Reconsider UHF Discount?

Tribune/Local TV Indicates Increasing Pressure to Change Ownership Rules

July 2, 2013 by Monty Tayloe|Top News

Tribune will likely avoid falling afoul of FCC ownership rules through shared service agreements in St. Louis and Denver, said Free Press Policy Director Matt Wood. He also pointed to previous Tribune efforts to sell off its newspaper properties as a possible solution to the cross-ownership conflict in Virginia. “There’s not a lot of formal levers for the FCC to grab onto,” he said, describing the deal as being “not as bad” as a recent plan for Gannett to buy Belo Corp.’s TV stations, which also featured a market overlap (CD June 14 p7). No mention was made of how Tribune and Local TV will get past cross-ownership rules during a conference call Monday held by the companies. The deal would allow Tribune to create “synergies” between its print, video and digital properties, said CEO Peter Liguori on the call. BIA/Kelsey Chief Economist Mark Fratrik said he believes the companies would not pursue the deal without believing it will be approved by the FCC. “They obviously have good legal counsel; good FCC counsel,” he said.

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A perception that the FCC could relax broadcast cross-ownership rules may be fueling a spate of communications deals like Tribune’s $2.73 billion acquisition of Local TV’s 19 broadcast stations, industry officials told us. The transaction was disclosed Monday. “Because there’s been some pressure to ease up on that rule, these companies are acting under the assumption they have a chance of getting the mergers approved,” said Fletcher Heald broadcast attorney Peter Tannenwald. Free Press identified market overlaps between Tribune newspapers and Local TV stations in St. Louis, Denver and the Hampton Roads area of Virginia. “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,” said Free Press President Craig Aaron in a news release.

Tribune/Local TV will give Tribune a combined 42 TV stations, making it the “the country’s largest commercial TV station owner” the buyer said in a news release. Set to complete by the end of 2013, the combination will make Tribune both the largest Fox affiliate group and the largest CW affiliate group. The deal will “enhance everything” by allowing Tribune to use the advantage of scale in future retransmission consent negotiations and to cut operating costs, said Liguori. “Scale matters.” Liguori said his company will use the deal to become the county’s “leading independent content creator and distributor,” using the platform provided by its large number of TV stations to test content before bringing it to wider audiences.

The increased scale of the company will let it “have more impact on the spectrum front,” said Liguori. Though there are still uncertainties about the FCC incentive auction, the increase in Tribune-owned TV stations will allow the company “more flexibility” to use an “innovative spectrum strategy,” he said.

The deal will give Tribune control over TV stations reaching 44 percent of the country, Wood said. Though the national FCC TV cap limits companies to 39 percent, Tribune said that under the UHF discount, the company’s cap figure is only 26 percent. “If the UHF discount ever made sense in an analog world, it makes no sense now,” Wood said. “The commission needs to take another look” at the discount, especially since UHF stations are actually preferable for DTV, he said. The current FCC won’t make radical shifts in ownership policy anytime soon, said Tannenwald. “It’s a very highly political topic, he said. “With an interim chairwoman, it’s hard to believe they'll stick their necks out on this.”