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Democracy Under Threat as Media Giants Gobble Up Local TV: Study

'TV consolidation is out of control, and communities are paying the price'

- Jon Queally, staff writer

(Image: Courtesy of Free Press)In a new wave of rapid media consolidation, large and unaccountable telecommunication corporations are gobbling up local television stations nationwide, according to a new study, devouring the interests of communities and unwitting consumers along the way.

Though consolidation of television and other media companies has been an unrelenting trend for decades, the media reform group Free Press says large telecoms have been acting to avoid the radar of the Federal Communication Commission in order to quietly take-over large swaths of the media landscape in search of profits and larger market domination.

In the group's new report, titled Cease to Resist: How the FCC’s Failure to Enforce Its Rules Created a New Wave of Media Consolidation (pdf), the research reveals a new trend in which large media conglomerates—including the Sinclair Broadcast Group, Gannett, Media General, Nexstar and the Tribune Company—are using smaller shell companies to evade the FCC’s media ownership rules.

According to Josh Stearns, public media campaigner at Free Press, skirting the FCC's oversight and regulatory mechanisms allows these aggressive companies to inflict real and lasting damage to the communities where their newly acquired stations operate. As Stearns explains:

[These media giants] are setting up shell companies to dodge federal limits on how much media one company can control. The FCC has turned a blind eye as communities have suffered the impact of these shady deals. In many markets, one company controls up to four TV stations — and even the local paper.

The result is a gutting of local news. Companies are shuttering entire newsrooms, laying off journalists and broadcasting the exact same stories on multiple channels. This means fewer journalists covering local government, and fewer diverse perspectives on the issues that matter to people.

“TV consolidation is out of control, and communities are paying the price,” said Free Press Research Director and report author S. Derek Turner. “Companies are swallowing up stations at an alarming rate, often through deals that violate the law. If the FCC doesn’t start enforcing its rules, the damage to local competition and viewpoint diversity will be overwhelming and irreversible.”

Among the report’s key findings:

  • In the first eight months of 2013, 211 full-power TV stations changed hands, the highest level in more than a decade, and the fourth-highest year on record in terms of deal value. The latest surge of consolidation is unique from prior waves in that it’s taking place in small and medium-sized markets and involves companies that are not household names.
  • Sinclair Broadcast Group is leading the current wave of consolidation. In the past two years alone, Sinclair has closed or announced deals that will increase its holdings from 58 to 161 stations nationwide. These deals will more than double the number of markets Sinclair serves from 35 to 78, covering nearly 39 percent of the U.S. population.

In numerous ways, the report makes a particular effort to point out the destructive role this kind of consolidation has had on local news coverage and the overall state of journalism across the United States.

“We’ve seen the effects of this so-called covert consolidation on local news already,” Turner said. “Stations in the same market air the same content, often with the same on-air personalities and production teams. You can literally change the channel and find the same exact news.”

Deeply troubling, says Free Press—amid the complex rules of the FCC and the regulations that govern companies that own media outlets—is that the large parent companies receive the benefit of purchasing and operating local television stations through their small shell companies they create because the FCC treats them as non-threatening, but in reality the parent company is holding all the strings (and the assets) as it continues to expand its media empire. From the report:

In researching the shell companies held by Sinclair and the other companies that use these covert-consolidation tactics, Free Press found that in almost every instance, the only asset the shell company owns is the license, while the parent company controls the physical assets. For example, Sinclair is often the sole financier of its shell companies’ debt, and it reaps nearly all of the profits the shell companies’ stations bring in.

Perhaps the most damning evidence indicating the true nature of these covert arrangements is the fact that under Securities and Exchange Commission rules, these shell companies and their parent corporations are considered one and the same. When Sinclair communicates with investors, it makes no effort to hide the fact that it’s the true owner of these shell companies and their stations, repeatedly referring to them as “our sidecar companies” and “our stations.” In its SEC filings, Nexstar specifically lists among its assets all of the licenses held by its shell company, Mission Broadcasting.

“What’s good enough for Wall Street should be good enough for Main Street,” Turner said. “The FCC should recognize that these shell companies and the outsourcing agreements that govern them are merely a legal fiction created by companies like Sinclair, Gannett, Tribune and Nexstar to evade the ownership rules.”

And Stearns puts the report in its proper historical and political context by adding:

Recent data show that 71 percent of Americans watch local TV news. So even if you aren’t watching your local newscast, this programming still has a huge influence on the political agenda of your community. That’s why politicians and their supporters spent nearly $3 billion to flood local TV stations with political ads in the 2012 election.

Instead of investing those record profits into their news operations, companies like Sinclair are going on a buying spree, gobbling up their competition and expanding their influence. Indeed, this surge of consolidation is taking place in small and medium-sized markets where the companies will have an even larger footprint. In the first eight months of 2013, 211 full-power TV stations changed hands, the highest level in more than a decade.

Sinclair is a prime example of what’s at stake. The company has long used its local stations to push its own political agenda. It forced its stations to air the anti-John Kerry documentary Stolen Honor two weeks before Election Day in 2004 and made news anchors read a pro-Romney script on the eve of the 2012 election.

During the next election, Sinclair will wield even more influence. In the past two years alone, the company has closed or announced deals that will nearly double the number of stations it owns, allowing it to reach nearly 39 percent of the U.S. population.

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