Media Ownership Rules, Diversity, and Sinclair-Tribune Merger

Media Ownership Rules, Diversity, and Sinclair-Tribune Merger

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October 31, 2017
Media Ownership Rules, Diversity, and Sinclair-Tribune Merger
On November 16, 2017, the Federal Communications
Table 1. News Consumption Trends
Commission (FCC) is expected to vote on whether to retain,
Percentage of Adults Who Get News from Each Platform
relax, and/or repeal regulations that restrict the number of
media outlets that a single entity may own or control within
Local
a local geographic market. The vote represents a
Year
T.V.
T.V.
Radio Newspaper
Online
reconsideration of rules the FCC adopted in August 2016,
1996
59%
65%
44%
50%
not
and marks a new phase in a long-running debate over the
federal government’s role in fostering
available
competition,
localism, and diversity in the media.
2000
56%
56%
43%
47%
not
available
Federal law (47 U.S.C. §257(b)) directs the FCC to promote
policies favoring a diversity of media voices and vigorous
2004
59%
59%
40%
42%
24%
economic competition. The FCC has sought to achieve
2008
57%
52%
35%
34%
29%
these goals by limiting common ownership of television
stations within the same geographic market and restricting
2012
55%
48%
33%
29%
39%
common ownership of television or radio stations and
2016
57%
46%
25%
20%
38%
newspapers within the same region.
2017
50%
37%
25%
18%
43%
Since 2004, the law (47 U.S.C. §303(h)) has directed the
Source: 1996-2012 data: Pew Research Center for the People & the
FCC to review its media ownership rules every four years
Press, “Biennial Media Consumption Survey 2012,” September 27,
to determine whether they are “necessary in the public
2012; 2016-2017 data: Jeffrey Gottfried and Elisa Shearer,
interest as a result of competition,” and to “repeal or modify
“Americans’ Online News Use Is Closing in on TV News Use,”
any regulation it determines to be no longer in the public
September 7, 2017.
interest.” Under a separate statutory directive (47 U.S.C.
Notes: Data from 1996 to 2012 show the percentage of adults who
§309(j)(3)(B)), the FCC, when awarding new broadcast
got news “yesterday” from each source, except that data on “Local
licenses, must promote opportunities for businesses owned
TV” are based on the percentage of adults who “regularly watch.”
by members of minority groups and women. The U.S.
Data from 2016 and 2017 are based on the percentage of adults who
Court of Appeals, Third Circuit, has repeatedly directed the
get news “often” from each media platform. “T.V.” includes
FCC to review its broadcast ownership diversity and media
broadcast and cable networks, as well as “Local T.V.”
ownership rules simultaneously.
The FCC’s draft proposal cites changes in radio listenership
In August 2016, the FCC completed the 2014 Quadrennial
and newspaper readership as evidence that some ownership
Review of its media ownership rules. Following this
rules are no longer necessary to achieve the agency’s goals
review, the agency made narrow changes to its rules
of viewpoint diversity. In addition, the draft proposal states
limiting the type and number of media properties a single
that while the video marketplace has changed substantially
entity may own (media ownership rules). In addition, the
since the FCC adopted rules limiting common ownership of
FCC adopted new rules related to the determination and
television stations in 1999, “broadcast television stations
disclosure of media ownership (attribution rules), as well as
still play a unique and important role in their local
the enhancement of media ownership diversity. The
communities.” For this reason, the draft proposal concludes
changes to be considered on November 16 would repeal or
that rules focused on preserving competition between
significantly alter some of the media ownership and
stations are still warranted.
attribution rules.
News Consumption
Current Rules and Proposed Revisions
The changes expected to be considered on November 16
The debate over media ownership rules occurs against the
would address several distinct media ownership rules and
background of sweeping changes in news consumption
create a new program to enhance ownership diversity.
patterns. Table 1 illustrates these general trends. Based on
surveys conducted by Pew Research Center, the percentage
Media Ownership
of adults citing local broadcast television as a news source
Local television ownership rules limit common ownership
declined from 65% in 1996 to 37% in 2017, and the
of television stations serving the same geographic region.
proportion describing newspapers as a news source
An entity may own or control two television stations in the
declined from 50% in 1996 to 18% in 2017. In 2017, for the
first time in the survey’s history, the percentage of adults
same television market, so long as the overlap of the
stations’ signals is limited and the joint control does not
citing “online” as a news source exceeded the percentage of
violate the “top four/eight voices test.”
adults citing “local T.V.”

