March 21, 2025 • 19 mins
US TV and radio broadcasters like Nexstar, Sinclair and Tegna face fierce competition from internet-delivered platforms, yet only the broadcasters are limited by strict FCC ownership rules. With Republicans now controlling the FCC, Congress and the White House — and with a business-friendly court overseeing broadcasters’ litigation against the FCC — the broadcasters have their best chance in decades to ease the FCC rules, potentially creating opportunities to pursue deals that unlock economies of scale. In this Votes and Verdicts Brief, Bloomberg Intelligence analysts Matthew Schettenhelm and Jennifer Rie tackle the legal path ahead on this important issue.
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Speaker 1 (00:15):
US broadcasters have faced FCC media ownership limits for decades,
and those rules have persisted even though broadcasters face a
slew of new competition from the Internet. Broadcasters took aim
at some key FCC ownership rules in a court hearing
this week. Will those rules survive and what lies ahead?
(00:37):
This is a Votes and Verdicts Brief.
Speaker 2 (00:39):
Hello, and welcome to the Votes and Verdicts podcast hosted
by Bloomberg Intelligence, part of Bloomberg's Research department, with five
hundred analysts and strategists working across all major world markets.
Our coverage includes over two thousand equities and credits, as
well as outlooks on more than ninety industries and one
hundred market induses, currency, and commodities. In this podcast series,
(01:02):
we talk about the intersection of business policy and law.
My name is Jennifer Ree and I'm a senior litigation
analyst with Bloomberg Intelligence covering antitrust.
Speaker 1 (01:11):
I'm Matt Schuttenhelm, an analysts covering US litigation and policy
in the TMT space.
Speaker 2 (01:17):
Our Votes and Verdicts Brief series highlights one of our
research reports on the Bloomberg terminal, giving you quick takeaways
to help you grasp a key litigation or policy topic. Today,
US broadcast ownership rules and the industries push to finally
make them go away. Matt, let's get started. There is
an important court hearing this week concerning broadcast ownership rules.
(01:40):
As I mentioned, that's what our topic is today. But
before we dive into what happened at the hearing, can
you just briefly remind us what media ownership rules are
currently enforced at the Federal Communications Commission and which companies
do they affect?
Speaker 1 (01:54):
Sure, Jen, So, there are two main categories of rules
at here at issue here, first of all, is a
rule on how many TV households across the United States
one company can serve, and under the FCC rule, no
company may serve more than thirty nine percent of US households. Now,
(02:18):
that's discounted a little bit for technical reasons for a
certain class of stations, but effectively it's thirty nine percent
with that discount added on. And so no internet video
platforms face any sort of national limitation like that, whereas
US broadcasters are limited to reaching a subset of the
(02:41):
US population. A second set of FCC rules address local markets,
the DMAs in New York and Chicago across the United States,
and they say how many TV and radio stations one
company can own in each of those local markets. And
(03:02):
on the TV side, the important thing to know is
that the FCC rule effectively prevents one company from owning
two top four ranked stations in a local market. And
broadcasters say they could benefit from significant economies of scale
by owning multiple stations per market. But this FCC rule,
(03:27):
which has been on the books for decades forbids that.
So what companies are we talking about that are most
impacted here? For TV broadcasters, we're talking about Nextstar, Tegna, Sinclair,
scripts Gray, as well as some larger companies that also
own the broadcast networks like Fox and Disney. They own
(03:51):
TV stations in local markets as well. And on the
radio side, it impacts companies like iHeartMedia and Cumulus.
Speaker 2 (04:00):
Okay, so you talked about the thirty nine percent rule
and the local ownership rules. Let's focus on that first.
The court hearing that I mentioned before and that I
know you listened into, was March nineteenth and the Eighth
Circuit Court of Appeals. So why was that particular hearing
particularly important?
Speaker 1 (04:19):
Yes, so you're exactly right. So this was This was
a court hearing just on the local market role, not
the thirty nine percent national ownership cap. And how this
was teed up is that Congress wrote to statutes that
makes the FCC review that local rule every four years.
(04:41):
It's called the quadrennial review, to confirm that that rule
still makes sense in light of competition, in light of
the public interest, and the FCC is supposed to remove
the rules that don't pass that test anymore. And in
twenty twenty three, the Biden FCC finished the late version
of that mandated four year review and it said, yep,
(05:04):
we're going to keep all of these broadcast rules, and
we're even going to tighten some of them. And this
court case was broadcaster's challenge to that Biden era order.
