FCC Ownership Plan Has Adverse Impact On TV Stocks
- by Wayne Friedman , April 21, 2017
Sinclair Broadcast Group was down 1.24% to close at $39.85 and Tegna was off 1% to 25.85, while Tribune Media dipped the most among the big groups -- 2.1% to $37.34. Nexstar Media Group was one of few gainers, up 0.4% to $69.10.
Sinclair made news on Friday by announcing it will buy the Bonten Media Group for $240 million. Sinclair has also been rumored to be considering a purchase of the big TV station group -- Tribune Media. Market capitalization of Tribune Media -- a rough proxy for a possible price for the company -- was $3.2 billion at the close on Friday.
On Thursday, Ajit Pai, FCC chairman, announced the agency plans to eliminate the so-called “UHF station discount.”
The rule was enacted in the mid-'80s, lowering -- discounting -- the actual TV household coverage those UHF stations get to, all because many of those stations operated with poor over-the-air reception.
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Now that virtually all those stations are on cable, satellite or telco systems -- through set-top boxes -- many analysts say this is no longer needed. In effect, eliminating the UHF rule could, in part, raise the overall TV station ownership cap to as high in 78% of total U.S. TV homes, in some cases, from the 39% level.
But Kannan Venkateshwar, media analyst at Barclays Capital, says the UHF coverage adjustment doesn’t necessarily mean actual higher overall TV ownership cap.
“Broadcast mergers become easier, but the path could be messy,” he says. “The FCC plans to go through a rulemaking process later this year to determine if the caps should be raised and, if it does go down this path, the UHF discount is likely to be eliminated again.
"It is not clear if the FCC can raise the caps on its own.”
Much of this was anticipated with the new Trump Administration. Venkateshwar notes that TV station groups' stocks have risen more than 40% since the election.
