Brokers: FCC Deregulation to Trigger Wave of Deals
Broadcasters are poised to execute a rush of mergers and acquisitions if the FCC relaxes ownership rules, but uncertainty about markets, the direction regulators may take and the future of broadcast networks could influence deal-making, broadcast brokers said in interviews this week. The agency's failure to relax ownership rules could spur a wave of bankruptcies, they said. “The industry is crying out for some relief, and it really deserves some relief, because we can't compete with the giant companies that we're forced to compete with now,” Media Services Group co-founder George Reed said. Tideline Partners Managing Partner Gregory Guy said “2025 is the most fundamentally important year for broadcasters in decades.”
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The expectation of relaxed ownership rules has shifted the industry from “a market where there's been a lot of sellers and no buyers” to a “very strategic market” where, depending on the extent of deregulation, many groups may look to grow, Guy said.
Kalil & Co. President Fred Kalil said he believes groups that were seen as seeking to sell stations -- such as Sinclair and Tegna -- have “flipped roles” to become potential buyers. Sinclair CEO Chris Ripley, at the NAB Show in April, said “everything is still on the table” when asked if his company was still looking to sell stations.
Brokers told us that if the national ownership cap is removed, Nexstar, Tegna and Sinclair would be widely seen as looking to expand, while Cox Media Group would be viewed as wanting to sell stations. Scripps executives last week said on an earnings call that the company wants to buy more stations, but brokers told us that's unlikely.
Broadcasters have long said that the regulations discourage investment in the industry and make it tough for station owners to obtain financing, but brokers told us that's changed in recent weeks. For example, Kalil said that a year ago it was much tougher to drum up interest in broadcast investments. And Guy added, “I’m getting calls from some new money.” He said that he expects investment from outside the industry to focus on existing station groups rather than on forming new ones. Kalil said he has spoken “to some of these guys with money, and they want to get back in.”
Broadcasters have been effusive about the financial upside of deregulation (see 2505080050), but other factors could offset the monetary benefits. MVPD subscribership continues to fall, which affects retransmission consent payments to TV broadcasters, and recent White House moves have led to general uncertainty in financial markets, brokers pointed out.
In addition, while FCC Chairman Brendan Carr has signaled that ownership deregulation is coming, the agency has been aggressive in threatening the broadcast networks based on their news judgment. Commissioner Nathan Simington recently suggested capping the fees networks receive from broadcasters (see 2505020066). This sort of treatment could lead to networks wanting to exit the station-affiliate business, a broker told us. All that uncertainty makes it harder for industry to know the value of stations, brokers said.
All the brokers said they expected most of the coming deals in TV to be in the form of station swaps, with companies jockeying and trading to acquire duopolies in major markets. Owning multiple top stations in a market creates big, quick gains for a broadcaster’s bottom line, Guy said. Because the FCC has already begun approving deals that create top-four duopolies using waivers, TV groups don’t necessarily need to wait for deregulation to start making such deals, said Ripley during Sinclair’s earnings call last week. Though the FCC is expected to get a fifth commissioner and a Republican majority this summer, it's still likely to take a year or more to finalize rules relaxing ownership requirements, said BIA Advisory Services Managing Director Rick Ducey in an email. “Waivers, swaps, and joint sales agreements are things that can happen in the meantime,” he said.
While Carr has telegraphed that he would look to do away with local and national TV ownership limits, his plans for radio deregulation are less clear, brokers told us. “Radio’s always been sort of the afterthought, both for regulators and Congress,” said Reed. Depending on what happens to radio ownership caps, radio groups are also likely to seek to acquire multiple stations in big markets while exiting smaller ones, Reed and Guy said. Owning stations in the same market allows companies “to consolidate and to cut some of the duplicate costs out of the business operation,” said Reed. “In a lot of these small and medium-sized markets, that's the difference in survival and having a good local media business that supports the community.”