Finance

Sinclair, Tribune CEOs Push Advantage of Sizing Up

Ripley, Kern play vastly different roles in station megadeal, but agree on need for growth 5/22/2017 8:00 AM Eastern
The Tribune Tower in Chicago

Having signed off on their companies’ $3.9 billion merger deal, Chris Ripley and Peter Kern, the respective Sinclair Broadcast Group and Tribune Media chief executives, in the next year or so will play key roles in ushering in a new era in the broadcasting business — one in which Sinclair, with the addition of Tribune’s 42 TV stations, will have unprecedented size and scale.

Though both men bring years of experience and business acumen to the deal, this is Ripley and Kern’s first true megawatt spotlight CEO moment — a unique circumstance considering the scope of the deal they will soon be shepherding through the federal regulatory process in the hopes of an OK. Opponents, from congressional Democrats to free-press advocates, are calling on the Federal Communications Commission — which made the merger possible by easing station ownership caps — to block it.

Ripley, who joined Sinclair as its chief financial officer in 2014, became the group’s president and CEO in January, when David Smith, who helped create and grow Sinclair’s portfolio to its current 173 stations, stepped down to focus on the implementation of the next-generation broadcast standard, ATSC 3.0, as executive chairman. Before that, Ripley was a managing director at UBS Investment Bank’s Global Media Group, managing and structuring mergers and acquisitions in the broadcast and entertainment businesses.

Kern’s place at the head of Tribune’s C-suite is even newer. He was named interim CEO in March to replace Peter Liguori, who left the job after leading Tribune through its reorganization (which led to its sale) after a wrenching four-year bankruptcy. Kern joined Tribune’s board in October 2016, and is Hemisphere Media Group chairman of the board and a managing partner of the equity firm InterMedia Partners, the investment firm founded by cable-industry veteran Leo Hindery. Kern has spent the bulk of his career investing in, advising and operating cable, broadcast, digital and publishing businesses.

Despite arriving at the merger for different reasons, Ripley and Kern, in separate interviews, sound in sync, at least philosophically, about the deal, and how it furthers what the broadcasters need to be — read: “BIG” — to compete against the megasized cable providers and telecoms. Sealing the deal (assuming it is approved), however, will be a profoundly challenging experience for each. Ripley will be charged with transforming Sinclair, which, with the addition of Tribune stations, will reach 72% of the country, into a next-generation business with multiplatform opportunities he calls “game changers.” Kern, currently the keeper of properties such as the legacy station, WGN Chicago, and the Tribune brand, will be turning over the keys.

Given these scenarios, each man has a unique take on what needs to happen, and when.

Ripley Believes in Media Growth
The way Chris Ripley sees it, opponents of the Sinclair-Tribune deal, who range from congressional Democrats to free-speech advocates, just don’t get it.

“The special-interest groups are just anti-media consolidation, but they miss the bigger picture — this industry won’t survive in the land of giants if it doesn’t scale up,” he said. “Everyone wishes that we were back in the 1950s and there were only three channels and people were just getting color television. We can’t turn back time. The world moves on.”

In fact, the way Ripley describes it, moving on is precisely the motivation behind Sinclair’s willingness to spend $3.9 billion for Tribune’s 42 TV stations, as well as cable’s WGN America and its multicast networks.

It’s time, he said, for the industry to move on to ATSC 3.0, the new broadcast standard, and its built-in opportunities, from personalized content and ads to mobile distribution. It’s also time for the broadcast industry’s players to bulk up; that way, as they expand their offerings with ATSC 3.0’s rollout, they’re big enough to compete with the giants among cable companies and telecoms such as Verizon Communications, AT&T and Charter Communications.

“We need to be consolidated to play in today’s world, and we need to have a better platform,” Ripley said. “For me, it’s just getting to being on an even playing field, because those are our counterparts in negotiations.

“Scale helps the economics in just about every aspect of our business,” Ripley said.

