Sinclair Broadcast Group

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Sinclair Broadcast Group, Inc.
Type	Public (NASDAQ:SBGI)
Founded	1971
Headquarters	Hunt Valley, Maryland, USA
Key people	David D. Smith, Chairman & CEO David B. Amy, CFO
Industry	Telecommunications
Products	Television
Revenue	▲$715.1 Million USD (2006)
Net income	▲ $53.9 Million USD (2006)
Website	www.sbgi.net

The Sinclair Broadcast Group (SBG) NASDAQ: SBGI is the operator of the largest number of local television stations in the United States with a total of 57 stations across the country in 35 primarily small and medium markets, many of which are located in the South and the Midwest. Broadcasts by SBG stations can be received by 24 percent of American households. The company is based in Hunt Valley, Maryland.

[edit] History

The company, founded by Julian Sinclair Smith, originated in 1971 as the Chesapeake Television Corporation with the launch of WBFF (channel 45) in Baltimore. A subsidiary of Chesapeake Television Corp., the Commercial Radio Institute, later founded WPTT (channel 22, now WPMY) in Pittsburgh, in 1978; and WTTE (channel 28) in Columbus, Ohio, in 1984. All three stations originally were independents, though WBFF and WTTE became charter affiliates of the Fox Broadcasting Company at its launch in 1986.

Smith's son David D. Smith began taking a more active role in the 1980s. In 1985, the Chesapeake Television Corporation changed its name to Sinclair Broadcast Group. In 1990, David Smith and his three brothers bought their parents' remaining stock and went on a buying spree that eventually made it one of the largest station owners in the country.

Though Sinclair became a public company in 1995 and is currently traded on NASDAQ under the symbol SBGI, the Smith family still retains a majority financial interest, and all four Smith brothers serve as executives or directors.

[edit] Background

Many stations are owned outright by the company, but many others are affiliated through local marketing agreements (LMA). Sinclair pioneered the LMA concept in 1991.

The stations are affiliates of various television networks: ABC, CBS, NBC and Fox. Sinclair also owned or managed several affiliates of the WB and UPN networks, which both launched in January 1995. In September 2006, the WB and UPN merged their operations into a new network, the CW. Eight of Sinclair's WB stations, along with independent KFBT (now KVCW) in Las Vegas, became affiliates of the new network. At the same time, Sinclair aligned 17 of its stations (ten former WB affiliates, six former UPN stations, and one independent) with MyNetworkTV, a new programming service owned by Fox's parent News Corporation. Sinclair's relationship with Fox/News Corporation was also strengthened after Sinclair agreed to a six-year affiliation renewal for its 19 Fox-affiliated stations. The deal also includes flagship WBFF in Baltimore, despite Fox owning a station, MyNetworkTV affiliate WUTB, in the same market.

On December 22, 2006, WTWC-TV in Tallahassee, Florida, renewed its affiliation agreement with NBC, keeping the station affiliated with the network through the end of 2016. [1]

Sinclair had experimented with using a centralized news organization called News Central that provided prepackaged news segments for distribution to several of the group's stations. These segments were integrated into programming during local news broadcasts. Mark E. Hyman, a high-ranking executive at Sinclair, also created conservative editorial segments called "The Point" that were broadcast on all of the group's stations with news departments. In addition, most of the stations that aired News Central emulated the prepackaged news studio appearance for local stories. This model was ultimately unsuccessful, and on March 31, 2006, News Central ended its national news broadcasts (although the "Point" commentaries lasted until November 30, 2006). Most stations running the News Central format ended up cancelling their news coverage altogether, although some stations that did so have subsequently contracted with competing stations in their markets to produce their newscasts.

Sinclair still produces a one-minute national news briefing for its stations, entitled Washington Newsroom. Starting in 2007, Sinclair launched a new newscast on some of its' stations, completely separate from local news operations, called American Crossroads. Like News Central and "The Point", the program, hosted by Jeff Barnd (a news anchor at WBFF) covers national news stories and offers a conservative editorial segment.

[edit] Relationship to Glencairn/Cunningham

Between 1994 and 1997, nine stations owned by Glencairn Ltd. entered LMAs with Sinclair-owned stations in the same cities. Glencairn was owned by Edwin Edwards, a former Sinclair executive, who also personally owned WPTT in Pittsburgh. It held itself out as a minority-owned broadcaster.

However, Carolyn Smith, wife of Sinclair founder Julian Smith and mother of current Sinclair CEO David Smith, supplied Glencairn's initial capital and controlled 70 percent of Glencairn's stock. In December 2001, after complaints from Jesse Jackson and several other media companies, the FCC fined Sinclair $40,000 for illegally controlling Glencairn. Sinclair tried to merge outright with Glencairn in 2001 and purchase Edwards' Pittsburgh station. However, the FCC only allowed four of the stations to come directly under the Sinclair banner. Glencairn kept the other six stations and changed its name to Cunningham Broadcasting. Nearly all of Cunningham's stock (90 percent) is owned by trusts in the name of four members of the Smith family, and all six Cunningham stations have LMAs with Sinclair stations. Based on these arrangements, Glencairn/Cunningham has served merely as a shell corporation with the sole purpose of evading Federal Communications Commission ownership rules.

