Rupert Murdoch’s 21st Century Fox, which owns 28 U.S. television stations, reportedly plans to join the bidding to buy Tribune Media’s 42 television stations — a potential multibillion-dollar deal that would make Fox the nation’s largest single broadcast station owner.
But this can only happen if government regulators relax restrictions aimed at discouraging media consolidation. And Ajit Pai, the new chairman of the Federal Communications Commission, has been busy signaling that he intends to do just that.
Since President Trump elevated Pai to lead the agency in January, the FCC has changed rules and made public statements announcing that it intends to scale back limits placed on station ownership. Just last week Pai told the National Association of Broadcasters at its annual convention in Las Vegas: “The last thing broadcasting — or any industry, for that matter — needs is outdated regulations standing in its way.”
That’s could be good news for Fox, which is in talks with investment firm Blackstone Group to jointly go after Tribune Media, the TV arm of what was once the Tribune Co., according to published reports. Fox’s interest was first reported by the Financial Times.
Another potential Tribune Media suitor is Sinclair Broadcast Group, the Maryland-based company that runs 173 television stations spread across the country.
If either Fox or Sinclair bought Tribune, they would blow past current FCC limits.
Both Fox and Sinclair are run by conservative-leaning executives, and their television operations have been accused of doling out coverage that favors Republicans and Trump, especially during the run-up to last November’s election.
Murdoch founded Fox, which includes several divisions, including Fox News. Sinclair caught attention for a series of sit-down interviews with Trump during the election while not providing the same coverage of Hillary Clinton. Last week, Sinclair hired Boris Epshteyn, a former Trump communications staffer, as its chief political analyst.
In addition, Blackstone chief executive Stephen Schwarzman was a major Trump donor and informal economic adviser. Blackstone, Fox and Sinclair could not be reached for comment.
“I have no problem with broadcast TV having viewpoints and perspectives,” said Andrew Jay Schwartzman of Georgetown University Law Center’s Institute for Public Representation, which has sued over previous attempts by the FCC to loosen TV ownership rules. “I do have a problem with cronyism and the possibility that regulatory decisions will be made because people are well-regarded by an administration.”
Murdoch has made no secret of his displeasure with FCC regulations on media ownership. In 2014, he was upset that Fox was barred from bidding for the Los Angeles Times because his company owned two TV stations in the Los Angeles market, violating FCC rules on cross-ownership of media properties.
“Sorry can’t buy Trib group or LA Times — cross-ownership laws from another age still in place,” Murdoch tweeted.
Mark Fratrik, chief economist at advisory firm BIA/Kelsey, said TV companies clearly preferred this Republican-led FCC’s direction over “a continuation of the last eight years.”
But, Fratrik said, “I wouldn’t characterize this as paying back Sinclair and Fox” for their support.
He said he was surprised Fox was considering buying Tribune because company leaders recently said they were not on the hunt for more acquisitions. Fox is still waiting for British authorities to sign off on its plan to assume full control of British satellite broadcaster Sky.
The FCC has been debating changing ownership restrictions on broadcast TV stations for years because of increased competition from cable and online options. Three decades ago, 60 percent of U.S. households had broadcast-only television. Last year, that number was 17 percent, according to market researcher GfK. Interestingly, that number has grown modestly in recent years.
Under current rules, the national TV audience that any single owner can reach with its stations is capped at 39 percent.
Last month, Pai’s FCC reinstated a rule that helps station owners get around that cap. The so-called UHF discount allows stations to count just 50 percent of its audience from UHF stations toward the audience cap. The rule dates back to 1985, when the broadcast dial was split between VHF (Channel 13 and below) and UHF (Channel 14 and higher), and UHF transmission had a more limited range. That difference was mostly eliminated with the switch to digital broadcast television.
The UHF discount had been dropped by the FCC, then under Democratic appointee control, just last September — a move that Fox and Sinclair opposed.
The return of the UHF discount was seen by analysts as opening the door for Sinclair to buy Tribune, since Sinclair needs help to stay below the 39 percent cap. Fox, too, would benefit from the discount.
Bernstein Research calculated that while allowing for some double-counting, permitting Fox to buy Tribune “would essentially double the coverage and size of Fox’s TV station group.”
Another current FCC regulation that could hinder Fox or Sinclair’s purchase of Tribune is the local ownership rule. That prohibits any owner from running more than two stations in most markets and prohibiting the same owner for any two of the top-four rated stations.
In Washington alone, for example, Fox owns two broadcast stations, WDCA and WTTG. Adding Tribune’s WDCW might violate FCC rules.
Similar problems could crop up in New York, Los Angeles, Chicago and Houston, among other cities.
FCC chief Pai, a Republican, frequently has called for relaxing TV ownership rules since joining the commission in 2012.
At the broadcaster’s convention, he made his case again, saying he wanted to “make sure that our rules keep up with the times.”
He pointed out how important broadcast TV remains, despite increased competition, especially when it comes to local news. Pai noted that when the Pew Research Center asked adults which forms of media they used to learn about the presidential elections, the most common answer was local television news — outpacing online sources, cable or newspapers.
And if Fox or Sinclair buy Tribune, one of them will control more local television news than anyone else.