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Who’s a Buyer, Who’s a Seller? - Broadcasting & Cable

Who’s a Buyer, Who’s a Seller?

On the go big or go home broadcast battlefield, groups look to get larger or cash out
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After a frenetic period of buying, selling and merging, the TV station trading market has finally slowed down due to several factors. One major one is the pending FCC spectrum auctions, which are giving many broadcasters pause.

While lots of station groups won’t participate in the upcoming auctions in early 2016, many will. Several others have been enticed due to the recent publication of the FCC-commissioned so-called Greenhill Book, which values stations much higher than initial forecasts.

Broadcasters, led by the National Association of Broadcasters, are now fighting a pitched battle with the Tom Wheeler-led FCC to make certain that the auction’s opening bids start high.

Some station groups in B&C’s annual Top 25—such as NRJ TV and Venture Technologies Group—have been specifically assembled to take advantage of the upcoming auction. Others, such as Ion Media Networks, are expected to opt to sell many if not all of their stations because the value of these properties will likely never be higher.

Broadcast groups owning major network affiliates are earning revenue via local and political advertising and retransmission consent fees. That means they aren’t likely to cash out in the auction, but broadcasters whose businesses are less than robust have to be thinking about taking the payout.

“Most broadcasters who are running their business as a business are not going to tender,” says Elliot Evers, managing director at Media Venture Partners. “If I’m Media General or Sinclair, I’ve got a darn robust operating business. Based on retrans, political and cost of debt, I’m instead going to buy as many stations as I can.”

Another major factor in decisionmaking is the FCC’s ruling last March that station groups within two years roll back any joint sales agreements in which the operating broadcaster is selling more than 15% of the owned broadcaster’s advertising inventory. That rule will likely require many groups to unwind existing agreements and it also puts a question mark on other existing joint operating agreements, such as local marketing and shared service agreements.

“There is uncertainty right now and the marketplace doesn’t like uncertainty,” says Frank Higney, media broker at Kalil & Co. Inc.

“One of the biggest impediments to activity over the past six to nine months are the JSA attribution rules,” says Evers. “People are still thinking through how to manage that going forward and what the world looks like post-Tom Wheeler.”

In addition, the FCC also said in September 2013 that it would be taking a hard look at the UHF discount, which allows station groups to take a 50% coverage discount for stations that air on the UHF frequency band. Since the transition to digital, the UHF frequency is actually more powerful than the VHF frequency, a flip-flop since the days of analog. As a result, the UHF discount is irrelevant in the digital world, but it continues to determine how close station groups can get to the 39% national ownership cap.

“The UHF discount is a legacy rule, but if you are going to see things as they are, it should be done away with,” says Evers.

“The UHF discount should be flipped with stations on the VHF band,” says Bill Fanning, managing director at Media Venture Partners. “Quite frankly, and the politics are not behind it right now, what is needed is a complete overhaul of the media ownership rules and a fresh look at the caps.”

Should the FCC get rid of the discount, which will become even more irrelevant once the spectrum auctions are complete and the bands are repacked, the agency is expected to grandfather in groups who would suddenly far exceed the cap. That said, waiting to see whether they will be forced to divest stations should they acquire new ones is causing some groups to sit on their hands.

Once these regulatory hurdles are cleared, analysts expect trading to pick up again, with potentially even more mergers between big groups, like the ones seen between Gannett and Belo, LIN and Media General, and E.W. Scripps Co. and Journal, which just closed April 1.

“We believe the buying and selling will pick back up,” says Higney. “We don’t believe it’s over and we can still see some major mergers taking place, although we can’t say what.”

“It won’t be on the scale of 2011 or 2013, but there will continue to be M&A over the next 12 months,” says Media Venture Partners’ Fanning.

1. Ion Media Networks

OWNERSHIP: Privately held 65.1% U.S. household coverage
(32.57% FCC UHF discount) 56 stations 56 markets Iontelevision.com
Brandon Burgess, chairman and CEO
LAST YEAR’S RANKING: 1

OUTLOOK: Enviable reach, but an outlier due to lack of local programming. Brandon Burgess, well-respected president and CEO, met with FCC chairman Tom Wheeler in February to discuss options regarding selling spectrum. Ion has plenty to sell. Earlier this year, Brian Brady’s Cedar Creek Broadcasting acquired Ion’s WRBU St. Louis and WZRB Columbia (S.C.) for $6 million, though the stations will continue to air Ion shows such as Cold Case, Burn Notice and Canadian science-fiction import The Listener.

