Sinclair Wants to Cancel TV Licenses to Get Allbritton Deal Approved
Sinclair wants to cancel the licenses of three TV stations involved in its $985 million plan to buy Allbritton’s TV stations because of FCC rules barring joint sales agreements, a lack of willing third-party buyers and an approaching deadline to close the deal, Sinclair said in a letter to the Media Bureau Thursday. The stations slated to go dark are WCFT-TV and WJSU-TV in Birmingham, Alabama, and WCIV-TV Charleston, South Carolina. Though Sinclair will preserve the content of those stations by multicasting their signals, closing the stations scuttles a plan by African-American broadcaster Armstrong Williams to participate in the deal (CD April 24 p12) and doesn’t serve the public interest, said commissioners Ajit Pai and Mike O'Rielly in a joint statement. “We hope the commission will act immediately to correct its misguided policy on JSAs."
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Sinclair’s solution could be used by other would-be buyers of JSA stations, said industry lawyers in interviews. The new plan comes after the broadcaster changed its plan after the bureau in March said it would scrutinize such deals generally (CD March 16 p21). A public interest lawyer was skeptical Sinclair can’t sell the stations, while another such lawyer said ending JSAs is good.
Sinclair’s purchase agreement with Allbritton allows either party to terminate the deal July 28, which means it needs to be approved by July 27 to survive, Sinclair said. The company gave “careful thought” to alternatives that would comply with FCC sharing arrangement rules and “provide a basis for prompt action” on the pending transaction, which has been pending since last fall, it said. When announcing the deal’s initial restructuring in March, Sinclair said the stations’ value would “have an immaterial impact’ on Sinclair and the Allbritton deal.
Sinclair’s plan to sell the Birmingham and Charleston stations fell though because of a lack of buyers, Sinclair said. Moelis & Co., the broker it hired to find a buyer, was unable to do so, said Sinclair. Sinclair/Allbritton had originally used JSAs to comply with ownership rules in Birmingham, Charleston and Harrisburg, Pennsylvania - - all areas where the two companies had ownership overlaps. After the FCC banned over O'Reilly and Pai’s dissents JSAs where one station accounts for more than 15 percent of another’s ad sales and the bureau’s guidance against such deals, Sinclair agreed to restructure the deal to sell the overlapping stations.
Sinclair’s solution of canceling licenses and multicasting the signals could become a common response to the FCC new policy on sharing arrangements, a broadcast attorney extensively involved in such arrangements told us. Multicasting allows the station to reap the ad sales and retransmission consent benefits of owning two stations without brushing up against media ownership concerns, the attorney said. It also means fewer stations on-air, the attorney said. It squeezes the two channels onto one station’s spectrum, freeing the rest up for other uses, pointed out Fletcher Heald broadcast attorney Frank Jazzo. Channel sharing “gets you almost to the same place” as sharing arrangements, Jazzo said.
Broadcasters moving from JSAs to channel sharing is good because it doesn’t violate FCC rules, said Free Press Policy Counsel Lauren Wilson. Free Press supports the FCC’s new JSA rules, and has been involved in several filings opposing Sinclair/Allbritton. Sinclair’s move to cancel the licenses is unlikely to be a common result of the FCC’s shift on sharing arrangements, and may be motivated more by the impending deadline in the deal than JSA rules, said Wilson. “They're choosing to go dark."
"It is inconceivable these stations are unsalable in those markets,” said Georgetown Law public interest attorney Andrew Schwartzman, who has also opposed JSAs and Sinclair/Allbritton. “This is an effort to pressure the commission on joint sales agreements.” Schwartzman pointed to the quick release of Pai and O'Rielly’s statement after the letter’s filing as evidence of a political motivation to the restructuring. Sinclair said it is still planning to sell an overlapping station in Harrisburg to a third-party buyer.
The plan to cancel the licenses likely shuts the door on the attempt by Williams’s company, Howard Stirk Holdings, to participate in the deal by buying WMMP Charleston and WABM Birmingham, said Pai and O'Reilly. HSH had applied for the first waiver of JSA rules to buy the stations, claiming a public interest benefit. Under the latest restructuring of Sinclair/Allbritton, Sinclair will retain both stations. HSH and Sinclair did not respond to requests for comment. “Instead of increasing the number of African-American-owned television stations, we are driving stations off the air,” said O'Rielly and Pai. Sinclair said it plans to move forward with amending the Allbritton deal absent an objection from the FCC. -- Monty Tayloe (mtayloe@warren-news.com)