UPDATED at 8AM PT with executive comment. Sinclair Broadcast Group, whose pending acquisition of Tribune Media stands to make the No. 1 local TV player a far more influential colossus, reported declines in third-quarter revenue and profits but praised the FCC’s recent deregulatory moves. It said it expects the Tribune deal to close by early 2018.
Total revenues dipped 3.3% to $670.9 million, compared with $693.8 million in the year-ago quarter. The company identified $3.1 million of lost revenue it blamed on the impact of the hurricane season and what it described as “other one-time adjustments.”
Operating income of $103.4 million exceeded the company’s projections but was down 33% from a year ago. The current quarter’s operating income included $8.8 million of one-time transaction and spectrum auction expenses, Sinclair said, and $3.1 million of lost revenue as a result of the impact of the hurricane season and other one-time issues.
The results undershot Wall Street expectations, and the company’s stock immediately took a hit. Shares were down almost 4% in morning trading, at $30.50, though volume was light.
Executive chairman David Smith, pugnacious son of the company’s founder, Julian Sinclair Smith, has been a vocal advocate of free-market policies and he drew attention in the company’s earnings release to the FCC’s open meeting on Nov. 16. That could prove a milestone date for U.S. media, as the Republican-controlled body will vote on sweeping changes to decades-old broadcast ownership rules.
Sinclair is poised to benefit from deregulation. It has grown from a single Baltimore radio station bought in 1971 to what is now the top station owner in the country, through a combination of sharp-elbowed negotiating tactics and political maneuvering. Against the larger backdrop of deregulatory efforts during the Trump Era, the media business could see the rollback of rules preserving net neutrality and limiting a single owner’s ability to control more than two stations in a single market. In fact, depending on the outcome of the meeting, a single station owner could control the local stations affiliated with ABC, CBS, NBC and Fox in a single market, which critics fear could gut many local news operations.
Even by its own bare-knuckled standards, comments from Smith both in the press release and during a conference call with Wall Street analysts were forceful. He saluted the FCC for making moves that acknowledge “that the competitive marketplace has changed and broadcasters actually do compete against everyone for viewers and advertising dollars.” The current ownership rules, he added in the release, “no longer reflect the realities of today’s media landscape and consumer viewing habits. We applaud the FCC’s action to level the playing field, especially in light of emerging technologies and consolidation in the telecom and cable industries.”
Asked on the call to elaborate, he said the Dept. of Justice, which joins with the FCC in determining the fate of media mergers, “sooner or later is going to have to get in alignment with the marketplace” and “pay attention to what’s happening in the real world.”
President and CEO Chris Ripley said the “punchline” of recent FCC moves is that the commission “gave us a market-driven answer, which is a win for us.” As Sinclair execs have looked more closely at the Tribune portfolio, Ripley said, “the more we learn, the more we like.” The deal will give the combined company “near-nationwide news capability. We’re starting to look at new models, such as personalized news channels. It opens up more avenues to be explored.”
Cable network WGN America, which gained momentum during the tenure of former Tribune CEO (and onetime architect of FX) Peter Liguori is “going great, well ahead of what we thought when we announced,” Ripley said. Current management “moved away from high-cost originals to lower-cost originals.” The shift, which led to critically acclaimed series Underground and others being jettisoned, has already improved financial results, Ripley said. “It won’t have huge impact on 2017, but will set up nicely for 2018. We didn’t have to do the heavy lifting. They already did it for us.”
In response to an analyst’s question, Ripley also said the company has “no interest in hiring” disgraced ex-Fox News host Bill O’Reilly, despite press reports suggesting a deal to restore him as a regular on-air presence was imminent.