VNN SPECIAL REPORT: What in the FCC is happening to local news?

(NATIONAL) New Year’s Eve, 2020. Many were celebrating. At the Federal Communications Commission (FCC), commissioners were adopting and releasing an 11th-hour report on the communication industry. Literally the last day they could legally publish it. The FCC is required by the RAY BAUM’S Act of 2018 to publish a Communications Marketplace Report in the last quarter of every even-numbered year which, in part, assesses the state of competition of various providers of communications services. Its contents, which have seen little news coverage since December 31, are that of which we at VNN have been waiting for. The 2020 Communications Marketplace Report, much like its 2018 predecessor, details a broad spectrum of communication. Like rapid growth in the social media and streaming service industries. But our main concern at VNN is local news. Let’s hit some report highlights. Consolidation first. Perhaps the most telling, what was left out of 2020 Communications Marketplace report. Acquisitions. In 2018, the report went in-depth discussing the buying and selling of television stations, highlighting the biggest purchases during that time period. The largest completed transaction was Nexstar Media Group’s acquisition of Media General (79 stations, totaling $4.6 billion). As well as how many stations were sold over a two-year period. In 2016, 156 stations were sold for a total of $5.3 billion, or an average of $34 million per station. In 2017, 561 stations were sold for a total of $4.9 billion or an average of $8.9 million per station. In the 2020 report, the phrase “stations were sold” is not mentioned even once. Don’t worry, we know of a few acquisitions, and other news. Even if the FCC suddenly found this information to be irrelevant. Station wheeling and dealing is mostly amongst companies called “station groups”, companies who own a lot of television stations. In January 2019, Gray Television announced their completed $3.6 billion acquisition of Raycom Media. In September 2019, Nexstar acquired Tribune for $7.2 billion. In December 2019, private equity firm Apollo Global Management closed the deal on Cox and Northwest TV and radio stations for $3.5 billion. In February 2020, Univision sold a majority of its stake to private equity firm Searchlight Capital and their partners for $526 million. The FCC greenlit that sale last month. In other acquisition news, Sinclair was hit with the FCC’s biggest civil penalty fine ever in May 2020, $48 million, stemming from a merger previously attempted with Tribune. Tribune is also suing Sinclair for their “misguided and ultimately unsuccessful attempt to retain control over stations that it was obligated to sell.” In September 2020, Scripps announced it was buying ION Media from private equity firm Black Diamond Capital Management for $2.65 billion. They said they plan to sell 23 stations to comply with the FCC’s duopoly restrictions. That deal is expected to close the first quarter of this year.

What did the 2020 Communications Marketplace Report list in regards to station ownership? How many markets each station group is in, and how many stations they own. These are some of the biggest players: ION Stations: 71 Markets: 61 Nexstar Stations: 162 Markets: 116 TEGNA Stations: 62 Markets: 51 Sinclair Stations: 115 Markets: 84 E.W. Scripps Stations: 48 Markets: 41 Gray Stations: 126 Markets: 92 You might have noticed that some of these companies have a higher station count than their market count. That’s because, according to FCC Broadcast Ownership Rules, an entity is permitted to own up to two television stations in the same media market if either the service areas of the stations do not overlap, or at least one of the stations is not rated among the top four rated stations in the media market. This chart doesn’t take into account pending transactions, like Scripps buying ION and what that will look like. A transaction Scripps said makes them “the largest holder of TV spectrum in the United States.” So, why was the meat and potatoes of media consolidation left out of the latest report? We’re not sure. But it seems like a good time to touch on the battle the FCC is gearing up for at the Supreme Court to allow them to relax media ownership rules. The FCC has been trying to loosen up the media ownership rules since 2003, but the courts have beat them back every time. A few years ago, the FCC tried to ditch a ban on companies owning a newspaper and a TV station in a major market, which would allow corporations like Fox to own both TV stations, like WWOR-TV, and newspapers, like the New York Post, both serving New York City. The FCC has been granting temporary waivers to WWOR, who is licensed in New Jersey, for years, despite the fact that their Jersey operations were shut down in 2013 and they’ve been operating in New York ever since. What else does the FCC want to do? The commission wants to remove the restrictions on owning radio stations and a TV station in the same market, revise the rule that limits the ownership of TV stations in the same market, and reverse its decision to ban the sale of joint advertising time by two same-market TV stations. In 2019, the 3rd U.S. Circuit Court