And what's really fascinating about the case is that the
broadcasters don't just ask the court to knock out that
(05:25):
decision by the Biden FCC. They asked the court to
go further and to wipe off the rules from the
books entirely. And broadcasters have actually tried this strategy before,
they've tried it in a number of times, but that
litigation has been stuck before the same three judge panel
(05:45):
in the Third Circuit in Philadelphia, and those three judges
have basically kept everything in place in case after case
after case. But in the most recent version of this
four year year review, the US Supreme Court finally stepped in,
and because of that, that broke this litigation free from
(06:07):
that three judge panel in Philadelphia. And that's how we're
in the Ace Circuit now, which is a court that's
very different from the Third Circuit. It's dominated by Republicans,
and the case that was argued this week was heard
by three Republican appointed judges. Republican appointed judges tend to
(06:28):
be more skeptical of regulation, tend to be more business friendly.
So broadcasters are already starting in a better place than
they've been with their litigation stuck in the Third Circuit
for case after case. And so really this is about
timing in terms of the importance of this litigation, because
(06:49):
under Brendan Carr, the new chairman of the FCC under
President Trump, the FCC I do think is likely to
work to ease these broadcast ownership rules. But the important
thing to know is that takes time. It's a slow process.
Under the Administrative Procedure Act, you have to go through
a full rule making to do that, and that can
(07:10):
take six to nine months at best, sometimes much longer
than that. But if the broadcasters won a big win
in this court case, everything goes much faster. If this
court takes the drastic step of saying, you know what, FCC,
you were supposed to review these rules and strike them
down every four years. You didn't do that, So we're
(07:31):
going to throw out those rules ourselves. And if the
court did that, that would speed up the deregulation that
the broadcasters would see, make it all happen much faster.
Speaker 2 (07:43):
All right, So their outcome here could actually, you know,
be pretty impactful for the broadcasters. You listen to the
oral arguments, so what was your impression? How do you
think they went? And also when do you think we're
going to find out a result?
Speaker 1 (07:56):
Yeah, so if I were the broadcasters, I would not
be pop being the champagne bottles. Yet, I thought this
three judge panel yesterday, listening to their questions, which isn't
always an indicator of how they're going to rule, but
I thought they were surprisingly even handed and moderate in
their questions. Both sides faced fairly difficult questions and I
(08:18):
think most importantly, the judges asked no questions about remedy,
the remedy of just striking these rules from the books,
and I think if a judge was thinking about going there,
you would have at least seen the judge explore that
a little bit with questions. So I think the idea
(08:43):
of a big broadcaster win the biggest broadcaster win is
not likely. Will will the broadcasters still win this case?
I think so. I think the court will fault the
FCC's reasoning for hanging on to this rule, and also
it's tightening of the rule in some respects, but I
think the remedy will be pretty modest. It will the
(09:05):
court is very likely to not take the step itself
of striking down the rules. It's likely to throw this
all back to the FCC for a do over. In
terms of timing, when will we see this court decision,
we don't know exactly, but typically federal appeals courts take
three to six months to decide cases, so I would
(09:29):
ballpark looking for it early this summer is when will
likely see that decision.
Speaker 2 (09:37):
So if the case goes as you expect as you
just outlined, what then is next for broadcasters that are
really looking to try to get these rules ease.
Speaker 1 (09:46):
Yeah, So, assuming that this isn't a sweeping win for
the broadcasters that just wipes the rules off the books immediately,
we are back to the FCC needing to deregulate itself
through the Administrative Procedures Act through a rule making. So
the first step there will be the FCC will need
(10:06):
to vote to release a notice of proposed rule making
to unwind both these local market rules how many stations
you can own in each market, as well as the
thirty nine percent national ownership cap. And the important thing
to know about that rulemaking process is not only that
it takes time, but also that it's because it's controversial,
(10:31):
the FCC can't start it until it has a majority
of Republicans at the FCC. Democrats are likely to oppose
this effort, and currently the commission is evenly divided. It
has two Republican commissioners and two Democrat commissioner commissioners. So
I don't think this action will start until either the
(10:53):
Senate confirms President Trump's new Republican FCC nominee Olivia Trustee,
she's awaiting a hearing at the Senate Commerce Committee, or
one of the Democrat commissioners steps down. Just this week.
