Sinclair Deal Debated On Hill

Blumenthal calls yet again for congressional scrutiny of merger

Sinclair/Tribune deal friends and foes clashed on Capitol Hill Wednesday at a debate and panel session hosted by the Georgetown Law’s Institute for Technology Law & Policy.

The forum did not break a lot of new ground, but there was some scorched earth, particularly when the issue of shared services and joint sales agreements came up. Sinclair deal foe Andrew Schwartzman suggested they were an end run around ownership rules and a "disgrace." Sinclair fans suggested that if they skirted the FCC rules, why did the FCC issue guidance on how to set them up. Because FCC staffers have been in the pocket of broadcasters for decades, Schwartzman shot back, to some audible breath-catching.

One bit of news, from Sinclair's Rebecca Hansen, was that of the potential buyers lined up to purchase any deal spin-off stations, if any are required as is likely, 20% are minorities.

Jim Winston, president of the National Association of Black owned Broadcasters, who was one of the panelists, signaled his hope was that the deal would be pro-diversity, at least in the sense of providing some opportunities for more black owned broadcasters.

The event, which featured a nearly full house audience--there were more bodies than box lunches, for example--also dealt more broadly with the necessity of media ownership rules in general. Winston said NABOB's past knee-jerk rejection of consolidation had morphed into less than that, citing the difference between the market caps of the largest broadcasters and the MVPD and online media company market caps that dwarfed them--Hanson came armed with a slide that illustrated that.

Hosting the debate was Gigi Sohn, distinguished fellow at Georgetown Law's Institute for Technology Law & Policy, and former counselor to FCC Chairman Tom Wheeler. She suggested she had to call in some favors to get both sides on the dais.

Sen. Richard Blumenthal (D-Conn.), who arranged for the room, made a late appearance to remind everyone that he opposed the merger and had called on Republican leadership to hold hearings on it in both the Judiciary and Commerce Committees--he is a member of both. He said the fact that none had been forthcoming on what he called a "profoundly important" deal to the public interest, no matter which way you looked at it, was "profoundly distressing," and reiterated his call for "close and searching congressional scrutiny."

The debate portion featured David Goodfriend, a backer of the Coalition to Save Local Media, which could be rechristened the Stop the Sinclair/Tribune Merger Coalition vs. Jerry Fritz, EVP at ONE Media, a joint venture controlled by Sinclair.

Initially it was to have been John Hane, Sinclair's counsel, but he was ill and Fritz, who is a former FCC official and Allbritton exec, agreed at the last minute to sub in.

The backdrop for the discussion was both the FCC's and Justice Department's ongoing vetting of the deal, but the FCC vote, scheduled for Nov. 16, to role back some media ownership regs, which rollback could mean fewer Sinclair stations would need to be spun off.

Goodfriend said that since broadcasters got a free monopoly form the government--spectrum, which they didn't pay for, and could sell for billions, along with a government-guaranteed monopoly on network programming for affiliated stations, and guaranteed carriage via must carry, the quid pro quo was that broadcasters had to serve the public interest, and that included free programming, local news, and viewpoint diversity.

He said Sinclair's history had been to buy stations, fire staff and centralize operations.

Goodfriend said that if broadcasters wanted to get out from under public interest regulations, it should give up all those benefits, as some in Congress (rep. Steve Scalise (R-La.) in particular) have proposed and broadcasters have fought.

Fritz said that most broadcasters are not the original owners so did not get their spectrum for free, that they have rising programming costs thanks to competition with big-pocketed MVPDs and online players, and that consolidating is a way to gain the scale to fight what is an existential threat to broadcasters existence from having to compete with essentially unregulated entities.

Goodfriend and Fritz agreed on the importance of local broadcasting, but Goodfriend said that was why letting the broadcasters combine to form the largest--by a wide margin--broadcast group should be denied, and Fritts why it was in the public interest for it to gain that scale.

Fritz argued that the FCC did not need to be in the broadcast merger review business at all, and that it should be left to the Justice Department to do an antitrust review. He argues that the FCC definitions of diversity and competition were set years ago according to political calculations, rather than reflecting market realities.

He pointed to the FCC's decision to break up Allbritton's WJLA-TV Washington and the Washington Star newspaper decades ago. The result: The Star died, he said.

Fritz argues that the current ownership limits, which the FCC is poised to loosen, prevent broadcasters from gaining the scale on the local and national fronts, to compete. He said it was preposterous that regs from another century still ruled, borrowing from Washington Irving, suggesting it was time for Rip Van Winkle to wake up and "get over it."

During the panel that followed, Hanson suggested that if they had gotten their spectrum for free, they would be expecting a check for the billions Sinclair had spent to acquire it. She said broadcasters were using their "government benefits" to try create a financially solid business.

Goodfriend had said during the debate that Tribune did more news in its top three markets than Sinclair--his point was that the deal needed to be in the public interest, so that Sinclair should improve on that.

Eddie Lazarus, EVP and general counsel for Tribune, said that was because in its top markets, Tribune stations were indies that did not have network morning and evening news, so programmed their own, while Sinclair's were affiliates that had network news obligations.

Schwartzman took issue with Hanson's use of the term "our spectrum." He countered that it was the public's spectrum, which is why the FCC could ask for certain programming--say, the three-hour, educational, children's TV requirement, which was a response to Fritz suggestion that the government should not be in the business of telling broadcasters what kind of content to air.

Lazarus, responding to the point about broadcasters getting free carriage, pointed out that most of the stations at issue are not must carry, and that retrans stations have no guaranteed carriage. He also pointed out that there was no requirement that stations deliver local news, and some like Ion and religious stations, don't.

News, he said, is a differentiator, and expensive, which like paying for expensive sports, like the Mets and Yankees on Tribune's WPIX New York, need the kind of scale a merger will provide. He said without that, more high-value sports will move behind the pay wall.