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Paramount’s Potential Station Sale Puts Local TV In The Crosshairs

Tim Hanlon

Willian Justen de Vasconcellos/@willianjusten via Unsplash

Paramount Global’s reported exploration of selling up to a dozen of its independent major-market local TV stations is a curious turn of events that invites both practical speculation about potential buyers, as well as strategic consideration of the broader implications for the local TV industry writ large. The possible divestiture, which could generate between $500 million and $1 billion for the beleaguered media conglomerate, raises some increasingly pressing questions as to the economic viability and intrinsic long-term value of local broadcasting.

Who Could Be Logical Buyers?

Among the likely interested buyers are the usual suspects — Nexstar Media Group, Gray Television, and Sinclair Broadcast Group — all of whom have been aggressively expanding their reach in recent years. However, their potential involvement raises significant questions. These companies are already at or near the Federal Communications Commission’s (FCC) ownership cap rule — which limits the number of TV stations one company can own to 39% reach of US households — and have been aggressively challenging legal definitions (Nexstar, for example, through an outdated, 70s-era loophole known as the “UHF discount,” already enjoys 68% national coverage), while also petitioning regulators to loosen or even do away with these restrictions.

This regulatory hurdle not only complicates potential acquisitions by most of the major pure-play broadcasters, but also highlights the dangers of further media consolidation. As these increasingly centralized entities grow, the diversity and quality of local news content are at risk, potentially leading to homogenized programming that fails to address the unique needs of individual communities.

Media industry-active private equity firms such as Cox Media owner Apollo Global Management and Standard General-owned (and thwarted Tegna acquirer) Standard Media (current portfolio: four small-market stations) are also logical suitors for the Paramount station castoffs, but bring their own set of questions. The raison d'être of PE is about extracting value from acquired companies, not creating it; concerns about whether these high-return-expectant firms would be truly committed to improving local stations’ current (let alone future) offerings are not only legitimate, but expected. Spreadsheet risk management (in this case, current regulatory limitations, and the relatively high cost of financing) is rarely compatible with the qualitative vagaries of content creation and quality journalism.

A Harbinger Of Things To Come?

The potential sale of these stations is indicative of more than just industry cycling or corporate reshuffling. It reflects a troubling, and now more urgent, shift in the local TV marketplace. Paramount’s consideration of offloading these assets suggests that traditional local broadcasting is being strategically sidelined in favor of potentially more profitable digital and streaming platforms. The very possibility of such a deal is likely to encourage similar divestitive considerations at other television networks and media conglomerates — consequences be damned. 

  • Consolidation Concerns: Most potential corporate buyers are already bumping up against or outright skirting FCC ownership limits, and any further consolidation will likely trigger new regulatory scrutiny and legal challenges. This consolidation trend not only risks reducing competition but also exacerbates already significant public concern about the concentration of media power in the hands of a few large corporations.

  • De-emphasizing Local Broadcasting: Paramount’s possible station divestiture hints at a strategic shift away from local TV as a core component of its business, not unlike what other similar firms are contemplating/experiencing. As more “television” companies pivot towards digital and streaming platforms, the role of local TV as a viable programming source and vital community service is already being undermined, and is increasingly at further risk. Diminished local news coverage and a loss of the unique perspectives that only locally focused outlets can provide are very real worries. 

  • Financial Intentions: While the estimated sale price of the full stable of stations is thought to be in the $500M-$1B range, that value is significantly less than what the collection could have fetched as little as a decade ago — and is most certainly less than the aggregated internal values and/or original acquisition costs of the properties involved. The fact that the private equity sector is seen as a (the most?) likely suitor for this potential station group spinoff is a telling sign that the real value opportunity here is in the short-term harvesting of local broadcast TV’s renowned (but flat-to-declining) free cash flows than in anything resembling long-term or strategic value creation.

Redefining Local As “Non-Core”

In sum, Paramount Global’s potential sale of its independent local TV stations could be the proverbial “canary in a coal mine” for the broadcasting industry. If major network/studio owners like Paramount are willing to offload their newly “non-core” local assets, it suggests a growing struggle to (or disinterest in) maintaining traditional broadcasting as a key part of the business model.

The potential long-term effects on local news quality, media diversity, and public access to different viewpoints are unclear, but the risks of further consolidation and a move away from community-focused content could not be more evident.

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