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), management services agreement (MSA), joint sales agreement (JSA), or a shared services agreement (SSA). In the U.S., JSAs for radio stations are counted toward ownership caps.
The most common use of an LMA in television broadcasting is to create a "virtual duopoly", where the stations operated under the agreement are consolidated into a single entity. The operations of the stations can be streamlined for cost-effectiveness through the sharing of resources, such as facilities, advertising sales, personnel, and programming. 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.
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 eight distinct broadcast television stations. An LMA does not effect the ownership of the station's license, thus they do not require approval by the Federal Communications Commission (FCC). This loophole allows 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).
LMAs can also allow companies to control foreign stations; the Canadian company Rogers Media uses a joint sales agreement to operate Cape Vincent, New York radio station WLYK as a station targeting the nearby Canadian market of Kingston, Ontario, where it owns CKXC-FM and CIKR-FM. Rogers owns a 47% stake in its licensee, Border International Broadcasting.
In 2013, both Tribune Broadcasting and Gannett were required to use LMAs to take over certain stations in their purchases of Local TV LLC and Belo respectively, as they did not have exemptions to the FCC's newspaper cross-ownership restrictions. For Tribune, the situation is only temporary, as the company is in the process of spinning off its newspaper arm as an independent company.
Effects of LMAs
The use of LMAs for virtual duopolies that circumvent the FCC's rules have been considered controversial by broadcasters and public interest organizations due to their effects on the industry, particularly the results of consolidation through the irregular use of LMAs. In markets where duopolies are not legally possible, a company may elect to form a duopoly by buying a station, but selling the license to a third-party, retaining only the "non-license" assets of the station—the FCC only recognizes ownership of television stations by facility IDs and other, and not by call signs or other property In turn, the purchaser takes over the purchased station under an LMA or similar agreement. Both Sinclair Broadcast Group and Nexstar Broadcasting Group have become infamous for their frequent use of this method to form duopolies with partners such as Cunningham Broadcasting, Deerfield Media, and Mission Broadcasting. While not to the same extent as Sinclair and Nexstar, Raycom Media has a similar business relationship with American Spirit Media, in which its stations are all operated by Raycom under shared services agreements.
The partnered stations may also consolidate their news operations: newscasts on the junior partner in the LMA, if it operated a separate news department before the LMA's formation, may be re-scheduled or cut back to prevent direct competition, or the stations may even simulcast newscasts in certain timeslots. The stations may either retain separate news productions (differentiated by on-air branding, anchors, and other elements), or share a single joint brand. 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; a seemingly separate newscast on one station in the duopoly may ultimately consist of re-packaged news content from the other station.
How the stations may be consolidated vary depending on the duopoly's structure, for example:
- In 2005, Nexstar's CBS affiliate WROC-TV in Rochester, New York took over the Sinclair-owned Fox affiliate WUHF under an LMA, and took over production of its 10 p.m. newscast. In 2013, Sinclair acquired the non-license assets of ABC affiliate WHAM-TV, sold the license to Deerfield Media, and began operating the station under an LMA. In October 2013, Sinclair announced that upon the beginning of 2014, it would terminate WUHF's LMA with Nexstar, transfer the station's operations into WHAM's facility, and move the newscasts WHAM produced for its The CW subchannel WHAM-DT2 (which include a morning and 10 p.m. newscast) to WUHF.
- In Evansville, Indiana, Mission Broadcasting acquired independent station WTVW in 2011 with its former owner Nexstar Broadcasting retaining operational duties under an SSA. WTVW consolidated news operations with recently acquired Nexstar station, ABC affiliate WEHT, and had its newscast output reduced through the reductions of its morning newscast from four hours to two and its 6 p.m. newscast – except on Sundays, where it remained one hour – from one hour to 30 minutes (leaving only a two-hour morning newscast, half-hour noon and 6:30 p.m. newscasts and an hour-long newscast at 9 p.m.). Both stations also adopted a joint Eyewitness News brand for their newscasts.
- In 2009, Raycom Media (owner of Honolulu-based 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 network affiliation) for those of KGMB (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. Due to its nature, the swap was not a transaction that would require the intervention of the FCC, aside from the changing of call signs. The three stations were then folded into a shared news operation known as Hawaii News Now. An estimated 68 positions from a total of 198 from the three stations would be eliminated as part of the agreement. On November 20, 2013, MCG Capital filed to sell KFVE to the aforementioned American Spirit Media.
- In 2013, through its acquisition of stations from Newport Television, Nexstar and Mission Broadcasting formed a full-power virtual quadropoly in Little Rock, Arkansas that consists of two duopolies owned by the two companies respectively; NBC station KARK-TV and MyNetworkTV station KARZ-TV (owned by Nexstar), along with Fox station KLRT-TV and CW station KASN (owned by Mission, operated by Nexstar under a local marketing agreement). All four stations were consolidated into KARK's facilities; 30 employees were laid off as part of the consolidation.