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Media Ownership Rules, Diversity, and Sinclair-Tribune Merger
Per this test, an entity may own two stations within a local
Budget. The draft proposal would retain the SSA disclosure
television market if (1) at least one of the stations is not
requirement.
among the four highest-ranked stations in the market and
(2) at least eight independently owned and operating
Prior to becoming FCC Chairman, Ajit Pai (who at the time
commercial or noncommercial full-power broadcast
was an FCC commissioner), contended that JSAs and SSAs
television stations remain in the market after the purchase.
have enabled broadcast stations to reduce costs, secure bank
The “top four ranked” stations in a local market generally
financing, attract advertising revenue, produce original
are the local affiliates of the four major English-language
programming, including news, and modernize their
broadcast television networks—ABC, CBS, Fox, and NBC.
facilities. Furthermore, he has contended that such
arrangements promote minority and female ownership of
Under the draft proposal, the FCC would remove the “eight
broadcast television stations.
voices” component, and incorporate a case-by-case review
option in the top-four prohibition, allowing it to evaluate
Diversity Policies
the competitive conditions in a specific market when the
In 2016, the FCC adopted rules designed to increase
operator of one station seeks to acquire another.
broadcast ownership diversity. Entities that own broadcast
stations and have total annual revenue of $38.5 million or
Cross-ownership rules limit the common ownership of
less (“eligible entities”) qualify for exemption from the
broadcast television stations with radio stations and of
media ownership rules. The agency also adopted six
broadcast radio or television stations with newspapers
measures to enable eligible entities to abide by less
within the same geographic market. The draft proposal
restrictive media ownership and attribution rules, and more
would eliminate all cross-ownership rules.
flexible licensing policies, than their counterparts.
Attribution Rules
Under the draft proposed rules, the FCC would create an
Many owners of commercial broadcast stations have
“incubator” program that would provide an ownership rule
relationships that fall short of the FCC’s definition of
waiver or similar benefits to an established station owner
common ownership, yet allow the owner of one station to
that helps facilitate station ownership for a certain class of
exert substantial influence over the operation and finances
new owners. For example, a broadcasting company could
of another station. To minimize such behavior, the agency
assist a new broadcast owner by providing “management or
has developed attribution rules.
technical assistance, loan guarantees, direct financial
assistance through loans or equity investments, training, or
The FCC’s attribution rules also impact a station’s ability to
business planning assistance.”
negotiate compensation from cable and satellite operators
for the retransmission of its broadcast signal. The Satellite
Thus, under the proposed rules, exemption from media
Extension and Localism Reauthorization Act (P.L. 113-
ownership regulations could apply to a larger company that
200) prohibits a television broadcast station from
facilitates station ownership of an eligible entity, as well as
negotiating a retransmission consent contract jointly with
the eligible entity itself.
another broadcast station in the same market, unless the
FCC considers the stations to be directly or indirectly
In establishing the parameters of an incubator program, the
owned, operated, or controlled by the same entity.
FCC may analyze how such a program could affect its goals
of promoting competition and localism as well as diversity.
Joint sales agreements (JSAs) enable the sales staff of one
broadcast station to sell advertising time on a separately
Potential Impact on
owned station within the same local market. Current FCC
Sinclair-Tribune Transaction
rules specify that television JSAs allowing the sale of more
On May 8, 2017, Sinclair Broadcast Group Inc. announced
than 15% of the weekly advertising time on a competing
that it agreed to acquire the Tribune Media Company for
local broadcast television station are attributable as
$6.6 billion. The transaction would make Sinclair the
ownership or control. Under the draft proposal, the FCC
nation’s largest television broadcast company and give it a
would eliminate the attribution rule for television JSAs.
presence in far more local markets than any other television
Thus, per statute, stations involved in JSAs, including those
station owner. In 10 television markets where Sinclair owns
that sell more than 15% of another station’s advertising
television stations, current FCC duopoly rules would
time, would be prohibited from jointly negotiating
preclude Sinclair from purchasing Tribune stations absent
retransmission consent because they would no longer be
divestitures. Absent divestitures, Sinclair would own two
considered jointly controlled.
top-four-rated stations in each of these 10 markets. In
addition, both Tribune and Sinclair operate JSAs and SSAs
Shared services agreements (SSAs) allow stations in a
in dozens of television markets. Absent intervention from
local market to combine certain operations, personnel,
the U.S. Department of Justice pursuant to antitrust statutes,
and/or facilities, with one station effectively performing
the FCC’s rule changes would enable Sinclair to acquire
functions for multiple, independently owned stations. In
these Tribune stations as well as take over Tribune’s JSAs
2016, the FCC adopted a requirement that commercial
and SSAs.
television stations disclose SSAs by placing them in their
online public inspection files. The requirement remains
Dana A. Scherer, Specialist in Telecommunications Policy
subject to approval from the Office of Management and
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Media Ownership Rules, Diversity, and Sinclair-Tribune Merger

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