Jeffrey Starks, one of those Democrats, said he would be
resigning his position, but he left it sort of vague,
(11:15):
he said in the spring, and so that may be
a signal he's going to wait until Olivia trustee is
confirmed so as not to let the Brendan Carr the
Republicans start work on this any earlier. So that remains
to be seen. But this is all going to play
out in the rulemaking process, most likely again barring a surprising, big,
(11:40):
big win for the broadcasters in this a circuit case.
And really to close this out, Jet, I think it
makes sense to kind of pivot over to your expertise
on antitrust. I think the US broadcasters have a solid
chance to ease these FCC rules either one way or
or or another, either through this court case or through deregulation.
(12:05):
But that's not the end of the story, because the
companies not only need to get past the FCC, they
need to get past antitrust review as well. Well, let's
turn to you on that. How much of a risk
do you see antitrust review on this topic?
Speaker 2 (12:21):
Yeah, well, thanks, Matt, I mean that's right, that's kind
of step one if the broadcasters are really looking to
expand their ownership in the way that you've described. The
FCC is step one because they also if they're going
to do a deal by another broadcaster own a lot
more stations, they're going to have to also go through
anti trust review at the Department of Justice. Now, unlike
the FCC, the DOJ doesn't have these specific rules like
(12:45):
the thirty nine percent rule you mentioned or the local
ownership rules. They have a set of merger guidelines that
they use to assess a deal in any industry, right,
and so those guidelines also apply to broadcast TV deals.
And the thing is, the way the transactions are analyzed
generally makes it difficult for any broadcaster to owner operate
any more than one TV station affiliated with the Big Four.
(13:07):
And when I talk about the Big Four, I mean CBS, ABC, NBC,
and Fox, And it's just the way the analysis works
would really probably end up banning ownership of more than one.
And that you know, that's aside from whatever the FCC
rules say or whatever they do. And what I'm talking about, though,
is how the DJ has historically analyzed broadcaster deals. There
(13:29):
have been a lot so we have a big history,
and the DOJ analysis has been very consistent, you know,
through administrations Republican and democratic, it's kind of been the
same analysis. Now I'm going to walk through what that
is and why it's hard to own more than one
of those Big four stations. But I do want to
say that there is kind of a wild card right
(13:49):
now with respect to future deals, because there's always possible
way in or influenced by President Trump, and that could
have some change in what has historically been the assessment
of the deals. But let me just talk about these
Big four stations. The DOJ views them as being in
a class by themselves and having greater importance to consumers
(14:12):
and advertisers and a broadcasters than any of the other
stations I'm talking about other broadcast stations or cable network programming,
because what the DOJ says is that Big Four content
has special appeal to viewers. And that's really mostly because
they carry the local sports and the local news. They
carry sports, and the popular prime time programs they carry
(14:32):
are those that are intended to have a mass broad
appeal rather than just appeal to niche markets, and other
stations largely don't have that kind of programming. And the
other thing that they observe is that the Big Four
or the highest rank in terms of audience share in
ratings in each local area. Matt, you called those DMAs.
That's what I'll go ahead and call these local areas DMAs.
(14:53):
And that's based on Nielsen ratings. Now, because of this,
because of this special appeal, the cable companies, light companies,
fiber optic, TV, YouTube or Hulu, you know, any entity
that offers up a package of stations for consumers to
buy for a price, they regard the Big Four programming
as it must have. They have to include those in
packages they offer subscribers. Now, I'm going to call those
(15:15):
companies MVPDs, and I'm referring to cable, satellite, fiber optic,
and some of these over the top providers that package stations.
So what that means is that when an MVPD and
a broadcast station group have a contract and they're negotiating
a retransmission fee at you know, the expiration of the
(15:35):
agreement or at a new agreement, and they can't come
to terms, the result can be a blackout. Right, We've
all seen that. We've seen that in sports it's very
frustrating when in your local area as station's blacked out,
and if the broadcaster has just one Big four station,
it doesn't really hurt the MVPD very much because viewers,
if they're watching CBS it's blacked out, they can move
over to NBC or ABC or to Fox, and that
(15:58):
really limits a broadcasters of ability to extract higher fees
from the MVPD. Now, if a transaction would give a
broadcaster the ability to black out more than one of
those Big four stations simultaneously, what that does is it
increases their bargaining leverage with the MVPDs and that will
likely lead to increased retransmission fees, and those fees generally
(16:18):
or pass through to consumers. So it means the consumer's
price goes up, and that's consumer arm and that's what
the anti trust enforcers are trying to prevent. That's the
main concern, the first concern the DJ has. They do
have a second one, though, and that's in relation to
the sale of broadcast television spot advertising. So these are
local ads I'm talking about, not national commercials, And it's
(16:39):
kind of the same analysis that I just walked through.
