Townsquare Washington State deals challenged


Two firms have filed Petitions to Deny in regard to the application of Townsquare Media to acquire stations from Revitalization Partners, a receiver charged with selling the former stations of New Northwest Broadcasters in Yakima WA and Tri-Cities WA. The petitions are from Cherry Creek Radio and the permittee of an FM CP.

Sunnylands Broadcasting LLC is permittee of a Union Gap WA Class A FM CP that will be located just south of Yakima, and was represented by Peter Gutmann of Womble Carlyle Sandridge & Rice. It had numerous complaints tied to its basic contention that it would be entering into an impossible competitive situation if the Townsquare deal is approved.

Gutmann noted that Townsquare would have a cap-maximum four FMs and two AMs that includes the market’s strongest stations in terms of ratings and facilities. The trust would be second, and the only significant further commercial competition would be from Hispanic and religious stations, which it said did not constitute real competition.

Further, it noted that the trust would be too beholden to Townsquare – there was no incentive to find a new owner, Townsquare retained the right to swap out stations in the future, the trust could not go into format competition with Townsquare, and Townsquare was to receive profits from stations in the trust while the trustee receives fixed compensation – all factors that the complainant said indicated the trust would not provide any meaningful competition to the Townsquare cluster.

The Cherry Creek Petition was handled by Dennis P. Corbett and Rebecca L. Neumann of Lerman Senter and referred to both markets.

CCR notes that the use of the Trust benefits Townsquare by effectively giving it control of 23 stations in the two markets when its legal limit would be 12, in a transaction which increases its total of 11 fully-owned stations by only one through the addition of one AM station. It noted the Townsquare would get the preferred facilities and formats, as well as the financial benefit from the stations left in the Trust, and called it a “sea change in the use of trusts.” It noted the lack of a larger transaction of which this one, involving two small markets, was a part, and the indefinite duration of the trust going forward.

CCR claimed that Townsquare and the Trust combined would control 72.7% of Tri-Cities revenue and 80.5% of Yakima revenue.

“If approved,” the attorneys wrote, “the unprecedented approach proposed in the captioned applications will invite a flood of imitators, in markets of all sizes. A grant would effectively rewrite the multiple ownership rules to allow stations that already own full, robust clusters to profit from the existence of beneficially-owned trusts operating large numbers of additional in-market stations for that strong cluster’s financial benefitl and for a potentially extended period of time, creating deep and harmful competitive imbalances throughout the country.” The concluded the deals should be turned down.

RBR-TVBR observation: Is ownership consolidation good or bad for broadcasting as a whole? Public interest watchdogs love to hate it, but it can also incite the ire of members of the broadcasting business who have to compete against a local capped-out juggernauts. This deal raises that issue once again. BTW, you can review an RBR-TVBR analysis of this deal from December 2010 that was referenced in the Cherry Creek petition.