The chief executive of television broadcaster Sinclair is optimistic that the company can execute on mergers, acquisition and asset trades, even if federal regulations do not substantially change that make those business-related transactions easier over time.
On a conference call with investors on Wednesday, Sinclair CEO Chris Ripley said the current regulatory environment in Washington allows broadcasters to pursue transactions with each other and with others that gives them a greater ability to grown and compete in the industry.
Ripley said he believes there are three types of opportunities Sinclair can take advantage of to grow its business.
The first involves buying out certain joint sales agreements, which Ripley said would “produce a bunch of synergies and require minimal cash out the door.” The second strategy would see Sinclair swap its licensed TV stations with other broadcasters who operate in overlapping markets, which could also be effectuated with minimal or no cash investment at all. And the last strategy involves “large-scale M&A,” or merger and acquisition activity — an idea that Ripley did not further elaborate.
Under current federal regulations, media companies like Sinclair are prohibited from directly owning licensed TV stations that reach more than 39 percent of the American viewing audience.
Local broadcasters like Sinclair have long complained that the rule precludes them from effectively competing against others in the media industry, including broadcast networks that have move prime-time and sports programming to their own streaming services and “Big Tech” firms like Facebook and Google that have chipped away at advertising revenue with virtually no oversight.
The Federal Communications Commission (FCC) is empowered by Congress to implement a cap on broadcast station ownership, and it is required to regularly review its ownership rules to determine if they are still warranted or should be modified for any number of reason. That review is supposed to take place once every four years, but the agency has often failed to complete its investigation and publish the findings in a timely manner.
Things are likely to change over the next few years: In January, President Donald Trump appointed FCC Commissioner Brendan Carr to serve as the Chairman of the agency. In doing so, broadcasters found an ally in a government official who has long expressed a desire to have broadcast ownership regulations loosened.
Last week, the CEO of the National Association of Broadcasters (NAB), the commercial trade industry representing local TV broadcasters in Washington, said it was time for the FCC to finally eliminate the broadcast ownership cap.
“For years, the FCC has treated TV and radio broadcasting as though it exists in isolation, ignoring the rise of cable, satellite, streaming and social media platforms that dominate today’s media consumption,” NAB CEO Curtis LeGeyt said. “These new competitors are not bound by the same public interest obligations as local stations, nor do they face the same regulatory burdens.”
This week, the NAB petitioned the FCC to implement a new rule that would see broadcasters transition away from the current ATSC 1.0 digital TV standard in favor of ATSC 3.0, also known as “NextGen TV.” The transition would allow broadcasters to make better use of limited radio spectrum for multicast TV and future commercial datacasting capabilities, and would give their businesses parity with streaming TV and other platforms, the NAB proferred.
Sinclair participates in Pearl TV, an industry group that promotes advancements in TV broadcasting, including NextGen TV. The company has also been at the forefront of the development, deployment and marketing of NextGen TV consumers through its One Media Technologies business.
On Wednesday, Ripley affirmed his support for the winding down of ATSC 1.0, saying a full move to ATSC 3.0 will “significantly increase the revenue opportunity that we have…because there will be so much more spectrum, which could be used for more content[and] also be used for datacasting opportunities.”
Many of Sinclair’s TV stations are already broadcasting on ATSC 3.0. In some markets, Sinclair operates the ATSC 3.0 “lighthouse” station, which distributes main network feeds from its own TV outlet and those affiliated with ABC, CBS, Fox, CW Network, NBC and Univision. In others, Sinclair’s main network signal is available through a lighthouse station operated by another broadcaster. Sinclair also makes a handful of PBS member stations available via Internet Protocol delivery on ATSC 3.0 lighthouse stations in a few cities.
Ripley said Sinclair’s revenue opportunities through its current ATSC 3.0 signals will be “small” in 2025, but it will build over time. He also affirmed the company is working with its partners to sign on more ATSC 3.0 stations across the country, and increase ATSC 3.0 capacity in the cities where signals are already offered.
“The need for more capacity is going to be the limiter,” Ripley affirmed. “Between now and 2028, we’ll be working on increasing that capacity, so that we can generate more revenue; when 1.0 is sunset, that’s when the real volume of new revenue will start to come into the industry.”
