By Zamir Ahmed, ACA Connects Vice President of External Affairs
If I told you there was a company for which I did all the hiring and firing, chose inventory and set prices, negotiated contracts, conducted the bookkeeping, ran marketing campaigns, made every business decision, and kept most – if not all – the profits but I had no control over the company, would you believe me? Of course not.
This is the same baloney broadcast television conglomerates are feeding us about their so-called “sidecar” agreements that they are exploiting to circumvent federal rules and squeeze even more money out of pay-TV subscribers.
Under these arrangements, a larger broadcast group will operate a television station licensed by the Federal Communications Commission (FCC) to a smaller broadcaster. The larger broadcaster will set the programming lineup on the station, sell advertising, oversee employment, control all financial matters, and could even receive 100% of the profits.
Sounds fishy, right? What if I told you a larger broadcaster can have a controlling interest in a sidecar station owner and even include the smaller broadcaster’s financial information in earnings reports? Or that a sidecar station is often licensed to a longtime business partner of an executive at the larger broadcaster – or even a family member?
Broadcasters use these sidecar agreements to skirt FCC rules that curb their control over the public airwaves at a national and local level. Broadcast groups may only reach 39% of U.S. households through the number of television stations they own, and a broadcast group is allowed to own two stations in a television market so long as only one of those stations is among the four most-watched stations in the area. Controlling a sidecar station thus enables a larger broadcaster to exceed that 39% national ownership cap or control two or more of the most in-demand television stations in a single market.
Sidecar agreements also increase the scale of broadcasters when they negotiate with cable and satellite television providers on retransmission consent – or the rate that pay-TV providers pay broadcasters to carry their stations on their systems. Larger broadcasters have more leverage over pay-TV providers and are able to extract higher retrans rates – which means higher fees for consumers – for sidecar stations than would otherwise be possible. Even as broadcast viewership ratings fall precipitously, sidecar agreements greatly expand broadcasters’ power over the marketplace and have helped retrans rates skyrocket an astronomical 1,529% since 2010.
Thankfully, the FCC recently took steps to address this abuse of its media ownership rules. Last week, the Commission proposed a $1.2 million fine and ordered the sale of WPIX-TV in New York because of Nexstar Media Group’s use of the Mission Broadcasting-licensed station to exceed the 39% national ownership cap. The FCC’s decision depicted the myriad ways Nexstar was the station’s de facto owner, “the most notable being Mission’s complete delegation of its retransmission consent authority for WPIX,” according to the decision.
ACA Connects appreciates the FCC’s efforts to ensure broadcasters are following the rules. As a trade association representing small and midsize cable providers, we know consumers are forced to pay higher prices when broadcasters flout media ownership regulations and engage in this chicanery. The Commission’s decision should be just the first step in increased oversight of sidecar agreements that overstep the law.
The FCC’s actions against Nexstar and Mission are an encouraging sign to everyone that has been urging the Commission to bring an end to this media ownership shell game. We look forward to working with FCC Chairwoman Jessica Rosenworcel and her fellow Commissioners to make sure broadcast conglomerates stop thumbing their noses at consumers, staging a shadow takeover of the public airwaves, and play by the rules.