Standard General’s $8.6B Bid Would Strengthen Local Newsrooms In Streaming Age
The pending acquisition of TEGNA by Standard General would create the nation’s largest minority owned, women-led broadcasting company. Tegna operates 64 television stations in 51 US markets. Spearheaded by Soo Kim, a long-term investor in the broadcast and local news industry, and incoming CEO Deb McDermott, a 20-year television industry veteran, Standard General intends to grow and invest in TEGNA’s operations to become a leading broadcast television company. Though accepted by shareholders, the deal requires the approval of the Federal Communications Commission (FCC). The deal’s emergence demonstrates the impact of internet disruption to traditional media and of FCC legacy regulations.
Plug and Play: Permissionless Innovation in Online TV
There are few barriers to start an online channel today. Compared to historical US regulation against the owning of radio stations, TV channels, and newspaper, an individual can wrap audio, video, and text elements into online property from the start. This is enabled by multiple internet-related technologies for the creation, management, and dissemination of content, embedded analytics for market research, and a variety of quality, security and speeding techniques to end users.
With the ubiquity of high-quality broadband across America, users can access this content from a range of devices at the time and place of their choosing on demand. Online entrepreneurs can create their own websites or leverage existing video platforms, use white label templates for marketing, and rely on interfaces like Roku for findability. Marketers enjoy different business models including advertising supported, subscription-based, or pay per view, and supplement it with cross-sells, coupons, catch-up offers, and other promotions. While there are fixed costs for content rights, innovators increasingly create their own content given that the inputs are plentiful, cost-competitive, and accessible with variable purchase of video servers, satellites, cameras, and other equipment. Many entrepreneurs use the all-in-one solution of smartphones for mobile live streaming to facilitate the viewing of sports, fundraisers, corporate events, local news, and so on. If there are bottlenecks at all in online TV, it is with Big Tech platforms, not regulators.
Antiquated Regulation of Traditional TV
Building or running a traditional, linear broadcast TV station is a different story. You must convince regulators at the FCC that your station serves the “public interest, convenience and necessity” and consistently report your numbers to the FCC. In the early 20th century, Congress and the Radio Corporation of America (RCA) seized the “public” airwaves and laid the foundation for the broadcast TV oligopoly of NBC, CBS, ABC, and PBS. This regime was subsequently shaped by the FCC through application, allocation, and approval of TV licenses (Note that in the 1990s, the FCC began auction for mobile wireless spectrum, allowing markets, not the regulators, determine outcomes).
Over decades, a series of laws established by Congress and interpreted as regulation by the FCC evolved into today’s Media Bureau, which makes policy recommendations for the FCC commissioners’ consideration. FCC licensing and ownership rules served to protect major networks, until the emergence of cable, thwarted for years by the FCC, chipped away the broadcast advertising cartel, which the internet finally dismantled.
While there are no rules against how many households Big Tech platforms like Netflix can reach, the FCC closely regulates the number of radio and TV stations a given entity can own within a specific area and how many households it reaches, maxing out at 39 percent of US TV households.
To foster competition, the broadcast and newspaper sector should be deregulated so it can compete with Big Tech, but progress has been slow and painstaking. FCC Commissioner Michael O’Reilly advocated for years for reform of media regulation. Finally in 2017, the FCC eliminated the outdated prohibition on co-ownership of a TV station and newspaper in the same market and the cross ownership of radio and television stations.
Reinventing Broadcast TV for the Digital Age
Soo Kim is up to the challenge of reinventing the media industry in the age of Big Tech. No stranger to adversity, he emigrated from an impoverished farm in 1970s South Korea, grew up in Queens, NY, and attended Princeton. His Standard General has a winning record of buying struggling TV stations and turning them around through thoughtful analysis and investments in people and technology.
Many analysts believe that broadcast TV is a dying business with no future, exacerbated by cord cutting. However, existing networks still have assets and important ties to the communities they serve that streamers lack. If assets can be redeployed and coupled with an effective local news strategy, local broadcasting can thrive; the demand for professional local news has only increased in the era of pandemics, crises, and disasters.
Kim is betting that news delivery can be improved through streaming, direct to consumer marketing, and the Advanced Television Systems Committee’s (ATSC) 3.0 standard, which allows 4K and high definition resolution and Dolby audio in over the air transmission. He plans to leverage proven TV executives, including McDermott (together they brought Young Broadcasting out of bankruptcy in 2010) and others to lead the transformation.
Standard General’s application to the FCC demonstrates a business plan focused on investment in talent and technology. Talent is critical to the content business, something Netflix touts in its reinvention of entertainment. Standard General plans to increase the number and salaries for station employees, add more field journalists, improve compensation packages, expand training in news production and investigation, and partner with local universities for pipeline of journalists.
The application further details technology and facilities investments in the many stations including Lincoln, Cape Girardeau, Richmond, Nashville, Albany, Knoxville, San Francisco, Raleigh, Spartanburg, Providence, and Mobile. This includes investment in multi-platform content distribution, new web assets, content management systems, cameras, cars, transmission equipment, computers for home and newsroom, and automated captioning for the hearing impaired. The investment expands coverage of Congress from the Washington DC newsroom and improves public safety during hurricanes from a state of the art radar system at WFLA in Tampa, Florida.
Preserving Local Media
Broadcast regulation has kept power in the hands of a few, leaving the future of local media in question. Standard General’s long record of investing in local news is notable and critical to the future of local news in this era of streaming and big tech dominance. Investments in people and technology will preserve local newsrooms. The FCC should approve the deal without delay.