Widespread, Cost-Saving TV JSAs Lead Executives to Question Why FCC Would Attribute Them

Widespread, successful ad-brokerage agreements among separately owned TV stations in the same market are leading some executives to question why the FCC wants to make attributable to the broadcaster controlling the joint sales agreements such JSAs. There are more than 100 stations in such deals, where one often lower-rated and smaller revenue outlet lets a bigger rival sell ads and they share office space and other clerical functions, our survey of brokers, lawyers and executives found. They said JSAs have become more prevalent in recent years, particularly among stations in small and mid-size markets.

None of the JSA stations we identified are owned by a top-four broadcast network. Several were in top-20 markets where the FCC would loosen TV cross-ownership rules. TV JSAs are less widespread than among radio stations and may be less prevalent than other types of TV sharing agreements, industry officials said. The commission in 2003 required radio JSAs to be attributable to the brokering station when the deal involved more than 15 percent of another outlet’s weekly ad time.

The draft Media Bureau order to end the current quadrennial review of ownership rules, which was due in 2010 under the Telecom Act and now is circulating, would extend the radio JSA rules to TV JSAs in two years (CD Nov 15 p1). Some TV pacts, particularly for stations affiliated with networks other than Disney’s ABC, Comcast’s NBC and CBS, would need to be scaled back so fewer ads are brokered so as not to violate limits on how many stations can be commonly held in a market, industry officials said. They said that because the Big Three have a lot of national programming, where ad time isn’t sold by the affiliate, those JSAs probably involve less than 15 percent of a station’s total spots. News Corp.’s Fox has no weekday evening and morning news shows and other, smaller networks with less national programming may mean affiliates have 15 percent or more of ads they show to sell, industry officials said. “I think most current JSAs cover significantly more than 15 percent of ad inventory,” said TV-station lawyer Frank Jazzo of Fletcher Heald, with clients in such deals.

Broadcasters, caught off guard by the TV JSA attribution proposals in the draft (CD Nov 23 p5), said a reason for the commission not to approve the requirement is the agency last asked specifically about attributing them in a 2004 rulemaking notice that proposed to do so (http://xrl.us/bn3weq). Including the requirement now may be a reason for the 3rd U.S. Circuit Court of Appeals to remand the forthcoming order, which is likely to be challenged by broadcasters seeking more deregulation, and by nonprofits that oppose easing rules, broadcast, cable and public-interest lawyers said. But they said the draft order is unlikely to change much before adoption, and an increase in the 15 percent threshold may not be authorized either. An increase would mean that fewer JSAs would have to be scaled back to comply with ownership rules. Bureau and commission spokespeople had no comment.

JSAs haven’t encountered gripes from entities other than pay-TV providers, seeking to reduce broadcasters’ leverage in retransmission consent talks by limiting separately owned outlets’ ability to jointly negotiate, station executives said. They said JSAs have been successful in cutting back-office costs and keeping on-air some stations that otherwise might have trimmed programming or gone dark because they were struggling for ad revenue. The bureau continues to OK sales of stations that include JSAs, said lawyers and executives including Sinclair General Counsel Barry Faber. The bureau OK'd the company’s purchase of stations from Newport TV, which include a few JSAs, he said. “The whole transaction was completely vetted by the FCC.” The Justice Department’s Antitrust Division, which decided not to challenge the approximately $400 million purchase of six stations (CD Sept 13 p21), is the agency that reviews “whether or not there are any issues with sales of advertising time,” not the commission, he said.

Figures provided to us by TV station broker BIA/Kelsey, which others said is the only entity that appears to track TV JSAs, show at least 98 stations are part of one. Others estimated that number is probably higher, although associations including NAB and TVB said they don’t track the figures, and industry officials noted the FCC doesn’t, either. Barrington Broadcasting, Belo Corp., Entravision, LIN, Media General and Nexstar are the only other publicly traded broadcasters that BIA data and industry executives said own TV stations in JSAs. Those companies had no comment, though some confirmed they have JSAs. Bonten Media Group, Cox Enterprises’ Cox Media Group (CMG), Granite Broadcasting, Ramar Communications and Venture Technologies are among other companies BIA/Kelsey says have JSAs.

