Local marketing agreement

In U.S. and Canadian broadcasting, a local marketing agreement (or local management agreement, or LMA) is an agreement in which one company agrees to operate a radio or television station owned by another licensee. In essence, it is a sort of lease or time-buy.

Under Federal Communications Commission (FCC) regulations, a local marketing agreement must give the company operating the station under the agreement control over the entire facilities of the station, including the finances, personnel and programming of the station. Its original licencee still remains legally responsible for the station and its operations, such as compliance with relevant regulations regarding content.

Occasionally, "local marketing agreement" may refer to the sharing or contracting of only certain functions, in particular advertising sales. This may also be referred to as a local sales agreement (LSA) or a joint sales agreement (JSA). In the U.S., JSAs for radio stations are counted toward ownership caps.

Uses

The most common use of an LMA in television broadcasting is to create effective duopolies between stations, allowing the consolidation and sharing of resources between them such as facilities, personnel, advertising sales, and programming. The sharing of resources between stations in this way can allow more streamlined and cost-effective operations of multiple stations.

Local marketing agreements also allow duopolies where they are not legally possible; FCC regulations only allow one company to own more than one station in markets where there are at least 8 distinct broadcast television stations. As such an operational agreement does not transfer ownership of the station's license, this can allow a broadcaster to operate more than one station in a market, even where there are too few stations to allow one, or to allow one between the top two stations in a market (which is prohibited in all markets).

Criticism

The use of LMA's has been considered controversial by many broadcasters and public interest organizations. Sinclair Broadcast Group and Nexstar Broadcasting Group have been singled out by critics for their prominent use of LMAs as part of their business models—the two broadcasters have also financed holding companies (such as Cunningham and Mission Broadcasting respectively) whose only purpose are to acquire television stations that they can be operated through an LMA by a station in the same market owned by its associated broadcaster. While not to the same extent as Mission and Cunningham, Raycom Media also has a similar relationship with American Spirit Media—most of its stations are located in markets where Raycom owns stations, and they are operated under LMAs with Raycom. Broadcasters can also collect carriage fees for the stations they operate under LMA's on behalf of their owner, often bundling its carriage agreements with those of stations they own outright. This can, especially in LMA's between two stations affiliated with "major" U.S. networks, allow the broadcaster to charge higher fees for retransmission consent to television providers for carrying the stations—which could result in smaller cable companies not being able to afford the higher fees imposed.

The consolidation of news departments through local marketing agreements between "major" network affiliates has also been criticized; redundant staff members are often laid off as part of the consolidation process, and the merger may reduce the number of unique editorial voices in a market as well. The partnered stations may also establish a joint news operation: two separately branded newscasts with different on-air personalities may ultimately consist of the exact same news content as each other, or the two stations may air newscasts under a single joint brand shared between the stations. However, many broadcasters who engage in the practice believe that such agreements are beneficial to the survival of television stations, especially in smaller markets—where the cost savings achieved through the consolidation of resources and staff may be necessary to fund a station's continued operation.

In 2009, public attention was brought to the issue of LMAs in Hawaii when Raycom Media (owner of Hawaii's NBC and MyNetworkTV affiliates, KHNL and KFVE) announced it would take over the operations of the local CBS affiliate KGMB (then owned by MCG Capital Corporation), giving it control of three television stations in Hawaii. The deal was a complex arrangement which involved trading the non-license assets of KFVE (such as its call sign, programming, and affiliation) for those of KMGB (placing the station under Raycom ownership, but using KFVE's license, signal, and virtual channel 5), and taking over KFVE (which moved to the channel 9 license owned by MCG Capital) under a local marketing agreement. The three stations would also be folded into a shared news operation known as Hawaii News Now. As ownership of television stations is recognized by facility IDs and not by call signs or other intellectual property, the swap was not a transaction that would require the intervention of the FCC, aside from the changing of call signs. An estimated 68 positions from a total of 198 from the three stations would be eliminated as part of the agreement.

FCC action

In February 2001, Clear Channel Communications subsidiary Citicasters was fined $25,000 for its use of time brokerage agreements and litigation to unlawfully control the radio station WBTJ FM 101.9 in the Youngstown, Ohio market; the company had also been the target of complaints for using KFJO FM to rebroadcast KSJO after it had nominally sold KFJO to minority-owned interests.

In the wake of the Hawaii News Now controversy, the Media Council of Hawaii complained to the FCC about the agreement, stating that it would "directly reduce the diversity of local voices in a community by replacing independent newscasts on the brokered station with those of the brokering station." In response, the FCC stated it would begin to investigate into the matter The FCC has since considered potential changes to its duopoly rule to remove the LMA loophole; tabling a proposal that would make such agreements count the same as ownership.

Internationally

In a 2005 Canadian dispute, Rogers Communications and Newcap Broadcasting had a joint sales agreement pertaining to CHNO-FM in Sudbury, Ontario, but community interests and the lobby group Friends of Canadian Broadcasting presented substantial evidence to the Canadian Radio-television and Telecommunications Commission that in practice, the agreement was a de facto LMA, going significantly beyond advertising sales into program production and news gathering. LMAs in Canada cannot be implemented without the CRTC's approval, and in early 2005, the CRTC ordered the agreement to cease.

In 2008, the Filipino Associated Broadcasting Company leased its airtime to the Malaysian broadcaster Media Prima (through the local subsidiary MPB Primedia, Inc) in a similar fashion to an LMA—with MPB Primedia providing entertainment programming, and ABC handling news programming and operations. Soon afterward, ABC and Media Prima were sued by rival media company GMA Network, Inc. for attempting to use the partnership to skirt laws requiring domestic ownership of broadcasters. In response, ABC's media relations head Pat Marcelo-Magbanua reiterated that the subsidiary was a Filipino company which was self-registered and Filipino-run. The concerns became moot in 2010, when Media Prima announced it would divest its ownership in the network to PLDT's broadcasting subsidiary MediaQuest Holdings

See also

• Concentration of media ownership