National Hispanic Media Coalition, Civil Rights and Technology Advocates Make the Case: Why The FCC Needs to Deny the Sinclair-Tribune Merger
In May 2017, Sinclair Broadcasting Group, Inc. announced its plan to acquire Tribune Media Company. To its shareholders’ delight, the merger would give Sinclair unprecedented market share, operating over 200 stations in over 100 markets nationwide. Injecting steroids into the unrivaled media giant, the larger and more powerful Sinclair would not only have a presence in over 70% of American households, but it would also have increased power to demand higher advertising and retransmission fees, costs that would trickle down to consumers.
Federal regulations have forced Sinclair to hit pause on its master plan. Because the acquisition would violate the media ownership cap set by Congress and undermine Federal Communications Commission’s commitment to media diversity, Sinclair was forced to amend its divestiture plan in April 2018. Over a year after its original proposal, Sinclair has yet to show how the proposed merger could be in the public’s interest. The National Hispanic Media Coalition (NHMC), Common Cause, and United Church of Christ, OC Inc. outlined several ways in which the merger would hurt marginalized communities and reduce media opportunities for people of color in its Petition to Deny.
Public Interest Standard
The Federal Communications Commission (FCC) is responsible for ensuring that the Sinclair merger would not harm consumers and by wielding any one firm too much market access, pricing power, or harm viewpoint diversity. The ‘Public Interest Standard’ is the legal standard of review in which Sinclair has the burden of showing that this merger would benefit the public. The current proposal falls woefully short of that standard.
Sinclair’s Divestiture Plan is a Sham
“It borders on a regulatory fraud,” is how former FCC Chairman Tom Wheeler characterized Sinclair’s divestiture plan to Politico. The complexity of Sinclair’s divestiture plan has been categorized as intentionally misleading by other petitioners and for good reason. Through the use of sophisticated business deals, Sinclair will divest some of its local broadcasters in name only while maintaining operational control of the divested stations. Additionally, Sinclair maintains the right to repurchase some stations at a later date. Given the unusual below market value prices that Sinclair has offered to long-time associates, Sinclair does not sincerely plan to comply with the FCC’s divestiture requirements. Rather, the company has methodically planned to use straw man deals, buy back options, and sidecar agreements to maintain control of many stations listed in its divestiture plan.
Sinclair Has Been Upfront About Its Goal to Increase Viewership and Advertising Revenue
Technology has disrupted the traditional broadcast industry, and more broadly the Technology, Media, and Telecommunications (TMT) ecosystem. Macro changes in consumer preference and choice have served as drivers for TMT firms to change course from historic corporate strategies. Thus, TMT firms such as Sinclair, Comcast, and Disney are currently engaged in a merger and acquisition land grab that will “monetize eyeballs,” driving audience growth and engagement. For a company like Sinclair that has created a monopoly in local broadcasting, acquiring Tribune and merging into a new broadcasting behemoth can only be seen as a power grab on its path to expansion.
Sinclair has been upfront about its intentions. According to its President and CEO, “In today’s’ complex media landscape, the future of local broadcasting depends on scale to compete for viewers and advertising revenue.” It begs the question, what is Sinclair willing to do in order to increase its viewership and generate more advertising revenue? More importantly, who will pay the cost?
While many American voters may support ‘light touch’ regulation of certain corporate activities, trusting the proverbial ‘invisible hand’ of free markets to justify the Sinclair merger would leave consumers sorely disappointed. The merger would harm localism, reduce viewpoint diversity, and increase prices. Given the firm’s track record questionable journalistic practices, it would also cause irreparable harm to the American public and democracy at large. For those reasons alone, regulators should deny Sinclair’s proposal as it fails to meet public interest standard.
As Sinclair’s Ambitions to Get Even Bigger, Localism Will Suffer
Those who control the media, control the narrative. Sinclair’s has historically acquired other broadcasters and centralized many journalistic functions to its headquarters while laying off local staff. While some would defend this practice as finding cost saving synergies or economies of scale, it jeopardizes the editorial integrity of local content.
