In late November, Cox Media Group-owned television stations were suddenly blocked from paying subscribers of the Dish direct broadcast satellite service, as a new retransmission consent accord between the MVPD and the owner of such properties as WSB-2 in Atlanta and WFTV-9 in Orlando would not be signed before the expiry date of the previous arrangement.
Finger pointing from both parties ensued, but one accusation of CMG from Dish was particularly fiery, and involved TEGNA. Was Dish accurate in its version of the retrans impasse? It appears to be the case, as Standard General has confirmed it will not negotiate retransmission agreements for both parties as if they were the same entity.
That’s still not good enough for one pro-cable TV lobby, of which Dish is a member, that wants federal regulators to kill the deal.
During their war of words nearly one month ago, Brian Neylon, Group President for DISH TV, issued a barrage of disparaging statements against Cox Media Group. Among his accusations was a claim from Neylon that “Cox is trying to negotiate for stations it does not yet own.”
That was particularly intriguing, and Dish did not elaborate on which stations those would be. However, industry chatter pointed to stations licensed to TEGNA, which sees Apollo Global Management as the link between that company and CMG. Apollo is the controlling interest holder in Cox Media Group, while the privatization effort of TEGNA would see Apollo gain a non-controlling, non-voting stake.
Yet, there was doubt that, minus any public comment from TEGNA, Cox Media Group, Standard General or Apollo Global Management, that combining TEGNA and CMG stations in a single retrans negotiation package was the biggest reason Dish failed to agree to a new carriage agreement with CMG. That’s because a February 2022 transaction that sees Cox Media Group agreeing to purchase KEVU-CD 23 in Eugene-Springfield, Ore., the MyNetwork TV affiliate for the market, and FOX affiliate KLSR-34 in Eugene — along with translators associated with the stations — from Patsy Smullin-led California Oregon Broadcasting Inc. (COBI) was apparently a focal point of the retrans impasse.
Still, the speculation that TEGNA and CMG stations were indeed seeking retrans equity was high, in particular because the Deb McDermott-led Standard Media saw its WLNE-6 in Providence; KLKN-8 in Lincoln, Neb.; KBSI-23 in Cape Girardeau, Mo.; and WDKA-49 in Paducah, Ky., all fade to black on Dish in lieu of a new retransmission consent accord in early November.
McDermott will serve as CEO of TEGNA, replacing Dave Lougee, upon the closing of Standard General’s purchase of the company, effectively integrating those four properties into CMG.
When that will transpire, if at all, is on everyone’s minds. And, with the clock ticking and a Q4 2022 closing anticipated by all parties, Standard General head Soohyung Kim on Friday sent a letter to the FCC that “address the applicability of retransmission consent agreements to the TEGNA stations that will be controlled by Standard General L.P.” once its proposed transaction is complete.
First, Kim insists, “As Standard General has previously stated, any impact of the transactions on the retransmission consent fees payable by multichannel video programming distributors is not central to Standard General’s thesis for the proposed transactions.”
As such, “in light of the cost of continued delay to the closing of the transactions,” Standard General “voluntarily and irrevocably waives enforcement or other application of any term or condition of an Retransmission Consent Agreement (RCA) that would, by reason of any of the transactions, result in an RCA between Cox Media Group and any MVPD applying to any current TEGNA station that will be controlled by Standard General after the closing.
Thus, any retransmission consent agreement with TEGNA in effect at the time of closing will continue to apply to TEGNA stations after the deal is completed.
Why, specifically, did Soo Kim submit the letter late Friday to the Commission? “The regulatory authorities have expressed concerns to us that our transaction could result in negative impacts on cable and satellite TV consumers in an environment where the government has a heightened focus on inflation,” it stated in a release distributed after the Closing Bell on Wall Street. “This commitment further demonstrates the public interest benefits of the transaction.”
Standard General also said that it continues “to be excited about the bright future we see for TEGNA under our leadership” and looks forward “to continue working collaboratively with regulators to complete their review of the proposed transaction and proceed to closing.”
The Standard General/Apollo Global Management joint privatization bid for TEGNA, a $24-per-share deal, was announced on February 22. If the FCC says yes, it would take TEGNA, the third-largest TV station owner by revenue, off the stock market. Just how big, dollar-wise, is the deal crafted by Soo, a former dissident shareholder who previously sought to gain control of TEGNA through board member adjustments?
“We estimate the value of TEGNA’s 64 full power and three low-power TV stations at approximately $8.71 billion, making it the second-largest transaction in broadcast deal history,” said Volker Moerbitz of S&P Global Market Intelligence’s Kagan media research unit. In fact, the TEGNA proposal is topped only by the 1999 Viacom/CBS merger. “We estimated the value of the TV stations at $8.75 billion,” Moerbitz says of that 23-year old transaction.
To help win regulatory approval of the TEGNA acquisition plan, Cox Media Group on March 30 announced the sale of 13 full-power stations in 11 markets to Imagicomm Communications LLC, parent company of the cable TV-distributed INSP network. The value of this deal, which has already closed, comes in at $488 million.
But, in order to meet regulatory approval, given the plan to make Apollo Global Management a non-voting equity interest holder in TEGNA, upon closing the following stations would be transferred to Cox Media Group, making it the licensee:
- ABC affiliate KVUE-24 in Austin
- ABC affiliate WFAA-8 and Estrella TV affiliate KMPX-29 in Dallas-Fort Worth
- CBS affiliate KHOU-11 and Quest-affiliated KTBU-55 in Houston
This further exacerbated negotiations between Dish and TEGNA, as the retransmission consent discussions likely included these stations, too, despite their pending transfer of control.
While the FCC continues to review the deal, which TEGNA shareholders approved in May, will Kim’s pledge to keep CMG stations out of TEGNA retrans negotiations fast-track its long-awaited regulatory approval? Could an agreement putting CMG stations back on Dish be imminent?
PRO-CABLE LOBBY WANTS SOO SHOO
All eyes are watching, as the Commission will ultimately decide whether or not to create the No. 3 TV station owner by revenue — and No. 2 TV station owner by assets — at a time when industry consolidation and the voluntary rollout of the ATSC 3.0 new digital broadcast standard are being matched by continuing ad-dollar siphoning to digital media and the rollout of 5G technology.
If it were up to pro-MVPD lobbying group American Television Alliance, the “highly complicated and unusual investment in the purchase of TEGNA’s television stations by another Wall Street giant, Standard General,” would be tossed by government regulators.
“Instead of being on its best behavior as Apollo’s Cox Media pushes for FCC approval of its investment, Apollo’s Cox Media has proven it is willing to disenfranchise viewers who have done nothing wrong while the FCC is watching closely,” ATVA spokesperson Jessica Kendust said on Monday morning, Los Angeles time. “This suggests that worse could be yet to come when the spotlight is removed.”
Kendust added that a bigger problem exists, as the ATVA has warned that this deal poses a more significant threat to consumers because the pending transaction will ‘intertwine’ Apollo’s Cox Media, Standard General and TEGNA in a way that permits the parties to collude — “resulting in higher prices all around.”
Kendust concludes, “We understand that Standard General has offered conditions to the FCC designed to address some of the harms we identified. But the reality is that the proposed investment increases the parties’ incentive and ability to collude in ways unaddressed by Standard General’s offer. The FCC should look closely at the transaction and do whatever it takes to prevent big broadcast from colluding.”
Dish is an ATVA member.
