Local marketing agreement
Its original licensee (the "junior" partner) still remains legally responsible for the station and its operations, such as compliance with relevant regulations regarding content.
[4] The first local marketing agreement in North American television was formed in 1991, when the Sinclair Broadcast Group purchased Fox affiliate WPGH-TV in Pittsburgh, Pennsylvania.
[5] Sinclair's use of local marketing agreements would lead to legal issues in 1999, when Glencairn, Ltd. (since restructured as Cunningham Broadcasting) announced that it would acquire Fox affiliate KOKH-TV in Oklahoma City, Oklahoma from Sullivan Broadcasting; Glencairn subsequently announced plans to sell five of its 11 existing stations that were operated by Sinclair under LMAs to that company outright.
As the family of Sinclair Broadcast Group founder Julian Smith controlled 97% of Glencairn's stock assets (which remains the case under its Cunningham structure) and the company was to be paid with Sinclair stock in turn for the purchases, KOKH and Sinclair-owned WB affiliate KOCB would effectively constitute a duopoly in violation of FCC rules.
[6][7] After the FCC updated its media ownership rules to allow a single company to own two television stations in the same market in August 1999, Sinclair restructured the deal to acquire KOKH outright.
[9] Even still, the related joint sales and shared services agreement structures became increasingly common during the 2000s; these outsourcing agreements proliferated between 2011 and 2013, when station owners such as Sinclair and the Nexstar Broadcasting Group began expanding their portfolios by acquiring additional stations in an effort to drive scale as well as to gain leverage in retransmission consent negotiations with cable and satellite television providers.
The most common use of an LMA in television broadcasting is to create a "virtual duopoly", where the stations operated under the agreement are consolidated into a single entity.
[11] Both Tribune Media and the Gannett Company were required to use shared services agreements as a similar loophole to take control of certain stations in their respective 2013 purchases of Local TV and Belo, as they did not have exemptions to the FCC's newspaper cross-ownership restrictions in the affected markets.
[25][42] Redundant staff members are often laid off as part of the consolidation process, and the sharing of news content reduces the number of unique editorial voices in the market.
This in particular is one of the caveats of pushes to ban outsourcing agreements by media consolidation critics, who also suggest that LMAs result in a decreased amount of local news coverage on the brokered station.
[11][25] In 2011, after temporarily losing its Fox affiliation for WFFT-TV to a subchannel of WISE-TV due to a reverse compensation dispute, Nexstar (ironically, given its use of similar practices in other markets)[11] filed an antitrust lawsuit against the station's managing partner, Granite Broadcasting, arguing that it had built a monopoly on local advertising sales by having effective control of the outlets for four major networks (ABC and MyNetworkTV on WPTA, and NBC, Fox, and The CW on WISE-TV; owned by Malara Broadcast Group and operated under agreements by Granite).
[78] Gannett Company's 2013 acquisition of Belo was opposed by organizations such as the American Cable Association and Free Press, due to Gannett's plans to use LMAs and two shell companies owned by former Belo and Fisher Communications executives (respectively, Sander Media and Tucker Operating Co.) to dodge FCC newspaper cross-ownership restrictions in Louisville, Phoenix, Portland, Oregon and Tucson.
Even though Gannett planned to operate KMOV separately from KSDK, the Department ruled the agreement to be a violation of antitrust law, as it would reduce competition for advertising sales.
[83] In December 2013, FCC Video Division Chief Barbara Kreisman sent a letter demanding information from the Sinclair Broadcast Group on the financial aspects of its "sidecar" operations, and warned that in the three aforementioned markets, "the proposed transactions would result in the elimination of the grandfathered status of certain local marketing agreements and thus cause the transactions to violate our local TV ownership rules.
[82][84] Sinclair restructured the deal in March 2014, choosing to sell WHP-TV, WMMP and WABM, and terminate an SSA with the Cunningham-owned Fox affiliate WTAT in Charleston to acquire the Allbritton-owned stations in those markets (WCIV, WHTM-TV and WBMA-LD, while also creating a new duopoly between the ABC and CW affiliates in Birmingham), as well as foregoing any operational or financial agreements with the buyers of the stations being sold to other parties.
[88] However, in Charleston and Birmingham, the company proposed to shut down stations entirely (rather than selling them to other buyers that would also handle their operational responsibilities) so it could maintain legal duopolies; surrendering the licenses for WCIV and the full-powered repeaters of WBMA-LD (WJSU and WCFT), and moving their ABC programming to Sinclair's existing stations WMMP and WABM respectively – which would shift their existing MyNetworkTV programming to digital subchannels.
Nexstar transferred this option to Mission Broadcasting, who subsequently exercised it in August 2020 (the following month, Scripps announced its intent to acquire Ion Media, including its New York station WPXN-TV).
Later that month, it was reported that the FCC had placed all pending acquisitions involving the use of shell companies on hold, so the Commission could discuss changes to its policies.
[107] FCC commissioner Ajit Pai, and Gordon Smith, president of the NAB, were also opposed to the new rules on joint sales agreements, believing that they would discourage the ownership of television stations by minority-owned companies.
[89][108] Tom Wheeler, however, proposed the restrictions in the hopes of encouraging more women and minorities to own stations, due to the ongoing consolidation in the television industry through company mergers and sharing agreements.
[16] The increased scrutiny being imposed by the FCC regarding local marketing, shared services, and joint sales agreements have led to more drastic measures by broadcasting companies attempting to use them in acquisitions; in 2014, two broadcasting companies declared intents to shut acquired stations down entirely and consolidate their programming onto existing stations through multicasting, rather than attempting to use sidecars and sharing agreements or selling them to other parties that would assume full responsibility of their day-to-day operations.
[116][117] In May 2014, Sinclair informed the FCC that it was unable to find buyers for WABM or WMMP – the company's MyNetworkTV stations in Birmingham, Alabama, and Charleston, South Carolina, that it planned to sell in its purchase of Allbritton Communications.
"[89] In September 2014, Sinclair backtracked on its original plans, and reached deals to sell WCIV, WCFT and WJSU's license assets to Howard Stirk Holdings for $50,000 each and lease them studio space, pending FCC approval.
[118][140] The FCC, however, required that Gray continue to operate WAGT as a separate station through the end of the auction, and not enter into any joint sales agreements.
The company accused Gray of using the spectrum auction and sale of the station to exit the agreements illegitimately, as they were to last through 2020, and apply to any future owner of WAGT.
Gray attempted to block the injunction by arguing that its actions were required in order to comply with the FCC's prohibition of joint sales agreements, but was denied.
Gossett argued that by legally blocking Gray's participation in the spectrum auction, Media General had "[sought] injunctive relief that interferes with a licensee's ultimate control of a station".
"[151] Local marketing agreements are effectively prohibited under the regulations of the CRTC, which require that all broadcast undertakings be "operated in fact by the licensee itself".
[152] Rogers Media and Newcap Broadcasting maintained a joint sales agreement pertaining to CHNO-FM in Sudbury, Ontario, but community interests and the lobby group Friends of Canadian Broadcasting presented substantial evidence to the CRTC that in practice, the agreement was a de facto LMA, going significantly beyond advertising sales into program production and news-gathering.
[153] For a time, CKEY-FM in Fort Erie, Ontario had a JSA with Citadel Communications to handle advertising sales for the station under a revenue sharing agreement, integrating it with its cluster in nearby Buffalo, New York.
