Transactions Category

FCC Announces June 19, 2016 Deadline for Revising TV Joint Sales Agreements

Scott R. Flick

Posted June 18, 2014

By Scott R. Flick

When the FCC voted at its March 31, 2014 meeting to deem television Joint Sales Agreements involving more than 15% of a station's weekly advertising time as an attributable ownership interest, it announced that broadcasters that are parties to existing JSAs would have two years to modify or terminate those JSAs to come into compliance. However, the FCC's Report and Order adopting that change to the rules was not released until April 15, 2014, and noted that the effective date of the rule change would be 30 days after the Report and Order was published in the Federal Register.

The Federal Register publication occurred on May 20, 2014, and the FCC today released a Public Notice confirming that the effective date of the JSA attribution rule is therefore tomorrow, June 19, 2014. At that time, the two-year compliance period will also commence, with the deadline for existing JSAs to be modified to come into compliance with the new rule being June 19, 2016. As a result, subject to any actions the courts may take on the matter, all new TV JSAs must comply with the FCC's multiple ownership rules from their inception, and JSAs that were already in existence before the rule change can remain in place until June 19, 2016.


Free TV Doesn't Mean Free Lunch

John K. Hane

Posted April 16, 2013

By John Hane

Recently, TVNewsCheck.com ran a short item noting that a large broadcast group (not a network owned and operated group) and a large multichannel video distributor (MVPD) successfully concluded carriage negotiations. There was no interruption of service. Given the successful outcome, I was surprised to see that someone posted a comment regarding the piece saying the deal illustrates why the FCC should tighten its broadcast ownership rules. No matter how many times I read comments of this sort, I am perplexed that people actually believe it's a good thing for the government to mandate that broadcasters be the underdogs in all major negotiations that impact the quality and availability of broadcasters' programming. If anything, government policy should encourage broadcasters to grow to a scale that is meaningful in today's complex television marketplace. Not one of the other major distributors makes its programming available for free.

If independent (non-O&O) broadcasters aren't permitted to achieve a scale large enough to negotiate effectively with upstream programmers and downstream distributors, you won't have to wait long see high cost, high quality, high value programming available for free to those who choose to opt out of the pay TV ecosystem. It's much better to have two, three or four strong competitors in each market, owned by companies that can compete for rational economics in the upstream and downstream markets, than to have eight or more weak competitors, few of which can afford to invest in truly local service or negotiate at arms-length with program suppliers and distributors.

For those who have not been paying attention, the television market has changed profoundly in the past 20 years. The big programmers and the big MVPDs have gotten a whole lot bigger. The largest non-O&O broadcast groups have grown too, but not nearly as much. Fox, Disney/ABC, NBCU and the other programmers are vastly bigger companies with incomparable market power vis-a-vis even the largest broadcast groups. The same is true of the large MVPDs, which together serve the great majority of television households.

There's nothing inherently bad about big content aggregators and big MVPD distributors. And anyway, they are a fact of life. Despite their size, each is trying to deliver a competitive service and deliver good returns for shareholders. That's what they are supposed to do, and in general (with a few exceptions) they serve the country well. But again, they are much, much larger than even the largest broadcast groups. If you believe that having a viable and competitive free television option is a good thing, that's a problem.

So in response to the suggestion that the FCC further limit the scale of broadcasters, I reply: why does the government make it so damn hard for the only television service that is available for free to bargain and compete with vastly larger enterprises that are comparatively unregulated?

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Increase in HSR Thresholds Makes More Room for Larger Communications Transactions

Miles S. Mason

Posted February 9, 2012

By Miles S. Mason

While the FCC gets to have a say in nearly every sale or merger in the communications industry, no matter how small, the Department of Justice and the Federal Trade Commission will also be called upon if a transaction is large enough. The test for when a transaction is large enough to require a filing with the DOJ or the FTC is whether it exceeds the minimum financial thresholds of the Hart-Scott-Rodino ("HSR") Act.

Because of inflation and other factors, however, the HSR thresholds must be annually adjusted to accurately separate small deals from big deals. This separation is critical because the DOJ and the FTC have limited resources to investigate transactions, and therefore only require advance notification of transactions that involve companies or transactions above a certain minimum size. Transactions that fall below the HSR reporting thresholds, however, are not immune from antitrust scrutiny even after they are consummated if they are likely to have an anticompetitive effect in any relevant market.

On February 27, 2012, the HSR thresholds will increase significantly, with the "minimum size-of-transaction test" threshold increasing from $50 million to $68.2 million. If the value of the proposed transaction is above $68.2 million but below $272.8 million (up from $200 million), reporting is required only if the ultimate parents of the acquiring and acquired entities meet certain "size-of-person" tests, the thresholds for which will also increase on February 27, 2012. Subject to a myriad of exemptions, transactions valued at over $272.8 million under the HSR regulations must generally be reported. If that sounds complicated (and it can be), Pillsbury's Antitrust lawyers recently published an Advisory with more details on these changes.

While transactions that meet these thresholds must be reported whether or not they are communications-related, the thresholds can be particularly relevant to large broadcasters, since broadcasters that enter into a transaction requiring an HSR filing need to be aware that they may not be able to implement a local marketing agreement or similar cooperative arrangement in conjunction with an anticipated acquisition until the HSR filing has been made and the mandatory post-filing waiting period has either passed without action by the DOJ/FTC, or the DOJ/FTC have agreed to terminate the HSR waiting period early.

With communications transactions starting to heat up again, the increase in the HSR thresholds is welcome, and may simplify transactions that fall above the current HSR thresholds, but below the new ones.


Should Media Lenders Feel Less Secure?

Miles S. Mason

Posted September 15, 2011

By Miles S. Mason

In an uncertain economy, obtaining financing for business transactions can be a challenge. It can be even more challenging for FCC licensees, since FCC rules prohibit granting a security interest in an FCC license. Because lenders want an enforceable lien on all of a borrower's assets, when those assets include FCC licenses, agreements must be structured carefully to give a lender all of the economic benefits of holding a security interest in the FCC license, without taking a security interest in the license itself.

The standard approach has been to provide the lender with a security interest in the "proceeds" of a license sale. That approach was called into question last October after a decision by the Colorado Bankruptcy Court (In re Tracy), which held that a security interest in the proceeds of an FCC license does not survive bankruptcy. While many communications lawyers saw this decision as an aberration, and the New York Bankruptcy Court (In re Terrestar Networks) rejected it outright in reaching an opposite conclusion last month, just a few days after that New York decision, on appeal, the Colorado U.S. District Court affirmed the reasoning in Tracy, once again opening the issue to debate.

Continue reading "Should Media Lenders Feel Less Secure?"