November 20, 2004
kcstar

Two more television stations in Kansas City merged operations Friday, as the owner of CBS affiliate KCTV bought a controlling stake in WB affiliate KSMO-TV.

But the deal — initially valued at $26.8 million, with a potential $6.7 million kicker later — probably will face legal challenges.

Kirk Black, the general manager of KCTV, made the announcement at KSMO's offices in Kansas City, Kan., Friday afternoon. Black said Des Moines-based Meredith Corp. was assuming control of Channel 62 immediately and KSMO's facilities would be moved to KCTV's Fairway offices within four months. He said the employees of both stations would remain on payroll, except for KSMO's general manager, Mark Martin, who is leaving.

“We're taking over KSMO,” said Black, who called the acquisition “exciting” and said it would make Meredith “the biggest player in town.”

Under the arrangement, KCTV will be able to sell all available commercial time on both stations and boost profits by combining operations, such as sales and engineering, which the stations now perform separately.

KCTV will also be able to determine up to 15 percent of KSMO's programming, or about five hours per weekday. Black said this could include adding KCTV's local news, Metro Sports or repeat broadcasts of syndicated fare such as “The Ellen DeGeneres Show” to KSMO's schedule.

The deal comes at a time when media ownership rules are in greater flux than at any time in history. The company is betting, in effect, that the federal courts, Congress and the Federal Communications Commission will resolve a variety of disputes affecting broadcasters in such a way that KCTV will be allowed to buy KSMO outright.

Currently, federal law on “duopolies” — the ownership of two stations in a single market — does not permit an outright KCTV-KSMO merger. Instead, Meredith is paying $26.8 million to enter into a “joint sales agreement” with KSMO's owner, Sinclair Broadcast Group of Hunt Valley, Md., with an option to buy the license for $6.7 million should the law change.

The joint sales agreement could be invalidated under a proposed rule change filed in August by the FCC.

Currently, both stations in a joint sales agreement are considered independent. If the rule change goes through, the owner of the larger station would be considered in control of the smaller one. That would put Meredith in violation of the commission's “voices” rule, which stipulates that stations cannot merge if that would reduce the number of independent voices in a market to fewer than eight.

There are 10 TV stations in Kansas City controlled by eight entities. E.W. Scripps Co. owns both KSHB-TV and KMCI-TV, while Hearst-Argyle owns KMBC-TV and operates KCWE-TV.

Further complicating matters, an appellate court in Washington in 2003 remanded several rules to the FCC, including the “voices” rule. If the commission is unable to justify the continuing need for the rules, they will be nullified and the KSMO deal would stand.

Another possibility is that the commission will allow the merger under a grandfather clause, as it has done when making rule changes in the past.

To Sinclair, challenging media ownership rules is nothing new. Shortly after the 1996 Telecommunications Act was passed by Congress, Sinclair struck deals that virtually doubled the number of stations under its control. The law on such deals was vague, and Sinclair was allowed to keep the agreements in place. It currently owns or operates 62 TV stations, more than any other company.

“This is the kind of skirting-the-law tactic that has helped make Sinclair the poster child for big, bad media,” said Jeff Chester of the Center for Digital Democracy, which advocates tougher media ownership rules. “Clearly Sinclair here is taking a wager that their pals at the FCC will give them a high five to sell the station.”

Chester and other industry observers predicted Friday that with Sinclair involved, the deal would face higher-than-usual scrutiny from political opponents and media watchdog groups.

Sinclair recently endured a storm of protest over its plans to broadcast a documentary, “Stolen Honor: Wounds that Never Heal,” that attacked presidential candidate John Kerry. It wound up showing a more traditional news program that featured both “Stolen Honor” and a pro-Kerry film.

With KCTV's newsroom as its disposal, KSMO is unlikely to become an affiliate in Sinclair's “News Central” operation, which produces a hybrid national-local newscast for more than 30 of its stations. Critics say “News Central” waters down local news, replacing it with large doses of right-wing commentary beamed in from its Maryland headquarters. Sinclair has argued that it is bringing local news to TV stations that traditionally did not offer news.

Sinclair officials did not return phone calls on Friday.

According to full-day Nielsen ratings averages, KCTV is the second-most-watched station in Kansas City. KSMO ranks fifth.

With the transaction, Meredith now owns or operates 14 TV stations in addition to its publishing assets. It has owned KCTV since 1953.

The company's shares closed Friday at $52.38, down 1 cent.