Four months ago, the TV company led by Pluria Marshall Jr. filed a lawsuit against an entity it acquired three stations from for what it says are this company’s active efforts “to undermine” its TV trio.
Marshall is a minority broadcast media owner known for his 21-year stint as GM of a small Gary, Indiana AM targeting the African-American community and, concurrently, as the Group Publisher of the Los Angeles Wave Publications Group since June 1998.
Now, one Member of Congress is acting on Marshall’s behalf to thwart efforts Marshall claims are threatening his business.
Rep. Cedric Richmond (D-La.) on Wednesday wrote to the Justice Department in support of Marshall and his Marshall Broadcasting Group.
The letter, addressed to Antitrust Division Asst. Attorney General Makan Delrahim, expresses Richmond’s concern “about alleged practices of a larger broadcasting entity that may be having a negative impact” on Marshall’s company.
That company: Nexstar Media Group, the entity poised to merge with Tribune Broadcasting.
“These alleged actions undermine the very purpose that led the FCC to allow past transactions that would not otherwise have been approved,” Richmond asserts.
Richmond’s note to the DOJ also states that the FCC may be unaware of the situation between Marshall and Nexstar, as Marshall sees it.
In short, Marshall Broadcasting Group — one of a handful of African-American owned broadcast companies — “believes its ability to provide a diverse television service is being undermined and threatened,” Richmond says. “In an industry where access to capital is sparse for people of color, preserving this toehold of television station ownership is of paramount importance to the few minority television licensees in existence.”
On June 6, 2014, Nexstar acquired three licensees in an all-stock deal — Grant Broadcasting, Communications Corporation of America and White Knight Broadcasting. Because of local ownership limits, three stations were sold to Marshall, newly formed to take on the purchase.
It agreed to acquire three full-powered FOX stations from Nexstar for $58.5 million.
Those stations are KMSS-33 in Shreveport, La.; KPEJ-24 in Odessa-Midland, Tex.; and KLJB-18 in Quad Cities, Ia.-Ill..
Nexstar CEO Perry Sook heralded the deal, saying at that time that it presented “an ideal framework for introducing and incubating a new, minority-controlled entrant to broadcasting, and for bringing additional news, information and specialized programming to MBG’s markets at the earliest possible opportunity.”
As reported by RBR+TVBR in June 2014, MBG intended to fund the station acquisitions via credit, which Nexstar has agreed to guarantee.
Further, the deal was structured so that Marshall would be acquiring the stations’ program contracts, equipment, and real estate interests in connection with studio and tower sites. Nexstar would provide sales and other non-programming services to MBG, allowing Marshall’s stations to use Nexstar personnel for engineering support, master control, traffic and billing and other administrative functions that do not relate to control of the stations or their programming.
This is likely where Marshall’s fight against Nexstar began. Per the original terms of the deal, MBG would be entitled to 70% of the revenue from advertising sold by Nexstar on the stations. It would not provide for any bonus payments to Nexstar for achieving revenue goals. Further, it would not be a fixed-fee payment; as total revenues increased, so would MBG’s share. The FCC required a modification, upping MBG’s ad revenue percentage to 85%.
This transaction structure was designed to provide Marshall with incentive to seek the best programming and, thus, maximize station advertising revenue while providing significant cost savings benefits.
The deal attracted the attention of both the Minority Media and Telecom Council (MMTC) and the National Association of Black Owned Broadcasters (NABOB).
MMTC’s “critical question”: Is this transaction designed to produce a free-standing, independent broadcast operation at the conclusion of the JSA agreement?
That’s a question Marshall wants answered today.
A 31-page complaint was filed in early April by Marshall’s legal counsel in New York Supreme Court, the state’s point of entry for legal cases, despite its name. Marshall is represented by well-known communications attorney David Boies of Boies Schiller Flexner LLP.
In the complaint, Boies argues on behalf of Marshall that Nexstar “never intended the transaction to be a permanent divestiture. Rather, it hoped that it would be able to reacquire the stations that it had parked with MBG if FCC regulations were subsequently modified or relaxed.”
To ensure that it would be in position to do so, Marshall asserts that Nexstar “conceived and executed a scheme to hobble the operations of MBG and those three television stations so that Nexstar would be able to acquire the stations cheaply, either in a bankruptcy sale or from an MBG that would have no choice but to sell at a fire sale price.”
Marshall said its suit “seeks to make MBG whole from Nexstar’s disingenuous and damaging actions – bringing to light Nexstar’s effort to sabotage MBG’s business and eventually buy back the stations for pennies on the dollar.”
Marshall’s complaint against Nexstar also takes the company to task for the $58.5 million price it agreed to in selling the three TV stations.
Marshall says it was overcharged, as Nexstar intended to sell the trio to “another potential buyer” for $42.3 million.
Nexstar initially tried to bring its transaction into compliance by selling KPEJ and KMSS to Mission Broadcasting for $27 million, with Mission signing both JSA and Shared Services Agreements with Nexstar. Similarly, Nexstar tried to sell KLJB to Mission for $15.3 million, with JSA and SSA deals in the mix. The FCC rejected this plan, arguing that Nexstar’s control of the three stations was too large.
This opened the door for Marshall.