Exclusive: In Wake of Fox-Sinclair Pact, Fox Stations Fear Affiliation SwitchesOption-to-acquire deal opens door to Fox growing station group, and perhaps grabbing affiliations 5/18/2012 02:17:55 PM Eastern
The unique pact between Sinclair and Fox, announced May 15 and revealing a series of options to buy specific stations in each other's group, may lead to Fox acquiring as many as three of Sinclair's CW or MyNetworkTV affiliates -- and perhaps turning them into Fox O&Os, as some affiliates fear. Such a play would leave current Fox affiliates in markets that include Raleigh, Las Vegas, Cincinnati and Norfolk without an affiliation.
The Fox affiliate in Raleigh, WRAZ, belongs to Capitol Broadcasting. Meredith owns KVVU in Vegas, Raycom has WXIX in Cincinnati, and LIN owns WVBT in Norfolk. The owners were alerted to the Fox-Sinclair arrangement before Sinclair's announcement went public, but the news nonetheless caught the group execs, and station staffers, off guard. "Surprised would be a good way to characterize it," said Paul Karpowicz, president of Meredith Local Media Group.
The Sinclair-Fox announcement, coming the morning after Fox's upfront presentation in New York, sparked substantial chatter among affiliates. "When it was announced, everyone was like, 'huh?'" said one group exec who asked not to be named. "Everyone is wondering about a new paradigm that no one really thought of."
The Fox network would not make an exec available to speak on the matter. "We have begun speaking to our affiliates regarding this matter and will address their concerns individually and privately," it said in a statement.
Scott Blumenthal, executive VP at LIN, said the network had not reached out to LIN about potential affiliation switch in Norfolk, where LIN owns the NBC and Fox affiliate, as of late in the day May 17. He suggested it was premature to speak about such scenarios. "There's been no discussion about that," he said. "We know about the deal [with Sinclair], and at this point, there's nothing to be said."
Karpowicz echoed Blumenthal in saying he'd not heard anything of Fox's plans beyond the initial heads-up, which he got in person in New York a day before the announcement. "We haven't had future discussions or communications," he said. "I'm sure next week some time, we'll re-engage with them and find out what they're thinking."
Calls to Raycom and Capitol top management were not returned at presstime.
Several sources within the four groups privately said they knew of no official plans for Fox to strip their affiliation, or otherwise change the course of business at their stations. Station execs say they'll continue operating as Fox affiliates until instructed otherwise, but several voiced considerable unease about what the future may hold. "We're keeping our options open and our heads up," said one.
The Sinclair-Fox deal was set in motion when Sinclair felt its flagship, WBFF Baltimore, was at risk of losing its Fox affiliation to Fox-owned WUTB, a MyNetworkTV affiliate, upon the expiration of its current affiliation agreement. "It was clear to us that the risk of losing our affiliation agreement had come back on the table," David Amy, Sinclair CFO, told B&C.
Fox countered in a statement that it was not intent on taking over the Fox affiliation in Baltimore. "Our only desire was to renew our affiliation with Sinclair," Fox said. "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."
Sinclair worked out an option to acquire WUTB, according to the May 15 press release, but Amy told B&C Sinclair was actually prohibited from doing so due to FCC ownership limits. Sinclair could instead work a deal to manage the station for another group that acquires its license.
Fox has of course pushed hard on its affiliates to earn, and share, significantly more retransmission cash from the stations' local subscription-TV providers than they had in the past. Initially some cried flagrant foul, and Fox and a handful of stations, including Nexstar's former KSFX (now KOZL) Springfield and WFFT Ft. Wayne, and Block Communications' KTRV Boise, ended up parting ways during a tumultuous 2011. Earlier this week at the affiliates board meeting in New York, chairman Steve Pruett mentioned how the board felt the network's increased compensation from affiliates had been well spent on programming, such as well crafted new comedies and marquee sports on Saturday nights. Indications from affiliates and network alike were that the partnership was strong, and the parties were simpatico.
Pruett said the Sinclair-Fox deal, which was tied to Sinclair renewing its affiliation agreements for 19 Fox affiliates through 2017, did not come up in the meeting. He said it was a "private business issue" between Fox and specific affiliates, and therefore not something the board addresses.
Per its agreement with Sinclair, Fox can exercise its options on WRDC-WLFL Raleigh, KVMY-KVCW Las Vegas, WSTR Cincinnati and WTVZ Norfolk between July 1, 2012 and March 31, 2013.
Some see it as saber-rattling from Fox to get more retrans out of stations. Others believe there's too much history between Fox and the four broadcast groups in question for Fox to make a move on their affiliations. "I don't see Fox being predatory against those groups," said one affiliates insider who did not want to be named. "Their relationship is strong with Fox."
Others wondered about ownership cap limits, though Fox comes in comfortably at 24.8% of U.S. reach, with the UHF discount.
But another camp felt it's inevitable that Fox will shake up those markets in a dramatic way. "I don't think you buy MyNet stations to keep them MyNet stations," said one affiliate. "The writing is on the wall."
Karpowicz, for his part, is curious to hear what Fox has planned for Vegas, and beyond. "The uncertainty of what it means," he said, "is what's unsettling."