Sinclair/Tribune Triggers MVPD Concerns, But FCC Fixes Seen Unlikely
MVPDs have numerous concerns about Sinclair's proposed $6.6 billion buy of Tribune, but not substantial confidence the FCC's review will fix those concerns. Meanwhile, public interest groups and left-leaning political organizations also could bring their own objections to the proposed deal, though they likely could see even less success, experts tell us.
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There likely will be some markets where New Sinclair would have to divest in markets where it has multiple stations, a cable industry official said. Sinclair said the St. Louis, Salt Lake City and Wilkes-Barre, Pennsylvania, markets might require divestiture (see 1705080018). Some MVPDs will be concerned about the overall scale of New Sinclair, though it's not clear yet how or whether that concern will materialize in advocacy, the official said. MVPDs won't be happy having to negotiate with such a big broadcast entity, but the GOP-controlled FCC is unlikely to give that issue much weight, and advocacy instead will likely revolve around New Sinclair violating duopoly rules in specific markets, the official said.
Deal watchers pointed to American Cable Association objections about Nexstar/Media General (see 1603210045) as a likely road map for MVPD objections that could be brought against Sinclair/Tribune. ACA and others called for limits on Nexstar’s leverage in retrans talks and ability to cause blackouts. But it could be an uphill battle since the objections and proposed conditions were for naught under Democratic Chairman Tom Wheeler, and Chairman Ajit Pai is going to be even less inclined, a broadcast lawyer said. As long as New Sinclair is within the national ownership cap, it's not clear what issues the FCC would raise, the lawyer said. New Sinclair would be dominant in some markets, and those are issues more for the DOJ than FCC, the lawyer said, saying the deal is big enough it will need DOJ review. It's still not clear how Sinclair will handle local markets where there are overlaps with Tribune, he said. Sinclair didn't comment.
This being the first major transaction under Ajit Pai's tenure, the chairman is likely to go by the book in the review, raising doubt many of the possible objections will go very far, said a lawyer with broadcast and cable clients. But a call by Senate Commerce Committee Chairman John Thune, R-S.D., for close scrutiny (see 1705090062) could prompt the FCC to at least pay more attention in its review to issues like media consolidation, the lawyer said. He said there undoubtedly will be objections on a market-by-market basis in areas where there would be a Sinclair duopoly. The deal is likely to get FCC approval since this is just what the agency must have expected would happen with its UHF discount action, the lawyer said.
Some MVPDs told us Sinclair/Tribune raises competitive worries. Sinclair already is more aggressive than Tribune in seeking retransmission rate increases, said George Lee, cable division manager at Utah's CentraCom. He said major broadcasters have been busy buying independent stations around Utah for the growing retrans revenue stream they represent, with CentraCom now paying more than $10 per subscriber monthly, double what it was in 2008, "and it's going to go up even higher than that." Broadcast consolidation means large broadcast companies have even more leverage to increase those fees, Lee said. He said he hopes the FCC will consider treating retrans fees akin to the way it treats copyright fees, with MVPDs paying a flat amount instead of having to negotiate individual contracts.
"Bullies become even bigger bullies when they have more consolidation and more size behind them," echoed Levi Maaia, Full Channel president. "I don't think [Sinclair/Tribune] bodes well for a level playing field for negotiations" between broadcasters and small and midsize MVPDs, he said. He said Sinclair often will bundle cable and broadcast stations in negotiations, requiring, for example, carriage of Tennis Channel alongside the local NBC affiliate.
Public interest opposition about New Sinclair's being too big in the market is likely, but probably won't carry weight with the Pai FCC, a broadcast lawyer said. The lawyer also said Fox tried to scotch Sinclair/Tribune by also bidding, but it's highly unlikely any networks would participate publicly in the regulatory proceeding. A cable industry official said the question becomes one of how networks respond to such broadcast station consolidation, with one option being more network owned-and-operated stations.