The FCC on Thursday voted to nix a decades-old cap limiting TV station audience reach for broadcasters. But that doesn't necessarily mean a wave of M&A is imminent.
Deals that consolidate an individual broadcaster’s over-the-air reach beyond 39% of U.S. TV homes will now be reviewed by the FCC on a case-by-case basis. The order repealing the 39% cap passed 2-1, with Republican FCC Chairman Brendan Carr joining Republican Commissioner Olivia Trusty in favor over the lone Democratic Commissioner, Anna Gomez.
Ending the cap is broadly seen as a win for President Donald Trump and key allies in the broadcast TV business. Key industry executives have long hoped Trump's administration would overturn what both executives described as antiquated regulations that kept their industry from better competing with Big Tech and other media forces. Both Carr and Trusty were nominated to their seats on the FCC by Trump.
The day after the president’s election win in early November 2024, Nexstar Media Group chief executive Perry Sook and Sinclair Broadcast Group CEO Chris Ripley, both publicly lauded what they predicted to be strong deregulatory possibilities to come.
How much will this change things?
Though notable, Thursday’s FCC ruling might not actually change all that much given broadcasters and the FCC have recently been keen on big deals that ignored the cap. In March, for example, Carr swiftly approved Nexstar’s $6.2 billion purchase of Tegna, which creates a broadcast reach concentration of more than 80%, despite the cap still being in place.
A bipartisan group of 13 states attorneys general sued Nexstar over antitrust violations and won a preliminary injunction. The deal is held up until the trial starts in July of next year. It is questionable whether and how much the FCC cap ruling will help Nexstar’s case.
Still, asked by equity analysts during Nexstar’s Q2 earnings call Thursday if there was a chance of an early settlement, Sook seemed emboldened by the FCC news, responding, "Is it possible there could be an out-of-court settlement? I suppose so.”
Likewise, Sinclair’s $622 million quest to take over family controlled E.W. Scripps would also have blown the doors off the ownership cap. But Sinclair’s quest never made it to FCC review, given Scripp’s voting shareholders unanimously opted for a poison pill last November to block the deal.
Battle lines are drawn
Though repeal of the ownership cap seems like it would encourage biggest operators in the declining U.S. broadcast market to sweep through what's left of the industry, Carr and other proponents argued the move gives smaller market stations the ability to band together.
“I don’t want local broadcast TV to go the way of local newspapers,” Carr said in a statement. “And yet the risk is real. To be sure, big city stations will be fine — the way big city newspapers are fine today. But that will not be the case everywhere.”
“The FCC’s decision to eliminate the outdated national television ownership cap marks a generational step toward strengthening local stations and ensuring they can compete in today’s media marketplace,” added Curtis LeGeyt, president and CEO of the National Association of Broadcasters (NAB), also in a statement.
However, Matt Wood, VP of policy and general counsel for Free Press — the media rights advocacy group —strongly questioned the FCC’s motives. He also refuted the agency’s authority to unwind a rule that was actually made in Congress.
“Changing this limit requires congressional action, but Carr doesn’t care,” Wood said in a press release. “He’ll do whatever it takes to clear the way for Trump-aligned billionaires to swallow up stations wherever and whenever they please. The result would be just one or two dominant broadcasters in every market, deep job cuts for journalists, and an influx of bargain-basement content disguised as local news.”
FCC Commissioner Gomez, who voted against the repeal likewise stated the move was "unlawful on its face and a profound departure from both statutory boundaries and longstanding broadcast policy."
Free Press already sued the FCC over the way it handled its Nexstar-Tegna review. Wood said it will sue the agency again over this latest ruling.
Among other trade groups and advocacy orgs, Free press is joined in opposition by the American Television Alliance, which represents pay TV operators.
“By eliminating this safeguard, the FCC has ignored congressional intent and opened the door to unchecked ‘Big Broadcast’ consolidation that will drive up costs for viewers and reduce local news programming,” said ATVA spokesman Hunter Wilson.
The ATVA described the cap ruling as a naked means of consolidating leverage in broadcast retransmission rights negotiations, noting that while the broadcast TV audience has declined by nearly half over the last 15 years, the fees cable and satellite TV companies pay broadcasters to carry their channels has gone up by 2,000%