TV CEOs Talk Affiliate Fee Cap and Deregulation

Implementing Simington’s proposal “would allow for the strengthening of local broadcasters and local news throughout the country,” said Sinclair CEO Chris Ripley: The FCC has authority to regulate the relationship between affiliates and networks, and “capping a major expense like that could be very helpful in terms of leveling the playing field with us and big tech and big media.”

Gray Chief Legal and Development Officer Kevin Latek declined to comment on Simington’s proposal but said there's a significant disparity between what broadcasters receive in retransmission fees from traditional multichannel video programming distributors and the fees from virtual MVPDs. The op-ed laying out Simington's proposal discussed network control over negotiations with Hulu Live and YouTube TV. “Whether through traditional cable or streaming platforms, the Commission must act decisively to level the playing field,” wrote the commissioner and Gavin Wax, his chief of staff.

Executives at Gray, Sinclair, Nexstar and Tegna were confident that ownership deregulation was on the way. Sook said the prospects for deregulation are the best he’s seen in 45 years in the industry, and he expects the FCC to issue an NPRM on ownership rules soon after Chairman Brendan Carr has a Republican majority, “which could happen by early this summer.” Ripley said there's a “groundswell” of support for deregulation in Washington, and he expects FCC action on ownership “fairly quickly” after commissioner nominee Olivia Trusty is confirmed. “She could be in place by Memorial Day,” Ripley said.

Sook said the FCC has the authority to do “pretty much everything” when it comes to broadcast ownership deregulation, meaning that it could eliminate both local station limits and the national ownership cap. “And so we think things could go pretty far, pretty fast.”

Though opponents of ownership deregulation have argued that only Congress can alter the national ownership cap, Sook said he doesn’t see the U.S. Supreme Court’s elimination of Chevron deference as a problem. “We actually read the Chevron ruling as a positive for industry, meaning that there could be judicial review of regulatory agency sanctions, and they couldn't just happen in a vacuum,” he said. “I don't see that as an impediment” to FCC action on the national cap.

Sook also said he has received indications that DOJ won’t seek to block broadcast mergers over advertising competition. “Pretty high up the food chain at the DOJ,” officials understand that broadcasters compete with internet advertising, he said. “I think people understand that and are willing to address marketplace realities in transactions that might be proposed going forward.”

Ripley and Sook discussed the possibility of moving ahead with station deals before changes to the rules are final. Carr has “indicated his willingness to consider waivers during either the pendency of a rulemaking or waivers just in general,” Sook said. “So, I think you'll see all of those levers be pushed as time goes on this year.” Ripley said that “depending on the situation, you don't necessarily have to wait for the rules to change,” similarly suggesting that broadcasters could use waivers to pursue station swaps while waiting for more sweeping rule changes.

Sook said Nexstar would prioritize increasing its national footprint over acquiring second stations, while Latek said Gray is “actively pursuing everything, and, I think, our peers are doing the same thing.” Tegna CEO Mike Steib said his company was open to buying and selling stations. “If there's anything someone wants to buy from us at a price that is more than it is worth to our shareholders, we're interested in selling it.”

Gray co-CEO Hilton Howell said broadcasting consolidation is “inherently universally positive in terms of saving money.”