Right-wing television giant Sinclair Broadcast Group is attempting to skirt ownership rules and gain approval from federal regulators for a $3.9 billion merger with Tribune Media by proposing sales—such as Chicago's WGN-TV to a Maryland-based car dealer—that would involve Sinclair still providing all services and effectively retaining control of the stations.
Despite Sinclair's reportedly cozy relationship with Federal Communications Commission (FCC) chairman Ajit Pai, the company has run into roadblocks with federal regulations in its mission to acquire Tribune Media's 42 stations. Sinclair announced last week that it would sell WGN-TV in Chicago as well stations in New York and nine other markets to appease regulators.
However, as the Chicago Tribune and consumer advocates are warning, proposed sales of stations in both Chicago and New York are actually sneaky bids for Sinclair to keep control of the stations through "an option and master services agreement" in each contract.
As the Tribune outlines, the $60 million sale in Chicago—to "a newly formed company headed by Steven Fader, a longtime business associate of Sinclair Executive Chairman David Smith"—would result in Sinclair still providing "everything from programming to advertising sales to the buyer, essentially running WGN-Ch. 9 through a services agreement."
"In plain English, these sidecar arrangements give Sinclair the ability to continue to manage the stations after they have been acquired by third parties, with the option to buy them back at some future time," according to a letter (pdf) of opposition that 15 members of the Coalition to Save Local Media sent to the FCC this week.
The WGN-TV deal would enable Sinclair to reacquire the station "for the same price, subject to adjustments, within eight years," the Tribune reports. Meanwhile, in New York, Sinclair has moved to sell WPIX-TV, under similar conditions, to Cunningham Broadcasting Corp.—which "is owned by the estate of Carolyn Smith, the mother of the Sinclair chairman."
The coalition letter declares that "Sinclair takes its misleading statements one step further in its plans for coming into compliance with the Commission's local ownership rule" in terms of how it plans to handle overlap markets—which are regions where Sinclair and Tribune both currently own stations, and the proposed merger would create a duopoly banned by federal regulations that aim to retain diversity in local news.
"Sinclair says, on one side of its mouth, that it intends to divest stations in eight different markets, but then, on the other side of its mouth, it says that with respect to three of these markets—Seattle/Tacoma, Oklahoma City, and Greensboro—it will enter into the same type of 'option' and 'services agreements,'" the letter notes. "And in three other markets—Indianapolis, Greensboro, and Harrisburg—Sinclair asks the Commission for waivers of the top-four duopoly rule."