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Mass Consolidation of Local TV Stations Likely as Wall Street Applauds Acquisition Frenzy

Phillip Dampier July 2, 2013 Competition, Consumer News, Public Policy & Gov't 1 Comment

Tribune_Company_logo The company best known for the 10 daily newspapers it publishes, including the Chicago Tribune, the Orlando Sentinel, the Baltimore Sun, and the Los Angeles Times, can’t wait to get out of the newspaper business.

Last December, the Tribune Company, the second largest newspaper publisher in the country, emerged from bankruptcy without its $13 billion debt and old owners. Now in charge: the same Wall Street banks that lent the company billions to go private. Two months after assuming control, Tribune’s new owners hired Evercore Partners and J.P. Morgan to oversee the dumping of Tribune’s newspaper portfolio.

Founded in 1847 with the launch of the Chicago Tribune, 166 years later the Tribune Company was finished with print news, probably for good.

Banker and now owner

Investment bank and now owner

Today’s Tribune, controlled by Oaktree Capital Management, best known for investing in “distressed” companies, JPMorgan Chase, a Wall Street investment firm, and Angelo, Gordon & Co., a hedge fund sponsor best known for helping the U.S. government deal with the toxic assets accumulated by banks that helped trigger The Great Recession, want into the television business instead.

Tribune, which already owned 23 local television stations including flagship WGN in Chicago, bought another 19 Monday in a deal estimated to be worth at least $2.7 billion.

The stations were acquired from Local TV Holdings, itself owned and controlled by Wall Street investment firm Oak Hill Capital Partners, founded by Texas oil billionaire Robert Bass. Oak Hill acquired the television outlets from The New York Times and News Corp., in two prior deals. Tribune won’t pay for the stations outright. It is financing the deal with a $4.1 billion credit line granted by banks including JPMorgan Chase and Citigroup.

The stations involved:

City of License/Market Station Channel
Huntsville, Ala. WHNT-TV 19 (19) CBS
Fort Smith – Fayetteville, Ark. KFSM-TV 5 (18) CBS
KXNW 34 (34) MyNetworkTV
Denver, Col. KDVR 31 (32) Fox
Fort Collins, Col. KFCT*
(*- satellite of KDVR)
22 (21) Fox
Des Moines, Iowa WHO-TV 13 (13) NBC
Moline, Ill. (Quad Cities) WQAD-TV 8 (38) ABC
Kansas City, Mo. WDAF-TV 4 (34) Fox
St. Louis, Mo. KTVI 2 (43) Fox
High Point – Greensboro –
Winston-Salem, N.C.
WGHP 8 (35) Fox
Cleveland – Akron, Ohio WJW-TV 8 (8) Fox
Oklahoma City, Okla. KFOR-TV 4 (27) NBC
KAUT-TV 43 (40) Independent
Scranton – Wilkes Barre, Penn. WNEP-TV 16 (50) ABC
Memphis, Tenn. WREG-TV 3 (28) CBS
Salt Lake City, Utah KSTU 13 (28) Fox
Norfolk – Portsmouth –
Newport News, Va.
WTKR 3 (40) CBS
WGNT 27 (50) The CW
Richmond, Va. WTVR-TV 6 (25) CBS
Milwaukee, Wisc. WITI 6 (33) Fox

Assuming the deal meets the approval of the Federal Communications Commission, Tribune will control 42 stations in 16 markets, including New York, Los Angeles, and Miami.

kdvrIt expects to pay off the loans and generate returns from the “significant free cash flow” generated by the stations.

Where will that cash flow originate? From pay television subscribers asked to pay a growing amount each year for the formerly “free TV” stations.

“Smaller players feel like they’re losing their way with pay-TV providers and broadcast networks,” Craig Huber, analyst at Huber Research Partners, told USA Today. “They feel like they’re at a disadvantage here unless they size up.”

As cable programming rates continue to increase and subscribers threaten to cut the cord, pay television providers have been more willing to play hardball and kick stations off the cable or satellite dial when they cannot reach a retransmission consent agreement.

With up to 90 percent of a station’s viewership coming from pay television platforms, a lengthy standoff can destroy a station’s primary source of income: advertising revenue.

To protect themselves, television station owners are retaliating by threatening providers with the loss of all of their stations across the country, not just one or two. The resulting subscriber uproar could prove politically difficult and threaten customer relationships with providers. The more stations a company controls, the bigger the threat it can pose to Comcast, DirecTV, AT&T and other national providers.

KTVITribune is not alone bulking up the number of stations they own and control. Last month Gannett nearly doubled its portfolio from 23 to 43 stations with the acquisition of Belo’s TV stations for $1.5 billion in cash and agreeing to cover $715 million in accumulated debt.

Sinclair Broadcast Group, already the largest local TV station owner in the country, has gotten even larger with the purchase of four TV stations owned by Titan TV Broadcast Group. If the deal is approved, Sinclair will own 140 stations in 72 markets. In some cities, Sinclair will nominally own or control up to five local stations.

Sinclair management is well-known for injecting conservative political viewpoints into local newscasts and programming decisions. In 2004, two weeks before the presidential election, Sinclair ordered all of its television stations to air propaganda critical of Democratic candidate John Kerry. Later that year, Sinclair ordered its ABC affiliated stations not to broadcast a “Nightline” episode about soldiers killed in the Iraq war, fearing it would turn the public against the war.

But for most owners, politics has nothing to do with the desire to supersize. It’s a matter of money.