of Appeals said the FCC “did not adequately consider the effect its sweeping rule changes will have on ownership of broadcast media by women and racial minorities.” A line has been drawn in the sand, with the Free Press on one side, and the National Association of Broadcasters (NAB) on the other. After they filed a brief in the Supreme Court case last month, Free Press Vice President of Policy and General Counsel Matt Wood released a statement saying in part: “These rules still matter greatly for local news and viewpoints. Even in the internet era, broadcast radio reaches almost 90 percent of people in the United States every week, and broadcast television remains the most popular source for local news and information. We need comprehensive action to remedy the historical discrimination that continues to block women and people of color from becoming station owners — not blessings for the FCC and the broadcast industry to further shut them out.” On the other side, you have the NAB saying change will be good and that Free Press offers “nothing but the forlorn hope that ownership limits will somehow pave the way for more minority and female station owners in the future, even though they have demonstrably failed to do so for many decades” and that “levels of minority and female ownership were extremely low decades ago when the broadcast ownership rules were extremely restrictive.” The Supreme Court will hear the case on January 19. What’s the big deal? So, what if media ownership consolidates? Opponents of consolidation have shared some possible negatives: Corporations may not share information harmful to their interests. Corporations may contribute to the merging of entertainment and news, increasing sensationalism. Corporations may be biased toward special interests of the owners. Corporations may be a force for standardizing culture. The main concern for many, again, is that media consolidation reduces diversity in both ownership and content. It’s an easy lead into why the FCC sets ownership rules in the first place. In their own words, “The Commission has long imposed limits on concentration of ownership of broadcast media in order to promote the Communications Act goals of competition, localism, and diversity.” Speaking to competition, again, right now most station sales go from one station group to another. And there is a mad dash happening now to gobble them up. Why? Two words: retransmit dollars. These fees are paid to local TV stations by cable, satellite and, more recently, streaming platforms to retransmit their broadcasts. And it’s the new favorite main revenue source for TV stations, much needed thanks to ever-declining advertising dollars. Where are those missed advertising dollars going? Flash back to social media and streaming services. The FCC’s 2020 Communications Marketplace Report says local ad revenue still makes up the largest share of revenue, but it fell in both the first and second quarters of 2020 compared to the previous year. Meanwhile, retransmit dollars earned by major station groups increased by nearly 20% compared to the previous year. Competition amongst the heavy hitting station groups is fierce. So, how has that diversity been doing? Not good for a long time. The “Fourth Report on Ownership of Broadcast Stations”, released in February 2020, provided a bleak update from 2017 data. African-Americans owned just .8% of commercial broadcast stations. American Indian or Alaska Native women lost all 8 commercial broadcast stations in which they held a majority ownership interest. Women owned just 5.3% of commercial broadcast stations, down from 7.4% in 2015. The number of stations has steadily declined over the last five years, too, and not all of them air local news. With consolidation rampant and fewer stations in operation, what is the FCC doing to increase diversity in media ownership? One of the final paragraphs of the FCC’s 2020 report states The Advisory Committee on Diversity and Digital Empowerment intends to provide advice and guidance, host events like workshops and symposiums, and make recommendations- all in the name of promoting diversity. Circling back to the Supreme Court battle, in the past the court has said that “assuring that the public has access to a multiplicity of information sources is a governmental purpose of the highest order, for it promotes values central to the First Amendment." How will that play into the FCC’s attempts to change their ownership rules? Stay tuned. Link to Supreme Court calendar: https://www.supremecourt.gov/oral_arguments/calendars/MonthlyArgumentCalJanuary2021.html Link to the FCC’s 2020 Communications Marketplace report: https://docs.fcc.gov/public/attachments/FCC-20-188A1.pdf Link to Statement of Commissioner Brendan Carr Approving in Part and Concurring in Part: https://docs.fcc.gov/public/attachments/FCC-20-188A2.pdf Link to Statement of Commissioner Jessica Rosenworcel, Concurring: https://docs.fcc.gov/public/attachments/FCC-20-188A3.pdf Link to Statement Of Commissioner Geoffrey Starks Approving In Part And Dissenting In Part: https://docs.fcc.gov/public/attachments/FCC-20-188A4.pdf Link to the FCC’s 2018 Communications Marketplace report: https://docs.fcc.gov/public/attachments/FCC-18-181A1.pdf