The FCC tips its old cap...right into the trash

In what has to be the early lead for the least surprising decision by a governmental agency this year, your Federal Communications Commission voted last Thursday to make it official and do away with the congressionally mandated rule that prevented any one company from owning so many local broadcast television stations that they reached over 39% of the nation’s television households.

Not only did the FCC Chairman (and the nation’s would-be “censor in chief”) Brendan Carr and his fellow Republican, the aptly-named Olivia Trusty, pair their votes to overrule lone Democratic commissioner Anna Gomez’s objections in a 2-1 vote to “lift the cap” as it were, they tried to blunt any fears of a free-for-all in the ownership marketplace by adding that it wasn’t “abolishing” the rule, but rather “replacing” it with a new system where the FCC would replace “the cap” with “a granular case-by-case review of television ownership deals.”

Whooo bubba, as we used to exclaim occasionally back during our southern years.

This move, the FCC’s press release proclaims: “will empower the FCC to approve deals that promote the public interest while allowing the agency to reject any deals that do not meet that standard.”

Here’s the thing—this is exactly what the Commission is supposed to do with any transaction regarding a broadcast license since its creation. What Thursday’s vote actually did was retroactively give the FCC the power to “modify” its own rule that it has blatantly ignored since it approved the acquisition of TEGNA by Nexstar Media just back on March 19th of this year. It also removed the “blissful ignorance” the agency has shown for years about the so-called “sidecar” deals that allowed large broadcasting companies to get around the now-abolished…er…sorry, the now-replaced limit on television station ownership.

Not surprisingly, those same companies were quick to applaud the FCC’s decision, as was their industry lobbying arm, the National Association of Broadcasters. All sang from the same hymnal that gave us this long-repeated reason for the decision. Again, citing the FCC’s carefully crafted PR wallpaper:

“The video marketplace has changed dramatically with the proliferation of digital platforms—all of which enjoy unrestricted national reach. Streaming services now reach over 80% of U.S. adults, and this scale provides them with a competitive edge in terms of attracting investment capital and increased advertising revenue. Eliminating the national cap will allow broadcasters to better compete with these unregulated digital giants. The market also reflects a growing imbalance of power in the network-affiliate relationship, which the national cap intended, but failed to curb, as evidenced by network control over online video carriage, preemption rights and revenue sharing requirements.”

In response, we’ll quote Colonel Sherman T. Potter from the classic television series M*A*S*H (as brilliantly portrayed by the late actor Harry Morgan): Horse Hockey!

There are two giant pieces of equine dung in that paragraph, the first being anything about the decision allowing broadcasters to better compete with “the unregulated digital giants.” In the case of the digital streamers called Hulu, Paramount+ and Peacock, those giants would be named Disney, Paramount-Skydance, and NBCUniversal—and all three of them also happen to be broadcasters.

Sure, sure, there are purely digital tech giants like Google, Meta, Apple and others that dominate the streaming space. Still, we have yet to hear one person explain how Nexstar, Sinclair, Gray, et al., will be better able to battle for eyeballs because they can own 200 or more local television stations, including two, three or even more over-the-air signals in any given local market.

Then there is the second thing we need to scrape off our boots now: this thinly veiled threat from Commissioner Carr to the national television networks. The FCC says it needs to address “a growing imbalance of power in the network-affiliate relationship.” The Commission wraps itself in the very real business of TV issues of “online video carriage” (the major networks negotiate the deals for services like YouTubeTV, Hulu Live TV, Fubo TV, etc. to carry local affiliates) “preemption rights” (how many times a local station can preempt or replace a network-scheduled program) and “revenue sharing requirements” (how much each local station has to kickback of the revenue it receives from Cable and Satellite carriers who pay a per subscriber fee each month to carry a local station) All to obfuscate from the very unreal problem of the current administration’s distaste for network newscasts and the currently still-employed hosts of late night shows.

At least those not named Byron Allen.