If a broadcaster has control of more than one of
these big four stations, it would result in higher prices
to local businesses and other advertisers that are just trying
to reach audiences in that DMA. And again it's because
these stations are special for certain advertisers who want to
target a broad audience in a local area, and the
(17:01):
advertisers view these stations is more important to them than
advertising on other stations. Now, I will say this, the
advertising markets are changing a lot, and this second concern
could fall to the wayside, you know, as viewing habits
of consumers keep evolving and the advertising market continues to change.
But even if that drops off as a concern of
(17:22):
the DOJ, you still have this issue of the retransmission fees.
And that's a big one because it translates directly into
higher prices for people, and I don't see that when
going away now, just to close this out, Matt, I
did mention that there's kind of a wild card in
that Recently, President Trump has sought to exert significant control
of regulatory bodies executive branch agencies, and as part of
(17:45):
kind of that, he may try to weigh in on
specific deals and push his DOJ to reach his desired result,
and of course that could lead to a change in
this analysis that the DOJ's really implemented for years now.
It remains to be seen whether this happens or not,
whether if he tries to exert influence, whether his DJ
will do his bidding, perhaps going against what the antitrust
(18:09):
laws would say they should do. But I raised this
because we did see a little bit of this pattern
during Trump's first term, so it is possible. But you know,
I'll say that the deals can still get done. But
the difference is no matter what the FCC is done
in relaxing their rules. If they do, the companies normally
would have to agree to divest stations in order to
(18:29):
get a deal done, where the overlaps result in this
ownership of more than one of the big four broadcast
TV stations in any DMA. So you know, I suspect
that would be the case going forward. But with the
caveat of the Trump.
Speaker 1 (18:43):
Wildcard, that's really helpful. Jen, Thank you so much, because
that's an important piece of this story. Just getting past
the FCC is not enough. You got to win an
antitrust review as well. So with that, let's close it out.
Thank you Jen for joining me today. That's today's Votes
and Verdicts brief. For our full report on the topic
(19:05):
and all of our research, please visit bi laws on
the Bloomberg terminal and thank you for tuning in to
Votes and Verdicts.
US broadcasters have faced FCC media ownership limits for decades,
and those rules have persisted even though broadcasters face a
slew of new competition from the Internet. Broadcasters took aim
at some key FCC ownership rules in a court hearing
this week. Will those rules survive and what lies ahead?
(00:37):
This is a Votes and Verdicts Brief.
Speaker 2 (00:39):
Hello, and welcome to the Votes and Verdicts podcast hosted
by Bloomberg Intelligence, part of Bloomberg's Research department, with five
hundred analysts and strategists working across all major world markets.
Our coverage includes over two thousand equities and credits, as
well as outlooks on more than ninety industries and one
hundred market induses, currency, and commodities. In this podcast series,
(01:02):
we talk about the intersection of business policy and law.
My name is Jennifer Ree and I'm a senior litigation
analyst with Bloomberg Intelligence covering antitrust.
Speaker 1 (01:11):
I'm Matt Schuttenhelm, an analysts covering US litigation and policy
in the TMT space.
Speaker 2 (01:17):
Our Votes and Verdicts Brief series highlights one of our
research reports on the Bloomberg terminal, giving you quick takeaways
to help you grasp a key litigation or policy topic. Today,
US broadcast ownership rules and the industries push to finally
make them go away. Matt, let's get started. There is
an important court hearing this week concerning broadcast ownership rules.
(01:40):
As I mentioned, that's what our topic is today. But
before we dive into what happened at the hearing, can
you just briefly remind us what media ownership rules are
currently enforced at the Federal Communications Commission and which companies
do they affect?
