Policy

Sinclair Deal Faces Democratic Tsunami

Merger will be mighty tough pitch to some audiences on Capitol Hill 11/20/2017 8:00 AM Eastern
Sinclair has been positioning itself as being squeezed between programmers and MVPDs.
(Source: Sinclair Powerpoint Slide)

WASHINGTON — Sinclair Broadcast Group is fighting for Capitol Hill support of its merger with Tribune Media. That, though, will be a mighty tough sell with Democrats in both the Senate and House, who are calling for an investigation of the FCC chair over what’s being criticized as a deregulatory aid package to the broadcasters in general, and Sinclair in particular.

According to a PowerPoint presentation slide deck obtained by Multichannel News, Sinclair has been positioning itself as being squeezed between two factions. On the one side, consolidated multichannel video programming distributors are disadvantaging broadcasters in key negotiations (read: retransmission consent). On the other, broadcast networks are chipping away at their bottom lines.

The American Cable Association, which represents smaller, independent cable MSOs, and satellite-TV provider Dish Network have been among those pushing back on the deal, saying it would give Sinclair undue leverage in retrans deals, particularly if the Federal Communications Commission allows it to own two of the top four stations in a market.

A Hill source confirmed that Sinclair had used the presentation to pitch the deal to Congress. Sinclair also took the unusual step of agreeing to debate its critics publicly on the Hill last week in a forum hosted by Georgetown Law, where the slide on relative market cap was very much in evidence (see chart).

Competitive, Regulatory Headwinds
Sinclair pitched the deal as “ensuring the future of free and local TV,” and counts the ways that MVPDs and media ownership rules pose a threat to that future:

● “Other media (cable, online, social) is taking local advertising dollars away from local TV stations.”
● “Unprecedented consolidation of content creators and distributors disadvantage broadcast in key negotiations.”
● “Outdated rules keep broadcasters artificially fragmented.”

It also made clear who it thinks is getting the short end of the retrans stick. “MVPDs seek to deny stations this important revenue stream by not paying fair value for our content,” it said in one slide. But it’s a safe bet Democrats on the Hill won’t quite see it all that way.

Even as Sinclair was pitching the deal to Democrats, the party leader on the House Energy & Commerce Committee, Rep. Frank Pallone (D-N.J.), was viewing the meld rather differently.

Joined by Oversight and Government Reform ranking member Rep. Elijah Cummings (D-Md.), Pallone called for FCC inspector general David Hunt to investigate whether chairman Ajit Pai has “taken improper actions” to benefit Sinclair in the deal.

Related: Dems Seek Investigation of FCC Chair Over Sinclair-Tribune

Pattern of Preferential Treatment
Specifically, Pallone and Cummings want Hunt to determine whether the chairman’s actions show a pattern of preferential treatment toward Sinclair and whether there was inappropriate coordination, which would likely be any coordination between the FCC and the White House and Sinclair, as well as whether the use of nongovernmental email or social media in a series of interactions complied with the Federal Records Act and the Freedom of Information Act (FOIA).

Those requests came in a letter to Hunt dated Nov. 13, followed days later by a similar request from Senate Democrats.

The legislators indicated they were referring to what they said was the chairman’s “repeated refusal to respond to congressional inquiries about recent reports that he may have timed a series of FCC actions over the past year to financially benefit Sinclair and to assist in its attempts to purchase Tribune Media Co.” Pai’s office essentially said, “move along, nothing to see here,” and suggested the request was politically motivated.

“Unfortunately, this request appears to be part of many Democrats’ attempt to target one particular company because of its perceived political views, an effort that dates all the way back to 2004 when ranking member Pallone, ranking member Cummings and other Democrats demanded that the FCC investigate Sinclair based solely on the content of a documentary they didn’t like and that hadn’t even aired,” said a spokesperson for Pai.

Pai has rolled back a number of past decisions of his predecessor that he opposed, including 2014 guidance on how the FCC would treat joint sales agreements and sharing arrangements between non-commonly owned stations and restoring the FCC’s UHF discount.

It is in one sense a chicken-and-egg conundrum. Did Sinclair see the deregulatory handwriting on the wall and, naturally, take the opportunity to heavy up, or did the chairman take all those deregulatory actions in service of Sinclair?

“Any claim that chairman Pai is codifying the rules now to benefit one particular company is completely baseless,” Pai press secretary Tina Pelko said.

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