Even smaller station groups are now consolidating. Media General and New Young Broadcasting Holding, are merging their combined 30 stations.

(Image: The Wall Street Journal)

(Image: The Wall Street Journal)

Critics worry the changing landscape of local television will threaten the concept of “local service” stations are required to provide as a condition of their broadcast license. A station owner that lives and works in the community served is becoming an increasing rarity, and the Federal Communications Commission has allowed stations that used to fiercely compete for local news viewers to now “share resources.” Many stations, especially those owned by out of area investment banks, have discontinued local news altogether in cost-savings maneuvers.

“This deal adds to a blizzard of broadcast industry consolidation that is poised to leave America’s media system less local, less diverse and less accountable to the people in these communities,” said Free Press’ Craig Aaron in a statement on the deal. “By the time all these deals are done, a handful of companies could control almost all of the network affiliates in major markets and swing states. Local broadcasts are becoming simulcasts, with the same cookie-cutter content piped in from distant corporate headquarters, once-competitive stations combined into single newsrooms and fewer journalists forced to fill more hours of airtime.”

“The FCC needs to wake up to what’s happening on local TV,” said Aaron. “Wall Street may be overjoyed at this merger mania, but the rest of us should be very worried about having fewer viewpoints on the air and fewer reporters on the beat.”

Former FCC commissioner Michael Copps shares his concerns about increasing media consolidation and its impact on an informed electorate. (Aired on Carolina Journal Radio May 23, 2013) (1 minute)

Currently there is 1 comment on this Article:

  1. James Cieloha says:

    As for Tribune: Tribune would turn KDVR into a CW station and could sell it directly to CBS as a owned and operated station and form a duopoly with KCNC while Tribune keeps KWGN and turns into a FOX station. Tribune would turn KTVI into a ABC station and KPLR getting turn into a FOX station and could sell it to either FOX as a owned and operated station or Nexstar owning it and running it as a FOX affiliate of their own with KDNL turning into a CW station under Sinclair ownership and control. Tribune would turn WGHP into a ABC station with WXLV turning into a FOX station under Sinclair ownership and control while WGHP could enter a JSA/LMA/SSA with soon to be Lockwood owned WCWG as a partner for launching newscasts. WHNT could enter a JSA/LMA/SSA with Lockwood owned WHDF as a partner for launching newscasts.

    As for Gannett: I would rather see Gannett spinning off KASW, KMSB/KTTU, and KMOV to Meredith and combined the operations of KASW with KPHO, and spinning off KTVK, and WHAS to Scripps and combined the operations of KTVK with KNXV with ABC moving to KTVK and KNXV becomes independent for competitive reasons and a very true win-win situation for Gannett, Meredith, and Scripps in Phoenix. Tribune would turn KTVI into a ABC station and KPLR getting turn into a FOX station and could sell it to either FOX as a owned and operated station or Nexstar owning it and running it as a FOX affiliate of their own with KDNL turning into a CW station under Sinclair ownership and control for competitive reasons and a very true win-win situation in Saint Louis.

    As for Media General: I would consider a 3 way swap between NBC, Media General, and Gannett with NBC grabbing KRON as an NBC O&O and the station is housed with KSTS in San Jose, Gannett grabbing KNTV as a MYNET affiliate or be an independent and share operations with KRON in San Jose until building a solo building for KNTV, and Media General grabbing WLTX. I would have liked the idea of Journal trading WFTX for WLAJ to form a duopoly with WSYM while WLAJ is assigned to a third party with combined operations in Lansing, Meredith trading WFSB and WSHM LD for KELOLAND, Sinclair trading WTVC and or WGME for WBAY, and Quincy trading WVVA and possibly WSJV for KWQC as a way to help Young pay off it’s debts from it’s bankruptcy and improve regional clutter for Media General and other broadcasting companies. I would favor Media General being able to grab WLGA from Harry Pappas and his Pappas Telecasting and formed a legal duopoly with WRBL.

    As for my ideas of suitors for the Allbritton stations: Disney could fully buy WJLA from Allbritton and turn it into a full ABC O&O station in Washington DC. I would be okay with Hearst getting KTUL, KATV, WCIV, and WSET with Nexstar getting WHTM and Sinclair transferring the license of WLYH to Cunningham/Deerfield and continue to fully owned WHP or Nexstar give control of WLYH to Mission for owning WHTM, and with Sinclair getting the combined WBMA LD/WJSU/WCFT with the intent of using the the combined WBMA LD/WJSU/WCFT to program FOX on it’s DT1 channel and MYNET on it’s DT2 channel while WABM continues to program MYNET on it’s DT1 channel and add FOX on it’s DT2 channel. Sinclair keeps the CW affiliation on WTTO and WDBB. Sinclair could transfer the license of WTTO and WDBB to Cunningham and WABM to Deerfield while Sinclair fully owns the combined WBMA LD/WJSU/WCFT combo or Raycom could buy the combined WBMA LD/WJSU/WCFT combo and place it under the control of American Spirit Media with the intent to move the FOX affiliation there on it’s DT1 channel with WBRC rejoining the ABC Network on it’s DT1 channel. The combined WBMA LD/WJSU/WCFT combo would air WBRC on it’s DT2 channel or all of it’s programming 24/7 with ABC is transferred and switched onto WBRC while WBRC would air the WBMA LD/WJSU/WCFT combo on it’s DT2 channel or all of it’s programming 24/7 with FOX is transferred and switched onto the WBMA LD/WJSU/WCFT combo.

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