Key Points
- Sinclair urged the FCC to approve Nexstar’s $6 billion acquisition of TEGNA, arguing broadcaster scale is critical to industry survival.
- The company dismissed merger opponents as self-interested, despite competing with Nexstar and TEGNA in many markets.
- Approval would also benefit Sinclair, which seeks looser ownership rules to expand its own station portfolio.
Sinclair has urged the Federal Communications Commission (FCC) to back a proposed $6 billion acquisition of TEGNA by Nexstar Media Group, saying the survivability of the broadcast industry depends on it, given the increased competition from other forms of media.
In a comment filed with the FCC earlier this month, Sinclair disparaged opponents of the merger — mainly public interest groups and pay television platforms like DIRECTV and Dish Network — calling them “wolves in sheep’s clothing” and accusing them of lecturing “the Commission about competition and the importance of local journalism” despite not producing any local news of their own.
Sinclair claimed that if any party was potentially aggrieved by the proposed merger between Nexstar and TEGNA, “it would be us,” since Sinclair’s local TV stations compete against those owned or operated by Nexstar or TEGNA in more than a dozen markets.
“Yet we are submitting comments in this proceeding because, unlike the Petitioners, we recognize that the market in which local broadcasters compete today is far larger than broadcast television,” Sinclair said.
To that end, Sinclair argues that the ability to continue making investments in local news content depends on federal lawmakers and regulators amending ownership rules and approving transactions that allow broadcasters to scale. For months, broadcast industry proponents have urged the FCC to eliminate or substantially lift its ownership cap that currently prevents local TV groups from owning licensed stations that reach more than 39 percent of the American viewing audience. Streaming services, like those owned by Google and Amazon, have no such restrictions, they argue.
Like Nexstar, Sinclair has expressed an interest in acquiring more stations and scaling up its operations — something that can only happen if the FCC grants individual waivers in each transaction, or modifies the current ownership cap.
Currently, Nexstar, Sinclair and others overcome this limitation by bankrolling shell companies that acquire the licenses of local TV stations on paper, then turn over their operational control of those stations to the larger broadcasters. Deerfield Media and Cunningham Media allow Sinclair to operate most of its stations through shared services agreements (SSAs) or local marketing agreements (LMAs). Nexstar does the same with companies like Mission Broadcasting and White Knight Broadcasting.
While Sinclair positioned its comments as supporting two peers who want to continue investing in local news, an approval by the FCC of the Nexstar-TEGNA transaction would be advantageous to its own business. The company has proposed acquiring or selling stations via transactions that involve other broadcasters over the past year; those deals require FCC approval. Sinclair is also pursuing a merger with Scripps, which would face the same regulatory scrutiny as the Nexstar-TEGNA deal. (Scripps, for its part, has rejected Sinclair’s offers.)
Opponents of the merger say allowing Nexstar to acquire TEGNA’s 60-plus TV station portfolio would concentrate too much power with a broadcaster who has a history of abusing its current market position.
Over the past few years, Nexstar and TEGNA have engaged in numerous disputes with cable and satellite TV operators by requiring those platforms increase the amount of money they pay for the privilege of distributing their licensed ABC, CBS, Fox, NBC and CW Network affiliates. DIRECTV, Dish Network, Verizon Fios and others have dropped channels owned by both broadcasters for weeks or months at a time, with the pay TV operators citing unjustified demands for more money.
Critics of the merger also call into question whether broadcasters will actually make continued investments in local news if they are allowed to grow larger. Sinclair has closed numerous local newsrooms over the past three years, and Nexstar and TEGNA have laid off journalists over the past 24 months.
FCC Chairman Brendan Carr has expressed support for a loosening of regulations if it helps broadcasters compete, though he has stopped short of endorsing an idea to raise or eliminate the broadcast ownership cap that the agency must enforce. The agency is currently exploring whether it has the legal authority to eliminate the ownership cap outright.
Adding a wrinkle to the proposed Nexstar-TEGNA transaction is Carr’s views on diversity, equity and inclusiveness (DEI) programs and initiatives — views that are influenced by his boss, President Donald Trump. Last year, Carr said the FCC would be more-critical of deals involving companies that have DEI programs or practices. Nexstar eliminated references to DEI from its website and demoted an executive in charge of executing those programs, but a senior executive later confirmed that DEI remains part of Nexstar’s “corporate philosophy.”
