A double take for Sinclair

Oct 8, 2001  •  Post A Comment

Sinclair Broadcast Group last week pushed the envelope on federal ownership limits. In Tallahassee, Fla., WTXL-TV, owned by Media Ventures Management, merged virtually all its operations with Sinclair’s NBC affiliate WTWC-TV.
Under the arrangement, Sinclair said it is managing, operating and selling local ads for both stations. But Sinclair said Media Ventures-which is in turn owned by Brian Cobb, owner of KADY-TV in Oxnard, Calif.-will retain control over programming decisions at WTXL, an ABC affiliate.
A Sinclair spokesman said the company was not planning to release the financial details of the deal.
But according to a source, all of WTXL’s non-programming personnel became Sinclair employees as of Oct. 1. Dennis LeClair, who was general manager of WTXL, is now a Sinclair employee and GM of both stations. A WTXL source said all stations personnel are moving to Sinclair’s building.
FCC rules generally bar broadcasters from acquiring a second TV station in a market as small as Tallahassee or in any area where fewer than eight independently owned stations would remain behind.
But Sinclair representatives said the Tallahassee deal had been carefully structured to avoid conflict with FCC ownership regulations, including the agency’s new prohibitions on local marketing agreements, or LMAs.
LMAs were the sort of station partnership arrangements that broadcasters were using several years ago to take over the operations of a second station in their market without actually acquiring them, at least under FCC rules.
Many observers saw LMAs as a blatant effort by the industry to carve a loophole to get around the agency’s duopoly rule, which barred ownership of more than one TV station in an area.
As a compromise of sorts, two years ago the FCC revised the duopoly rule to allow some TV stations in larger markets to merge. But LMAs and combinations that couldn’t meet the new duopoly criteria were supposedly out.
According to Sinclair representatives, the FCC’s LMA test is whether one station is programming the other. Since WTXL retains its programming autonomy in Tallahassee, Sinclair argues that the partnership is not an LMA-and therefore none of the FCC’s business.
If it turns out that Sinclair’s analysis is right, sources said the same structure could ostensibly be used to rationalize combining every station in every market, with no need for the FCC’s blessing.
“Our attorneys advise us that it [the deal’s structure] is not an FCC issue,” said David Amy, Sinclair executive VP and chief financial officer. “It’s a way for us to share broadcast cash flow and remain competitive.”
Mr. Amy also said Sinclair, which pioneered the LMA concept, is considering replicating the Tallahassee partnership elsewhere.
“We think there’s lots of opportunities to do this in some of our other markets,” Mr. Amy said.
Paxson Communications has combined the sales operations of more than 50 of its Pax network stations with stronger stations, mostly NBC affiliates, in its markets.
But Paxson’s combinations focus on common sales, while the Sinclair deal combines virtually all station functions except program authority. The Sinclair deal is also extraordinary because it merges affiliates of two of the four major networks.
At deadline, an FCC official said the agency did not have enough facts about the deal to comment on it.
But Andrew Schwartzman, president of the activist Media Access Project, said the Sinclair deal could raise regulatory concerns.
“It certainly smells like a duck-a commonly owned duck,” Mr. Schwartzman said.
Meanwhile, a Tallahassee competitor of Sinclair’s said the deal would consolidate sales for three networks in the market, because WXTL-TV already sells The WB, which is offered over a cable channel in Tallahassee.
A source said the deal would also give Sinclair about a 27 percent share of advertising in a market that is currently dominated by CBS affiliate WCTV, which has 58 percent.
“My concern is when you put competitors together, it knocks out some of the competitiveness in the market,” a Tallahassee source said.