Sparking broadcaster consolidation
The FCC (Federal Communications Commission) is rewriting rules that executives at Comcast (CMCSA) have called “investment-killing regulations.” The agency has reversed several regulations since it got to work under President Donald Trump. For instance, it voted to eliminate price restrictions in the business data service market and to undo a rule that restricted television station ownership.
Relaxing the television ownership rule could lead to a wave of industry consolidations. Sinclair Broadcast Group (SBGI) is one of the broadcasting companies that has shown interest in tapping more television assets. The company is seeking to acquire Tribune Media (TRCO), the parent of several TV stations serving markets such as New York and Miami.
Need to divest assets to gain clearance
In a move that further shows Sinclair’s appetite for more TV assets, the company recently tapped 14 stations owned by Bonten for $240 million, according to FierceCable. The stations’ reach is about 1.0% of the US national TV market. Sinclair’s stations cover 24% of the national market, according to Bloomberg. Tribune reaches 26% of the country, which shows the companies would be required to divest themselves of some stations to gain regulatory approval for their merger.
Nevertheless, the acquisition of Tribune would sharpen Sinclair’s competitive edge in the US television advertising market, which will be worth ~$77.9 billion by 2020, according to eMarketer.
More consolidation in the market
However, the FCC vote to undo an Obama-era rule and replace it with an old TV ownership regulation could be overturned in court, posing risks to broadcasting companies who may want to take advantage of the new regulation.