Small TV Stations to FCC: We Need Shared Services Agreements

Say cable operators have plenty of retrans muscle, smaller-station profits have plummeted and sharing is necessary

By John Eggerton -- Broadcasting & Cable, 12/21/2011 2:14:09 PM

Small-market TV station representatives met with commission staffers Monday (Dec. 19) to make their case for shared service agreements and other similar arrangements, pointing out they can be a local programming lifeline for stations whose pre-tax profit average plummeted by 95% between 1999 and 2009.

That is according to a copy of an ex parte filing with the FCC Wednesday, and comes as the FCC is preparing to vote, as part of a combined rulemaking proposal and inquiry, to look into whether those joint station arrangements, which can include joint operations, sales and news, violate the FCC's local ownership caps, which it plans to retain as part of the rulemaking portion of the item

In their pitch to staffers with commissioners Robert McDowell and Mignon Clyburn, representatives of the Coalition of Smaller-Market Television Stations, the markets where FCC rules limit joint ownership, said that such agreements allow stations to preserve local -programming. They also tried to put in context the financial pressures on smaller stations that make such arrangements necessary.

According to data submitted to the FCC and based on NAB TV financial Surveys, the pre-tax profit average for markets 50-210 went from $908,462 in 1999 to only $42,003 in 2009, the last year for which figures were shown. That is a drop of 95.4%. The figures were only slightly better for Big Four network affiliates, dropping from a $1,096,054 average pre-tax profit in 1999 to only $131,863 in 2009, down 88%,

The coalition cited what it said were "real-world" examples of where SSA's has "saved and expanded local public service and diversity in news operations."

Those included in Wichita, where they said an SSA between Schurz and Entravision enabled he latter to launch operations six months earlier on "the only Spanish-language local television news operation in the entire state of Kansas," and in Syracuse, where a Barrington SSA saved a local news operation from being shuttered.

The FCC is particularly concerned with the impact of the arrangements on local news operations.

One of the reasons cable operators have argued for bringing joint operating and programming and sales and services agreements under the FCC's ownership rules is that they argue joint retrans negotiations involving those arrangements give the stations undue leverage.

The coalition countered that in their experience, coalition members had only twice had stations operating under a shared services agreement been asked by a cable operator not to conduct joint negations, which request was honored and not repeated by the operators the next time around.

They also said a collective "Hah" to the suggestion broadcasters had the leverage, even in pairs, over cable ops. "The major MVPDs are enormous business entities whose financial resources and negotiating sophistication dwarf those of the television stations and groups with whom they negotiate," they told the staffers.

They challenged the claim by cable operators that joint negotiations boosted retrans fees, saying that broadcasters "seek fair value for each station, based on marketplace considerations, regardless of whether the negotiation process is conducted jointly or separately." And besides, they said, cable operators already undervalue broadcasting relative to the popularity of its programming.

"We urge the Commission to take these realities into account in connection with the ownership and retransmission consent rulemaking proceedings," they said. The FCC's media ownership rule decision is expected sometime early next year, but it is unclear when and what action it will take on retrans. It has proposed clarifying what constitutes good-faith bargaining, but could address the issue through the media ownership proceeding if it concludes shared service agreements in similar markets should be disallowed under local ownership cap rules.