At Yet Another Meeting, FCC Won't Tackle TV Ownership Cap
A dangling national ownership cap proceeding and a flurry of TV dealmaking mean there’s an expectation the FCC will act to change the 39 percent audience reach cap, officials said. But broadcasters, industry analysts and attorneys aren’t sure when the commission will do so. The agency was seen as on the brink of issuing a cap order in July, and though that didn’t happen, broadcasters have considered an order possible ever since. Some think the midterm elections could affect timing, and others said the jockeying to buy Tribune could lead the agency to act. Commissioners' Sept. 26 tentative agenda Wednesday (see 1809050029 and 1809050056) doesn’t include action on the cap. Attorneys said a vote on such a contentious issue outside a meeting is unlikely.
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Every broadcaster, analyst and attorney we interviewed expected action eventually. They agreed the collapse of Sinclair/Tribune and U.S. Court of Appeals for the D.C. Circuit dismissal of the challenge to the UHF discount removed most of the impetus to move immediately. Looming broadcast deals and lingering uncertainty about the threshold's future mean the pressure isn't all off, industry officials said. “The commission will eventually raise the national cap in a way that facilitates some dealmaking,” said Cowen analyst Paul Gallant. The FCC didn't comment.
Merger activity is heating up for TV broadcasting, said media broker Gregory Guy, echoing many. Reports of private equity interest in TV investments, the availability of Tribune and the likelihood of spinoffs lead many industry officials to expect a rush of transactions. “Spinoffs and merger activity are good for large and small broadcasters,” said Bayou City Broadcasting CEO DuJuan McCoy. Industry officials split on whether that wave of deals could be stalled by uncertainty around the cap and discount.
Broadcasters may be willing to bet that pending deals affected by the UHF discount or national cap numbers would be grandfathered, one lawyer said. Others said the lack of clarity on ownership reach limits could affect large deals involving big groups -- such as likely plays for Tribune. Nexstar is seen a possible buyer of Tribune stations. Nexstar CEO Perry Sook again said the cap should be eliminated, meeting FCC Chairman Ajit Pai last month (see 1808210056). Because the agency has a proceeding open on altering the cap and removing the discount, broadcasters can’t be certain on the future of those rules, an analyst said.
Industry officials are divided over whether the midterm elections are a factor in the timing. “I’d be surprised if they go in that direction before the November midterms,” Gallant said. “Media ownership is still something of a political third rail.” Some industry attorneys expressed doubt that TV station ownership is an issue that would receive much oxygen in the current national political climate. Midterms could spur movement now, some industry attorneys said, since they could lead to Democrats gaining control of one or both houses of Congress.
The ownership cap and UHF discount aren’t the only source of uncertainty about dealmaking after the Sinclair/Tribune hearing designation order. Broadcasters are watching to see how the FCC and DOJ treat Gray/Raycom’s streamlined deal (see 1808270038). Gray’s separate proposal for a top-four combination in Sioux Falls, South Dakota (see 1806080055) also is seen as a trial balloon for future applications, an analyst said. The FCC hasn’t granted such a combination since it allowed for the possibility with the media ownership reconsideration order last year.