If all that’s true, Sinclair is setting itself up for a bright future. With Tribune’s stations, Sinclair will reach 72% of the country, giving the group a near-national footprint, as well as a presence in New York, Los Angeles and Chicago. Sinclair also would get Tribune’s national cable channel WGN America, and multicast networks including Antenna TV.

Then there is all that spectrum which, when leveraged in conjunction with with the IP-based ATSC 3.0 delivery protocol, will increase the industry’s distribution capacity four to five times what it is today, Ripley said.

Sinclair will be able to deliver content to mobile devices, offer subscription streaming services, expand the distribution of its multicast networks and offer personalized programming, and advertising, Ripley said. “The services we are going to roll out are going to be game changers for the industry,” he said.

Additionally, a bigger Sinclair will have more leverage. Ripley said that while Sinclair will gain an edge in negotiating with multichannel video programming distributors, he has no plans to buck the current retransmission-consent model, “because the ecosystem works.” Sinclair has no plans to launch a national network, cable news or otherwise, or to ditch syndicated programming, he said.

Sinclair also maintains it has no conservative agenda — something opponents say the company promotes via “must-run” content on its stations. Ripley denied Sinclair uses its newscasts as a platform, despite a case to the contrary made May 13 in The New York Times.

“The Times story selectively chose stories that paint a false picture of a conservative agenda that pervades all of our content,” Ripley said. “We provide national content from our Washington Bureau for our local stations to use … The percentage of this national content varies from station to station … but it makes up a small amount of our newscasts.”

Kern Relishes Role as Closer
For a man in a high-profile position in midst of an even higher-profile deal, Peter Kern is remaining remarkably under the radar. One example: Kern hasn’t taken a corporate-style headshot for years.

Perhaps that’s because, when it comes to discussing Tribune’s sale to Sinclair, and the role he played in facilitating it, Kern is very clear that he was brought in as the closer — the guy to seal the deal that his predecessor, Peter Liguori, set in motion, which has included selling off assets such as the metadata company Gracenote and real estate, including Chicago’s iconic Tribune Tower, along the way.

He also is charged with guiding the company’s strategy, and watching its books, before Sinclair takes over. Since the Sinclair-Tribune deal was announced, stock performance is up 50%, Kern said.

The company is also taking a more aggressive approach to streamlining, such as reigning in everything from costs to market expansion, he said. That effort has been in motion for more than a year, following Tribune’s emergence from bankruptcy, resulting in its pending sale.

“Along came an opportunity around something bigger … and I think we came to a very good conclusion,” Kern said.

Yet, by virtue of the job, which he took on an interim, and short-term, basis in March, Kern is also now the guy heading a deal that many — from politicians to free-speech advocates — don’t like. While not surprised by the pushback, Kern shares Ripley’s view that consolidation among broadcasters is necessary in an arena dominated by mega-companies in the cable and telecom businesses.

“There’s always noise around consolidation,” Kern said. “But this is not a move toward massive consolidation. If anything, this is a move toward leveling the playing field so local broadcasters can successfully compete.”

Kern also was in the unenviable position of delivering the news to Tribune employees, who face a precarious future under Sinclair.

“I think it’s totally rational that people that work at companies that are combining have some nervousness,” he said. “But I am a real believer that if everyone does their job and performs their best” they will come out ahead, he said.

Beyond the employees themselves, Kern also didn’t express any qualms turning Tribune — a legacy brand with legacy stations — over to Sinclair, whose reputation for promoting conservative causes over TV has spurred some of the opposition to the deal.

“I don’t know anything about politics. But I think it’s foolish to think anyone could put their own agenda out as content and still perform as a business if the markets don’t want to hear about it,” he said. “I am sure Sinclair will try to maximize the company and serve the markets they are in.”

Kern said he expects the Sinclair-Tribune merger to be just one of a series of consolidations to come, and that it will prove to leverage its scope to succeed in new arenas such as over-the-top and mobile content distribution.

“It’s going to be a great company, the largest and most successful local broadcaster ever,” he said. “You need to look at that as an opportunity.”

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