Gannett, Other Station Groups Have ‘Several Strategic Reasons for Wanting to Grow’

By Merrill Knox 

Gannett’s acquisition of Belo is the latest example of consolidation by local station groups. Sinclair Broadcast Group is in the process of acquiring 38 new stations, and Media General and Young Broadcasting recently announced a merger. The New York TimesBrian Stelter takes a look at the motivation behind the consolidation trend:

Station owners like Gannett have several strategic reasons for wanting to grow. Along with obvious efficiencies, bigger companies tend to have more leverage when they negotiate with cable and satellite distributors over retransmission fees — the broadcast equivalent of the per-subscriber fees that cable channels receive. These fees, although a relatively new revenue source, have become vitally important to stations as they try to offset audience and advertising declines.

In many cases, Gannett’s stations earn higher fees than Belo’s, and because of contractual clauses “we will be able to move them to our rates shortly after we close the transaction,” Gracia C. Martore, Gannett’s chief executive, said in an interview.

Being bigger is also better when stations negotiate with the networks that provide them with programming. Networks like CBS have been aggressive about receiving a slice of retransmission fees, something known in the industry as reverse compensation. “Scale has become much more important” in those discussions, [SNL Kagan senior analyst Robin] Flynn said.