Speaker 1 (01:54):
Sure, Jen, So, there are two main categories of rules
at here at issue here, first of all, is a
rule on how many TV households across the United States
one company can serve, and under the FCC rule, no
company may serve more than thirty nine percent of US households. Now,
(02:18):
that's discounted a little bit for technical reasons for a
certain class of stations, but effectively it's thirty nine percent
with that discount added on. And so no internet video
platforms face any sort of national limitation like that, whereas
US broadcasters are limited to reaching a subset of the
(02:41):
US population. A second set of FCC rules address local markets,
the DMAs in New York and Chicago across the United States,
and they say how many TV and radio stations one
company can own in each of those local markets. And
(03:02):
on the TV side, the important thing to know is
that the FCC rule effectively prevents one company from owning
two top four ranked stations in a local market. And
broadcasters say they could benefit from significant economies of scale
by owning multiple stations per market. But this FCC rule,
(03:27):
which has been on the books for decades forbids that.
So what companies are we talking about that are most
impacted here? For TV broadcasters, we're talking about Nextstar, Tegna, Sinclair,
scripts Gray, as well as some larger companies that also
own the broadcast networks like Fox and Disney. They own
(03:51):
TV stations in local markets as well. And on the
radio side, it impacts companies like iHeartMedia and Cumulus.
Speaker 2 (04:00):
Okay, so you talked about the thirty nine percent rule
and the local ownership rules. Let's focus on that first.
The court hearing that I mentioned before and that I
know you listened into, was March nineteenth and the Eighth
Circuit Court of Appeals. So why was that particular hearing
particularly important?
Speaker 1 (04:19):
Yes, so you're exactly right. So this was This was
a court hearing just on the local market role, not
the thirty nine percent national ownership cap. And how this
was teed up is that Congress wrote to statutes that
makes the FCC review that local rule every four years.
(04:41):
It's called the quadrennial review, to confirm that that rule
still makes sense in light of competition, in light of
the public interest, and the FCC is supposed to remove
the rules that don't pass that test anymore. And in
twenty twenty three, the Biden FCC finished the late version
of that mandated four year review and it said, yep,
(05:04):
we're going to keep all of these broadcast rules, and
we're even going to tighten some of them. And this
court case was broadcaster's challenge to that Biden era order.
And what's really fascinating about the case is that the
broadcasters don't just ask the court to knock out that
(05:25):
decision by the Biden FCC. They asked the court to
go further and to wipe off the rules from the
books entirely. And broadcasters have actually tried this strategy before,
they've tried it in a number of times, but that
litigation has been stuck before the same three judge panel
(05:45):
in the Third Circuit in Philadelphia, and those three judges
have basically kept everything in place in case after case
after case. But in the most recent version of this
four year year review, the US Supreme Court finally stepped in,
and because of that, that broke this litigation free from
(06:07):
that three judge panel in Philadelphia. And that's how we're
in the Ace Circuit now, which is a court that's
very different from the Third Circuit. It's dominated by Republicans,
and the case that was argued this week was heard
by three Republican appointed judges. Republican appointed judges tend to
(06:28):
be more skeptical of regulation, tend to be more business friendly.
So broadcasters are already starting in a better place than
they've been with their litigation stuck in the Third Circuit
for case after case. And so really this is about
timing in terms of the importance of this litigation, because
(06:49):
under Brendan Carr, the new chairman of the FCC under
President Trump, the FCC I do think is likely to
work to ease these broadcast ownership rules. But the important
thing to know is that takes time. It's a slow process.
Under the Administrative Procedure Act, you have to go through
a full rule making to do that, and that can
(07:10):
take six to nine months at best, sometimes much longer
than that. But if the broadcasters won a big win
in this court case, everything goes much faster. If this
court takes the drastic step of saying, you know what, FCC,
you were supposed to review these rules and strike them
down every four years. You didn't do that, So we're
(07:31):
going to throw out those rules ourselves. And if the
court did that, that would speed up the deregulation that
the broadcasters would see, make it all happen much faster.
Speaker 2 (07:43):
All right, So their outcome here could actually, you know,
be pretty impactful for the broadcasters. You listen to the
oral arguments, so what was your impression? How do you
think they went? And also when do you think we're
going to find out a result?
Speaker 1 (07:56):
Yeah, so if I were the broadcasters, I would not
be pop being the champagne bottles. Yet, I thought this
three judge panel yesterday, listening to their questions, which isn't
always an indicator of how they're going to rule, but
I thought they were surprisingly even handed and moderate in
their questions. Both sides faced fairly difficult questions and I
(08:18):
think most importantly, the judges asked no questions about remedy,
the remedy of just striking these rules from the books,
and I think if a judge was thinking about going there,
you would have at least seen the judge explore that
a little bit with questions. So I think the idea
(08:43):
of a big broadcaster win the biggest broadcaster win is
not likely. Will will the broadcasters still win this case?
