When the Federal Communications Commission (FCC) penalized Nexstar Media Group and its business partner, Mission Broadcasting, over violations of federal ownership rules related to a local marketing agreement in New York City, it didn’t stop at fining the broadcasters more than $1.2 million for the scheme.
The agency also issued a demand that could see Nexstar’s lose control of a local television station in the biggest market — or lose ownership of several other stations across the country.
On Wednesday, the FCC issued a notice of apparent liability for forfeiture (NAL) that accused Nexstar and Mission of conspiring to pull a fast one on regulators several years ago when Nexstar was seeking approval to acquire Tribune Media.
At the time, Tribune Media owned WPIX (Channel 11, CW) in New York City — its biggest television station by market size — and that posed a problem for Nexstar.
Under federal law, one company can own as many television stations as they’d like, so long as their collective reach does not exceed 39 percent of the American television market.
At the time of the merger, Nexstar was already one of the largest independent owners of local television stations in the country — and its marriage with Tribune Media would have put it over that federal ownership cap. To satisfy that concern, Nexstar agreed to divest a number of stations to other companies. In New York, WPIX was sold to the E. W. Scripps Company, with Nexstar retaining an option to buy the outlet if federal ownership rules changed within a certain time frame.
Instead of exercising that option, Nexstar transferred to Mission Broadcasting, a company that employs fewer than 60 people and whose headquarters are based in a Texas strip mall. With the FCC’s blessing, Mission bought WPIX from Scripps, then allowed Nexstar to assume all operational control of WPIX — including the appointment of station executives, hiring of employees, selling advertisements and managing the station’s finances.
After receiving complaints from Comcast, DirecTV and a number of other groups, the FCC began probing Nexstar’s relationship with Mission specifically concerning WPIX. This week, the agency said Nexstar exerted too much control of the station, making it a de facto owner of WPIX — and that put Nexstar over the federal ownership cap.
In addition to fining Nexstar more than $1.2 million — the first time the agency has imposed a financial penalty against a broadcaster for violating federal ownership rules — the FCC also told Mission it needed to sell WPIX.
The FCC said that sale could go one of two ways: Mission could sell WPIX to Nexstar outright, which would allow the broadcaster to continue controlling the station, its personnel and finances, just as it did before. If the companies take that approach, the FCC says Nexstar will need to sell off a number of stations in other markets to put it below the ownership cap.
The second option involves Mission selling the station to a third party company that is not related to Nexstar or its other partner business, White Knight Broadcasting.
Under the proposal, if Nexstar chooses the first option, it would still need to seek regulatory approval for the transfer of WPIX’s license and related station assets. There is no guarantee the FCC will approve the transfer, but it appears highly like regulators will green-light the application, so long as Nexstar agrees to sell off enough stations to put it in compliance with federal ownership rules.
To that effect, Nexstar would not be allowed to divest the stations to Mission, or any other company that it has local marketing agreements with. It also wouldn’t be allowed to enter into local marketing agreements to operate the divested stations for at least eight years, the FCC said.
If Nexstar and Mission opt for the second option, the FCC wants to make sure the sale of WPIX to an unrelated third party is done in a clean way. The agency said Nexstar and Mission would not be allowed to enter into a local marketing agreement to operate WPIX for at least eight years, and Mission would be prohibited from buying back the station for the same period of time. Both companies also could not retain an equity stake in the station, the FCC said.
It does not appear that Nexstar is considering either of those approaches: In a statement on Thursday, the company’s founder and CEO Perry Sook said he was “disappointed” by the fine and divestiture order and affirmed that their arrangement with Mission to operate WPIX and other stations was legal.
To that end, Sook blamed media reports on their business arrangement for apparently influencing the FCC’s decision-making process on the matter — even though the agency cited just two news outlets in the source footnotes of its 42-page order (Nexstar’s own website and the company’s filings with the Securities and Exchange Commission were cited throughout the document.)
“We believe the FCC has been misled by the often distracting noise in the media ecosphere, and that it has completely misjudged the facts,” Sook said. “The facts are that Nexstar has always complied with FCC regulations and that its relationship with WPIX-TV under a Local Marketing Agreement (LMA) was approved by the FCC in 2020, when WPIX-TV was purchased by Mission Broadcasting, Inc.”
Sook said local marketing agreements that allow one large broadcaster to exert control over numerous stations were “vitally important to maintain a competitive media marketplace and to enable broadcasters to continue investing in local news, investigative journalism, and other services that they uniquely provide to the communities in which they are located.”
The statement did not indicate whether Nexstar intends to fight the FCC’s order, but an executive familiar with the company’s thinking said the “paperwork is being drafted” to formally appeal the judgment and divestiture order. If the FCC reaffirms the order, “we’re prepared to fight this in court,” the executive said.
