Nexstar Deal Could Provide Template for Future JSA Deals, Attorneys Say
A Nexstar deal to sell three TV stations to African-American-owned Marshall Broadcasting that involves sharing arrangements (CD June 9 p15) could provide a template for the rest of the industry to get deals through an FCC perceived as hostile to such transactions, said broadcast attorneys in interviews. Though the $58.5 million deal involves practices specifically discouraged by recent FCC rule changes on sharing arrangements, its stated goal of helping the public interest by increasing minority broadcast ownership is exactly the sort of exception the commission said it would endorse, said broadcast attorneys and public interest officials Monday. “This is the type of transaction NABOB was hoping to see as a result of the new JSA rule,” said National Association of Black Owned Broadcasters Executive Director Jim Winston.
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Since the FCC began focusing on deals involving sharing arrangements, there has been a widespread reluctance in the broadcast industry to file for approval of such transactions, said industry attorneys. If the Nexstar deal gets FCC approval, it could provide a game plan for future deals, the attorneys said. Since opponents of the rule, which increases the attributability of JSAs, had argued that it would adversely affect minority ownership (CD March 14 p9), there may be pressure on the FCC to grant a waiver of the new rule to a minority-owned broadcaster, they said. If the commission does so, other broadcasters looking to have transactions approved could seek out deals with minority broadcasters, they said.
Though Nexstar has not expressly said it will pursue a JSA waiver, the news release announcing the deal Friday (http://bit.ly/1u23SN2) said it will establish “a new paradigm that addresses recent proposed FCC regulation changes” and Nexstar CEO Perry Sook called it “a model to increase media ownership diversity.” Nexstar did not comment for this story.
Though industry officials described the Nexstar deal as appearing designed to meet the FCC and Media Bureau’s description of permitted exception to the new policies for sharing arrangements, Nexstar is also challenging those policies in court. Along with NAB, Howard Stirk Holdings and the Prometheus Radio Project, Nexstar filed a petition for review against FCC JSA attribution rules and handling of the quadrennial review of media ownership (CD June 5 p16). The ongoing proceeding in the U.S. Court of Appeals for the D.C. Circuit isn’t likely to affect the timing of the Nexstar deal, because no requests for injunctions have been filed and such requests are rarely granted against the FCC, Winston said.
Using FCC policies to give companies a reason to sell to minorities is precisely the way to address the problem of ownership diversity, Winston said. “There have to be business incentives -- that’s the only way these deals get done.” Wilson said even if the deal leads to more minority owners, using it as a template to get deals through is a bad thing if it doesn’t lead to owners with control over their stations and a path to wealth creation. “The profits are key,” Wilson said.
FCC reaction to the proposed deal will determine if other broadcasters follow Nexstar’s lead, said a broadcast attorney. If the commission approves the deal but imposes a time limit on the waiver or requires that complete ownership of the stations is gradually transferred to Marshall -- an idea originally proposed by NABOB -- it may not be a palatable plan for broadcasters to follow, the attorney said. The plan “seems to be in line with the FCC’s mandate of diversity/localism and may help with the approval process,” said Wells Fargo analyst Marci Ryvicker in an email to investors.
Nexstar will provide sales and other nonprogramming services to Marshall, and the Marshall stations will use Nexstar employees for engineering support, master control, traffic and billing, and other administrative functions that do not relate to control of the stations or their programming, the release said. The stations involved in the deal are Fox affiliates KLJB Davenport, Iowa, KMSS-TV Shreveport and KPEJ-TV Odessa, Texas. The release said Marshall will receive 70 percent of the advertising on the stations sold by Nexstar, and the deal doesn’t include bonus payments. Public interest groups and the bureau have flagged those payments as areas of concern in other transactions.
The deal is related to Nexstar’s buy of Grant Co. (CD Nov 7 p16) and Communications Corp. of America, the release said. The deal will substitute Marshall for Mission Broadcasting, a frequent “shell company” affiliate of Nexstar’s, said Free Press Policy Counsel Lauren Wilson, who has opposed other deals involving sharing arrangements. The FCC should thoroughly examine the way profit would flow between the two companies before approving the deal, Wilson said, though she characterized herself as “hopeful” that the deal could represent a real path for increasing diversity in broadcast ownership. At this early stage, the deal doesn’t appear to contain long-term guaranteed purchase options or leave most of the tangible assets of the stations in Nexstar’s hands, details that had concerned NABOB about a previous attempt at a JSA rule waiver by the African-American-owned Howard Stirk Holdings and Sinclair, Winston said. -- Monty Tayloe (mtayloe@warren-news.com)