2. Tribune Media

OWNERSHIP: Public (NYSC: TRCO) 44.05% (27.05% FCC) 42 total: 39 owned, 3 operated; 33 markets tribunemedia.com
Peter Liguori, president and CEO
Larry Wert, president of broadcast media
LAST YEAR’S RANKING: 3

OUTLOOK: Last August, Tribune Media, which holds TV and radio stations and a cable network, completed its spinoff of Tribune Publishing. In December, Tribune Media began being traded on the New York Stock Exchange. Tribune Media is big, and is unburdened by the newspaper division. The acquisition of Local TV late in 2013 added some true market leaders, such as WJW Cleveland and WGHP High Point (N.C.), and best practices, to the bunch. Bart Feder came on board as senior VP of news following Katherine Green’s short stint in the role. It is a big job. Diginets Antenna TV and This TV further extend Trib’s reach.

3. CBS Corp.

OWNERSHIP: Public (NYSE: CBS, CBS.A) 38% (23% FCC) 27 owned, 17 markets cbslocal.comcbscorporation.com
Sumner Redstone, executive chairman
Leslie Moonves, president, CEO
Peter Dunn, president, CBS Television Stations
LAST YEAR’S RANKING: 4

CBS’ local TV, radio and digital go to market as unified operation when appropriate. Earlier this year, Gerald Griffin came on board from ABC as senior VP, business development and strategic partner. ships. Late in 2015, CBS announced it was putting news, weather and entertainment content in taxis in Los Angeles and Twin Cities, with other markets getting “Curb TV” down the road. A bit late to the diginet party with oldies net Decades, a venture with Weigel. Featuring a daily show hosted by Bill Kurtis—Through the Decades debuts next month—Dunn called Decades “the most ambitious” diginet ever created.

4. Sinclair Broadcast Group

OWNERSHIP: Public (NASDAQ: SBGI) 37.5% (23.77% FCC) 147 total: 104 owned, 43 operated; 79 markets sbgi.net
David D. Smith, president, CEO, chairman of the board, director
David Amy, executive VP, COO
Steven M. Marks, VP/COO, broadcast
Steve Pruett, VP/COO, broadcast
LAST YEAR’S RANKING: 5

After finally closing on $1 billion Allbritton deal in August, Sinclair sealed up New Age Media in November and four Media General outlets in December. The torrid deal flow of the past few years has subsided with regulators looming, but no one is better at working within FCC rules to maximize reach; in one Illinois market, Sinclair owns two ABC affiliates and a CW and operates a pair of Fox stations. American Sports Network and NewsChannel 8 extend the brand. Its new Digital Ventures Group launched in late March. David Smith has strongly suggested Sinclair will spin off its digital business. He and tech guru Mark Aitken are bullish on next generation ATSC 3.0 standard.

5. Fox Television Stations

OWNERSHIP: 21st Century Fox, NASDAQ: FOXA 37.1%, (24.5% FCC) 28 stations, 17 markets www.21cf.com/Television/Fox_Television_Stations_Group/
Rupert Murdoch, chairman, CEO, 21st Century Fox
Chase Carey, president, COO, 21st Century Fox
Roger Ailes, chairman, CEO, Fox News, and chairman, Fox Television Stations (FTS)
Jack Abernethy, CEO, FTS
LAST YEAR’S RANKING: 6

Fox flirted with a deal for Tribune’s KCPQ Seattle to maximize its football rights package, but settled for more affiliation cash from Trib. Pulled off a swap with Cox for KTVUKICU San Francisco-Oakland, giving up stations in Boston and Memphis. Group uses the summer to test first-run shows, such as last year’s Laughs; this year will be The Boris and Nicole Show. Key retirements: Kevin Hale, general manager at KTTV-KCOP Los Angeles, and longtime CFO Betsy Swanson. Joseph Dorrego took over for Swanson. New game show diginet Buzzr TV debuts in 17 Fox markets this summer. Primetime titan Empire a huge boost for stations’ late news.

6. NBCUniversal Owned Television Stations

OWNERSHIP: Comcast (NYSE: CMCSA) 36.07% (19.123% FCC) 10 NBC, 16 Telemundo; 19 markets nbcuniversal.com
Steve Burke, CEO
Ted Harbert, chairman, NBC Broadcasting
Valari Staab, president, NBCUniversal Owned Television Stations
LAST YEAR’S RANKING: 7

Thanks to cable cash, Comcast has reinvigorated the group with investigative teams, gear, more live shots, better talent; NBC group is a cool(ish) place to work again. Sign of the times—late last year, WCAU Philly social media editor Sarah Glover was upped to a group role in social. Eric Lerner is in for retiring Michael Jack at flagship WNBC. Earlier this year, the stations added live streaming functionality to TV Everywhere app. A few acquisitions on the Telemundo side, including Philadelphia, and the owned Telemundo stations debuted local 5:30 p.m. newscasts last Nov. 3. Diginet Cozi TV chugging along.

