TV Companies Stand to Win if Trump Removes Media Ownership Limits

The country's television station owners can hardly wait for Donald Trump.

David Smith, president, CEO and chairman of Sinclair Broadcast Group (SGBI) , the country's largest owner of local TV stations, called the election of a Republican for president a rare chance to eliminate ownership caps that he said unfairly burden broadcasters when competing for viewers and advertisers against cable TV providers and the digital platforms of Facebook (FB) and Alphabet's (GOOGL) Google.

"There's a really serious opportunity to seek complete deregulation in the broadcast industry," Smith said on Wednesday an an investor conference hosted by Wells Fargo. "If Donald Trump is as deregulatory as he suggests he is, to wipe away regulations we're going to be the first industry in line to say, 'We are the most over-regulated industry that exists in the United States.'"

A federal statute bars broadcasters from owning TV stations that reach more than 39% of U.S. TV households. Sinclair as well as major broadcasters CBS (CBS) , 21st Century Fox (FOXA) , NBC owner Comcast (CMCSA) , Disney's (DIS) ABC and station owner Tribune Media (TRCO) have been pressing the FCC to raise or eliminate the cap, in some cases for more than 20 years.

Broadcasters have argued that such limitations in the age of the Internet, when a plethora of news sources are readily available, unfairly limit the size and scope of their businesses.

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Shares of Sinclair, Tribune Media, Tegna (TGNA) and Gray Television (GTN)  rose steadily following Trump's victory amid speculation that a Federal Communications Commission with a Republican majority would loosen media ownership rules, or in the case of the TV station cap, ask Congress to do so. Since Tuesday, Sinclair were gaining 9.4% while Gray was up 22% and Tegna had added 6.7%.   

Smith, 65, who will step down as Sinclair CEO in January after 28 years at the company, was unequivocal when he said Sinclair would seek to "eliminate the cap immediately."

To be sure, Trump has vowed to stop AT&T's (T) $85 billion acquisition of Time Warner (TWX) , arguing that a single company shouldn't be allowed to own so many high-profile media properties. But whether Trump was playing populist or would implore his FCC to uphold media ownership restrictions remains unclear.

Less uncertain is that removing the 39% ownership cap likely would spark a wave of mergers and acquisitions among station groups looking to gain scale. Sinclair sees greater reach as essential to spreading out the costs for a business that uses a team of anchors operating out of a studio at the company's headquarters in Hunt Valley, Md., near Baltimore, to broadcast largely homogenized national news reports to augment the news teams at its approximately 100 local network affiliates nationwide.

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Peter Liguori, president and CEO of Tribune Media, which controls 42 owned or operated broadcast stations including WGN, voiced a similar position this week at the Wells Fargo conference, describing the ownership cap on broadcasters as "dampening, as being artificial." Like Smith, Liguori would like to extend Tribune Media's national footprint.

"We certainly believe we have a terrific machine in place that can be scaled, and that makes good business sense, to drive margins and growth," he said.

But media ownership rules, largely put in place in the early 1990s, have stood the test of time, even enduring through the administration of George W. Bush when the commission was headed by Michael Powell, now president and CEO of trade association NCTA.

Throughout the past two decades, the agency largely has agreed that local television news stations and local newspapers still carry an outsized weight in local communities and that allowing one company to own multiple sources of public news and information would be detrimental to a well-functioning democracy.

"The fact that the FCC has held the line going back to the 1990s, keeping some diversity of viewpoints at the local level, has been a great success," said Craig Aaron, president and CEO of Washington public interest media group Free Press. "That we'd lift restrictions to allow for more consolidation, more cookie-cutter content, more centralized production, is the wrong answer."  

This past summer, FCC Chairman Tom Wheeler, a Democrat and former president and CEO of NCTA and wireless industry trade association CTIA, reaffirmed the commission's support for rules that prevent one media company from owning two major TV stations in a single market as well as preventing a television company from buying a newspaper in a shared region.

During a fierce debate, Rupert Murdoch's 21st Century Fox, which owns 28 TV stations covering more than 37% of the country's households, argued that the FCC's ownership rules fail to level the industry's playing field a time when streaming services such as Netflix (NFLX) and Time Warner's HBO Now can easily gain unrestricted audiences across borders.

"For an agency that claims to be forward-thinking and focused on the future, when it comes to broadcasting, the FCC still applies analog regulation in the digital age," industry lobby National Association of Broadcasters said in August after the commission voted along party lines to uphold the longstanding media ownership restrictions. "NAB strongly disagrees with the FCC's decision to cling to long-outdated media ownership rules that no longer serve their purpose." 

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