WB/UPN Combination Will Hurt Sinclair, Trigger Consolidation

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.

11 Responses to WB/UPN Combination Will Hurt Sinclair, Trigger Consolidation

  1. George January 29, 2006 at 6:38 pm #

    An interesting part of this discussion has to do with two former UPN stations owned by Fox: WWOR in NY and WDCA in Washington DC. In both of those cities, the new CW affiliate is the former WB station. So Fox has stripped their stations of any UPN logos. This may also lead to the establishment of a second Fox network.

    By the way, don’t expect much from the Telecom Act in 2006 as far as ownership. That issue is so mired in politics that it won’t get past committee. And I think the public is better served. The 96 Act, for all its faults, was a bi-partisan measure. Now, the Congress is so lost in ideology and agendas that the public interest would be the last concern of our elected representatives.

  2. Paul January 31, 2006 at 5:33 pm #

    I’m not so confident about ownership and the future Telecomm Act. The greed of the NAB knows no bounds.

    The fact that the 96 Act was bipartisan doesn’t mean that it was any good. The relaxation in radio ownership decimated the radio dial and paved the way for the Clear Channelification of FM and Rushification of AM radio.

    It’s not that the Congress is lost in ideology and agenda — they’re all awash in broadcast lobby cash, Democrat or Republican. It’s completely bipartisan, they all love camapign donations from the MPAA, RIAA and NAB.

  3. George January 31, 2006 at 6:38 pm #

    The NAB is a non-profit organization. Their only income is from their members.

    The 96 Act is the law. We have laws in this country, and without them, we have anarchy. The radio dial was in a lot of trouble before 96. The FCC had approved too many radio stations. It was impossible for anyone to have enough audince to make money. Stations were shutting down. Maybe you’re too young to know what it was like. In the 80s, big companies that had owned radio stations started selling them like they had the plague. RCA get out of radio. National Casualty Insurance got out of radio. General Tire was forced to divest its stations. The only people interested in buying stations were radio companies like Emmis and Clear Channel. That’s where we are today. Had it not been for companies like Clear Channel buying stations, we’d had a lot fewer stations on the air now. Because no one else is buying radio stations. Their money is keeping a lot of stations in small towns on the air. The alternative is a centralized radio service like what XM and Sirius is doing.

    I dont trust the religious right with broadcast law. They have made their views clear. They want to control content. So far, the law has left content to the licensees. But the right wing isn’t satisfied with that, and their goal is to use the radio to further their views.

  4. Paul January 31, 2006 at 7:50 pm #

    Frankly, I’m fine with Anarchy.

  5. George January 31, 2006 at 8:20 pm #

    That’s interesting. Then by definition, you must approve of large corporations ignoring, circumventing, or even changing the law in order to line their own pockets. They’re just doing what you’d do if you had the opportunity.

  6. Paul February 1, 2006 at 7:25 am #

    Uh, no. Anarachy is a specifically anti-corporate and anti-capitalist philosophy, in addition to being anti-government.

    With Anarchy there would be no Clear Channel, Nexstar or Sinclair.

    The current situation, with companies colluding with the government to draft laws in their own interest, without regard to the public interest, is just simple corruption, bordering on fascism.

  7. George February 1, 2006 at 8:29 am #

    You can’t place your rules on anarchy. It is the lack of rules and laws. There would be no laws preventing corporations from growing or existing, no governments to control them, and nothing you or anyone else could do about them. The thing about having laws is that when companies break them, you have recourse. In anarchy, you don’t have that chance. The problem with laws is you have to understand them. As for the public interest, the courts have ruled that companies are people too, and their interests have as many rights as individuals. So while you may feel what they;re doing is not in YOUR interest, they are serving the interests of a lot of other people.

  8. Paul February 1, 2006 at 1:13 pm #

    I’m not talking about “my rules” for Anarchy. The philosophy of Anarchy as such goes back to the 19th century, and has roots going back much further. For example, see the wikipedia entry on Anarchism:

    “The word Anarchism is derived from the Greek αναρχία (‘without archons (ruler, chief, king)’). Thus anarchism, as a political philosophy, is the belief that rulers and laws are unnecessary and should be abolished. Anarchism also refers to related social movements that advocate the elimination of authoritarian institutions, particularly the state. [1] The word ‘anarchy,’ as most anarchists use it, does not imply chaos, nihilism, or anomie, but rather a harmonious anti-authoritarian society.”

    Philosophically, I regard the moment when the Court ruled that corporations were people was the moment that turned the legal tide against real people.

    I do understand the laws, and have spent the better part of 10 years studying them.

    Knowing and understanding them is different than liking them or accepting them as right, correct or moral.

  9. George February 1, 2006 at 2:03 pm #

    Where in that definition of anarchy does it say anything about corporations? I think most corporations would advocate eliminating the state, so they could avoid paying taxes or following work rules. They might not be called corporations, since the rules of incorporation would also be eliminated, but there would be commerce and associations of people. And they’d be dedicated to screwing over other individuals. That’s the nature of man, and another philosophy we can discuss some other time. 🙂

    Keep in mind that corporations don’t like or accept the rules they operate under. Which is exactly why they do what they do. And why I say you’re not much different.

  10. Paul February 1, 2006 at 2:35 pm #

    Except corporations don’t agree with the “harmonious” part. More of the general definition goes:
    “In place of what are regarded as authoritarian political structures and coercive economic institutions, anarchists advocate social relations based upon voluntary association of autonomous individuals, cooperation, mutual aid, and self-governance.”

    You can see how the “screwing over other individuals” is frowned up on in this philosophy.

  11. George February 1, 2006 at 2:56 pm #

    I think you’d agree that a lot of people and groups wouldn’t agree with the “harmonious” part. Including street gangs in South Central, and the guy who just stole my stuff. It’s not just corporations.

    In the real world it’s next to impossible to get achieve consensus on anything, from politics to good music to proper behavior at a formal occasion. Especially in this country. I enjoyed the American Experience program on John Adams a few weeks ago that showed even the Founding Fathers disagreed on the proper role of the government. Strict Constitutionalists could learn from the battles fought between Adams and Jefferson.

    It’s hard to apply 19th century philosophies to the 21st century. A lot of water has poured over the dam or under the bridge in that time. Perhaps after the apocalypse, when the world has been destroyed save a handful of cave dwellers, such ideals might be practical for a few months. Then petty disagreements will cause the few survivors to eat each other for dinner. In the meantime, I live in the real world.

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