FCC Considers Allowing Waivers for Some TV Ownership That Draft Wouldn’t Allow

Some at the FCC are considering whether to allow waivers of media ownership rules for some types of arrangements that are barred under draft rules involving TV stations, agency and industry officials said. They said in interviews that some Media Bureau staff members are considering a waiver process for joint sales agreements where a TV station brokers ads for another outlet in the market, when spots on the second station in the JSA exceed 15 percent of that broadcaster’s commercials. A draft order ending the 2010 quadrennial media ownership review would require the attribution of such JSAs to the station doing the brokering within two years (CD Nov 15 p1). That would mean many of the JSAs would need to be renegotiated so the arrangements don’t violate ownership rules, reducing their cost savings, said executives at companies that own brokering stations. There are more than 100 stations in JSAs (CD Nov 29 p5).

The delay in approving the quadrennial review order because the commission sought comment on minority ownership data, with replies due next Friday (CD Dec 5 p3), gave broadcasters more time to make the case that TV JSAs shouldn’t be attributed, industry officials said. LIN TV and Schurz Communications, which each own several TV brokering stations in JSAs, sent executives to the commission last week to make the case against attribution for the first time since the draft order circulated Nov. 14 (CD Dec 26 p15), docket 09-182 shows (http://xrl.us/bn73ie). Bureau staff members still hope (CD Dec 12 p5) to circulate a revised order shortly after the Form 323 ownership data comments are received, an agency official said.

Staff got more time to work out a middle ground of sorts in a revised draft order between multichannel video programming distributors and public interest groups seeking attribution of TV JSAs and other ownership arrangements like shared services agreements (SSAs), and broadcasters that want no attribution, the commission official said. Although the two sides may remain far apart after new rules are adopted, the pause in voting on the order has led to consideration at the FCC about whether to waive JSA attribution in cases where a broadcaster shows there’s cause for exemption, the official said. Steve Waldman, who wrote an FCC report last year on the future of the media industry, said waivers for common ownership of daily newspapers and TV stations make sense. A commission spokesman declined to comment.

Some at the bureau and on the eighth floor appear amenable to JSA waivers to preserve some arrangements that executives contend would otherwise have few cost-savings if they brokered less than 15 percent of spots, industry officials said. The staff of all FCC members and bureau officials who Schurz Communications Senior Vice President Marci Burdick met with “seemed to be extremely interested” in TV JSAs, she said: Some of those officials weren’t aware “of the level of service that had been created in some markets” through the pacts. Without JSAs, brokered stations would need to hire staff to sell ad time, as those workers are often close to nonexistent at such stations, and use the money they'd have spent on programming for such employees, said LIN CEO Vincent Sadusky. “At a minimum, the existing agreements ought to be grandfathered.” A further notice on JSA attribution, because the last rulemaking on the arrangements was in 2004, would be better than attributing them in the coming order, he said: “We want to have an adequate amount of time to be able to argue our points,” as JSAs are “part of the economic structure” of the industry.

Waivers for TV duopolies in smaller markets where there aren’t eight other stations, meaning such common ownership is now forbidden, or of top-four rated outlets would provide broadcasters with the economic benefits they now get through JSA/SSAs, Sadusky said. “For many, many years” LIN has sought “an objective waiver standard for these smaller markets” for stations that if owned separately “cannot maintain viable local newscasts,” he said: Such a waiver would go beyond the current failing station exemptions the bureau provides, to cover outlets that “barely make money.” Failing station waivers go to unprofitable outlets.

Rather than a contractual issue, changing TV JSAs so the brokering station handles less than 15 percent of ads for the other station would make little economic sense, said Burdick, Sadusky and other industry officials. Almost all ads at the brokered station that aren’t sold by the national network are sold by the broker, they said. They noted that stations get no revenue from ads sold by networks that run in network-provided TV shows. “In smaller-market stations, a disproportionate amount of revenue often comes from locally produced programming,” said Burdick. Schurz also owns radio stations, newspapers and cable systems with about 100,000 subscribers total in Arizona, Florida and Maryland. Burdick is NAB TV board chairman. MVPDs’ “unconstrained market power,” with one serving half or more of TV subscribers in a third of markets, makes it “even more important for broadcasters to be able to achieve greater efficiencies through arrangements like JSAs,” NAB said. “Attribution of TV JSAs is not needed to safeguard competition,” association executives told Commissioner Mignon Clyburn last week, an ex parte filing said (http://xrl.us/bn73kz).

Cross-ownership waivers are better than bright-line limits, Waldman said. By requiring applicants to show they'd increase post-transaction the amount of news the formerly separately owned broadcaster and newspaper carried, waivers could allow efficiency of scale without cutting local news output, he said. Waldman also raised the idea in an online Columbia Journalism Review post (http://xrl.us/bn73mj). “We just have to look at the whole question of what is a healthy local news ecosystem in a different way than we used to” by considering consolidation per se neither good nor bad but judging deals based on whether each one would help remedy “the collapse of reporting” on local topics, Waldman told us. Waiver recipients that renege on commitments would have that considered when making future requests for ownership exemptions, “like a reputation score on eBay,” he said. Waldman said the waiver criteria for common ownership of a radio or TV station in the since-remanded 2007 quadrennial review order had “some sense to it.” The current draft order would allow cross-ownership of a TV station and a daily newspaper in top-20 markets when the broadcaster wasn’t a top-four station, without requiring the public-interest showings mandated in 2007, agency officials have said. Waldman, affiliated with Columbia University, is chairman of the Council on Foundations’ nonprofit media working group (http://xrl.us/bn73of) and publisher of thebrooklyngame.com.

A TV waiver process where the FCC acts quickly makes sense to some executives. “A process by which the FCC could look at these unique conditions” would be supported by Burdick, she said. “Unfortunately, our experience is most of these do not get acted upon.” There’s “a history to suggest that those waivers don’t get acted on in a timely manner,” she said. That makes most potential sellers of stations that would need a waiver under new ownership “wary,” Burdick said. “That creates uncertainty in a transaction. That makes it difficult for the seller and buyer together.”