Journal, Scripps Combining Broadcast Operations, Spinning Off Papers

Journal Communications and E.W. Scripps will combine their broadcast operations into one company and spin off and merge their newspapers into another, they said. The all-stock transactions will result in Scripps owning 34 TV stations and 35 radio stations while newly created Journal Media Group will cover 14 markets with the combined newspaper properties, the companies said. Though there are no “market ownership conflicts” between the two companies according to Scripps CEO Rich Boehne, Journal has existing TV and radio duopolies in some markets and may brush up against FCC radio ownership limits in others. Though Boehne said the stations involved were “immaterial” to the deal, he said the companies would try to work with the FCC to hold on to them: “We hope we'll prevail and keep them all."

Scripps would be the No. 5 U.S. independent TV group, and reach 18 percent of TV households, said a news release Wednesday (http://bit.ly/1AEq9Xm). Scripps shareholders will own 69 percent of the broadcasting company and 59 percent of Journal Media Group, while Journal Communications shareholders will own 31 percent of Scripps and 41 percent of Journal Media, said the firms. Tim Stautberg, senior vice president of newspapers for Scripps, will become president, CEO and a director of Journal Media. Boehne will remain as board chairman, president and CEO of Scripps.

The deal would help Scripps capture more political ad revenue through stations in important swing states like Wisconsin, Boehne said. The deal is also expected to lead to growth in retransmission consent revenue for Scripps, though the company said many of Journal’s retrans deals had been recently renegotiated without the greater leverage from Scripps/Journal.

Journal has TV duopolies in Boise, Idaho, Green Bay, Wisconsin, and Tucson, Arizona, and some of the stations are also co-located with radio stations, said a Scripps spokeswoman. Some of the duopolies are based on failing station waivers, Scripps told us. Even though the deal doesn’t include changes to the duopoly arrangements, the transfer of licenses from Journal to Scripps means the FCC will review those arrangements, and could possibly ask for divestitures, said an industry lawyer. The deal isn’t seen as likely to run into many regulatory hurdles, said communications attorneys.

One possible FCC sticking point will be rules limiting how many radio stations one company can own in a market and how many radio and TV stations can be cross-owned in the same market, Scripps and Journal executives said. In Wichita, the deal would leave Scripps owning six radio stations, which could attract FCC attention, Scripps said. Since rules limiting radio ownership and TV/radio cross-ownership are based on the number of independent news voices in a given market, it’s not immediately clear how the rules will affect Scripps/Journal, said a broadcast attorney.

The combining broadcasters are trying to “keep up” with growing consolidation in video, said Guggenheim Partners analyst Paul Gallant. Through increased scale, Scripps will be able to save money on expenses and negotiate with more leverage for retransmission consent fees and content, he said. He said regulatory interference with the deal is unlikely.

The deal speaks to the increasing pressure on smaller broadcasters to get bigger, said Fletcher Heald broadcast attorney Frank Jazzo, who’s not involved in the transaction. Moving forward with the deal doesn’t mean a perceived broadcaster wariness of how the Media Bureau will treat deals involving sharing arrangements has gone away, he said. Since the deal doesn’t appear to hinge on such arrangements, Journal and Scripps likely didn’t believe the increased FCC scrutiny of such deals would derail their plans, he said. Another perceived FCC threat to broadcast deals -- a possible UHF discount rulemaking -- also doesn’t apply to this transaction, he said. Boehne said the deal is expected to close in 2015, though he said the companies couldn’t be sure because of the regulatory review process.