Commissioners Robert McDowell and Ajit Pai may vote against the order, or concur with it, because they'd like to see more deregulation than what’s in the draft, broadcast and public-interest lawyers said. The draft would allow waivers for common ownership of newspapers and TV stations in top-20 markets, end limits on common ownership of TV and radio stations within markets and kill radio/paper cross-ownership limits. Commissioner Mignon Clyburn, irked the agency didn’t complete studies on the hurdles faced by minorities and women to broadcast ownership (CD Nov 19 p1), appears not to want a deregulatory order, said broadcast and public-interest lawyers.

Most JSAs are in smaller markets, industry officials said and BIA/Kelsey data show. About two-thirds are in markets below No. 100, the data show. “They've been used particularly in smaller and medium-sized markets when there is a struggling station that a stronger station sees an opportunity to partner with,” an NAB spokesman said. It’s “better” to have such a combination and the additional local news that springs from it “than to have a competitor to a pay-TV provider” go “out of business,” he said. Top-20 markets with JSAs are Dallas including Belo’s WFAA(ABC), and Univision in the Orlando market acting as a broker for its WOTF and Entravision’s WVEN(Univision), the data show. Univision has them in several other markets including Boston, a spokeswoman said. Among markets No. 21 through 50, BIA/Kelsey shows nine stations in JSAs, including in Cincinnati with Sinclair’s WKRC-TV(CBS) and in Jacksonville, Fla., CMG’s WAWS(Fox) and Bayshore TV’s WTEV(CBS). Some of the data reflect transactions that have been agreed to but not completed, industry officials said, including CMG’s purchase of WAWS from Newport, which a CMG spokesman said is pending.

The impact on TV broadcasters would be swift and negative if the FCC makes JSAs attributable, said all industry officials who responded to our informal survey. It would have a “shattering effect” and “hurt some people,” since “in most markets, it’s the only way to survive,” said President Frank Kalil of radio and TV station brokerage Kalil & Co. It’s “as close as you can get” to “having two stations under a shared roof,” and “the economics are dramatic,” in terms of efficiencies, he said. Many markets also have shared services agreements, said Kalil and Director Robert Heymann of broker Media Services Group. “Anything that these broadcast station owners can do to reduce their costs, they are going to look at very seriously,” said Heymann.

JSAs reduce costs by about two-thirds of what each station would bear if all operations stood alone, executives estimated. They said many accords involve consolidating into one operation all but transmitters, with separate studios. “They're prevalent among the entire industry,” said Faber, whose company owns or provides services to 74 stations. JSAs aren’t about getting a “competitive advantage” in jointly selling ads as much as “the ability to run stations in a more efficient manner,” he said. “It creates a more efficient ad buy for advertisers” that don’t need to buy spots separately, and “the only people who have complained about this are the cable companies” that often join together in ad sales arrangements for regions, Faber said. It’s a “fundamental question” why the FCC is poised to adopt the attribution rule, with “no record at all that is of any recent vintage,” he said. The FCC has a record on which to attribute other arrangements beyond JSAs, Free Press Policy Director Matt Wood said. The group held a Wednesday news briefing with other nonprofit groups (CD Nov 28 p16) opposed to ownership deregulation. “The FCC can’t ignore deals that let stations consolidate their newsrooms while merely pretending to keep separate ownership in place,” Wood said.

Gray TV, among the owners of stations without JSAs, has considered starting such an agreement in lieu of buying a station where it already owns one, said President Robert Prather. “They've proved to be very successful in a lot of cases -- probably kept a lot of stations on the air.” FCC rules require each station in a JSA to make separate programming decisions with some staff including a general manager and have equipment including a transmitter, Prather and others noted. The licensee must keep ultimate control over its “personnel, programming and finances,” Jazzo said. One reason smaller markets tend to have JSAs is only in the largest markets can two be commonly owned, he said. JSAs are “very efficient, it’s worked very well for the people who have done it,” said Prather, whose company has 40 stations. “You can combine pretty much all of your back-office functions.”