The phones at brokerage firm Patrick Communications were ringing off the hook after the FCC released its final opening bid prices for the broadcast incentive auction. The company, which has been working out channel share deals for the past year, did another two-dozen or so just in the few days after the release, says founder and managing partner Larry Patrick.
“We’re going to see a mad scramble for the next six or seven weeks of people trying to get deals,” he says. “This is the single biggest restructuring of the TV industry since the birth of television. It’s going to make some people enormously wealthy.”
In an auction that Patrick expects to hit $100 billion, some of the biggest winners might be low-rated, poor-performing stations because, he says, they are strategically located in a spot “where the FCC has to buy up a whole block of land,” so to speak. For many, it will be considerably more cost effective to sell their space on the dial than to operate a station.
Of course, of the hundreds of expected sellers in the auction, not all are getting out of the business. That’s where channel sharing comes in, particularly for some big traditional broadcasters.
Perhaps that will mean scores of Fox-owned MyNetworkTVs moving to subchannels of Fox and using a smaller portion of Fox’s power to offer up their valuable space. When it comes to The CW and MyNetwork, Patrick says, “It’s almost universally not worth it to operate them.”
Patrick says he has seen a handful of agreements with PBS stations. Other stations can channel share with themselves. Gray Television, for instance, plans to move programming from WAGT—the NBC affiliate in Augusta, Ga., that the company is acquiring from Schurz Communications—over to its low-power CBS affiliate WRDW and put WAGT up for the auction.
“That station has, unlike pretty much any other Gray station, a very high spectrum value that suggested it would be more valuable on the auction,” says Kevin Latek, Gray’s senior VP, business affairs.
The opening bid to move WAGT off-air is $210,768,300, second highest in the market and well above the $124,085,520 bid for WRDW.
“Spectrum is the single most valuable thing broadcasters have,” Patrick says. “There will be a lot of jockeying to see what’s happening, a lot of people playing, a lot of very fast, furious contracts and handshakes before they file with the FCC.”