2 winners and 2 losers from the $3.9B Sinclair-Tribune deal

Handshake
If approved, the Sinclair/Tribune Media deal will form the single largest owner of TV stations in the U.S. So it’s easy to spot several other potential winners and losers.

Sinclair Broadcast and Tribune Media are the most obvious direct beneficiaries of Sinclair’s $3.9 billion bid to acquire Tribune’s 42 TV stations, its cable network WGN and its minority stake in the Food Network. But by looking out ahead and to the peripheries of this deal—which, if approved, will form the single largest owner of TV stations in the U.S.—it’s easy to spot several other potential winners and losers.

Winners

  1. Companies looking to buy TV stations: By bringing Tribune’s TV assets into its already massive stable of stations, Sinclair would take control of a mind-boggling 215 stations. Factor in other outstanding transactions like the recent Bonten Media deal, and Sinclair will hold 233 stations in about 108 markets, according to Moody’s.

    Of course, even Sinclair has admitted that amount could push it past the FCC’s broadcast ownership rules limiting national audience reach to 39%. Therefore, the broadcaster has said it might divest stations, particularly in markets where Sinclair and Tribune have overlap.

    Sinclair CEO Chris Ripley said that Sinclair and Tribune have stations overlapping in 14 markets and, if the companies need to divest any of those stations to push through the acquisition, those stations would be a hot commodity for other broadcasters. In particular, those pieces could be enticing to broadcast groups like Meredith and Gray, both of which lately have been snapping up stations.
     
  2. ATSC 3.0: Sinclair has been front and center as the biggest industry cheerleader for ATSC 3.0, the next-generation TV standard promising improved picture, better sound, mobile access and a handful of other features. With Tribune’s stations merged into Sinclair’s already impressive TV footprint, Sinclair will have even more scale to help push ATSC 3.0 out to the masses.

    As the Wall Street Journal pointed out, Sinclair’s added scale and ATSC 3.0’s deeper access to targeted viewership data means that Sinclair could emerge as a titan of addressable advertising in the broadcast industry.

    “Tribune’s stations allow Sinclair to strengthen our commitment to serving local communities and to advance the Next Generation Broadcast Platform. This acquisition will be a turning point for Sinclair, allowing us to better serve our viewers and advertisers while creating value for our shareholders," said Sinclair Executive Chairman David Smith in a statement (PDF).

Losers

  1. Pay TV operators: Even if Sinclair has to divest stations to make its Tribune Media acquisition happen, it will still be a behemoth with a local broadcast network scale similar to major players like Fox Television.

    “This is a about a play to get bigger because the world requires scale,” MoffettNathanson analyst Michael Nathanson told the New York Times.

    That sheer size will give Sinclair a lot of leverage in retransmission consent negotiations with pay-TV operators and virtual MVPDs. Broadcasters’ retransmission revenues are already projected to rise and broadcasters have made no bones about retrans being a vital and significant part of their financial performance in the future.

    Net retransmission revenue for broadcasters is on track to reach $13.5 billion by 2021, according to Wells Fargo analysts. If pay-TV operators have to contend with a colossus like Sinclair, which will be able to use its massive scale to tip retrans negotiations in its favor, then those figures may need to be revised.
     
  2. 21st Century Fox: There are conflicting reports about whether Fox may attempt to outbid Sinclair for Tribune. Fox was said to be partnering with Blackstone to help finance a bid for Tribune, but publications like the New York Times indicated that the race for Tribune really came down to just Sinclair and Nexstar Media—and Nexstar Media CEO Perry Sook said his company appraised Tribune but that the asking price exceeded Nexstar’s “walkaway threshold.”

    Regardless of whether Fox truly intends to make a play for Tribune, Sinclair’s added scale after locking down the deal means Fox could soon be facing much tougher competition in the conservative-leaning news outlet department. Sinclair has been tied to President Donald Trump in reports suggesting the broadcaster offered him favorable coverage. Sinclair also recently hired former Trump campaign spokesman Boris Epshteyn as its chief political analyst.

    As Michael Wolff pointed out, the Tribune deal will give Sinclair a “network-size broadcast presence” and a wider audience for its conservative programming like “Full Measure with Sharyl Attkisson.” As the once-venerable Fox News suffers through the loss of its major network stars and the ouster of its key executives, its vulnerable state makes it reasonable to picture Sinclair posing a significant challenge in the conservative news market.

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