With the federal cap on local TV station ownership nearing its end, Sinclair CEO Chris Ripley said he “couldn’t be happier” to see a long-sought industry goal accomplished.
The Republican-controlled FCC is set to vote Thursday on whether to eliminate the rule barring a single owner from controlling stations reaching more than 39% of U.S. households. That limit has increasingly frustrated local TV station owners, who argue it is irrelevant in a pre-streaming age. Brendan Carr, the Donald Trump appointee who chairs the agency, has long railed against the cap.
“We couldn’t be happier, and we certainly applaud the FCC for taking this very meaningful step to remove an outdated regulation that really just has no place in this modern media marketplace,” Ripley told Wall Street analysts Wednesday during Sinclair’s second-quarter earnings call.
Before the call, Sinclair reported mixed results for the April-to-June period, nipping analysts’ consensus revenue forecast but falling short of estimates for net losses per share. Revenue totaled $840 million, up 7% from the year-earlier period, while losses doubled to $1.06 per share.
Sinclair is the No. 2 owner of stations in the U.S. The top-ranked company, Nexstar Media Group, has extra reason to cheer the developments in Washington, as its $6.2 billion acquisition of rival Tegna was blocked by a federal judge earlier this year. Nexstar, which reports earnings on Thursday around the time of the FCC vote, has said it believes the easing or removal of the cap is relevant to its case, which is now in the Ninth Circuit Court of Appeals. Under the Tegna transaction Nexstar elected to close last March despite a lawsuit by DirecTV and the attorneys general of several states, the reach of the combined company would be well in excess of the current cap.
During the appeal, Nexstar and Tegna are required to abide by a “hold-separate” order put in place by the lower-court judge, but Sinclair has also made a hostile offer for E.W. Scripps that the station rival rebuffed. Ripley and other execs intend to pursue other deals as the broadcast sector contends with cord-cutting and ongoing shifts in viewer habit.
“It is very significant to change this rule,” Ripley added of the cap, “as we look at large scale M&A, which is a major objective for us. This really de-risks those opportunities, and we expect that some of the counter-parties that we are interested in will be more likely to want to transact with this certainty put on the books.”
Legal challenges to the removal of the cap are widely expected. Anna Gomez, the lone Democrat on the FCC, has maintained that only Congress can change or eliminate the cap given that it was the entity that enacted it in the 1990s.
“We fully expect people to challenge this order, and we think the FCC is on solid legal ground here in terms of their authority to change this rule and the rationale behind changing it,” Ripley said. “The FCC’s mandate is to deregulate over time. That was the mandate from Congress, as conditions change, and that’s what’s happening here.”
