Quirky Deal Preserves Sinclair's Baltimore Flagship

Sinclair negotiates option to buy Fox station, but legally can't acquire it

By Michael Malone -- Broadcasting & Cable, 5/16/2012 1:57:24 PM

Even for veterans of the broadcast business, Tuesday's announcement from Sinclair was a unique one. In ironing out four-year affiliation agreements for its 19 Fox affiliates, Sinclair and Fox also agreed to grant Sinclair, the largest Fox affiliates holder, "an assignable option to purchase at fair value," Fox-owned WUTB Baltimore, a MyNetworkTV affiliate. Making things slightly more complicated, Fox Television Stations was granted an option to purchase Sinclair's stations in three markets, including Raleigh, Las Vegas, Cincinnati and Norfolk -- all CW or MyNetworkTV (MNT) affiliates.

The peculiar arrangement had its genesis in Fox expressing interesting in moving Baltimore's Fox affiliation from Sinclair's WBFF to its own WUTB, said Sinclair CFO David Amy. That scenario was off the table for the current affiliation agreement between Fox and Sinclair, but that deal was to expire at the end of 2012, said Amy, putting WBFF's Fox affiliation in potential jeopardy.

"It was clear to us that the risk of losing our affiliation agreement had come back on the table," said Amy.

A Fox spokesperson suggested Sinclair's Baltimore affiliation was solid all along. "Our only desire was to renew our affiliation with Sinclair," Fox said in a statement. "They are a significant member of the Fox affiliate group and we are delighted they will be with us for a long time to come."

It's not the first time Baltimore has witnessed a possible affiliation shakeup involving Fox and Sinclair. Fox acquired WUTB in the Chris-Craft deal in 2001. In 2002, there was speculation that Fox would move its affiliation from WBFF to WUTB, but that died down when Sinclair and Fox worked out agreements near the end of the year.

WUTB, a former UPN station, is an outlier in the Fox owned group, an MNT affiliate that's not part of a duopoly.

Adding yet another level of complexity to the Fox-Sinclair pact, said Amy, is that Sinclair cannot acquire WUTB due to FCC ownership restrictions. But it could work out an arrangement similar to that which exists between Sinclair and Cunningham Broadcasting: another group holds the license, while Sinclair manages the station for a fee. That group won't be Cunningham, says Amy, which is also prevented from owning another station in Baltimore due to its ownership of WNUV, a CW affiliate.

WBFF is an emerging presence in DMA No. 27, increasingly competing with the established stations owned by Hearst TV and CBS. Amy called the May 15 announcement a "fantastic outcome" for Sinclair. "We save the Fox brand here in Baltimore," he says, "and it puts us in a position where we shouldn't have the real risk of Fox coming into the market to take the affiliation away."

Sinclair has made it clear that CW and MNT stations are not a pivotal part of its gameplan, despite having 18 MNT affiliates and 14 CWs. In the May 15 announcement, David Smith, Sinclair president and CEO, mentioned the group's "current focus to lessen our exposure to MNT and CW stations, particularly in markets where we do not have a duopoly structure with a Big Four network."

David Amy said the CWs and MyNets are "probably the weakest part of our station portfolio."

Sinclair calls itself "the largest and one of the most diversified television broadcasting companies," the group growing following $585 million worth of acquisitions in the fall.

It owns, operates, programs or provides sales services to 74 stations in 45 markets.