Sinclair/Allbritton Deal Must Be Amended to Comply with Local Ownership Rules, Says Media Bureau

Sinclair’s $985 million deal to buy Allbritton would eliminate the grandfathered status of some of its existing sharing arrangements, causing some of the transactions involved in the deal to violate the FCC’s local ownership rules, said the Media Bureau in a letter to Sinclair released Friday. The deal involves nine Allbritton TV stations and Allbritton’s Washington, D.C.-area 24-hour local news cable channel, NewsChannel 8.

Along with asking Sinclair to “amend or withdraw” deals involving stations in Charleston, S.C., Birmingham, Ala., and Harrisburg, Pa., to comply with FCC rules, the letter asks Sinclair to respond to public interest group allegations that it will have financial control over some of the shared stations, and to explain why it violated commission rules by not including information about the affected sharing arrangements in its submission to the FCC. “Sinclair’s only references to the agreements are found in footnotes to the description of the transaction,” said the letter. “Sinclair’s financial hold on these stations prove that the sidecar companies are a fiction,” said Free Press Policy Director Matt Wood in an email.

In all three markets, the conflict with local ownership rules is a result of existing stations owned by Cunningham Broadcasting, all of which are already involved in local marketing agreements (LMAs) with Sinclair, says the letter. Under FCC rules, LMAs between two TV stations in the same market that account for more than 15 percent of the programmed station’s broadcast hours per week are attributable, meaning they count toward the ownership limits of the licensee of the station providing the programming, the letter said. Sinclair didn’t comment.

As part of the deal for Allbritton, Sinclair is proposing to transfer its WMMP Charleston to Howard Stirk Holdings (HSH) while acquiring Allbritton station WCIV-DT. Sinclair would continue to provide services to WMMP under a sharing arrangement. But an arrangement already exists under which WMMP provides programming for the Cunningham station WTAT, the letter says. If WMMP is assigned to HSH, and Sinclair is providing its programming, the existing combination of stations will be broken and not entitled to grandfathering, said the bureau. “Sinclair would have an attributable interest in WTAT-TV if it continued to serve as broker, and that interest, combined with Sinclair’s other ownership interest in the market, would then violate our local TV ownership rule,” said the letter. Similar situations exist in Birmingham and Harrisburg, according to the letter.

The bureau also cited filings from public interest groups Free Press and Put People First calling into question the extent of Sinclair’s ownership of stations that will be involved in sharing arrangements after the Allbritton deal. In Harrisburg, WHP-TV would be owned by Deerfield, but pay Sinclair $11.6 million over the first year, along with a performance bonus, 30 percent of its sales revenue and a monthly lease payment. WHP earned $12.6 million in advertising revenue in 2012, says the letter. The letter also cites similar situations in other designated market areas involved in the deal. In response, Sinclair must “demonstrate how, given the figures provided, the assignee would retain a financial incentive to control programming,” said the bureau.

To bring the applications into compliance, Sinclair has to amend or withdraw them in the three affected markets, the Media Bureau said, saying Sinclair’s transactions are also violating FCC rules because of a “failure to include relevant information.” Sinclair must “provide a detailed explanation” to the bureau on how not including the existing local marketing agreements in its submission to the commission is consistent with “the Applicant’s responsibility to provide all information necessary,” said the letter. Sinclair has 15 days to respond. The American Cable Association, which along with the public interest groups filed objections to the Sinclair/Allbritton deal, said it was “pleased” with bureau scrutiny of the deal. “This level of inspection is appropriate and necessary given the issues identified by the Bureau,” said ACA. Free Press said it looks “forward to the answers” and hopes the agency “will keep digging if and when Sinclair’s responses raise more questions than they resolve.”