Local TV Station Owners Have Reason to Back FCC Chair on Kimmel

(Bloomberg) -- A gathering storm over late-night TV comedy has given local station owners a chance to curry favor with the Republican-controlled Federal Communications Commission, which must ultimately bless any of their merger plans and approve deregulation they’re seeking.

During an appearance on a conservative podcast on Wednesday, FCC Chariman Brendan Carr encouraged local stations to drop Jimmy Kimmel’s late-night show over comments the ABC host made surrounding the assassination of political activist Charlie Kirk. Afterward, two of the nation’s largest TV station owners, Nexstar Media Group Inc. and Sinclair Inc., raced to announce they would be pulling Kimmel’s program from their lineup.

“Mr. Kimmel’s comments about the death of Mr. Kirk are offensive and insensitive at a critical time in our national political discourse,” Andrew Alford, president of Nexstar’s broadcasting division, said in a statement. 

Sinclair, the largest owner of ABC affiliates, went even further, tying the Kimmel situation to larger goals. 

“This incident highlights the critical need for the FCC to take immediate regulatory action to address control held over local broadcasters by the big national networks,” Vice Chairman Jason Smith said in a statement.

The unusual maneuvers — station groups don’t typically criticize their national partners so openly — underscore the degree to which the industry has reached a pivotal point in its livelihood. For years, the local station groups have been able to squeeze higher fees from cable and satellite-TV providers but that source of funds is challenged as consumers cancel subscriptions. Networks, too, have been asking stations for higher fees for distributing their programming.

Local TV executives see consolidation as an antidote to their problems. Owning even more stations would allow them to cut costs, by sharing local newsrooms and ad sales staff between several stations in a market, for example. It would also give them more clout in negotiations with the cable operators that distribute their signals and the networks that provide their programming.

To get there, the broadcast industry wants the Trump administration to do away with regulations that limit station ownership. Presently, no single company can own stations that reach more then 39% of US households. Companies also can’t own more than two stations in any single city.

The commission under Carr is weighing changes that would allow for more consolidation. Carr has said he believes broadcasters should have more room to merge, giving them the ability to compete more aggressively with online media. The commission could consider some changes on the local restrictions as early as Sept. 30.

Nexstar is seeking to acquire rival station owner Tegna Inc. in a transaction worth $6.2 billion, including debt. Nexstar needs the FCC to approve not only the transfer of Tegna’s station licenses, but also the rule changes. The deal would allow the company to reach 80% of US households, twice the current limit.

The local TV industry’s reaction to the Kimmel show is “traceable to their industry’s number one priority, which is lifting the FCC’s limits on the number of stations they can own,” said Andrew Schwartzman, a communications attorney and senior counselor with the Benton Institute for Broadband and Society. “It is not a coincidence that Nexstar, the company that most wants regulatory relief, was first out of the gate.”

Nexstar said the decision to take Kimmel off the air was made independent of the FCC.

“The decision to preempt ‘Jimmy Kimmel Live!’ was made unilaterally by the senior executive team at Nexstar, and they had no communication with the FCC or any government agency prior to making that decision,” the company said in a statement.

Sinclair is also seeking deals. The company recently announced it has embarked on a strategic review that could result in a sale or break up. Sinclair didn’t respond to a request for comment.

Both Nexstar and Sinclair own stations in markets where many viewers were supporters of Kirk and offended by Kimmel’s comments, said Hank Price, a former station manager. 

“They’re the heartland of America,” Price said. “They’re just bombarded with emails and phone calls.”

Large station owners may also prefer to lose the late-night shows entirely, freeing them to run news or other programming for less than what the network shows cost them, according to Price.

“The affiliates might see this as a big opportunity to have the time period,” he said. “It’s not one thing. It’s all those things together.”

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