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ATVA criticizes Nexstar’s takeover of Phoenix TV station

The watchdog group says it bears a resemblance to Nexstar's divestiture — and, later, operational control — of WPIX.

The watchdog group says it bears a resemblance to Nexstar's divestiture — and, later, operational control — of WPIX.

Quick Read

The American Television Alliance (ATVA) is criticizing Nexstar’s plans to operate a Phoenix TV station under a local marketing agreement (LMA).

• Federal regulations prohibit one broadcaster from owning TV stations that reach more than 38 percent of U.S. TV households.

• Nexstar and other broadcasters use LMAs to sidestep the federal ownership cap in a way the ATVA says is anticompetitive.

A consumer watchdog group has criticized Nexstar Media Group’s plans to take over a Phoenix-area television station and move the market’s CW Network affiliation to the outlet.

On Monday, Nexstar announced it will operate Phoenix-area independent station KAZT (Channel 7) and move its CW Network affiliation there in February as part of a time-brokerage agreement with the station’s owner, Londen Media Group.

The plan resembles a local marketing agreement, or LMA, that Nexstar has executed over the years with several other local TV licensees, including White Knight Broadcasting and Mission Broadcasting.

Under federal law, a company may not own a collection of TV stations that reach more than 38 percent of American television households. Nexstar reached that cap through its purchase of Tribune Media several years ago, and has been increasingly relying on a loophole in existing law that allows it to assume operational control of TV stations that are technically owned by and licensed to third parties like Mission and White Knight.

The practice has drawn immense scrutiny over the past few years as Nexstar seeks increased fees from cable and satellite companies for the carriage of channels it owns and operates. Those fees are charged to cable and satellite customers in their bills, and some providers like DirecTV have opted to pull Nexstar-owned or operated channels in recent years in order to avoid having to raise fees charged to their subscribers.

For more than a year, White Knight and Mission stations have been unavailable to DirecTV customers due to one such fee dispute with Nexstar. Last summer, DirecTV pulled another 160 local TV stations directly owned by Nexstar over a demand for higher fees.

At the same time, Nexstar has worked feverishly to secure new affiliation agreements for its CW Network after acquiring a controlling 75 percent stake in the network last year. In Detroit, Nexstar has worked to facilitate a sale involving Mission that would see family-owned Adell Broadcasting sell its sole TV station, WADL (Channel 38), for $75 million.

The WADL sale has been held up at the Federal Communications Commission (FCC) amid strong opposition from consumer interest groups like the American Television Alliance (ATVA), which counts numerous cable and satellite TV companies among its members.

The ATVA says Nexstar’s exploitation of federal ownership loopholes help the company grow big in a way that harms consumers. As Nexstar scales up, it gains more leverage to demand more money from cable and satellite operators, which triggers programming-related blackouts and ultimately leads to higher pay TV prices.

The move in Phoenix is yet another example of this practice, a spokesperson for the ATVA said in a statement emailed to The Desk on Monday.

“Here they go again — broadcast giant Nexstar is so big that it cannot buy new stations in new markets under the FCC’s ownership rules,” the ATVA spokesperson said. “So what does it do?  It enters into a ‘local marketing agreement’ with some other station, under which it owns the station in everything but name.”

The ATVA spokesperson noted that Nexstar took the same approach in New York City, where it was forced to divest WPIX-TV (Channel 11) in order to satisfy regulatory concerns while it was trying to acquire Tribune Media in 2018. The station was sold to the E. W. Scripps Company for $75 million, though Nexstar reserved the option to acquire WPIX between 2020 and 2021.

Nexstar finalized its acquisition of Tribune Media in September 2019. Ten months later, Mission announced plans to acquire WPIX from Scripps for that same $75 million plus accrued interest. The transaction came as Scripps was seeking regulatory approval to acquire Ion Media, which owned a station in the New York market.

The transaction between Mission and Scripps was finalized in a few short months, and Nexstar immediately began operating WPIX through a local marketing agreement.

On Monday, the ATVA said Nexstar was using the same tactic to enter the Phoenix market, a move that would give the company ownership or operational control over TV stations in 10 of the largest 15 markets across the country.

“This is what it did in New York with WPIX. This is what it’s trying to do in Detroit with WADL,” the ATVA spokesperson said. “It’s time for Nexstar to play by the same rules as other broadcasters.”

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).