7. Univision Communications

OWNERSHIP: Privately held by Broadcasting Media Partners, an investor group that includes Madison Dearborn Partners, Providence Equity Partners, Saban Capital Group, Thomas H. Lee Partners and TPG Capital. 36% (19.135% FCC) 33 stations, 21 markets univision.net
Randy Falco, president/CEO
Kevin Cuddihy, president of local media, Univision Communications
LAST YEAR’S RANKING: 2

Last summer, Kevin Cuddihy, former president of Univision Television Group, was named president of local media, supervising 130 TV and radio stations, and working on getting local TV and radio in common markets working together on content, marketing, sales. Last spring, Alberto Miery Terán, GM of Univision’s Los Angeles stations, was promoted to executive VP of the TV group. Univision debuted female-focused subchannel Escape and male-targeted Grit in major markets over the summer, joining Bounce TV on the digital tier.

8. Gannett

OWNERSHIP: Public (NYSE: GCI) 31.27% (26.85% FCC) 44 stations, 38 markets gannett.com
Gracia C. Martore, president, CEO, Gannett Co.
David T. Lougee, president, Gannett Broadcasting
LAST YEAR’S RANKING: 8

Gannett’s big broadcast-print split happens mid-2015, with TV division getting a new name. Lougee wants Gannett to be a big player in the homegrown programming game, and he’s got the footprint to do it. Gannett and Debmar-Mercury jumped in bed together last year, and Gannett grabbed Bob Sullivan, who spearheaded development on Scripps’ first-run shows, to be senior VP of programming. Respected Lougee was B&C’s 2014 Broadcaster of the Year and used his acceptance speech at the TVB conference in September to talk up more automated ad transactions. Ellen Crooke and Michael Valentine are corporate news veeps.

9. Media General

OWNERSHIP: Public (NYSE: MEG) 23.26%, (15.6% FCC) 64 total stations, 59 owned, 5 operated; 48 markets mediageneral.com
Vincent L. Sadusky, president, CEO
Deborah A. McDermott, senior VP/COO
LAST YEAR’S RANKING: 12

MEG swallowed Young, and then swallowed LIN to earn spot at the Top 10 table. The latter closed at the end of ’14; LIN CEO Sadusky ended up running the show, touting “strong balance sheet, significant free cash flow, enhanced scale and a diverse geographic footprint” of merged operation. Sold WVTM Birmingham and WJCL Savannah to Hearst TV, and WALA Mobile to Sinclair, to ease the deal. Picked up stations in Colorado Springs and Tampa. Various digital businesses consolidated in Empire State Building. Sadusky reminded investors in March that there’s substantial room to grow under the ownership cap. Another merger?

10. ABC Owned Television Stations Group

OWNERSHIP: Disney (NYSE: DIS) 22.74% (20.96% FCC) 8 stations, 8 markets abclocal.go.com
RobertIger, chairman/CEO, Walt Disney Co.
Rebecca Campbell, president, ABC Owned Television Stations Group LAST YEAR’S RANKING: 9

The gold standard of networkowned stations: top talent, top tech, top ratings. The group lost a key figure when Arnie Kleiner, KABC GM, retired earlier this year. Cheryl Fair, longtime news director, succeeded him. Group looks for The F.A.B. Life, with Tyra Banks, to jump-start daytime. After Live Well Network’s demise, ABC announced it will air new multicast Laff. Expanded a deal with Rentrak for ratings measurement covering its stations. No M&A activity since offloading Flint and Toledo five years ago. We assume Disney likes local broadcast? They’re good at it.

11. Hearst Television

OWNERSHIP: Wholly owned subsidiary of the privately held Hearst Corp. 19.028% (13.69% FCC) 31 stations, 27 markets hearsttelevision.com
Jordan Wertlieb, president
LAST YEAR’S RANKING: 10

12. E.W. Scripps Co.

OWNERSHIP: Public (NYSE: SSP) 18.43% (11.36% FCC) 28 total: 27 owned, 1 operated; 24 markets scripps.com Richard A. Boehne, president, COO
Brian G. Lawlor, senior VP, television
LAST YEAR’S RANKING: 13

13. Nexstar Broadcasting Group

OWNERSHIP: Public (NASDAQ: NXST) 17.9% (11.35% FCC) 91 total: 65 owned, 26 operated; 57 markets nexstar.tv
Perry Sook, chairman, president, CEO
LAST YEAR’S RANKING: 11

