In mid-July, the Justice Department gave its blessing to Kathy Lau and John Exline‘s Red River Broadcast Co. to sell a NBC affiliate to one of the nation’s largest owners of broadcast TV stations.
On Tuesday, just one day after the Third Circuit Court of Appeals squashed the Commission’s cross-ownership rule rewrite, the FCC’s Media Bureau moved forward with a similar decision — Gray Television is cleared to grab the station.
Minutes before RBR+TVBR‘s Wednesday deadline, news of the deal’s closing arrived via the exclusive broker of record, representing the seller: Kalil & Co.
Gray has been awaiting regulatory approval for its purchase of KDLT-46 in Sioux Falls, S.D. from Red River, a deal valued at $32.5 million.
The deal was first filed with the Commission in May 2018.
With the FCC’s OK, KDLT-46 can now be a sister property to the ABC affiliate in Sioux Falls, KSFY-13.
While this deal formally creates a duopoly, it actually creates a three-network cluster, as KSFY-13.2 is Sioux Falls’ home for The CW Network.
Given the duopoly play for Gray, strict scrutiny was placed on the deal. In July 2018, The American Television Alliance (ATVA) filed comments with the FCC blasting the deal, arguing that Gray failed to make an adequate public interest showing in its desire to own the market’s NBC affiliate. Specifically, ATVA took Gray to task for neither addressing the impact of retransmission consent fees on consumers nor demonstrates that any benefits arising from the duopoly will outweigh the harms.
These concerns were ultimately overweighed by the benefits of Gray ownership of KDLT and its full-time satellite partner, KDLV-5 in Mitchell, S.D.
In her decision, Michelle Carey, the Media Bureau’s Chief, reinforced the FCC’s Top Four waiver policy. This allows the Commission to consider, on a case-by-case basis, whether
the public interest would be served by permitting a top-four combination based on the specific circumstances in the local market.
Here, Carey says yes.
Helping her reach this decision was the demonstration by Gray that Nexstar Media Group-owned KELO-11, a dual CBS/MyNetworkTV affiliate, dominates Sioux Falls in terms of audience share, local ad revenue and various local news metrics.
Further, competition from cable networks and the vast geography of the Sioux Falls DMA “creates special challenges and additional costs” for stations serving the market.
Gray’s No. 1 argument: the combination of KDLT-TV and KSFY-TV is necessary for the stations to compete effectively against “the dominance of KELO-TV” and to achieve the economies of scale necessary to serve the disparate population centers in the market.
Carey agrees, with no petitions to deny filed in response to the transaction. However, two informal objections were filed by ATVA and the NCTA. General concerns were offered, and Carey acknowledged they dealt with retransmission consent. These challenges were rejected.
“[W]e conclude that this transaction will produce significant public interest benefits,” Carey said. “While ATVA complains that the benefits claimed by Gray are vague, unverifiable, and not transaction-specific, Gray’s subsequent filings in this proceeding adequately address
these concerns.”
