As Their Station ClientsGet Bigger, Syndicators Adjust

New era of broadcaster consolidation simplifies negotiations in some ways—with fewer, more powerful buyers—but it also could threaten sellers’ leverage

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The leverage that the emerging local broadcasting “super groups” are gaining from the recent spate of M&A deals has syndicators recalibrating some of their approaches to their station buyers.

Why This Matters
Station consolidation means the business of syndication is once again undergoing dramatic change, with negotiations getting even tougher.

With greater size, station groups are better able to set their own terms, whether working with syndicators, vendors or talent. So while Wall Street may be bullish on Gannett buying Belo, Tribune buying Local TV and Sinclair buying several groups, some syndicators are more bearish on the activity.

“Syndicators have to be looking at [consolidation] and saying ‘Oh no, this is not a good thing.’ How do you drive shows’ value if a local market is basically owned by two large groups? Whichever TV station is not interested in a show in that market will just make that known, which means that the syndicator will have absolutely no leverage there,” says Bill Carroll, VP, director of programming, Katz Television Group.

Tougher to Drive Market-By-Market Value

For years, distribution of syndicated shows has been dictated by who can get their shows cleared in the country’s top three markets: New York, Los Angeles and Chicago. And the key stations in those markets were owned by five groups: ABC, CBS, NBC, Fox and Tribune. The three traditional affiliates’ time slots were usually filled by long-running programming—such as CBS Television Distribution’s Wheel of Fortune, Jeopardy! and Entertainment Tonight, and Disney/ABC Television’s Live!—leaving Tribune and Fox with slots to spare and a lot of sway over what shows got cleared.

Once syndicators got past the top markets, there was far more jostling. Sinclair—with no TV stations in the top 10 markets—long has served as syndicators’ second sales stop.

Sinclair now owns 140 TV stations, including multiple TV outlets in single markets, nearly 60 more than it owned just two years ago. Sinclair’s added size means it not only can acquire shows at more efficient prices, but it also can effectively prevent its competitors from getting those shows, even if the competitor wants to pay more money for it.

For example, five stations buy syndicated programming in the country’s 34th-ranked market, Milwaukee: Sinclair, Local TV, Weigel, Hearst and Journal Broadcast Group. If Sinclair acquired a talk show in a group deal that included Milwaukee, it could effectively remove the other stations in Milwaukee from contention, even if the stations in that market were willing to bid up the price.

That’s why syndicators would much rather sell their shows on a market-by-market basis, with competing stations bidding up price tags. With station groups this big, however, that is less likely to happen. To combat this, syndicators head to the biggest markets first to try to get the most money they can for shows, and then design their group deals later. If syndicators can get more money for their shows in the bigger markets, they can let smaller markets go in group deals even if it means they are leaving money on the table in those markets.

“It’s a bit of 3D chess,” says Ira Bernstein, copresident of Debmar-Mercury. “You have to play it out on different levels.”

Another syndicator says negotiations have played out between syndicators and stations like this for years, but now some of the station groups have far more leverage.

Bigger Groups Have More Options

That will be true for the new Tribune-Local TV group as well, but Tribune also is expected to begin developing much more of its own programming. In March, concurrent with the arrival of Peter Liguori as Tribune CEO, former Liguori lieutenant Matt Cherniss came on board to run cable network WGN and reboot Los Angeles-based Tribune Studios.

Meanwhile, “the pros are that stations get healthier and have more money to spend,” says one syndicator who declined to be named. If a syndicator sells a show to Fox and Sinclair, it’s effectively done with distribution.

Moreover, syndication business models are changing. It’s less true that shows have to be cleared in the top three markets in order to launch. Syndicators are much more willing to run tests—such as Warner Bros.’ test of Bethenny last summer, and Twentieth’s of Kris Jenner and Warner Bros.’ The Real this summer—than they once were. In fact, Twentieth just moved its first-run production and development under the Fox Television Stations, indicating that all of its development will first be tested before heading out for any sort of national sale.

“What this provides is more opportunity for more shows to go on the air with different types of business models,” says the syndicator.

Says Carroll: “It just means that syndicators are going to have to do an even better job of producing programming. There’s always a way, but it’s not easy. It means you have to be more adaptable and willing to put together deals that work.”