Analysis: FCC’s New TV Station Ownership Rules A Stunner

Dec 28, 2023

By Ted Hearn, Editor of Policyband

Washington, D.C., Dec. 27, 2023 – Nexstar Media Group – by revenue and markets served – is the largest TV broadcaster in the U.S., saying on its website that it has “200 owned or partner stations in 116 U.S. markets reaching 212 million people.”

In the age of Big Tech, Nexstar’s industry-leading $5.1 billion in annual revenue is puny. Online retail giant Amazon rakes in $5.1 billion every three and a half days.

Still, Nexstar probably shows NFL games to more American viewers than anyone else. Amazon, according to Comcast President Mike Cavanagh, commands 25% of all U.S. Internet bandwidth when Amazon Prime streams NFL games on Thursday nights.

So, if you are Nexstar CEO Perry Sook, it must have been jaw-dropping to see the details of the Federal Communications Commission’s new TV station ownership rules, which as of Tuesday are now more restrictive in that TV station consolidation within local markets has become much more difficult, if not impossible, under Democratic FCC Chair Jessica Rosenworcel.

What will probably shake up someone like Sook most was the FCC’s emphatic language that TV stations will be just fine under its revised local television ownership rules, especially the one that says Nexstar can’t own more than one of the four top-rated stations in a market – which typically, but not always, refers to the local affiliates of ABC, CBS, NBC and Fox.

“Although there are far more sources of video programming available today than there were when the Local Television Ownership Rule was first adopted, most commenters assert that non-broadcast programming is not a substitute to broadcast programming, which remains unique. We agree," the FCC said.

Did the FCC just say that Nexstar and Amazon do not compete in the video programming marketplace? Didn’t Amazon Prime announce today that it will begin showing ads on TV shows and movies starting on Jan. 29?

Financial pressure on TV station owners isn’t new, but it isn’t going away, either. But that didn’t seem to bother the FCC.

Three weeks ago, Naveen Sarma, S&P’s Managing Director and Sector Lead for the U.S. Media and Telecom Sectors, said he didn’t think CBS parent Paramount Global had the cash to pay the $2 billion it owes the NFL over the next 12 months.

Amazon can cover its annual NFL bill with less than a day’s revenue. Is anyone surprised to see that Paramount Global is searching for a buyer while Amazon’s founder is sailing his new yacht in the Adriatic off Croatia?

The FCC’s new rulebook is long and complex, technical and tedious – which means a full understanding of the new rules won’t surface until the agency reviews proposed transactions or issues enforcement rulings against a TV station that pushed the limits. Many important details are contained in the 460 footnotes accompanying the 95-page document.

So how does this whole thing cash out?

First, the FCC won’t allow ownership of more than one ABC, NBC, CBS, or Fox station in a single market. A broadcaster can always try to breach the top-four rule in some clever way, but that would take an FCC waiver after a prolonged examination.

Second, the FCC said a TV station can no longer use multicast services and low power TV stations to control the programming of multiple Big Four networks in a market. The FCC said it acted to prevent circumvention of the top four rule, crediting arguments by cable TV companies that control of multiple Big Four networks contributes to signal blackouts and excessive retransmission consent fees.

Third, the FCC said the new rules would be enforced prospectively. Citing NCTA - The Internet & Television Association, the FCC said there were 114 instances in 92 markets where a TV station owner controls the programming of two or more top-four networks using a low power TV station or multicast stream. The U.S. has 210 TV markets. With this FCC decision, TV station owners caught a break in that these combinations will not be subject to instant divestiture.

Fourth, the FCC’s grandfather olive branch seems of limited worth and could actually depress TV station values. That’s because the FCC said, in footnote 335, “such grandfathered arrangements will not be transferable or assignable” without FCC clearance. Gray TV controls all Big Four programming in Harrisonburg, Va. Is Gray’s ABC affiliate WHSV worth less today because the owner probably can’t find a buyer for its quadropoly owing to new FCC restrictions? Quite likely.

Broadcasters don’t have many options. Congress can’t help because the Biden White House will support Rosenworcel with a veto. A favorable ruling from the Supreme Court could take several years to arrive – well past the point when legacy media needed to consolidate to survive.

Maybe the FCC’s outlook would change if Nexstar starts shopping for TV stations in Croatia.