Big Deals = Big Changes In Station Groups
The past 12 months have seen a frenzy of station acquisitions among the biggest television station group owners that resulted in five of last year’s top 25 companies leaving the list through mergers. They are Allbritton, Belo, LIN, Local TV and Young.
TVNewsCheck’s annual ranking of the Top 30 is based on advertising revenue estimates for 2013 provided through an exclusive arrangement with BIA/Kelsey.
The rankings are based on advertising estimates alone, and do not include other revenue from retransmission consent fees and websites and other digital ventures.
Also, although the estimates are for 2013, the station groups are credited for revenue for all stations they own and operate as well as for any stations they announced they are acquiring between May 23, 2013, when the last Top 30 was posted, and April 30, even if the deals have not closed.
Despite all the changes, the top three spots remained the same with Fox first, CBS second and Sinclair third.
After that, however, there was plenty of movement among the top 10. Last year’s No. 4, ABC/Disney dropped to No. 7; Gannett climbed from No. 6 to No. 4 this year; Hearst dropped from No. 7 to No. 9; Tribune climbed from No. 8 to No. 6; Univision slipped from No. 9 to No. 10.
Media General recorded the biggest rise on the list, jumping from No. 17 last year to No. 8, largely because of its announced $1.6 billion merger with LIN. While that deal is awaiting FCC approval, the resulting Media General would have 74 stations in 46 markets and coverage of 23% of all TV homes.
TV's Top 30 Group Owners
At the end of March, the FCC threw a monkey wrench into the station sale process when Chairman Tom Wheeler won a 3-2 vote that changed the commission’s rules so that TV broadcasters generally may not form new joint sales agreements in which one station sells 15% or more of the advertising time of another separately owned station in the same market. Many broadcasters have been using JSAs exceeding 15%, usually in concert with shared services agreements, to operate second TV stations in markets where outright ownership is prohibited by agency rules.
By TVNewsCheck’s count, deals valued at more than $3 billion are lodged in the FCC bureaucracy because of JSA and SSA issues. The biggest part of that total is the $1.6 billion attached to the merger of Media General and LIN. The parties tried to engineer that deal around the new thinking at the FCC. But who can say exactly what the thinking is? Both companies have pre-existing sidecar deals built on JSAs and SSAs that could gum up the works.
Deals in limbo include Sinclair Broadcast Group’s $985-million purchase of Allbritton Communications announced last July. In the face of Wheeler's zero-tolerance policy regarding sidecars, Sinclair vowed in March to spin off the Allbritton stations in Harrisburg, Pa., Charleston, S.C., and Birmingham, Ala., to a buyer who is really, truly and absolutely not related to it and it has hired an investment banker, Moelis, to find one.
Another is Nexstar's buy of Communications Corp. of America. That $270 million deal has been pending for a year with no sign of resolution at the FCC.
“Last year was remarkable in terms of the dynamics of TV groups getting bigger,” says Mark Fratrik, BIA/Kelsey SVP and chief economist. “2012 was a good year for political advertising on TV. While interest rates were higher than they were in the downturn, they still are at what I’ll call historical lows.
“And the whole retransmission consent dynamic” has been very important too, he adds. “When a larger group acquires a station, the arrangements they have with the MSOs and the satellite companies automatically kick in the newly acquired stations at a noticeably higher retransmission consent rate. So as soon large company A buys smaller company B there’s a big increase in retransmission consent, which goes right to the bottom line.”
BIA/Kelsey, an investment and research firm based in Chantilly, Va., tracks station group ownership and uses information from individual stations and markets, in addition to historical data, to generate its station and market ad revenue estimates. It checks its estimates against whatever public information is available, Fratrik says.