Satellite broadcast DirecTV is still moving forward with an antitrust lawsuit against Nexstar Media Group over allegations of price collusion with respect to some of its ancillary businesses, even though its main carriage dispute with the broadcaster has since been resolved.
This week, a spokesperson for DirecTV affirmed the company has no plans to pull its lawsuit, which accuses Nexstar of improperly colluding with two other companies — Mission Broadcasting and White Knight Broadcasting — to inflate costs associated with carriage agreements of its local TV channels.
While technically separate companies, all broadcast stations licensed to Mission and White Knight are operated by Nexstar through business arrangements known within the industry as “shared services agreements.” Among other things, Nexstar hires employees to work at the stations licensed to Mission and White Knight and negotiates carriage of their TV channels with cable and satellite operators like DirecTV.
Stations licensed to Mission and White Knight have been unavailable to DirecTV subscribers since last year, when a carriage agreement expired with no new deal in place. In March, DirecTV filed its lawsuit against Nexstar and the two other companies, arguing that the business arrangement between Nexstar and the other two companies was illegal under federal law.
DirecTV also says Nexstar’s operational control of Mission and White Knight stations makes it a de facto owner of those broadcast outlets, and the arrangement allows Nexstar to circumvent federal regulations that limit the cumulative reach of their stations.
Currently, broadcasters can own as many stations as they like, as long as they don’t have too much control of the airwaves in a single metropolitan area, and as long as their cumulative ownership of broadcast stations doesn’t exceed the reach of 38 percent of the American viewing population.
Nexstar’s ownership of 160 local TV stations puts it at the 38 percent limit under existing federal rules. But when including stations owned by White Knight and Mission, Nexstar actually operates broadcast outlets that reach nearly 70 percent of American households, DirecTV says.
For its part, Nexstar doesn’t dispute it operates White Knight and Mission stations, but says its shared services agreements follow the law.
Things appeared to unravel further when DirecTV was forced to pull Nexstar-owned stations after a separate deal covering those channels lapsed in July. For weeks, large parts of the country were without one or more local station owned by Nexstar, which put ABC, CBS, Fox, NBC and CW Network programming out of reach of millions, unless they switched away from DirecTV or installed an antenna.
The situation was resolved three weeks ago, with Nexstar and DirecTV hammering out a new distribution agreement that allowed the satellite provider to once again offer Nexstar-owned channels to their customers. The deal also covered the streaming version of DirecTV and legacy subscribers of U-Verse, which is no longer sold to customers.
The new agreement between DirecTV and Nexstar didn’t require the satellite company to pull its months-long lawsuit, which is still pending in court and could proceed to a trial next year, according to two people with knowledge of the situation.
A judge overseeing the case is now weighing whether to accept a motion filed by Nexstar to dismiss the antitrust case.
DirecTV’s ‘Tactical Advantage’
In a June affidavit that accompanied the motion, attorneys for Nexstar argued the premise of the case was intended to help DirecTV “gain a tactical advantage in [ongoing] negotiations” concerning carriage of Nexstar’s 160 channels on the satellite platform. (At the time, the dispute involving Nexstar-owned channels was still several weeks from happening.)
Attorneys for Nexstar said DirecTV felt further aggrieved by an industry-wide trend in which broadcasters were demanding more money for their channels, which Nexstar’s attorneys said was connected to higher programming-related costs for the broadcasters themselves.
“Now, on [the eve of] its renewal negotiations with Nexstar, DirecTV concocted this alleged antitrust conspiracy, based on rates proposed by Mission and White Knight that DirecTV did not pay,” the attorneys said.
In other words, Nexstar and the two other media companies felt DirecTV had no standing to bring an antitrust case, because it refused to pay the fees Nexstar demanded for the White Knight and MIssion channels. Since DirecTV refused those higher rates, it couldn’t claim to be injured by anything Nexstar or the other two companies did or did not do.
“DirecTV lacks constitutional standing, because it cannot establish that its alleged injury is redressable or traceable,” Nexstar’s attorneys wrote. “Even if DirecTV were to succeed on the merits, nothing would require defendants to enter renewed contracts with DirecTV for retransmission consent rights.”
Attorneys for DirecTV say that isn’t the point. They argue that Nexstar’s demand for higher fees in exchange for the right to redistribute the Mission and White Knight channels isn’t just due to rising programming costs, but is the offspring of a vast conspiracy between all three companies to squeeze out more dollars from cable and satellite platforms like DirecTV.
DirecTV also says taking a closer look at White Knight and Mission as standalone businesses results in curious revelations that ultimately point to those companies existing as independent operations on paper only.