- By contrast, when the operations of WAGT (the Schurz Communications-owned NBC affiliate in Augusta, Georgia), were taken over by Media General's ABC affiliate WJBF-TV, the stations aimed to create a more efficient operation through consolidation, while maintaining separate on-air brands and news programming. A new, high-definition capable facility was constructed in a former Barnes & Noble location for the stations. Both WAGT and WJBF maintain their own studios (along with a third for shared and non-station specific productions), newsrooms, and sales departments within the facility. While the newscasts on both stations do share some "factual" video content, they are otherwise produced independently of each other. However, upon the consolidation, most of WAGT's managerial staff were dismissed and other employees were reassigned to different positions.
Broadcasters can also collect carriage fees for the stations they operate under LMAs on behalf of their owner, often bundling its carriage agreements with those of stations they own outright. This can, especially in LMAs between two stations affiliated with the "major" 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.
Gannett's 2013 acquisition of Belo was opposed by organizations such as the American Cable Association and Free Press, due to Gannett's plans to use LMAs and two shell companies owned by former Belo and Fisher Communications executives (Sander Media and Tucker Operating Co.) to dodge FCC newspaper cross-ownership restrictions in Louisville, Arizona, Portland, and Tucson. Although Gannett contended that the arrangements were legal, Free Press president Craig Aaron stated that "the FCC shouldn't let Gannett break the rules. Media consolidation results in fewer journalists in the newsroom and fewer opinions on the airwaves. Concentrating media outlets in the hands of just a few companies benefits only the companies themselves." Concerns surrounding Gannett's cross-ownership of stations in Arizona soon became moot; Tucson's KMSB and KTTU were already operated by Raycom Media under a shared services agreement established under Belo ownership (however, Gannett would still handle advertising sales for the stations), while Meredith Corporation announced a deal to purchase the independent KTVK and CW affiliate KASW right after the completion of the Gannett/Belo deal (however, due to Meredith's ownership of KPHO-TV, it will sell KASW to SagamoreHill Broadcasting and operate it under an LMA).
In February 2001, Clear Channel Communications subsidiary Citicasters was fined $25,000 for its use of time brokerage agreements and litigation to unlawfully control Youngstown, Ohio area radio station WBTJ (101.9 FM, now WYLR); 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 2009, the Media Council of Hawaii complained to the FCC about Raycom's Hawaii News Now operation, 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.
In December 2013, acting upon its proposed acquisition of Allbritton Communications, FCC Video Division Chief Barbara Kreisman sent a letter demanding information from Sinclair Broadcast Group on the financial aspects of its "sidecar" operations, and warned that "In three of the markets – Charleston, Birmingham and Harrisburg – the proposed transactions would result in the elimination of the grandfathered status of certain local marketing agreements and thus cause the transactions to violate our local TV ownership rules." It was asserted that the deal might only be legal if the affected stations were operated under shared services agreements.
In the midst of its December 2013 purchase of Belo, the Department of Justice blocked Gannett from using an agreement with Sander Media to operate CBS affiliate KMOV alongside its own NBC-affiliated station KSDK, and ordered Gannett to sell KMOV. Even though Gannett planned to operate KMOV separately from KSDK, the Department ruled the agreement to be a violation of antitrust law, as it would reduce competition for advertising sales. Following the closure of the Belo deal, Gannett announced that KMOV, along with Belo's Phoenix stations (KTVK and KASW, where it would have formed a triopoly with its own KPNX) would be sold to Meredith Corporation.
In January 2014 town hall meeting, FCC chairman Tom Wheeler disclosed that he planned to place more scrutiny on the use of LMA-style agreements and shell companies, stating that "there were a couple of references in a couple of recent decisions in which we've said that we’re going to do things differently going forward on what were called these shell corporations." Later that month, it was reported that the FCC had placed all pending acquisitions involving the use of shell companies on hold, so the Commission could discuss changes to its policies. Among the deals affected by this decision are the aforementioned Sinclair/Allbritton purchase.
On March 6, 2014, the FCC announced that it would hold a vote on March 31 on a proposal to ban joint sales agreements involving television stations outright, making them attributable to FCC ownership limits if the senior partner sells 15% or more of advertising time of a competing junior partner station in the JSA; the ban would apply to both existing sharing agreements under such a structure as well as pending station transactions that include a JSA. Station owners would be given a two-year grace period to unwind existing joint sales agreements; coordinated retransmission consent negotiations between two of the four highest-rated stations in a single market would also be barred under the proposal. FCC chairman Tom Wheeler also proposed an expedited process to review joint sales agreements on a case-by-case basis, granting a waiver of the rules if a broadcaster can prove a particular joint sales agreement arrangement serves the public interest. The regulations would go into effect immediately, if a majority of the agency’s commissioners vote in favor of the restrictions.
In a 2005 Canadian dispute, Rogers Media 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.
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