Sinclair’s Tribune Purchase, Path Paved By Trump

Submitted on May 12, 2017

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During the same week that President Donald Trump fired the man in charge of the investigation into the Trump Administration’s ties to Russia, Sinclair Broadcast Group, the largest owner of local television stations in the United States, agreed to buy Tribune Media for $3.9 billion. Sinclair is set to acquire Tribune Media’s 42 stations and a prized asset, WGN America, a basic cable and satellite television channel. With the deal, Sinclair will reach more than 70 percent of American households with stations in many major markets, including Chicago, Los Angeles, and New York. The proposed deal was made possible by a deregulatory vote by the Federal Communications Commission last month. It seems as though the Trump Administration, by paving the way for increased media ownership consolidation, is granting this conservative-leaning station group owner greater influence over our civic discourse. This is a major development that could fly beneath the radar while our attention is drawn to the White House-induced crisis at the FBI.

What Does Sinclair Gain With This Move? Money and Power.

“By tying together multiple markets in retransmission consent negotiations, companies like Sinclair are able to demand higher payments for their signals. Consumers ultimately foot the bill.” -- John Bergmayer, senior counsel at Public Knowledge.

With this deal, Sinclair expects to make more money through retransmission fees and political advertising.

Retransmission Fees: Sinclair wants a larger slice of retransmission fees — the money pay-TV providers (mainly cable and satellite operators) pay to retransmit local broadcast television stations’ signals. Owning more stations gives Sinclair more of those fees, which altogether are expected to grow to over $10 billion by 2021, up from $8 billion this year. The acquisition will allow Sinclair to leverage its larger size in two ways: 1) negotiate higher fees from those pay-TV companies; and 2) since Sinclair has to pass along some portion of those fees (as much as 30 percent) to national TV programmers like CBS and Fox, it can haggle for a better deal and pay less.
Political Advertising: Political advertising is huge in election years and has been growing at historic rates following the Supreme Court’s Citizens United decision. We can expect big advertising dollars from SuperPACs going to local TV stations for the coming 2018 midterm elections. The acquisition of Tribune could be part of a strategy to rake in PAC advertising money. David Zurawik, writing for The Baltimore Sun, claims that both Sinclair and Tribune have:

pursued a strategy of station acquisition in swing states – those states like Ohio, Florida and Pennsylvania where both parties have relatively equal levels of support and presidential elections have often been decided. The idea here was that those stations would be cash cows in hotly contested national elections with candidates pouring buckets of PAC money into their coffers for advertising time. Clinton delivered with the most expensive campaign in presidential history. Running the stations cheap and raking in the PAC money is a winning business model, but questions can reasonably be raised about how such stations serve their viewers. And it becomes an even larger question when you consider the added political clout such stations have because of their geography in swing states.

Sinclair expects to accumulate more political power by using its stations in key swing states to push conservative-leaning news programming. And Sinclair is no stranger to using its stations to try and impact elections. In 2004, Sinclair drew criticism when, just weeks before the presidential election, it was said to make plans to preempt its regular primetime programming to air a privately-produced documentary critical of Democratic nominee John Kerry's anti-war efforts following his service in the Navy. Word of the plans sparked complaints by Democrats and threatened advertiser boycotts. Sinclair's Washington bureau chief, Jon Leiberman, was fired after he called the program "inflammatory" and publicly criticized the company's involvement in the project. Sinclair denied that it planned to air the program and instead produced a news special that contained a portion of the documentary and other material.

Sinclair’s conservative push could also be seen in the 2016 election. The company demanded certain stories be run by WJLA, the ABC affiliate in Washington, DC, which Sinclair bought in 2014. Paul Farhi noted in The Washington Post that, “Sinclair has effectively remade WJLA in its own image, which is to say, it continues to cover local and national news but with a distinctively conservative flavor.” Farhi continues:

In the most recent campaign, WJLA, and Sinclair stations around the country, gave a disproportionate amount of neutral or favorable coverage to candidate Donald Trump compared with his rival, Hillary Clinton, according to internal documents supplied by people at WJLA. Sinclair officials pointed out that Trump and his surrogates were far more accessible to Sinclair’s reporters than Clinton.

Among the stories that Sinclair’s managers ordered stations to air were those questioning Clinton’s handling of her controversial e-mail server, the documents show. Another “must-run” report — about her health — included this internal description: “Why did Hillary Clinton struggle with disclosing her medical diagnosis? She has been repeatedly faced with previous questions of trust. Can a president lead with so many questions of transparency and trust?”