While purportedly an independent entity, White Knight lacks even the most basic hallmarks of a freestanding business,” attorneys for DirecTV argued, pointing out that a corporate address associated with White Knight returns to the residence of a purported White Knight executive, whose actual job is running a recruitment firm.
The business structure of Mission is equally problematic, DirecTV argues, noting that “two of its four membres are long-time Nexstar employees.” And under federal securities regulations, Nexstar has been required to report various business-related expenses and income associated with White Knight and Mission, including the fact that “Nexstar has received substantially all of the consolidated [companies’] available cash, after satisfaction of operating costs and debt obligations” — a line that The Desk also found in a filing with the U.S. Securities and Exchange Commission.
The Sahl Conspiracy
Even if all of that was above board, as Nexstar claims, DirecTV says it has evidence of a conspiracy between the broadcaster and the two other companies. Attorneys for DirecTV pointed to an email sent in September 2022 by Nexstar executives to the satellite service in which Nexstar asked a billing-related question about carriage-related payments for White Knight channels.
“The email reflected exact subscriber rates found in DirecTV’s retransmission consent agreement with White Knight — rates which White Knight was prohibited from sharing with Nexstar, both under the terms of its [retransmission agreement] as well as applicable FCC regulations,” attorneys for DirecTV said.
Prior to the September e-mail, DirecTV sought to renegotiate carriage of Mission and White Knight-owned channels before its agreement covering those stations was set to lapse.
Attorneys for DirecTV said the company’s executives typically negotiate renewed carriage deals with their executive counterparts at the broadcasters and programmers that own the channels. But when DirecTV executives tried to contact their counterparts at Mission and White Knight, Nexstar interjected and demanded they work with Eric Sahl, a purported intermediary hired by Nexstar to negotiate that new carriage deal.
Sahl was not unknown to DirecTV: Attorneys for the company said the mediator “has a history of using his access to Nexstar’s confidential information to coordinate supposedly-independent sidecar negotiations for the benefit of Nexstar.”
DirecTV encountered Sahl and his negotiating tactics in 2021, when the satellite company was working to hammer out a new carriage deal with broadcaster Vaughn Media, whose stations are also operated by Nexstar. Then, it seemed apparent that terms proposed by Sahl were intended to benefit Nexstar, not Vaughn — and that was further demonstrated when Sahl began referencing confidential information related to Nexstar’s strategy for ATSC 3.0, the new digital transmission standard commonly known as NextGen TV that Nexstar and other broadcasters are working to develop and market.
During negotiations for a deal covering the White Knight channels, Sahl at one point asked DirecTV to shell out more money for continued carriage of CW Network programming — which stood out as odd to executives, because White Knight did not have any CW Network affiliates at the time, attorneys wrote in their brief. DirecTV later learned that Nexstar was on the cusp of announcing it had acquired a 75 percent stake in the CW from its former parents, Paramount Global and Warner Bros Discovery.
“White Knight had absolutely no interest in raising CW in negotiations with DirecTV,” attorneys for DirecTV said. But “Nexstar had directed Sahl to include the CW in the White Knight negotiations to ascertain DirecTV’s willingness to pay for CW stations, and ultimately inform Nexstar’s future negotiations.”
The Mission and White Knight channels were ultimately pulled from DirecTV and its associated platforms last October. Shortly after the channels disappeared, websites associated with Mission and White Knight-owned stations published statements about the programming blackout that contained nearly-identical language found in press releases that Nexstar issued when its channels were dropped from cable and satellite providers.
“The identical statements in all three press releases clearly originated from the same source: Nexstar, which drafted talking points that it intended to use for itself, and provided those same talking points to Mission and White Knight,” attorneys for DirecTV wrote.
Shortly after the programming blackouts started, DirecTV executives tried to reach the executive who lists himself as the president of White Knight. Their email was returned with an automatic message that said the executive was unavailable through the rest of the month, because he needed to focus his full attention to his other job at the recruitment company, attorneys said.
Even today, DirecTV subscribers still don’t have access to Mission and White Knight-owned stations. Attorneys for the company said DirecTV has lost numerous subscribers in the areas where the stations operate, but the exact amount of lost customers was redacted in publicly-available court documents.
The loss of subscribers is being used by DirecTV’s attorneys to refute Nexstar’s claim that it wasn’t financially injured by its apparent conspiracy with Mission and White Knight. DirecTV has urged the federal judge overseeing the case to reject the motion to dismiss. As of Tuesday, the motion was still pending in court.