Sinclair's merger with Tribune is officially dead

Tribune Media pulled out of the deal with right-leaning Sinclair Broadcast Group after the FCC recommended it'd reject the merger. Here's what you need to know.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
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Sinclair Broadcasting In Spotlight After Viral Video Shows Local TV Anchors Reading Identical Script Lambasting Fake News

The $3.9 billion merger between Sinclair Broadcasting Group and Tribune Media is officially dead. 

Win McNamee / Getty Images

Sinclair Broadcast Group's controversial $3.9 billion takeover of Tribune Media won't be happening, despite the media giant's vows to continue its fight to preserve the deal.

Tribune on Thursday called off the sale of 42 TV stations to Sinclair, saying in a statement that the broadcaster hurt the deal by trying to "maintain control over stations it was obligated to sell," and by engaging in "unnecessarily aggressive and protracted negotiations with the Department of Justice and the Federal Communications Commission over regulatory requirements."

Sinclair announced separately that it's withdrawn the merger from consideration before the FCC. 

The news comes after FCC Chairman Ajit Pai last month said he had "serious concerns" regarding the merger, a signal the agency will recommend rejecting the deal.

Pai's announcement was unexpected given that many believed he'd pursued friendly policies toward Sinclair. Some worried Pai had gotten so cozy with the company that the inspector general of the FCC had reportedly started investigating Pai to determine if he'd inappropriately pushed for rule changes that would help make the Sinclair merger easier to approve.

Pai has repeatedly denied these claims.

Critics of the merger, ranging from consumer rights groups to Democrats, had said the deal would've given conservative-leaning Sinclair, which already owns nearly 200 stations, too much power to influence local media. But Sinclair had argued that the deal was critical to ensuring the future of free, over-the-air television and that it better positioned the company to compete with online giants such as Facebook and Google for advertising.

The company had vowed to continue its fight to preserve the merger. In July it offered to amend the deal in an effort to appease regulators, who'd alleged the company misled them. 

But Tribune said in a statement Thursday it had had enough. 

"This uncertainty and delay would be detrimental to our company and our shareholders. Accordingly, we have exercised our right to terminate the merger agreement, and, by way of our lawsuit, intend to hold Sinclair accountable," Tribune CEO Peter Kern said in the statement.

To help you make sense of what's been going on, CNET has put together this FAQ.

Who are these companies again?

Sinclair Broadcast is the largest TV broadcasting company, owning 193 television stations and 589 channels in 89 markets.

Tribune Media owns 42 television stations. More importantly, many of those stations serve major cities such as New York, Los Angeles, Chicago and Washington, DC.

Why were people concerned about this deal?

Sinclair is considered a conservative-leaning company and has routinely pushed its local stations to air so-called "must-run" segments. It would be one thing if these segments were locally produced and reflected that community's views, but they're centrally produced and distributed to Sinclair's local stations across the nation.

Former journalists at a Sinclair-owned station in Seattle have complained that the content is often politically biased and poorly produced, according to a New York Times report. "Must-run" segments included things like daily "terrorism alert" reports and a 2016 piece questioning support for Hillary Clinton on the grounds of the Democratic Party's historic ties to slavery, the Times said.

Earlier this year, the company began forcing journalists at its affiliates to read these "must-run" scripts. An unnamed anchor told CNN in March that many people in the newsroom were "uncomfortable" with the new initiative called "anchor delivered journalistic responsibility messages."

A video from Deadspin went viral in April showing how Sinclair had its news anchors across the country read the same script warning of alleged bias in reporting by other media outlets. The script featured in the Deadspin video sounds eerily similar to an editorial that aired last year from Scott Livingston, Sinclair's vice president for news, accusing the national news media of publishing "fake news stories."

Then there are Sinclair's ties to the Trump campaign during the 2016 election.

What's the connection with Trump?

Trump has a long history with Sinclair Broadcast Group. 

According to a December 2016 story in Politico, the Trump camp "struck a deal with [the media giant] during the campaign to try and secure better media coverage." Trump's son-in-law, Jared Kushner, reportedly told a group of executives that the campaign promised to give Sinclair more access to Trump. In exchange, Sinclair would broadcast their Trump interviews across the country without commentary, Politico reported.

In March 2017, the New York Post reported that Trump had close ties to the executive chairman and former CEO of Sinclair, David Smith, and that the two had discussed possible changes to media ownership rules. Democratic Reps. Frank Pallone from New Jersey and Elijah Cummings from Maryland noted these connections in a letter they sent to the FCC's inspector general (PDF). 

In April, Trump also defended Sinclair against charges of bias in the wake of the Deadspin viral video.  

"So funny to watch Fake News Networks, among the most dishonest groups of people I have ever dealt with, criticize Sinclair Broadcasting for being biased," Trump tweeted. "Sinclair is far superior to CNN and even more Fake NBC, which is a total joke.

Then in July, Trump bashed his own Republican-led FCC for opposing the deal, even though the agency said Sinclair had tried to mislead them about planned divestitures it was going to make to get the deal approved. 

In a tweet, he said it was "so sad and unfair" that the FCC didn't approve the merger. He also lamented in his tweet that the merger would have provided a "conservative voice for and of the People." He compared the deal to the Comcast/NBC merger approved in 2011, which was a much different deal, combining a cable company with a broadcaster.  

"Liberal Fake News NBC and Comcast gets approved, much bigger, but not Sinclair. Disgraceful!" he tweeted.

Were the Democrats worried about that connection?

Yep. Some expressed concerns that Trump's relationship with Sinclair flowed down to Pai, who was selected by the president to serve as chairman.