There were no equivalent “must-run” stories examining Trump’s refusal to release his medical, draft or tax records, or the immigration records of his wife, Melania. But there was a story titled “Donald Trump Reflections of 9/11,” and a feature about women who were campaigning for Trump that included an interview with his daughter-in-law Lara.

Local TV stations rank high in public trust, and that is partly because they avoid delving into divisive topics such as national politics, said Harry A. Jessell, editor of TVNewsCheck, a TV broadcasters trade publication. Sinclair executives -- such as Sinclair vice president for news Scott Livingtston --see it differently, Jessell said. They believe they are pushing back against what they see as a liberal bias in most news programming. Livingston “sees himself like an old-fashioned newspaper publisher, one with a point of view,” Jessell said.

Indeed, two months before Monday’s merger announcement, Livingston aired a short "must-run" commentary piece to many of Sinclair's 173 stations. Todd Frankel for The Washington Post wrote, "In the segment, which looks like it belongs in a newscast, [Livingston] stands before a wall of video monitors and warns that 'some members of the national media are using their platforms to push their own personal bias and agenda to control exactly what people think.' He accuses the national media of publishing 'fake news stories' — a direct echo of President Trump’s frequent complaint — and then asks viewers to visit the station’s website to share 'content concerns.'"

Benefiting From Pai’s FCC

So far, the Trump Administration and Federal Communications Commission Chairman Ajit Pai have been very kind to Sinclair. FCC regulations cap the size of a single company’s potential viewership at no more than 39 percent of the total national TV audience. The “ultra high frequency (UHF) discount,” a regulatory loophole which allows station groups to only count 50 percent of the audience reach of their UHF station footprints, was just reinstated by the Pai-led FCC. Andrew Jay Schwartzman, Benton Senior Counselor at the Public Interest Communications Law Project at Georgetown University Law Center's Institute for Public Representation (IPR), explored the UHF discount in an article in Benton’s Digital Beat, Beware: The UHF Discount Is Rising From The Dead. Schwartzman concluded that “restoring [the UHF discount] would likely lead to vastly increased concentration of control of TV stations in this country.”

Lo and behold, Sinclair announced the deal only a few weeks after the FCC’s decision to reinstate the discount.

National leaders on Capitol Hill weighed in on the UHF discount prior to the FCC's vote. "Media consolidation leaves consumers behind with fewer independent news sources in many media markets," said House Commerce Committee Ranking Member Frank Pallone (D-NJ). Pallone and House Minority Leader Nancy Pelosi (D-CA) sent a letter to Chairman Pai last month urging the Chairman to, “reject reopening the UHF loophole, and instead explore ways to promote minority media ownership and diversity of programming on our airwaves.” Nevertheless, Pai persisted.

Schwartzman told Variety he is considering filing a legal case against Pai’s move to reinstate the UHF discount, saying there is no justification for it to still be on the books, given that digital TV has erased the differences between the UHF and VHF bands.

“I think there will be a lot of battling” over the Sinclair-Tribune merger, Schwartzman said. “But the bottom line is that this FCC is going to be more than willing to approve any transaction that they possibly can. They never met a merger they didn’t like.”

Influencing the FCC: Easy as Pai?

In March, Bloomberg reported that just days after Donald Trump’s surprise Electoral College victory, then-Commissioner Ajit Pai was at a conference with Sinclair executives. Pai spoke to Sinclair’s managers about his views on the media marketplace and broadcasters’ role.

“[Sinclair executives] are actively courting and buttering him up," said Free Press president Craig Aaron at the time. “Clearly Sinclair believes that Ajit Pai is going to clear the way for them to do whatever kind of deals they want to do.”

In February after President Trump tapped Pai as FCC chair, Christopher Ripley, Sinclair’s chief executive officer, told investors, “We do expect this new FCC to tackle the ownership rules. We’re very optimistic about this new FCC and the leadership of Ajit Pai. And in terms of what that could lead to on the [ownership] consolidation side, we definitely anticipate that more consolidation will happen, in fact we think it’s a necessary activity.”

"Sinclair has shrewdly and effectively gamed the FCC's ownership rules for many years," said Schwartzman. For example, to expand from a single station in Baltimore in 1971 to the behemoth it is today, Sinclair pioneered a unique strategy. In so-called “shared services agreements” (SSAs), Sinclair (and other station group owners) provide station-related services – including programming services – to one or more other TV stations in the same local market.

