Free Press allegations that sharing agreements in Sinclair’s proposed purchase...

Free Press allegations that sharing agreements in Sinclair’s proposed purchase of Allbritton would give Sinclair financial control of ostensibly separate stations are based on “unsubstantiated estimates,” Sinclair’s lawyer said in a letter to the FCC Media Bureau last week (http://bit.ly/1caQ5xe). Free Press had claimed (CD Dec 9 p5) that some of Sinclair’s sharing arrangements involved the affected stations -- which would be owned by affiliated company Deerfield Media -- paying out nearly their entire annual revenue to Sinclair, which would bring the arrangement into conflict with the FCC’s local ownership rules. However, Free Press’s numbers are based on estimates from 2012. “The application of these unsubstantiated estimates to future performance of the stations is wholly speculative and should be dismissed for that reason alone,” Sinclair said. If operated under the terms proposed in the transaction, the stations involved in the sharing agreements will have “more than adequate revenues” to pay the fees involved with the sharing arrangements and “generate a significant operating profit for the licensee,” said Sinclair. The Media Bureau had also asked Sinclair to show how the companies that will own the stations involved in the sharing arrangements will have a financial incentive to control their own programming. “Every station license, whether or not involved in sharing agreements, has an inherent incentive to control programming” to attract more viewers and increase value to advertisers, Sinclair said. Since the “key costs” of a station involved in a sharing arrangement to receive services are fixed, “operating profits will increase if the revenue increases,” Sinclair said. The Media Bureau has also previously approved sharing arrangements similar to the ones proposed in the Allbritton transaction, and with a similar profit sharing breakdown, Sinclair said. That’s one of the reasons behind Free Press’s challenge of the transaction, Free Press Policy Director Matt Wood told us. Such transactions are a workaround for avoiding the commission’s ownership rules, he said. “This is why we want the full commission to take this up,” he said. Sinclair also disputed the Media Bureau’s contention that the company violated reporting rules by not including copies of local marketing agreements in its submission to the commission. Since the agreements cited by the bureau don’t involve stations involved in the Allbritton transaction, Sinclair had no reason to include them in the submission, the broadcaster said. The Department of Justice review of the Sinclair/Allbritton deal has been put on hold pending the FCC and Sinclair resolving the dispute over the sharing arrangements, Sinclair said. “It is vital that there be a prompt resolution of these matters so that antitrust review can be completed,” Sinclair said.