Assignment 1: Sinclair Broadcast Group Sinclair Broadcast Group, Inc.

Is the largest television broadcasting company in the United States of America. With a network of 162 television stations in 77 markets, Sinclair produces its own programs and/or provides sales services to cable TV distributors. The most important channels hold by Sinclair Broadcast Group are FOX, ABC, MyTV, CBS, NBC and Univision. Sinclair Broadcast group is already the nation's largest owner of TV stations, mainly small and medium size TV markets. Given the global decrease of viewership in the US qnd the difficulties faced by Broadcast companies to raise revenue stream through advertising, how can we explain the continual expansion of the company that has just met an agreement to buy 8 New Age Media? The key of Sinclair Broadcast Group's sucess is the Big Money in Broadcast retransmission fees that became the new mother lode for Sinclair Broadcast Group. Retransmission fees, that were not significant for broadcaster ten years ago, are charged by local networks to satellite TV viewers to get an access to their signal. The Congress authorizes broadcast stations to grant or deny retransmission signal to viewers. This legislation leads then to tense negociations every year between Cable distributors and Broadcasters. In fact, it used to be 100% margin revenue for TV stations. But, according to SNL Kagan, broadcasters retransmission revenue skyrocketted to $1.757 billions in 2012 (which represent an increase of 717% since 2006). This money goes to programming, to put high quality programs. Sinclair Broadcast plays on its big audience to put pressure on cable TV. Univision is actually the leader in collecting retransmission fees over the last 5 years. It reflects the fact that in the hispanic market (20% of the market) in the United States, Univision is the dominant broadcaster and it is a must see television programming for hispanic market. Another important point is local NFL retransmission that is deal breaker for subscribers to cable TV. It is futhermore a low-cost TV content for Sinclair Broadcast which makes it even more profitable. In september 2013 CBS (affiliated to Sinclair Broadcast Group) negociated retransmission fees with Time Warner Cable. On the one hand, CBS needed New-York Los-Angeles and Dallas in the fold, on the other hand, Time Warner Cable couldn't afford not to have NFL in some markets. This kind of negociations became an annual ritual, in 2009 Mediacom and Sinclair Broadcast Group faced the same problem. Most of the time such negociations are solved a few days before the beginning of the NFL season. Nevertheless, in september 2013 the crisis lead to a shutdown of channels for a few days for CBS, but an agreement restored CBS programming to Time Warner Cable. At a first sight, Sinclair Broadcast seems to have won 1 or 2 dollars per cable subscribers. But these escalating sports fees are thrust upon all the subscribers of all pay-tv providers, wether they want the programming or not. Which means that viewers that are less willing to pay more for programs they don't watch may stop their subscription, that may have a negative effect on Sinclair Broadcast's profits. Another tendancy that may have a negative drawback on Broadcast companies is the will of TV cable companies to switch to a la carte offers, to reduce the costs of retransmission fees and to keep viewers who do not want to pay for what they do not watch. To conclude, even if retransmission fees negociations explain the growth of Sinclair Broadcast Group and its expansio, it is also a reason for the decrease of subscription. That is why Sinclair Broadcast groupe has urged the FCC to grant flexible use waivers that would clear the way for broadcaster to deploy digital broadcasting system and avoid the switch of subscribers to a la carte or other internet offers.