Sinclair, Fox agree to affiliation terms, purchase options


SBG / Sinclair Broadcast GroupTelevision group Sinclair has secured rights for 19 owned-or-operated Fox affiliates through the end of 2017, and has the option to purchase one of Fox’s stations. And Fox gets some options as well.

The Sinclair/Fox affiliation agreements expire 12/13/12, and the new agreement will kick in 1/1/13 and run through 12/31/17. Terms were described as being consistent with the going market rate for Fox affiliation reverse compensation.

Sinclair notes that one other Fox-affiliated station, KFXA-TV in Cedar Rapids IA, is also accepting the same terms as the Sinclair stations. It has a non-programming relationship with the station.
In addition, Sinclair will have the option to double up in Baltimore with Fox’s MNT WUTB-TV, which would form a duopoly pairing with its corporate flagship – WBFF-TV. In addition to Baltimore being one of Sinclair’s key DMAs, it is also the group’s corporate home.

The purchase option can be triggered any time between 7/1/12 and 3/31/13. The price will be fair market value, but not to exceed $52.7M.

During the same period, Fox may purchase, at fair market price, Sinclair stations in any three of four markets. On the table are Raleigh, NC (WRDC/MNT and WLFL/CW); Las Vegas, NV (KVMY/MNT and KVCW/CW); Cincinnati, OH (WSTR/MNT); and Norfolk, VA (WTVZ/MNT). If Fox goes for it, the price for WUTB will decrease $25M.

“We are very pleased to have reached agreement to renew all of our affiliations with Fox Broadcasting, allowing us to continue as the largest FOX affiliate group,” commented David Smith, CEO and President of Sinclair. “For us, a pivotal aspect of the agreement was securing our affiliation on WBFF-TV, our flagship station in Baltimore. Our FOX affiliate in Baltimore is one of our most important television assets, and over the years the station has built a strong local brand. We believe that this affiliation was at risk, and negotiated with Fox to acquire the option to purchase FTS’ station, WUTB, in Baltimore in hopes that acquiring this station would solidify WBFF’s position as a Fox affiliate in Baltimore in the long term.”

Smith added that limiting Sinclair’s “exposure” to MNT and CW affiliates was a corporate goal, particularly in markets where they are not paired with a Big Four affiliate – and each of the markets on the table would fit that bill.

Wells Fargo analyst Marci Ryvicker was quick with an assessment of the agreement. She said, “We view this deal as a positive for SBGI in that it provides: i) a long-term affiliation agreement with the company’s largest programming provider, ii) visibility and security with regard to programming expense payments, and iii) the additional ‘bonus’ of possibly creating a duopoly (and eliminating a tough competitor) in one of SBGI’s most important markets.”

RBR-TVBR observation: Hmmm – what would you be thinking if you owned the Fox affiliate in one of the markets it may move into? Four different television groups would have Fox affiliates in markets where Fox might suddenly debut with either an MNT/CW pair or an MNT standalone. We have to believe that Fox would have to be considering making these O&O markets at some point.

The exposed include Capitol Broadcasting in Raleigh, Meredith in Las Vegas, Raycom in Cincinnati and LIN in Norfolk.