In 2014, Pai's Democratic predecessor, Tom Wheeler, called the SSA arrangements an "end-run” around FCC ownership limitations. Defenders, including Pai, say the arrangements help cut costs, lets local stations afford news programming, and promotes station ownership by members of minority groups.

The Trump Connection

Sinclair came under fire in December after Jared Kushner, President Trump’s son-in-law, told business leaders in New York that Trump’s campaign had struck a deal with Sinclair: greater access to then-candidate Donald Trump for what the campaign considered more balanced coverage than it was getting from national outlets like CNN and MSNBC. In fairness, it should be noted that what was downplayed in some of the stories is that Sinclair insisted it offered the same deal to Hillary Clinton’s campaign. But it did not help the narrative that Sinclair has a conservative bent and pushes for Republican candidates.

In April 2017, Sinclair hired Boris Epshteyn as chief political analyst. Epshteyn was a ubiquitous presence on cable news throughout the 2016 campaign, first as an outside Trump supporter and then as a paid Trump campaign staffer. Later, he was hired to be the Special Assistant to The President and Assistant Communications Director for Surrogate Operations for the Executive Office. But, in March, Ephsteyn left the White House job amid reports that he had developed a contentious relationship with the producers and journalists that were key to his job arranging news media interviews for White House surrogates.

Consolidation and News Programming

A Pew Research study from 2016 showed that almost 60 percent of adults get their news from television, and, of those, almost 50 percent rely on local stations.

A major concern with the Sinclair-Tribune acquisition is that the deal will provide Sinclair with an even bigger platform for its news programming in a quickly-consolidating market. Critics note that Sinclair produces seemingly-local newscasts at its headquarters, not local stations. For example, commentator Mark Hyman, based in Hunt Valley (MD), appears on dozens of Sinclair news stations. Hyman, who has doubled as Sinclair's vice president for corporate relations, is part of a national team of anchors, commentators, and weathercasters that Sinclair calls “Central Casting.” To the company, it is an efficient way to cut the costs of local journalism, bringing news to small stations while minimizing the number of people employed in these communities.

"Owning more stations would allow Sinclair to produce and air more pre-packaged content that isn't connected to the communities their stations serve," said Danny Hayes, an associate professor at George Washington University in Washington. "One consequence may be a further erosion of what is already a pretty anemic local news environment."

Free Press Policy Director Matt Wood said, “Local broadcast television is still the most important local news source for many people, particularly in low-income and Spanish-speaking communities. The last thing local communities need is fewer perspectives — and more politically biased news.”

Michael Copps, an FCC Commissioner from 2001 to 2011 and now a special adviser to Common Cause, called the planned merger “another blow to the diversity of journalism that we should have. It’s symptomatic of what is happening in this market,” he said, “which is fewer and fewer organizations controlling more and more of the information on which our democracy rests.”

Copps went on to say:

Sinclair's acquisition of Tribune Broadcasting is expected and disappointing. Expected because the new FCC majority is foaming at the mouth to rubber-stamp more massive media mergers; and disappointing because Sinclair is not known for the best journalism in the land, to put it mildly. Our nation’s civic dialogue suffers yet another blow with this merger.

A Rival to Fox News?

Many in Washington are wondering if the Sinclair-Tribune deal could mean that Sinclair will position itself as a conservative rival to Fox News.

Stephen Battaglio withThe Los Angeles Times wrote, “Sinclair, which has a reputation for injecting conservative commentary in local news, could leverage the cable and satellite retransmission deals for its TV stations to get carriage of a potential new news channel that could skew politically to the right of Fox News. Sinclair could also put such a network with national reach on its over-the-air digital multicast channels.”

“I think they have ambitions to do that,” said Ben Bogardus, an assistant professor of broadcast journalism at Quinnipiac University, who is a former news producer at Sinclair’s Washington (DC) station WJLA. “They’ve bought up enough real estate and market share that they can legitimately launch a national news station and they have content to fill it.”

Future Merger Review

For the moment, the fate of the deal rests in the hands of the FCC as well as the nation’s antitrust regulators at the Department of Justice. As with any merger of this size, the government has the ability to review and block the merger, permit it to proceed as proposed, or require Sinclair to make certain changes in order for it to proceed. The Department of Justice likely would review the transaction for its compliance with antitrust law, while the FCC will review whether it is in the public interest.

Sinclair said it may sell some stations to comply with FCC ownership requirements and antitrust regulations.

You can follow news of the merger in Headlines.

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