Sinclair CEO Tells Investors Recent TV Station Purchases About Spectrum
Sinclair’s recent TV station buying spree has been fueled in part by a desire to aggregate more spectrum, which the company believes will be increasingly valuable, CEO David Smith told investors at a Deutsche Bank conference Monday. “We think the long-term prospects for a spectrum-space play in TV, and the opportunities it’s going to provide, are very material and we think that time is getting closer and closer,” Smith said. “These acquisitions are a mechanism to get into position to play what we think is clearly going to be a larger opportunity that exists by virtue of a platform that is capable of doing things well beyond what it’s capable of doing now,” he said. The company has been a proponent of a plan to let broadcasters provide backhaul Internet service to carriers (CD Nov 17/11 p11).
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Advances in technology, such as the rise of 4K video technology that delivers resolutions far higher than HDTV, will prompt TV stations to adopt new broadcast technology, Smith said. “When it comes time to do 4K from a broadcast platform, we're going to need a new platform,” he said. That will give broadcasters an opportunity to offer more services than they do now, he said. “We think there’s probably two or three years’ worth of work left to get the industry ready to be able to do 4K, and anything else that’s coming,” he said. “And in our view that’s when the opportunity really starts."
Smith said he “can’t fathom” being a participant in the FCC’s planned incentive spectrum auction. “It makes absolutely no sense to me,” he said. Some investors have been speculating on broadcast assets ahead of the auction, but beyond them Smith said he isn’t sure there will be much interest among TV station operators.
Meanwhile, Sinclair plans to keep buying stations when it finds good deals, he said. Under FCC ownership rules, Sinclair could double the number of TV stations it owns, primarily by acquiring stations in smaller markets, before running into limits, Smith said. “Right now we cover roughly 30 percent of the country but when you count it the way the administrative agency counts it, we're only roughly 16 or 18 percent,” he said, because UHF stations are counted differently than VHF stations. “We could literally buy a TV station in markets from 75 or 80 to 200 and not hit the mark,” he said.
Scale gives Sinclair more leverage negotiating contracts with its equipment and programming suppliers as well as with its distributors, Smith said. “Look at Mediacom,” he said. “We represent roughly more than half of all their subscribers. So how can they not have a deal with us?"
Smith was incredulous that investors value Internet companies such as Netflix and LinkedIn higher than Sinclair. “How can they be worth more than we are,” he said. “We reach 34 million households. Netflix reaches 32, 33 million households and all they do is stream. Are there barriers to entry in our business? Yes. There are no barriers to entry in their business and guess who’s coming in: Intel,” he said. “I'm just a poor lowly broadcaster trying to figure out why people put money behind companies like that and all they do is bleed money.”