Commentary

Thanks To FCC's Sinclair-Tribune Decision, Media Mergers May Slow

The threat of bigger media mergers may have hit the pause button. But don’t get too comfortable.

Early last week, the Federal Communications Commission had “serious concerns” about the $3.9 billion Sinclair Broadcast Group/Tribune Media merger. In particular, it focused on Sinclair’s fuzzy efforts to sell off some stations in markets to come under the current 39% U.S. TV household cap, which represents all the TV stations one company can own.

The FCC order asks an administrative law judge to rule on the matter. And, for many, that is a death knell to the deal.

Some evidence of this comes as TV station group stocks fell last week. Investors aren’t happy.

Over that five-day period, Tribune stock was down 14%; Sinclair was off 18%. Other station groups also took hits: Nexstar Media Group losing 7%; Tegna, off 10%; Tronc, a 6% pullback; and Gray Television, sinking 2%.

Is there more out-of-the-blue actions from the FCC?

Concerning Sinclair/Tribune, Barton Crockett, media analyst for B. Riley FBR, said: “We would assume that if the FCC had these feelings, it would have expressed them privately to Sinclair before issuing this statement, and that Sinclair would have heard enough to adjust its divestitures before we got to this point.”

John Janedis, media analyst at Jefferies Research Services, adds: “We assume [Tribune Media] will look to pursue another transaction, though regulatory hurdles could limit potential partners.”

All this connects, in part, to the judge’s decision approving the AT&T-Time Warner. Serious questions arose concerning a TV distributor (AT&T) owning a TV network group (Time Warner). Some worried a pay TV provider could favor one TV program group over another.

Craig Moffett, senior research analyst, of MoffettNathanson Research, believes this actually worked in favor of Disney’s bid -- over Comcast -- for Fox's businesses.

The idea is that Comcast, owning cable systems and a big broadband network, isn’t the right owner when it comes to buying more TV content producers -- even though Comcast was allowed to acquire NBCUniversal.

Though not the same thing -- or the same time -- more scrutiny is being applied to big merger media deals -- including big TV station group deals.

Political bias? Is that a negative or positive thing? We know how President Trump feels about CNN, owned by Time Warner, recently bought by AT&T. And what about Sinclair, which has enjoyed wide national coverage of its conservative news bent?

Make all those calculations. But don’t look for any big, ground-breaking media mergers until then.

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