Look Out, Belo! MSOs Wary of ‘Super Group’

Operators Express Concerns over Gannett's Growing Retrans Clout
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WASHINGTON — Gannett’s $2.2 billion purchase of Belo stations has become the latest flashpoint in the battle between cable operators and broadcasters over coordinated retransmission-consent negotiations.

Cable operators took aim at Gannett last week at the Federal Communications Commission, seeking to block the spinoff of stations that are part of the deal, but the broadcaster provided some of cable’s ammunition itself.

The salvo came in a petition to deny the transfer of the licenses of Belo’s KMOV, St. Louis; KTVK and KASW, both Phoenix; and KMSB and KTTU, both Tucson, Ariz.; or at least condition the transfer on disallowing coordinated carriage negotiations.

July 25 was the FCC deadline for filing petitions to deny the deal. The petitioners are the American Cable Association, which represents hundreds of smaller and midsized independent MSOs; DirecTV; and Time Warner Cable, which joined as an “informal objector.”

The stations at issue are part of Gannett’s $2.2 billion (cash and debt) deal to buy Belo’s broadcast holdings.

Because some of those properties are in markets where Gannett already owns stations — and cannot own more without violating FCC local-ownership limits — Gannett is spinning them off to new owners rather than selling them outright. But Gannett has said it expected to be able to either own or “service” all the Belo stations, and Gannett CEO Gracia Martore has said the company expected to consolidate “all the results from these stations into Gannett’s overall financial results.”

She reiterated that point on a call with investors last week, saying the deal would create a “super group” including the Gannett- owned stations. The Belo deal would swell Gannett from 23 stations to that 43-station “super group.”

“This transaction is entirely consistent with all FCC rules, policies and precedent, and will bring substantial benefits to the public,” a Gannett spokesman said.

The ACA told the FCC that Gannett “would enjoy a significant increase in negotiating leverage based solely on its aggregation of market power. The transaction accordingly threatens to drive up retransmission-consent fees (and, in turn, consumer prices) and to increase the risk and incidence of broadcast programming blackouts in these DMAs.”

If the FCC does approve those transfers, the petitioners want a condition that Gannett and the assignees of the stations at issue — former Belo group chief Jack Sander and former Fisher Communications CEO Ben Tucker — can’t coordinate retransmission-consent negotiations.

The National Cable & Telecommunications Association used the deal last week to argue that it was time for the FCC to change its rules.

“The pendency of this transaction accentuates the importance of the commission moving expeditiously to make clear that the joint negotiation for retransmission consent by multiple broadcast stations in a particular market is impermissible,” the NCTA said.

Under former chairman Julius Genachowski, the FCC proposed making some TV-station joint sales attributable under the FCC’s local market caps. His proposed changes to ownership rules have yet to be acted on.

At FCC chairman-designate Tom Wheeler’s nomination hearing last month, Sen. Maria Cantwell (D-Wash.), a longtime media consolidation critic, brought up the Gannett-Belo deal. She said she saw it as an effort by Gannett to “use shared-services agreements as a way to get around [FCC local-ownership] rules.”

Wheeler said he understood the seriousness of the issue, but declined comment on the use of shared-services agreements.

“I am not informed enough to be explicit on that,” he said, “but I am going to be.”

TAKEAWAY

Cable operators have asked the FCC to deny some station transfers from Belo to Gannett, citing the resulting retransmission- consent heavy-up.

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