Tuesday, September 24, 2013

New federal rule could prevent companies like Sinclair from gaining hegemony over TV stations

UPDATE, Sept. 27: The Federal Communications Commission voted 2-1, along party lines, to start changing the rule. The Republican congressman who chairs the subcommittee that oversees the FCC, Rep. Greg Walden of Oregon, objected, saying "This amounts to regulatory purgatory for broadcasters between now and whenever the FCC produces a rule" at the end of the process. "Though the rule as currently proposed would not affect current pending TV deals, it would stop any further consolidation dead in its tracks," Katy Bachman of AdWeek reports.

Sinclair Broadcast Group has been buying up mostly small-market television stations at a rapid rate in the last 30 months, more than doubling its station count from 58 to 108, and it could own 149 stations when pending deals are complete, Roger Yu reports for USA Today. "But Sinclair's singularly torrid pace of growth has fueled debate about enduring questions on concentration of media ownership and fresh attempts by federal regulators to scale back broadcasters' ambitions." It's not the first time Sinclair has made news. The company has been criticized in the past for airing biased election specials targeting Democratic presidential candidates, and there is fear that if one company owns all the stations in a market, they will control the news content of every show. (Associated Press photo by Steve Ruark)

"Under current FCC rules, the reach of a broadcaster's TV stations may not exceed 39 percent of U.S. households," Yu writes. "But broadcasters have been allowed to count UHF stations as having only 50 percent of the reach of VHF stations. UHF signals didn't cover as much ground when stations were still broadcasting in analog signals. The prevalence of digital signals now makes the UHF-VHF distinction largely moot, and the FCC has plans to eliminate the UHF discount. If the discount is eliminated, Sinclair's total U.S. household reach — if counting all 149 stations — will jump overnight to about 38.2 perecnt, bringing it awfully close to that 39 percent limit. With the discount, Sinclair's reach would be about 22 percent."

If the UHF discount goes away, as is widely expected, Sinclair may turn to an old industry maneuver to find other ways to continue to mushroom, Yu writes. "The FCC prohibits the owner of a station that is among the top four in local viewership to buy another top-four station in the same market. Broadcasters have relied on 'shared services agreements' or 'local marketing agreements' to get around the restrictions. In such arrangements, a broadcaster buying a station can recruit or create a separate corporate entity to own the station. In return for a fee, the broadcaster then provides a range of services for the station owner, ranging from merely selling ads and negotiating retransmission fees to assuming editorial operations. Cable companies and media critics say the practice has been abused by broadcasters in pursuit of industry consolidation. They argue that shared service agreements erode stations' independence and programming quality because one company controls multiple voices." (Read more)

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