I think so. I think the court will fault the
FCC's reasoning for hanging on to this rule, and also
it's tightening of the rule in some respects, but I
think the remedy will be pretty modest. It will the
(09:05):
court is very likely to not take the step itself
of striking down the rules. It's likely to throw this
all back to the FCC for a do over. In
terms of timing, when will we see this court decision,
we don't know exactly, but typically federal appeals courts take
three to six months to decide cases, so I would
(09:29):
ballpark looking for it early this summer is when will
likely see that decision.
Speaker 2 (09:37):
So if the case goes as you expect as you
just outlined, what then is next for broadcasters that are
really looking to try to get these rules ease.
Speaker 1 (09:46):
Yeah, So, assuming that this isn't a sweeping win for
the broadcasters that just wipes the rules off the books immediately,
we are back to the FCC needing to deregulate itself
through the Administrative Procedures Act through a rule making. So
the first step there will be the FCC will need
(10:06):
to vote to release a notice of proposed rule making
to unwind both these local market rules how many stations
you can own in each market, as well as the
thirty nine percent national ownership cap. And the important thing
to know about that rulemaking process is not only that
it takes time, but also that it's because it's controversial,
(10:31):
the FCC can't start it until it has a majority
of Republicans at the FCC. Democrats are likely to oppose
this effort, and currently the commission is evenly divided. It
has two Republican commissioners and two Democrat commissioner commissioners. So
I don't think this action will start until either the
(10:53):
Senate confirms President Trump's new Republican FCC nominee Olivia Trustee,
she's awaiting a hearing at the Senate Commerce Committee, or
one of the Democrat commissioners steps down. Just this week.
Jeffrey Starks, one of those Democrats, said he would be
resigning his position, but he left it sort of vague,
(11:15):
he said in the spring, and so that may be
a signal he's going to wait until Olivia trustee is
confirmed so as not to let the Brendan Carr the
Republicans start work on this any earlier. So that remains
to be seen. But this is all going to play
out in the rulemaking process, most likely again barring a surprising, big,
(11:40):
big win for the broadcasters in this a circuit case.
And really to close this out, Jet, I think it
makes sense to kind of pivot over to your expertise
on antitrust. I think the US broadcasters have a solid
chance to ease these FCC rules either one way or
or or another, either through this court case or through deregulation.
(12:05):
But that's not the end of the story, because the
companies not only need to get past the FCC, they
need to get past antitrust review as well. Well, let's
turn to you on that. How much of a risk
do you see antitrust review on this topic?
Speaker 2 (12:21):
Yeah, well, thanks, Matt, I mean that's right, that's kind
of step one if the broadcasters are really looking to
expand their ownership in the way that you've described. The
FCC is step one because they also if they're going
to do a deal by another broadcaster own a lot
more stations, they're going to have to also go through
anti trust review at the Department of Justice. Now, unlike
the FCC, the DOJ doesn't have these specific rules like
(12:45):
the thirty nine percent rule you mentioned or the local
ownership rules. They have a set of merger guidelines that
they use to assess a deal in any industry, right,
and so those guidelines also apply to broadcast TV deals.
And the thing is, the way the transactions are analyzed
generally makes it difficult for any broadcaster to owner operate
any more than one TV station affiliated with the Big Four.
(13:07):
And when I talk about the Big Four, I mean CBS, ABC, NBC,
and Fox, And it's just the way the analysis works
would really probably end up banning ownership of more than one.
And that you know, that's aside from whatever the FCC
rules say or whatever they do. And what I'm talking about, though,
is how the DJ has historically analyzed broadcaster deals. There
(13:29):
have been a lot so we have a big history,
and the DOJ analysis has been very consistent, you know,
through administrations Republican and democratic, it's kind of been the
same analysis. Now I'm going to walk through what that
is and why it's hard to own more than one
of those Big four stations. But I do want to
say that there is kind of a wild card right
(13:49):
now with respect to future deals, because there's always possible
way in or influenced by President Trump, and that could
have some change in what has historically been the assessment
of the deals. But let me just talk about these
Big four stations. The DOJ views them as being in
a class by themselves and having greater importance to consumers
(14:12):
and advertisers and a broadcasters than any of the other
stations I'm talking about other broadcast stations or cable network programming,
because what the DOJ says is that Big Four content
has special appeal to viewers. And that's really mostly because
they carry the local sports and the local news. They
carry sports, and the popular prime time programs they carry
(14:32):
are those that are intended to have a mass broad
appeal rather than just appeal to niche markets, and other
stations largely don't have that kind of programming. And the
other thing that they observe is that the Big Four
or the highest rank in terms of audience share in
ratings in each local area. Matt, you called those DMAs.