In three markets, Cunningham owns the fourth-highest rated station while Sinclair owns one of the three highest-rated stations. The FCC's duopoly rules do not allow common ownership of two of the four highest-rated stations in a single market. In Cunningham's three other markets, there are too few stations or unique station owners to permit a Sinclair duopoly. The FCC requires a market to have eight unique station owners once a duopoly is formed.

[edit] Nightline controversy

In 2004, Sinclair attracted controversy when it decided that seven of its ABC-affiliated stations would not broadcast an April 30 airing of Nightline, which was a tribute to the soldiers killed in the 2003 invasion and subsequent occupation of Iraq.[2]

The group issued a statement that said in part, "The action appears to be motivated by a political agenda designed to undermine the efforts of the United States in Iraq." ABC responded, saying that the program was meant to be "an expression of respect which seeks to honor those who have laid down their lives for this country."

For differing reasons, the decision to not air the episode attracted criticism both from supporters and opponents of the Iraq war. Affected stations were in the following markets:

• St. Louis
• Columbus, Ohio
• Asheville, North Carolina
• Greensboro, North Carolina
• Charleston, West Virginia
• Pensacola, Florida
• Springfield, Massachusetts

WTXL in Tallahassee, Florida, formerly owned by Media Venture Management but, at that time, operated by Sinclair under a local marketing agreement, decided to air the program. In some of the affected areas, such as Pensacola, other broadcasters stepped into the breach to air the broadcast.

On an unrelated note, three other Sinclair-owned stations which are now ABC affiliates -- WKEF in Dayton, Ohio, WICS in Springfield, Illinois and WICD in Champaign, Illinois -- also did not air the controversial episode of Nightline because they were affiliated with NBC at the time.

[edit] Kerry film controversy

In October 2004, it was reported that Sinclair would order all 62 of its affiliate stations to preempt prime time programming to air Stolen Honor: Wounds That Never Heal, a documentary critical of U.S. presidential candidate John Kerry's anti-Vietnam War activism, just two weeks before the November 2 election. [3] The film was produced by Carlton Sherwood, a former associate of Tom Ridge, and accuses John Kerry of prolonging the Vietnam War because of his anti-war activism. The organization Swift Boat Veterans for Truth, an anti-Kerry organization whose name become well known in the 2004 election year, was cross-promoting the film as part of a $1.4 million advertising campaign. [4]

In response, the Democratic National Committee filed a legal motion with the Federal Election Commission stating that it is inappropriate for the media organization to air "partisan propaganda" in the last 10 days of an election campaign. [5]

Sinclair fired its Washington bureau chief Jon Lieberman, stating he revealed company business when he publicly discussed the documentary in an interview published October 18, 2004, in the Baltimore Sun.

Sinclair later aired an edited version of the documentary.

SBGI stock took a dive during and leading up to this time period as stockholders who threatened lawsuits and portions of the general public became enraged. The stock did not fully recover until late 2006.

[edit] Retransmission disputes

[edit] Suddenlink

In the summer of 2006, Charter Communications streamlined its operations, which included selling off portions of its cable system which were "geographically non-strategic". Charter accounts in the Huntington-Charleston, West Virginia market area were purchased by Suddenlink Communications. Sinclair requested a $40 million one-time fee, and a one-dollar-per subscription per month fee from Suddenlink for retransmission rights of both WCHS-TV and WVAH-TV on the Suddenlink cable system [6]. This led to a protracted media battle and smear campaign between the two companies, and Sinclair pulled the two stations off the air on cable systems covering the neighboring Beckley, West Virginia market.

After several weeks of negotiations, the two companies reached an agreement which allowed WCHS-TV and WVAH-TV to continue transmission over the Suddenlink cable system. The terms of the agreement were not released to the public [7].

[edit] Mediacom

Cable TV company Mediacom filed an antitrust lawsuit against Sinclair on October 2006, claiming that Sinclair insisted on blanket carriage of 22 SBGI stations at all Mediacom cable companies where SBGI operates a TV station regardless of market differences. The District Court for the Southern District of Iowa denied Mediacom's injunction motion on October 24; Mediacom appealed to the United States Court of Appeals for the Eighth Circuit, but they dropped the appeal on December 13. ^[1]

