Purchase option crops up in Hawaii SSA


Raycom, owner/operator of two television stations is planning to offer services to a third station owned by MCG Capital under a shared services agreement. And it turns out that the agreement includes a purchase option. In another development, the two owners may run into trouble over their public files.

The shared services agreement (SSA) brings together Raycom’s NBC KHNL-TV and MyNetworkTV KFVE-TV with MCG’s CBS KGMB-TV.

The Star-Bulletin in Honolulu reported that the pair of owners told the FCC that the option was indeed part of their agreement, should the ownership rules ever change and begin to look on such local combinations favorably.

The duo also pointed out that MCG was retaining control of its programming, although Raycom would be asked to handle local news. Since that would comprise less than 15% of KGMB’s programming, it would not constitute an attributable interest for Raycom.

The companies insist that they are not doing anything that has not been cleared by the FCC many times before.

The public file problem is a result of visits an individual named Larry Geller made to each owner, with others, asking to see the public files – they were seeking a copy of the SSA agreement. At MCG’s offices, they were shown the file but found it is such disarray that they could not find what they were looking for, and were told that the rest of what was supposed to be in it was at another location. They did not have time to keep searching. At the Raycom office, Geller and his party were told first by the GM that he did not know where it was, then that it was locked and the person who knew where the key was could not be located. After a few hours they gave up and promised to try again.

Geller’s experiences seeking the SSA documentation are a prominent part of the Media Council Hawaii’s complaint filed with the FCC.

RBR-TVBR observation: Raycom and MCG are correct. There are SSAs just like this one in effect all over the country, operating pretty much like this one is intended to, apparently with the FCC’s blessings.

And the same purchase option is in numerous other contracts, and there is nothing whatsoever worrisome about it. Unless the rules change, and it sure doesn’t look like they are going to any time soon, the contract clause is meaningless.

Both owners may each face public file liability – the baseline fine for a file problem is $10K.

The bottom line is that this sort of arrangement has been allowed in many markets. If this one is successfully challenged, will that pull the tablecloth out from under all the others that are already in existence?