"All of these actions, when taken in context with reported meetings between the Trump administration, Sinclair, and Chairman Pai's office, have raised serious concerns about whether Chairman Pai's actions comply with the FCC's mandate to be independent," Pallone and Cummings wrote in their letter to the FCC's inspector general.

What actions has the FCC taken that concerned critics?  

The FCC voted in November to relax several media ownership rules, including a provision that would allow broadcast groups to own two of the top four TV stations in a market, as well as eliminate a rule that prohibits ownership of both a newspaper and broadcast station in the same market. The change would allow more broadcasters to combine with newspapers in the same market.

These rules, which were created more than 40 years ago, were meant to ensure a variety of perspectives on public airwaves.

Pai said that the rule is no longer needed and that it puts broadcasters at a disadvantage when competing for ad revenue with internet giants such as Facebook and Google.

The agency was also expected to vote in July to alter the limits on how many TV stations a company can own. Currently, broadcasters are capped at a national audience reach of 39 percent. It's unclear what the suggested new cap would be. But the agency ended up not taking that vote.

Anything else?

Last summer the FCC reopened a decades-old regulatory loophole called the "UHF discount" that, critics say, essentially paved the way for the Sinclair-Tribune merger.

The UHF discount allows Sinclair to undercount the reach of some of its stations, which is important because of an FCC rule that no entity can own stations reaching more than 39 percent of the nation's TV households.

The FCC eliminated this loophole in September 2016 when the agency was controlled by Democrats. Pai reinstated it in April, just ahead of the merger announcement in May.

What else had the FCC done that might have helped Sinclair?

The FCC also voted last year to adopt a new framework for a next-generation TV standard called ATSC 3.0, which would allow broadcasters to stream video to mobile devices. Commissioner Jessica Rosenworcel, a Democrat, has noted that Sinclair owns several patents for the technology, which has made her suspicious that the FCC rushed to adopt a standard to benefit Sinclair.

"Before we authorize billions for patent holders and saddle consumers with the bills, we better understand how these rights holders will not take advantage of the special status conferred upon them by the FCC," Rosenworcel said.

How has Pai responded to this criticism?

A spokesman for Pai's office in February denied there was any favoritism on behalf of Sinclair.

"Given that the FCC under Chairman Pai's leadership recently proposed a $13 million fine against Sinclair, the largest fine in history for a violation of the commission's sponsorship identification rules, the accusation that he has shown favoritism toward the company is absurd," he said.

He added that Pai has for years called on the FCC to update its media ownership regulations.

"The chairman's actions on these issues have been consistent with his long-held views," the spokesman said.  "Considering the strong case for modernizing these rules, it's not surprising that those who disagree with him would prefer to do whatever they can to distract from the merits of the reforms that the FCC has adopted."

Why should consumers care about the changes to media ownership that make it easier for Sinclair and other media giants to consolidate?

Critics say these rule changes will result in increased media consolidation and fewer points of view at a time when consumers need access to a diversity of opinions.

"Many Americans still get most of their news about local electoral politics from broadcasters," said Gigi Sohn, who worked for former FCC Chairman Tom Wheeler.  "It's local broadcasters and newspapers who cover local politics and issues that are important to every community."

Sohn said the changes will affect medium-size and small markets the most, where there may only be a handful of broadcasters already operating.

What concerned Pai and the other FCC commissioners about the deal?

If the merger were to close, Sinclair would exceed the FCC's 39 percent ownership cap. The broadcaster would have access to 72 percent of the TV viewing households in the US. Even though Pai has advocated changing that cap, he hasn't talked about eliminating it completely.

Sinclair proposed selling a number of stations to get under the cap. But the would-be new owners of those stations had ties to the broadcaster, which critics said would still allow the company to continue to control the stations.

Pai agreed with that assessment.

"The evidence we've received suggests that certain station divestitures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law," Pai said in his statement.

What's everyone saying now that the deal is officially dead? 

Sinclair hasn't commented beyond its statement that it's pulled the merger from consideration before the FCC. 

But Sinclair's critics had plenty to say. 

"Good riddance to a really bad deal that would have given Sinclair an unprecedented amount of control of our local media," former FCC Commissioner Michael Copps said in a statement. "Broadcasters are supposed to serve the needs of the communities where they operate. But Sinclair has shown its only interest is taking over as many local stations as possible to become a national network at the expense of local programming and diverse viewpoints."

Many called the end of the merger a victory for independent journalism in the US. And they credited the work of grassroots activism for bringing awareness to the control Sinclair would've had on media throughout the country.

"Already Sinclair's racist and biased must-run segments hurt local journalism and communities," Brandy Doyle, campaign manager for CREDO Action, a social change activist organization, said in a statement. "Thanks to grassroots pressure, even Trump's FCC had to acknowledge that this deal was bad for the public interest," she added. "The end of the merger is a victory for our media and democracy."

"This transaction had but two supporters -- Sinclair and Tribune," Sohn said in her statement.  "It was opposed by large and small cable companies, rural broadband providers, conservative cable channels and the public interest community. Chairman Pai and his colleagues did right by the American people and the entire broadcast industry by putting the brakes on this merger."

"This was a terrible idea to begin with," Jacob Hutt, a fellow with the ACLU, said in a statement. "The merger would have trampled on First Amendment principles, crippled the future of journalism, and disproportionately harmed minority communities. We thank the thousands of activists that raised their voices to prevent the damage this deal would have done."

First published Nov. 15, 2017.
Update, Aug. 9, 2018, 12:50 p.m. PT: Added details about the cancellation of the merger, Tribune's statement about ending the merger, and other developments from earlier in 2018.

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