Additionally, Sinclair uses must-run segments to ensure that conservative talking points penetrate local market barriers. For instance, you may have heard reporters from across the country reading in unison from the same script. Centralized editorial news programming, also known as must-run segments, are regularly produced by Sinclair in its Baltimore, Maryland headquarters and distributed via local stations nationwide. This editorial news practice, which has been highly criticized for its biased reporting, poses a direct threat to independent journalism and democracy.
The example highlighted here is only one of many. Other must-run segments have been riddled with bigotry, hate, and just plain disinformation. In fact, when a former Sinclair Journalist detailed the company’s biased practices regarding climate change, she described Sinclair’s editorial practices as being far from objective.
The Most Vulnerable Consumers Would Not Have a Choice in Local Programming
In its original proposal, Sinclair would own 233 television stations in 39 of the top 50 markets with a national audience reach of approximately 72 percent. Post-merger Sinclair would maintain a presence in 108 markets spanning from New York to Los Angeles, making Sinclair the largest broadcaster in the nation. Set aside the fact that the merger would violate the FCC’s national ownership cap of 39 percent of U.S. television households. Sinclair’s unprecedented access to U.S. television households coupled with its questionable editorial practices and the firm’s cozy ties to the Trump Administration make a dangerous combination.
Proponents for the Sinclair merger argue that consumers have freedom to change the channel, an argument that is simply not true. Approximately 37 percent of Americans rely on broadcast television as a primary resource for news. Local news is also a critical resource for communities of color and other marginalized communities that over index on broadcast television over their white counterparts. Low-income households earning less than $30,000 per year and senior citizens over the age of 65 also rely on local television more than their respective cohorts. These numbers illustrate that even though various technologies have increased access to news and information for the masses, large swaths of the population continue to rely solely on free, local broadcasts. In effect, especially in markets where Sinclair would control the local news market, vulnerable populations would not have an alternative to Sinclair’s programming and risk becoming even more disenfranchised by hearing only one voice.
The Sinclair-Tribune Merger Would Undermine Viewpoint Diversity
Diversity of thought is one of the defining traits of America. The proposed merger will not only harm diversity of thought but also the ownership diversity of broadcast stations. Women and minorities are underrepresented in broadcast station ownership, a problem with minimal improvement over the past 50 years. The National Advisory Commission on Civil Disorders, often referred to as Kern Commission, documented the dangers of journalistic diversity to civil society in 1968.
As early as 1978, the FCC recognized that the inadequate representation of marginalized communities in the broadcast industry was “detrimental not only to the minority audience but to all of the viewing and listening public.” Again, the proposed merger runs contrary to the FCC’s public interest standard and its obligation to ensure diversity of information sources.
The Merger Would Impact Your Wallet
The broadcast television business model consist of two primary revenue streams, advertising and retransmission fees. Advertising revenue is fairly straightforward, where firms pay broadcasters for carrying their ads. However, retransmital fees are less understood by consumers. Retransmission fees are fees collected by broadcasters from services that rebroadcast local TV station content such as cable TV operators and services such as YouTubeTV. According to the American Cable Association, retransmission fees represent the fastest growing part of customers’ cable bills. As stated in the American Cable Association’s Petition to Deny, “[Sinclair] would gain substantial new national leverage, enabling them to raise retransmission consent fees ultimately paid by ACA member subscribers.”
Economic studies commissioned by DISH as part of its Petition to Deny also support the claim that a more consolidated broadcaster base will ultimately be passed on to consumers as a result of higher retransmission fees, compliments of Sinclair. In 2016 Sinclair blacked out local programing retransmission by DISH in an negotiation more similar to an extortion than a retransmission fee negotiation. The 2016 blackout effected 5 million DISH subscribers and is an indicator of what the future holds for both firms and American consumers if the proposed merger is executed.
The proposed transaction would also give Sinclair increased bargaining power in retransmission consent negotiations, forcing distributors as well as consumers to pay higher prices. Sinclair has admitted that the transaction would allow Sinclair to maximize its post-merger leverage in order to raise retransmission fees.
Ultimately, consumers will pay the price. For obvious reasons, the Sinclair-Tribune merger should be denied.