Sinclair's retransmission agreement with Mediacom was originally set to expire on December 1, 2006, but Sinclair later extended the deadline to January 5, 2007. Despite the extension, the two sides remained at an impasse over how much money Mediacom should pay Sinclair for carriage of its stations. On January 4, the FCC's Media Bureau denied Mediacom's complaint stating that Sinclair failed to negotiate with Mediacom in good faith. After failing to respond to Mediacom's offer to take the dispute to binding arbitration before the deadline, Sinclair pulled all 22 stations from Mediacom's lineups shortly after midnight on January 6. ^[2] Despite a plea from Iowa's Congressional delegation urging the two sides to submit to binding arbitration, Sinclair rejected the plea on January 11. ^[3] The two sides discussed the dispute in front of Iowa lawmakers on January 23. ^[4] On January 30, 2007, Senators Daniel Inouye, Chairman of the US Senate Committee on Commerce, Science and Transportation and Ranking Member Ted Stevens signed a letter addressed to Kevin Martin, the chairman of the Federal Communications Commission, directing him to resolve the issue.^[5] The impasse ended on February 2 when Mediacom announced that it had reached a retransmission agreement with Sinclair for undisclosed terms. All 22 stations were restored to Mediacom systems shortly after the agreement was announced.^[6]

Many satellite providers in the impacted areas looked to capitalize on the Mediacom/SBGI conflict and ran vigorous campaigns to try to recruit disenfranchised Mediacom subscribers. Sinclair's stations in Iowa, KDSM-TV in Des Moines and KGAN in Cedar Rapids, offered $150 rebates (payable as $10 monthly credits) while other markets offered $100 rebates for switching to DirecTV. ^[7] Mediacom and the American Cable Association criticized this campaign as a type of bounty payment.^[8] Mediacom lost 14,000 subscribers during the last quarter of 2006 and an additional 18,000 subscribers during the first quarter of 2007.^[9]

[edit] Time Warner Cable

Sinclair was also involved with retransmission negotiations with Time Warner Cable, but the two sides reached an agreement on January 19, 2007^[10].

[edit] Comcast

Broadcasting & Cable reported on January 5, 2007 that Sinclair may pull 30 stations from Comcast systems after its retransmission agreement was slated to expire on February 5 ^[11]. Comcast was granted an extension so the retransmission rights were extended to March 1 ^[12]. The deadline passed at 2 a.m. early Thursday morning, March 1.[8] The two sides were still talking so the deadline was extended to March 10.[9] Comcast has stated that they will not pay cash for retransmission rights, but is willing to barter such as giving free commercials for SBGI stations on Comcast cable channels.[10] On March 9, Comcast and Sinclair jointly announced a four-year deal for retransmission rights which expire on March 1, 2011.[11]

[edit] Notes

[edit] Sinclair-owned stations

Note: ** indicates a station built and signed on by Sinclair.

Footnotes:

• ¹ These stations are nominally owned by Cunningham Broadcasting and operated by Sinclair under local marketing agreements. However, Cunningham Broadcasting's stock is almost completely controlled by trusts in the names of members of Sinclair's founding Smith family.
• ² WNAB is owned by Tennessee Broadcasting, LP, an affiliate company of Beverly Hills-based Lambert Broadcasting, but its operations are managed by Sinclair under an outsourcing agreement. Sinclair is looking to acquire the station outright under an FCC "failed station" waiver.
• ³ Via local marketing agreements, Sinclair operates these stations, which are owned by local independent or private companies. The lone execption among this group is WTTA, in which Sinclair CEO David Smith is the station's majority owner.
• ⁴ These stations are owned by Sinclair, but operated by Nexstar Broadcasting Group under local marketing agreements.
• ⁵ The planned acquisition of KFXA by Sinclair is awaiting FCC approval.

[edit] Former Sinclair-owned stations

• ¹Operated by WTWC-TV under a shared services agreement (license was held by a third party)

[edit] See also

• Lists of corporate assets

[edit] References

• Paul Schmelzer (October 20, 2004). The Eternal Twilight of the Sinclair Mind. AlterNet.
• Lisa de Moraes (April 30, 2004). Stations to Boycott Nightline's List of the Fallen. Page C07, Washington Post.
• Al Tompkins (April 30, 2004). ABC Breaks Through Nightline Blackout (Poynter Online)
• Paul Schmelzer (April 23, 2003). The Death of Local News. AlterNet.
• Katie Benner (October 11, 2004). Anti-Kerry film sparks DNC response. CNN
• Wil S. Hylton (December 2005). Not Necessarily the News. GQ.

[edit] External links

[edit] Sinclair

• Sinclair Broadcast Group, Inc. official site
• American Crossroads official site
• SBG - station list
• CJR Who Owns What: Sinclair Broadcast Group

[edit] Anti-Sinclair activism

• Sinclair Watch
• Stop Sinclair.org petition
• The "Counter"Point Blog
• Iowans for Better Local Television

[edit] News/comment

• "Not Necessarily the News" By Wil S. Hyton GQ December 2005.
• David Smith denies political agenda, Oct 2004
• Sinclair Broadcast: The Puppetmasters, AlterNet, February 17, 2005.
• "Sinclair's Disgrace" by Eric Boehlert, Salon, Oct. 14, 2004
• Disinfopedia - Sinclair Broadcast Group
• dKosopedia - Sinclair Broadcast Group
• Ketupa.net - Sinclair Broadcast Group
• Business Week article on the controversies of David Smith and the Sinclair Broadcast Group