Local Deals in Doubt

The first settlers along the mountainous Tennessee-Virginia border eked out a hardscrabble existence among the flinty peaks and isolated hollows. Life today doesn't seem any easier for WKPT, the ABC affiliate in Johnson City, Tenn.

Operating on channel 19, a UHF channel with poor reception in the mountainous terrain, the 30-year-old station has lost money for six years running.

WKPT President George DeVault Jr. predicts he can break into the black in 2005, but only if he continues getting a little help from one of his stronger local rivals, CBS affiliate WJHL. The sales staff of Media General Corp.-owned WJHL sells ad time on DeVault's stations through a joint sales agreement (JSA) the stations established in 2002 after WKPT was hammered by the costs of converting to digital TV and ABC's disastrous decline in prime time ratings.

In return for the sales help, DeVault gives Media General a cut of the sales and covers WJHL's expenses for contributing ad production, traffic support and sales-staff hours to his station.

But joint sales agreements in small markets could soon become a thing of the past if the FCC sticks to a plan that would make it much harder for stations like WKPT to hire competitors to broker ads.

In August, the FCC announced it has “tentatively concluded” that TV joint sales contracts give the brokering station too much influence over both the programming and the ad prices in a market. A junior partner might become so dependent on the extra ad revenue that it might cede control of programming decisions to the brokering station, the FCC said.

To greatly limit JSAs, the FCC has proposed a change in its local ownership rules that would outlaw the ad partnerships in most small markets across the country. Under the change, both stations in a joint sales agreement would be considered a duopoly, or under control of the brokering station's owner. The rule would apply if the arrangement is responsible for 15% or more of the junior station's ad revenue. The FCC forbids duopolies in markets with fewer than eight separately owned stations.

The FCC plan for TV JSAs mirrors a radio rule imposed two summers ago. The FCC began phasing out another type of TV partnership known as local marketing agreements (LMAs) in 1999. LMAs were considered even more of a threat to local programming diversity because they allow the stronger station to make key programming and operational decisions for the weaker one.

Eliminating joint sales deals would deal a blow to weaker stations across the country. Twelve Paxson Communications stations have their ad time purchased for them in markets where NBC has an O&O. Sinclair Broadcast, Nexstar and Granite Broadcasting also rely on JSAs for a big chunk of their revenue. In return, the junior partners pay the brokering stations a commission of roughly 10%, and many also agree to cover expenses for the brokering station.

The FCC collects no official records of JSAs, but, according to estimates by the National Association of Broadcasters, somewhere between 50 and 100 stations across the country depend on JSAs.

DeVault, along with NAB attorneys, made the case for preserving small-market JSAs to FCC acting Media Bureau Chief Deborah Klein and staffers. DeVault said in a filing that it is wrong to assume junior stations will cede control of programming to the brokering stations: “The licensee ... in a pay-as-you-go JSA must program the station well, or positive sales results will not follow,”