While we hate to turn this into the JSA/SSA blog, it appears that events are moving quickly on that front, so there is seemingly some news almost every day. The week before last, the big news was comments of the Department of Justice filed with the FCC, suggesting that Joint Sales Agreements be attributable (meaning that they should count for multiple ownership purposes. i.e. you can’t do a JSA with another station in your market unless you can own that station), and that the FCC review Shared Services Agreements and similar arrangements on a case-by-case basis. This is pretty much the position that the FCC’s new Chairman was expected to take, based on rumors floating around Washington (see our article here). The way that the trade press reacted to the filing of the DOJ’s comments was an expectation that the “fix is in,” so that the expected action at the March FCC meeting was now a foregone conclusion. But this past week has been filled with stories about broadcasters making the case that there is more to consider here, and late last week came an public filing from NABOB (the National Association of Black Owned Broadcasters), summarizing positions it took in a meeting with FCC Commissioners last week, to, prehpas reluctantly, support at least some limited continuation of these agreements as they could be a force for promoting minority ownership of broadcast stations.
The DOJ’s comments certainly did say that they supported the attribution of JSAs, though the reasoning of that determination was not especially compelling or even internally consistent. The DOJ recognized that some JSAs could actually be beneficial to competition. Even though they recognized the potential benefits of JSAs, because they had supported the attribution of JSAs for radio, over 15 years ago, and as any agreements between competitors had the potential for impeding competition in a market, they contended that JSAs should be attributable. As TV NewCheck put it in a very good article published on Friday, the DOJ’s reasoning is “so 1997.” But beyond that, had the DOJ’s brief not been signed by the DOJ, there would have been numerous reasons for the Commission to give it little weight in its consideration of JSAs and SSAs
The DOJ filing does not provide any factual analysis at all of the issues with JSAs, or any analysis of how many of these agreements promoted the public interest, and how many impeded it. The DOJ mentions that they had analyzed four cases involving JSAs over the last ten years, apparently challenging only one. In 10 years! The brief does not even suggest that the DOJ knows how many JSAs are in existence, or what the public interest benefits that arose from their formation. Yet, without even knowing the facts, the DOJ makes the blanket pronouncement that these agreements should effectively be banned by FCC rules.
The DOJ essentially relies on its conclusion that radio JSAs should be attributable, and, as TV JSAs involve agreements between competitors, they therefore should be attributable. Beyond the obvious failure to account for the differences in media completion in the intervening 15 years (as pointed out by the TV NewsCheck article), the DOJ did not even recognize that the attribution of radio JSAs followed perhaps the most significant liberalization in the local radio ownership rules that has ever occurred – going from a strict limit of one party being able to own only 4 radio stations in any radio market to allowing one owner to hold as many as 8 licenses in a single market. In TV, the liberalization of the local ownership restrictions simply has not occurred despite the incredible increase in media outlets in the last 15 years.
Just think of the changes in competition in the media marketplace that have taken place in the last 15 years. Facebook did not even start to operate until 2004, and it was not available to everyone until 2007. Netflix did not start streaming until 2007, and Amazon actually starting a year before in 2006. YouTube and Pandora both started streaming to the public in 2005. All of these companies (except, perhaps Netflix and Amazon) get local advertising dollars – meaning that they compete with TV stations for local ad sales. All compete for viewership. Local cable companies and their local sales arms have also become much more aggressive competitors in the last 15 years. But the DOJ takes that the position that TV is an island unto itself, immune from these competitive pressures, and should be analyzed as if these competitors don’t even exist.
TV broadcasting needs to remain competitive in today’s marketplace, and especially in smaller markets, there simply is not the advertising revenue to support all the stations that exist as fully independent television operations. While combinations of stations allow for economies of scale, and the preservation of free over-the-air competitors, the DOJ comments do not look at where these deals are necessary in today’s media marketplace. Broadcasters have been visiting the FCC and filing written comments pointing over the last few weeks since the FCC plans have become public, pointing out the positive benefits of these agreements. In many cases, new news programs and minority-oriented programming and station technical improvements not possible without these combinations have been cited.
Moreover, there has been no real analysis of what would happen if the FCC was to make these stations go independent. Who would end up operating them? It would seem that the “sidecar” stations were all marginal stations to begin with, or there would have been some independent operator making bids to acquire them. While those proposing attribution for these interests envision independent locally owned TV stations sprouting when these deals are undone, the truth is likely to be much different. In many of the smaller markets where these arrangements exist, there are unlikely to be new local entrants looking to buy these stations, as TV stations are costly to run and there simply is not the advertising base to support a fully local station beyond a couple of network affiliates who are well established in the marketplace. The disposition of these stations seems much more likely to be to national programmers – like shopping networks which proliferated before JSAs become as common as they are now.
Perhaps most notable was the fact that NABOB last week stated that it reluctantly supports the continuation of these agreements. The support was with a caveat, that JSAs be allowed where they contribute to minority ownership and provide a path to independence of the stations over time. In essence they support using JSAs as a type of incubator program. But they recognize that these arrangements can serve a public good – the point recognized but ignored by the DOJ.
The TV JSA proceeding was first opened a decade ago, and the FCC’s proposed findings and the official comments on those proposals were all made before the technological changes cited above. It seems curious that the FCC would now be moving to decide this matter without seeking to refresh the record to take into account today’s marketplace (or to even determine how many of these arrangements currently exist and the impact that the termination of these arrangements would have on stations and TV companies).
The decision will apparently be made at the FCC’s meeting, now scheduled for March 31. We will all certainly be watching the decision to be made that day, and the ramifications of that decision that are certain to follow.