Media General’s acquisition of the parent company of WIVB-TV (Channel 4) announced Friday would mark the second ownership change for a leading Buffalo TV station this year and bring all three of Buffalo’s major stations into an exclusive club: Their owners all have their roots in newspapers.
But the proposed $1.6 billion purchase of LIN Media reflects a larger push by TV companies to increase their bargaining power with cable companies.
The deal comes on the heels of the planned sale of WKBW-TV (Channel 7), the ABC affiliate, announced in early February, to E.W. Scripps Co. The local NBC channel, WGRZ-TV (Channel 2), is owned by Gannett Co.
If approved, the merger would create the second-largest local TV broadcasting company in the nation with 74 stations in 46 markets reaching 26.5 million households, equivalent to 23 percent of the U.S.
The acquisition requires approval by the Federal Communications Commission, as well as the shareholders for both companies. Rival bids are eligible until May 15, but to close a deal, a $26.6 million breakup fee would be required.
The Media General deal is the latest in a string of big TV transactions around the country. Another involved Gannett, which acquired Belo Corp.’s stations for $1.5 billion. And Sinclair Broadcast Group, which has WUTV and WNYO in Buffalo, announced $2 billion in deals last year.
Experts say a driving factor is the retransmission fees paid by cable companies to carry the stations and their programming on their systems.
“Media companies increasingly need to get big in order to have the kind of muscle they’re going to need for retransmission deals with cable companies, and that’s a big deal,” said Al Tompkins, senior faculty for broadcast and online at the Florida-based Poynter Institute, which focuses on journalism. “They need leverage, not only for (retransmission), which is worth millions of dollars to these stations. But it’s also really important that they have enough muscle to be able to negotiate with networks.”
Tompkins said it used to be that networks were very close partners with local stations, but “increasingly the networks and the stations have a little more acrimonious relationship.” A group consisting of only a small number of stations has less bargaining power in those situations, he said.
Those retransmission fees have become a key source of revenue for the stations’ owners, on top of advertising, said John Wilcox, a professor in economics and finance at SUNY Buffalo State. The more stations the owners can negotiate on behalf of, the more clout they have with the likes of Comcast.
Another factor driving mergers, Tompkins said, is media companies spreading their costs among multiple stations. Some have done that by centralizing certain behind-the-scenes operations that viewers don’t notice.
The three TV companies crossing paths in Buffalo, the nation’s 52nd largest media market, have varying newspaper credentials now.
Gannett maintains a widespread presence in newspapers – most notably with USA Today – and also owns or services 42 TV stations.
Media General owns or operates 31 TV stations. It is backed by Warren Buffett, the chairman of The Buffalo News, and Mario Gabelli. The company goes back to the establishment of the Richmond Dispatch in 1850, and its newspaper holdings grew in the decades that followed.
In 1955, the company ventured into the TV business, when it launched a Tampa, Fla., TV station as an NBC affiliate, the first of many TV properties it would control. Last year, Media General underwent a landmark change when it sold all of its newspapers.
E.W. Scripps Co. has agreed to acquire WKBW, the local ABC affiliate, plus a station in Detroit, from Granite Broadcasting Corp. for $110 million. Scripps has a rich history in print going back to the 19th century and launched its first TV station, in Cleveland, in 1947. Today, it has 19 stations to complement its print holdings.
“I think you’re seeing a consolidation of the industry as a whole, and some of the stations happen to be in Buffalo,” said Michael Nurse, WKBW’s general manager and president.
Nurse said he is pleased that WKBW is shifting to ownership by a media company such as Scripps, to better equip itself to compete with a company like Media General that is poised to enter this market: “You just look at what these companies can bring to bear: equipment, technology, resources, staffing, you name it.”
Tompkins, the Poynter faculty member, said it is no surprise that newspaper companies have diversified. “Newspapers got hit so hard by the loss of classified (advertising), the loss of so much real estate advertising ... Newspaper companies really had to find new revenue streams.”
Tompkins described Gannett, Media General and Scripps as “pretty good players. They’re all serious news players.”
LIN acquired WIVB, the local CBS affiliate, in 1995 from King World Inc. for $95 million. More than a decade ago, LIN acquired Channel 23 and renamed it WNLO.
A Media General spokeswoman, Lou Anne Nabhan, said in a statement that the two Buffalo stations “will benefit from” a commitment to news and local programming.
Paul Sweeney, a Bloomberg Industries analyst, said LIN was an attractive takeover candidate. “They have a strong management team that’s really made a huge commitment to digital media, to migrating the television business online. They’ve got good TV stations and a growing digital business.”
Bloomberg News contributed to this report. email: email@example.com