That's what I'll go ahead and call these local areas DMAs.
(14:53):
And that's based on Nielsen ratings. Now, because of this,
because of this special appeal, the cable companies, light companies,
fiber optic, TV, YouTube or Hulu, you know, any entity
that offers up a package of stations for consumers to
buy for a price, they regard the Big Four programming
as it must have. They have to include those in
packages they offer subscribers. Now, I'm going to call those
(15:15):
companies MVPDs, and I'm referring to cable, satellite, fiber optic,
and some of these over the top providers that package stations.
So what that means is that when an MVPD and
a broadcast station group have a contract and they're negotiating
a retransmission fee at you know, the expiration of the
(15:35):
agreement or at a new agreement, and they can't come
to terms, the result can be a blackout. Right, We've
all seen that. We've seen that in sports it's very
frustrating when in your local area as station's blacked out,
and if the broadcaster has just one Big four station,
it doesn't really hurt the MVPD very much because viewers,
if they're watching CBS it's blacked out, they can move
over to NBC or ABC or to Fox, and that
(15:58):
really limits a broadcasters of ability to extract higher fees
from the MVPD. Now, if a transaction would give a
broadcaster the ability to black out more than one of
those Big four stations simultaneously, what that does is it
increases their bargaining leverage with the MVPDs and that will
likely lead to increased retransmission fees, and those fees generally
(16:18):
or pass through to consumers. So it means the consumer's
price goes up, and that's consumer arm and that's what
the anti trust enforcers are trying to prevent. That's the
main concern, the first concern the DJ has. They do
have a second one, though, and that's in relation to
the sale of broadcast television spot advertising. So these are
local ads I'm talking about, not national commercials, And it's
(16:39):
kind of the same analysis that I just walked through.
If a broadcaster has control of more than one of
these big four stations, it would result in higher prices
to local businesses and other advertisers that are just trying
to reach audiences in that DMA. And again it's because
these stations are special for certain advertisers who want to
target a broad audience in a local area, and the
(17:01):
advertisers view these stations is more important to them than
advertising on other stations. Now, I will say this, the
advertising markets are changing a lot, and this second concern
could fall to the wayside, you know, as viewing habits
of consumers keep evolving and the advertising market continues to change.
But even if that drops off as a concern of
(17:22):
the DOJ, you still have this issue of the retransmission fees.
And that's a big one because it translates directly into
higher prices for people, and I don't see that when
going away now, just to close this out, Matt, I
did mention that there's kind of a wild card in
that Recently, President Trump has sought to exert significant control
of regulatory bodies executive branch agencies, and as part of
(17:45):
kind of that, he may try to weigh in on
specific deals and push his DOJ to reach his desired result,
and of course that could lead to a change in
this analysis that the DOJ's really implemented for years now.
It remains to be seen whether this happens or not,
whether if he tries to exert influence, whether his DJ
will do his bidding, perhaps going against what the antitrust
(18:09):
laws would say they should do. But I raised this
because we did see a little bit of this pattern
during Trump's first term, so it is possible. But you know,
I'll say that the deals can still get done. But
the difference is no matter what the FCC is done
in relaxing their rules. If they do, the companies normally
would have to agree to divest stations in order to
(18:29):
get a deal done, where the overlaps result in this
ownership of more than one of the big four broadcast
TV stations in any DMA. So you know, I suspect
that would be the case going forward. But with the
caveat of the Trump.
Speaker 1 (18:43):
Wildcard, that's really helpful. Jen, Thank you so much, because
that's an important piece of this story. Just getting past
the FCC is not enough. You got to win an
antitrust review as well. So with that, let's close it out.
Thank you Jen for joining me today. That's today's Votes
and Verdicts brief. For our full report on the topic
(19:05):
and all of our research, please visit bi laws on
the Bloomberg terminal and thank you for tuning in to
Votes and Verdicts.
Host
Elliott Stein
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