By Jenn Topper and S. Derek Turner
3:00 PM EST, November 6, 2013
So far this year, 223 local TV stations have changed hands. This is the biggest wave of media consolidation ever — and it's all happening in small and mid-level markets, involving companies most people have never heard of.
Leading this wave is Hunt Valley-based Sinclair Broadcast Group. Sinclair alone is behind seven deals this year, including a $985-million deal to buy nine stations from Allbritton Communications. But it's not alone; other media companies are also racing to gobble up stations.
And these companies are doing everything they can to maximize profits. Just last month, Sinclair fired nearly 30 employees from Seattle's KOMO and Portland, Ore.'s KATU. This is par for the course for Sinclair, where the average number of employees per station has declined by nearly 20 percent since 2001.
The Federal Communications Commission has limits on how many stations one person or company can own in a given market. But, as a new report from public interest group Free Press shows, companies like Sinclair are using outsourcing agreements and shell companies to skirt the rules and create media fiefdoms in markets all over the country.
In a response to the report, Sinclair said it "completely complies" with the law and objects to claims that it uses shell companies and shady tactics to dodge FCC rules.
But in nearly all instances, the only asset a Sinclair shell company owns is a station license. Under FCC rules, Sinclair is able to claim that the shells are separate entities despite clear evidence to the contrary.
Consider Sinclair's longtime shell, Cunningham Broadcasting. Like many of the companies created to sidestep the FCC's rules, Cunningham has no physical presence, and is even headquartered at Sinclair's flagship station WBFF in Baltimore. Sinclair, through Cunningham, controls Baltimore's WNUV.
Furthermore, under Securities and Exchange Commission rules, Cunningham is considered the same company as Sinclair. And when it communicates with investors, Sinclair refers to its shells, which include Deerfield Media and Howard Stirk Holdings, as "our sidecar companies." Similarly, it refers to stations nominally operated by these shells as "our stations." (Sinclair, through Deerfield, controls Baltimore's WUTB.)
As is typical of parent companies in this situation, Sinclair is usually the sole financier of its shells — and it generally reaps all of the shells' profits.
The impact of this covert consolidation on local news is being felt across the nation. Companies like Sinclair are closing newsrooms, laying off journalists — and in many cases, airing the same broadcast on multiple stations in a single market. In these communities, viewers can change the channel, but they'll find the exact same anchors and stories.
If the FCC continues to turn a blind eye to Sinclair's control over these stations, this trend is only going to get worse. It's time for the agency to acknowledge that broadcasters like Sinclair are violating its rules — and to step in to promote greater competition and diversity in the local TV market. Sinclair's fake companies shouldn't get to hold real licenses to the public's airwaves.
The FCC should take a serious look at whether companies like Sinclair, which get these valuable airwaves for free, are truly serving the public interest. It should close the numerous loopholes that have allowed Sinclair and others to dodge its rules — and stop the wave of consolidation before the damage is irreversible.
Jenn Topper is the media manager and S. Derek Turner is the research director for Free Press, a nonpartisan organization that advocates for diverse media ownership, universal and affordable Internet access, vibrant public media and quality journalism. Email them at firstname.lastname@example.org and email@example.com.
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