This argument reminded us of the move the FCC made back in the early 1970’s when it created something called the Prime Time Access Rule (PTAR). The PTAR required local stations in the Top 50-sized markets to have access to one hour of evening programming on their schedule to present local programming, rather than having the network control four hours on each weeknight’s schedule. The PTAR made stations responsible for filling the 7 PM hour, and network primetime would be held to three hours, 8:00 to 11:00 PM each night in the Eastern and Pacific time zones (7:00 to 10:00 PM in the Central and Mountain time zones)

And what locally created and focused programming did stations put in that precious hour? Mostly syndicated fare like “Wheel of Fortune” and “Jeopardy”. Some were a little more creative and tried efforts like “Evening/PM Magazine” or other truly local productions, but most of those have gone away now. What’s left is either the few program offerings still in syndication or another hour of local evening news that nobody ever asked for.

The Prime Time Access Rule was eventually repealed by the FCC in 1995. The programming it inspired local stations to air—instead of more network fare—is largely still in place, though now with different faces hosting each program.

Except for Wheel’s Vanna White, who will keep turning those letters seemingly forever.

Still attractive distractions aside, if we might return now to the FCC’s latest gem of a “rulemaking decision,” the reactions to their move have been pretty much “along party lines,” as they often say in Washington, DC. The wait now is to see what happens as a result of the ownership cap going away as a straight mathematical exercise and instead becoming reviewable as “transactions that would have exceeded the cap that do promote the public interest and could gain Commission approval.”

Put more simply, the regulatory role of the FCC just moved firmly into political gatekeeping of who can and can’t own as much as they want of the local media landscape.

Lest anyone think this is the final word on the subject, it of course certainly is anything but.

Lawsuits are already being threatened, and many billable hours of lawyers will likely follow. The previously approved Nexstar-Tegna deal is now stuck in the Federal courts after both a coalition of states’ attorneys general and DirecTV sued to block it. That case won’t head to trial until likely sometime next year.

We imagine the first true test of the “no-cap-unless-we-say-so” rule will be the full assimilation of the stations owned by third parties, but fully operated by the industry giants. For example, WPIX in New York City, which is technically owned by “Mission Broadcasting” but really operated as if it were owned by Nexstar (because it all but is, except on paper), will surely be assimilated back into “the mothership” at some point. Same for the stations owned by Cunningham and Howard Stirk Holdings being absorbed into Sinclair Broadcast Group (that had already started happening in anticipation of the FCC’s vote). It is what Gray Television is in the midst of doing with the American Spirit Media-owned stations that it would have previously not been allowed to own outright.

After those moves play out, we can only assume that the station brokers who midwife the buying and selling of local TV properties will assemble deals of all sizes and shapes to consolidate ownership of stations further. It will be as if they were fast-food franchises being gobbled up by a handful of well-funded corporate players.

On the other hand, those mid-sized and smaller ownership groups that are publicly traded and who have been trying hard to convince Wall Street that their profitability margins are coming back “very soon” may be forced into selling stations to mollify their stockholders. After the quarterly earnings report from Scripps last week, we wonder if they could be first in line to do some wheelin’ and dealin’ along with the workforce cuts and cost savings it has announced.

We keep thinking of the pivotal scene in the movie “Trading Places” with Eddie Murphy and Dan Akroyd, who corner the market on frozen orange juice futures on the floor of the commodities exchange. Don Ameche implores his beleagured traders to return to the growing scrum of frantic trading by shouting “Get back in there and Sell, Sell, SELL!”

Finally, should anyone think that we are cheering for or against more consolidation in the ownership of television stations, let us be clear once again in our position. Above all else, we want local broadcasting to not only survive but actually thrive—in a very challenging media business landscape.

If last Thursday’s vote somehow delivers that — if fewer, bigger station groups actually translate into more local journalists covering more city councils and school boards instead of fewer — we’ll happily tip more than our cap to that.

We might even tip a glass of whatever everyone else is drinking.

Alas, we just don’t see the math working that way. Scale has never been the thing standing between a station and a well-staffed newsroom; the checkbook has. And a 2-1 party-line vote in DC doesn’t change who’s writing those checks, or what they’ve historically chosen to spend them on.

That’s the real world where the lifting of “the cap” actually gets tested. Everything else is just wishful thinking.

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