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Sinclair’s ‘Brazen’ Plan to Sell New York, Chicago Stations With Strings Attached Draws Criticism

Sinclair Broadcast Group has stirred new outrage among critics of the broadcast TV giant with its effort to sell TV stations in New York and Chicago to secure federal approval for its $3.9 billion acquisition of Tribune Media.

Sinclair surprised the industry last month by unveiling a proposal to sell two of Tribune’s flagship large-market stations — WPIX-TV New York and WGN-TV Chicago — as part of its divestiture plan to comply with the FCC’s station ownership limits.

But the sale of WPIX and WGN would come with strings attached in the form of agreements with the buyers that would allow Sinclair to continue to operate both stations. Sinclair last week in an FCC filing revealed more details of the sale plan that brought out new howls of protest from media watchdog groups opposed to the deal, which would make Sinclair by far the largest owner of TV stations in the country.

Critics have characterized Sinclair’s plan for WPIX and WGN as a bold effort to sidestep FCC rules by technically transferring ownership of the station to entities affiliated or long associated with Sinclair and its management. Moreover, the sale price for both stations is shockingly low: $15 million for WPIX and $60 million for WGN. Sinclair would not only continue to operate the stations and receive the lion’s share of their revenue, but the sale agreement with both buyers gives Sinclair an option to buy the stations back within eight years. That’s seen as a marker for the company to bide its time in the hopes that the FCC relaxes its station ownership restrictions in the near future.

“This is their most brazen flouting of the existing FCC rules,” said Craig Aaron, president of the Washington, D.C.-based Free Press. “The only role these supposed owners have is to sign everything away to Sinclair including all of the profits. These sham deals are in place only long enough so that Sinclair can lobby hard enough to get rid of the (ownership) rules and buy the stations back.”

Other opponents of the Sinclair-Tribune deal — including the Coalition to Save Local Media, a group of industry groups and unions, and Newsmax, the conservative cable news network — have urged the FCC to reject Sinclair’s proposal.

A Sinclair spokeswoman defended the shared-services arrangement as permissible under FCC rules. “These agreements are structured to be consistent with similar agreements that the FCC has approved for over ten years,” she said.

Sinclair’s plan is to sell WPIX-TV New York to Cunningham Broadcasting Co. Cunningham is believed to be largely owned by the estate of Carolyn Smith, the late mother of Sinclair chairman David Smith. The company owns 20 other TV stations, most of which are operated under joint agreements with Sinclair.

The buyer for WGN-TV is listed as Steven B. Fader, chairman of Baltimore-based Atlantic Capital Group. Fader is a business partner of David Smith in Atlantic Automotive Corp., which owns dozens of car dealerships.

The sale price of $15 million for a VHF station in the nation’s largest TV market and $60 million for a VHF station in the No. 3 market was described as “comical” by a broadcast TV veteran. It’s been some years since a comparable station to WPIX-TV changed hands in New York. Back in 2002, Fox paid $425 million to acquire WPWR-TV Chicago, a UHF station that was not nearly as strong in the market as WGN-TV.

Sinclair’s critics have also zeroed in on FCC chairman Ajit Pai for what some characterize as his cozy relationship with Sinclair. Pai has long been a critic of FCC media ownership rules, arguing that they no longer reflect the reality of the contemporary media landscape. But the Sinclair-Tribune deal has faced a long road in securing approval from the Justice Department and FCC on the Tribune deal, which was first inked last May. The Sinclair spokeswoman said the company expects the deal to close in the second quarter of this year. Observers had expected FCC and DOJ rulings this month after Sinclair filed its final divestiture plan last month.

The Tribune acquisition will put Sinclair well over the FCC’s current limit on the number of U.S. TV households that a single entity can reach. That limit stands at present at 39%, although the FCC is planning to study the possibility of raising the cap. With the Tribune deal, Sinclair will reach about 45% of the U.S. (using the FCC’s formula for discounting the reach of UHF stations versus stronger VHF outlets). The plan to sell Tribune’s VHF outlets in New York and Chicago helps Sinclair shave nearly 10% from its total reach tally.

“An FCC serious about doing its job would reject this sham,” Aaron said of the WPIX and WGN sale plans. “Unfortunately, we have an FCC more interested in what’s good for Sinclair’s bottom line than the viewers in Chicago and New York.”

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