Free Press is upset not only about the wave of deal-making in the television business this year, but the method of consolidation and the FCC’s complicity in allowing it to happen. The key Free Press objection is the use of shell companies and LMAs to create otherwise illegal local station combinations.
Free Press notes that the practice is used by many companies, and cited its use by companies such as Sinclair and Nexstar.
“TV consolidation is out of control, and communities are paying the price,” said Free Press Research Director and report author S. Derek Turner. “Companies are swallowing up stations at an alarming rate, often through deals that violate the law. If the FCC doesn’t start enforcing its rules, the damage to local competition and viewpoint diversity will be overwhelming and irreversible.”
The report details noticeable results from the practice, such as nearly identical local news broadcasts being shown on two different stations.
Free Press notes that in many if not most of these arrangements, the sidecar company owns only a station’s FCC assets, primarily the license, while the controlling company owns everything else. The controlling company also gets the lion’s share of the profits generated by the arrangement.
No attempt is made to hide the JSA/SSA sidecar company arrangements – stations operated on behalf of a second party licensee are freely discussed and cited in quarterly financial results conferences.
Free Press is calling on incoming FCC Chairman Tom Wheeler to get involved. “If Tom Wheeler wants to be an honest regulator, he should end the dishonest practice of covert consolidation,” Turner said. “By closing these loopholes, Mr. Wheeler and the FCC can give truly independent owners a chance to compete fairly to better serve their communities.”
RBR-TVBR observation: There is nothing all that covert about this practice, and there is a reason television companies freely admit to these arrangements. It’s because there is ample precedent from the FCC that such arrangements are OK.
We believe it hinges on the FCC’s general policy of staying out of programming, sales and other administrative matters. The Commission has oversight responsibility over a number of station practices, but these areas are not among them.
For example, a licensee is perfectly free to turn over station programming to a second party – and most do. They affiliate with ABC, CBS, Fox, NBC, Univision, Telemundo, CW, MNT, PBS and any number of other program sources.
Is it that much different for Sinclair to provide programming to a partner station?
We totally understand why Free Press and others are upset about local television consolidation, particularly regarding news programming, but the question remains as to whether the FCC has the authority to do anything about it without stepping on the First Amendment.
Former FCC Chairman Julius Genachowski made noise about looking into the JSA/SSA question, but he’s gone now and last we heard there is little enthusiasm at the Commission to delve deeply into the subject.
But we’re talking about Washington here, which means you never know…