sinclair,” he said.

Were Blackstone-Fox to acquire Tribune, they may still face the prospect of having to sell stations in some major markets, like in New York and Los Angeles. In L.A., Fox owns KTTV-11 and KCOP-13, and Tribune owns KTLA-5, but FCC rules do not allow for common ownership of three stations in the same market.

Public interest groups also have been sounding the alarm about the UHF discount, and potential further relaxation of ownership rules.

In a filing with the FCC last month, Schwartzman and Angela J. Campbell wrote that the discount had become an “important loophole” for station groups to avoid exceeding ownership caps. They predicted that the discount would “effectively repeal the 39% national ownership cap and rapidly usher in new transactions…”

Timothy Karr of Free Press said that “the losers in any such merger would be the people in the areas these station conglomerates are supposed to serve, particularly the many people in low-income and Spanish-speaking communities who rely on local broadcast television for local news. The last thing these communities need is cookie-cutter content from a consolidated media company pushing an ideological agenda.”

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