Thursday, October 8, 2009

Protesters move against Honolulu TV Station's Shared Services Agreement

The Media Council of Hawaii is taking its complaints about a two-owner, three-station Honolulu television cluster to the FCC.

Raycom and MCG Capital are the owners of the stations. The shared services agreement (SSA) brings together Raycom’s NBC KHNL-TV and MyNetworkTV KFVE-TV with MCG’s CBS KGMB-TV.The plan, announced in August, was to merge backroom operations at the three stations, share news operations and some news programming, and eliminate a reported 68 jobs.

MCH claims the trio would control 45% of the revenues in the market, which it finds excessive. In general, it’s calling the SSA an attempt to get around FCC ownership caps, and says it’s not in the public interest.

Raycom has asserted that the move is simply a way to cope with new market realities, and that without the SSA it is quite possible that one or more stations in the market would have to be shuttered.

MCH is officially protesting the arrangement at the FCC, and is being represented by the Institute for Public Representation at Georgetown University Law Center.

RBR-TVBR observation: This combination would have been dicey under Michael Powell’s failed ownership dereg attempt. The oddity of the Honolulu DMA – covering several islands – means that it has more than 18 stations, enough to support a three-station cluster. But putting together two of the top four stations was never going to be allowed, so we suspect that under those rules, the pairing of KHNL and KGMB would be nixed.

Of course, those TV duopoly rules never came to pass. But you can see the problem defending a combo that would have been questionable even under Powell’s much-maligned plan.

It will be interesting to see how the FCC handles this for three reasons.

For starters, it will test the old rule of thumb that you have to be able to legally own it to LMA it. However, the FCC seems cool with shared service agreements (SSAs), joint sales agreements (JSAs) and time brokerage agreements (TBAs) as long as the licensees of both parties to the agreement are on hand and taking an active role in the management of their station(s). What will happen when this particular SSA is put to the test?

The second thing, if the SSA is deemed proper, is whether the FCC will knock it down on public interest grounds.

The third matter is the financial health of the stations. The FCC has frequently granted waivers to allow otherwise illegal combinations to be formed on the failed station exception. Will the FCC keep in mind the solvency of the licensees in order to make sure that all the stations licensed to the market are financially capable of remaining in business?

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