14. Entravision Communications Corp.

OWNERSHIP: Public (NYSE: EVC) 14.13% (7.9% FCC) 33 total: 23 owned, 10 operated; 22 markets entravision.com
Walter F. Ulloa, chairman, CEO
LAST YEAR’S RANKING: 14

15. Raycom Media

OWNERSHIP: Employee-owned 13.07% (9.44% FCC) 48 total: 38 owned, 10 operated; 37 markets raycommedia.com
Paul McTear, president, CEO
LAST YEAR’S RANKING: 14 (tied with Entravision)

16. NRJ TV

OWNERSHIP: Private, NRJ Holdings, 5 Star Spectrum, Drumcree 12.87% (6.44% FCC) 7 stations, 6 markets no company website Ted B. Bartley, president and CEO

LAST YEAR’S RANKING: N/A

17.Liberman Broadcasting

OWNERSHIP: Private 11.33% (5.7% FCC) 5 stations, 5 markets lbimedia.com Jose Liberman, founder
Lenard Liberman, president, CEO Winter Horton, COO
LAST YEAR’S RANKING: 16

18. Cox Media Group

OWNERSHIP: Subsidiary of Cox Enterprises 11.13% (5.57% FCC) 14 total: 13 owned, 1 operated; 10 markets coxmediagroup.com James C. Kennedy, chairman John Dyer, president and CEO, Cox Enterprises Doug Franklin, executive VP and CFO, Cox Enterprises
Bill Hoffman, president
LAST YEAR’S RANKING: 17

19. Meredith Corp.

OWNERSHIP: Public (NYSE: MDP) 10.74% (6.42% FCC) 16 stations, 12 markets meredith.com Steve Lacy, chairman, CEO
Paul Karpowicz, president, Meredith Local Media Group
LAST YEAR’S RANKING: 19

20. Gray Television

OWNERSHIP: Public (NYSE: GTN) 7.99% (5.73% FCC) 61 stations, 43 markets gray.tv
Hilton H. Howell, Jr., president, CEO James C. Ryan, senior VP, CFO Kevin Latek, senior VP, business affairs
LAST YEAR’S RANKING: 20

21. Venture Technologies Group

OWNERSHIP: Private 6.65% (3.321% FCC) 3 stations, 3 markets ventechgroup.com
Lawrence Rogow, chairman
LAST YEAR’S RANKING: N/A

22. Jericho Partners

OWNERSHIP: Private 6.49% (3.21% FCC) 3 stations, 3 markets Michael Jahrmarkt, manager
LAST YEAR’S RANKING: N/A

23. Hero Broadcasting

OWNERSHIP: Private 6.47% (3.23% FCC) 2 stations, 2 markets
Robert Behar, president, CEO
LAST YEAR’S RANKING: N/A

24. Graham Media Group

OWNERSHIP: Public, owned by Graham Holdings (NSE: GHC) 6.31% (3.14% FCC) 5 stations, 5 markets ghco.com Donald E. Graham, chairman, CEO Nicole Maddrey, senior VP, general counsel
Emily Barr, president and CEO, Graham Media
LAST YEAR’S RANKING: 24

25. Weigel Broadcasting

OWNERSHIP: Private 4.12% (2.06% FCC) 5 stations, 3 markets weigelbroadcasting.com/diginets Norman Shapiro, president, chairman
Neal Sabin, vice chairman
LAST YEAR’S RANKING: N/A —with Michael Malone

CRITERIA

Broadcasting & Cable's annual ranking of the Top 25 TV station groups is based on data gathered by BIA/Kelsey and SNL Kagan, supplemented heavily by our own research. Only commercial broadcasting groups are included in this list. All of the groups listed have been contacted for verification.

Rankings are based on total coverage of the U.S, with totals based on the FCC’s UHFdiscount included in parentheses. Although the UHF discount is much less relevant now that most TV stations broadcast digitally, allowing UHF signals to cover the entire market, it remains in place and thus is included here.

This list counts all full-power stations owned and substantially operated by the group in question, and that includes local marketing agreements, shared services agreements, joint sales agreements and master service agreements. Low-power, Class A, satellite and semi-satellite stations are not included in group totals when they are duplicative. However, low-power stations are included if they are major affiliates or the only representation of a network in a market.

Pending station deals are not counted in station totals.

Groups comprised of only one station, such as Mountain Broadcast Corp. or WRNNTV, both of which own one station that serves the New York City DMA, are not considered groups and thus are not included here.

After a frenetic period of buying, selling and merging, the TV station trading market has finally slowed down due to several factors. One major one is the pending FCC spectrum auctions, which are giving many broadcasters pause.

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