The news this week that the WB and UPN will be merging into one network has many mid-sized station owners shaking. That’s because a lot of markets have one affiliate for each network, but when they combine, one of those stations is going to lose its network affiliation.
Already big players like Tribune and CBS have contracted to have their stations join the new CW network. But, as Ken Schreiner points out, the mid-size owners like Sinclair may be getting the shaft, especially in markets where Tribune and CBS own stations that will affiliate with the CW. According to Ken, Sinclair’s stock dropped 16% when the news broke last Tuesday.
Sinclair is vulnerable in eight markets where it owns a WB or UPN affilate. In four of those markets–Tampa, Pittsburgh, Norfolk, and Oklahoma City–Tribune or CBS already own a station that will join the CW. In a press release, Sinclair says that 1% to 1.5% of its net revenues may be at risk.
In mediageek’s backyard of Champaign, IL there is a WB and a UPN affiliate, and the local paper reported that neither station knows which one will be picked to be the CW affiliate.
The local UPN affiliate is owned by Nexstar, an aggressively growing midsize TV owner that mediageek readers should be familiar with. Nexstar is less invested than Sinclair in these two minor networks, owning just three UPN affiliates.
The local WB affiliate is owned by Acme communications, whose CEO and founder was also CEO of the WB from 1993 to 2004. Given that connection, I think its a good bet that Acme will retain CW affiliation for all of its stations, unless one conflicts with a Tribune or CBS-owned station. And it seems that investors would agree, since unlike Sinclair, Acme’s stock went up 15% when the UPN/WB deal was announced.
In the Champaign market, my money is therefore on Acme-owned WBUI to become the CW affiliate, with Nexstar-owned WCFN losing out.
In a lot of ways this is just a lot of corporate maneuvering in a big-money game of chicken. But at local stations there are probably jobs at stake. Local news broadcasts will probably be the first to go at stations that lose affiliations in this deal, since there likely will be a loss of viewers in addition to a loss of a network program lead-in. Viewers living in markets with Sinclair station may see their news programs cut even more than they already have been.
So, as much as companies like Sinclair and Nexstar like to kick back at the networks, those affiliations nevertheless make up a significant portion of those stations’ value, both to advertisers and to cable and satellite. A station that just carries a slate of syndicated programmng rather than network programming (even if it’s from the #5 network) is just not as valuable, and cable companies won’t be as eager to cough up for carriage rights. Since those rights made $40 million for Nexstar and $20 million for Sinclair in 2004, this is more than just a drop in the bucket.
This battle will come to a head this year as the Telecomm Act of 2006 gets drafted in Congress. The station owners may try to get the gov’t to give them more rights against the networks. They’ll also push to raise local TV ownership limits, for two reasons. First, big companies like Tribune want to own more than 1 or 2 stations in a single market. Second, the smaller owners that are barely profitable (Sincair, Nexstar) can’t easily get rid of stations in a lot of markets because bigger owners are already at their max.
My guess is that this one consolidation between the UPN and the WB will trigger another wave of local station consolidation that will be far from in the best interest of the viewing public.
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