On February 1, one of the media industry’s biggest deals of some time — Gray Television‘s purchase of Quincy Media, Inc. — became known.
The Gray deal, valued at $925 million, sees the immediate divestment of Quincy stations in six markets where current local ownership rule limits prevent Gray from keeping the stations.
The transaction also sees Gray seeking a “failing station” waiver in an Indiana market and one Wisconsin market, with details of its plan filed as part of a publicly redacted 106-page filing made with the FCC.
Gray is seeking the Commission grant of failing station waivers for its proposed
acquisition of Quincy’s stations in the South Bend-Elkhart and Fort Wayne, Ind., markets; and in the Duluth, Minn.-Superior, Wisc. DMA.
In the South Bend-Elkhart DMA, home to Notre Dame University, Gray owns and operates WNDU-TV and proposes to acquire Quincy’s WSJV-TV, licensed to Elkhart.
In the Ft. Wayne and Duluth-Superior DMAs, Gray proposes the acquisition of existing station combinations that Quincy owns and operates.
Such a waiver can be in the public interest, Gray says, should the “failing” station have a low all-day audience share; negative cash flow for three consecutive years prior to the application; and if there is no out-of-town buyer willing and able to acquire the station at
other than an artificially depressed price.
According to Gray, each of the three requested waivers meets all four of these standards.
What may be the biggest takeaway from Gray’s request is what it considers its local market competition to be in 2021, compared to year’s past. “The case for small market duopolies like those requested in this transaction is far stronger today than it was when the Commission adopted the failing station waiver standard,” Gray states. “With increasing competition from digital companies, including Google and Facebook, and broadcast ratings in decline due to viewer fragmentation from streaming services such as Netflix
and Amazon, no rational out-of-market buyer would be interested in purchasing WSJV,
WISE-TV, or KDLH on a standalone basis.
WISE is an affiliate of The CW Network. WSJV is an affiliate of digital multicast networks Heroes & Icons. KDLH is also a CW Network affiliate.
“Any prospective buyer would need to invest significant amounts of capital to improve the stations’ performance – without any guarantee that they could generate the revenues needed to pay for the upgrades as standalone stations,” Gray argues. ‘To add to the difficulty, any out-of-market buyer would need to take into account the effect the COVID-
19 pandemic has had on broadcasters, particularly broadcasters in small markets.”
The company also reiterated how in fall 2020 it released a story outlining “efficiencies and
economies of scale from common ownership of multiple stations” in a market will result in an increase in local news production. Research conducted by Dr. Mark Fratrik at BIA Advisory Services supported Gray’s argument.
Meanwhile, in Quincy Media’s home market of Quincy, Ill., Gray asserts that its purchase of WGEM-TV plus WGEM-AM & FM will not run afoul of FCC cross-ownership rules.
