Sinclair Interested in Selling Off Some Spectrum in Incentive Auction, CEO Amy Says
Sinclair Broadcast is considering participating in the TV incentive auction, said CEO David Amy on a panel of broadcast executives at the SNL Kagan TV and Radio Finance Summit Thursday. “There are some markets where it could make sense,” such as designated market areas where Sinclair has duopolies and could sell spectrum while maintaining the same presence through channel sharing, Amy said. Amy's profession of interest in the auction was just 10 days after losing a court challenge along with NAB against the auction in the U.S. Court of Appeals for the D.C. Circuit. NAB General Counsel Rick Kaplan conceded Thursday that the decision's language means future court challenges against the FCC aren't likely to succeed. Litigation “is not a major threat” to the auction happening on time, Kaplan said. The auction and a transition to ATSC 3.0 aren't likely to synchronize, he said.
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CBS, Media General and Tribune also have expressed interest in the auction, said SNL analyst Robin Flynn. The auction's opportunities may be overblown, said Nexstar Chief Financial Officer Tom Carter. Nexstar is focusing its auction attention only on its stations that are in very desirable areas to clear spectrum, he said -- just seven or eight of the company's 58 stations. The auction is “interesting” but Carter said he's not sure how “meaningful” it will be to his company. Gray TV Senior Vice President Kevin Latek said his company is primarily interested in profiting from the auction “on the back end” -- taking advantage of opportunities created by other broadcasters exiting the business.
The biggest missing piece for the FCC's auction plans is how its TVStudy software will perform, Kaplan said. The FCC should release more information about its desired clearing target to create certainty for broadcasters and make the auction more attractive to publicly traded companies, said Venture Technologies CEO Paul Koplin. The commission can't do so because it won't know the clearing target until it knows how many broadcasters are participating, said Media Bureau Chief Bill Lake, calling the reverse auction “a price discovery mechanism.”
Lake also said the auction procedures item that went into circulation Thursday will change the percentage discount that stations moving from UHF to VHF receive in the auction. It also reduces the amount of impaired spectrum the commission is willing to accept, he said. Though information about impairments along the Canadian and Mexican border isn’t currently available to broadcasters, they will have that information by the auction, he said.
Retransmission consent revenue is better this year than expected, said Flynn, reaching roughly $6 billion. By 2021, that number could rise to $10 billion, she said. Flynn and Paul Hastings attorney Sherrese Smith, a former adviser to ex-FCC Chairman Julius Genachowski, both said congressional and FCC movement against retrans rules is seen as unlikely to happen soon.
Broadcasting retransmission rights are undervalued, said CEOs from Bonten Media, Heartland Media and Northwest Broadcasting during a retrans panel. “It's incumbent on us to be tough in these negotiations,” said Heartland CEO Robert Prather. Dish and DirecTV are tougher to negotiate with for retrans than cable multichannel video programming distributors (MVPDs), said Northwest CEO Brian Brady. The direct broadcast satellite companies intentionally negotiate in order to cause blackouts and win political sympathy, he said. “It's part of their business plan,” he said.
To increase leverage, broadcasters should stop agreeing not to disclose the terms of their retrans contracts, said Prather. “Why not tell the world what we're getting from these cable guys?” he said. “Transparency is to our advantage,” Prather said.
Though some broadcasters pointed to MVPD consolidation as a threat to broadcaster revenue, broadcasters will make up that scale gap by consolidation of their own, said Carter. Though Flynn said TV merger and acquisition was quiet because of the impending incentive auction, negotiation is still occurring behind the scenes, Carter said.
Political advertising revenue in 2016 is expected to be more than $3 billion because of the presidential election, said TVB CEO Steve Lanzano. A high number of battleground states could drive that number higher, but a drawn-out Republican primary battle could lower it, he said. That decrease would be caused by likely Democratic Party nominee Hillary Clinton holding back most of her ad dollars until the other party's dust settles, he said. Automated advertising sales technology -- called programmatic -- that allows advertisers to make national broadcast ad buys without having to make individual deal with each broadcaster involved could also boost TV ad revenue, Lanzano said. He and many others Thursday said digital advertising is no longer viewed as a replacement for TV ads. “The bloom is off the rose,” Lanzano said.