License to share: Cozy relationship among TV stations yielding less diverse content
Grand Junction TV stations broadcast local news that looks and sounds the same because, in many cases, it is.
The city’s ABC affiliate, KJCT, and NBC affiliate KKCO air many of the same videos, often post the same stories on their websites and share on-air talent.
The city’s Fox and CBS affiliates operate out of the same building and broadcast identical local newscasts.
For KJCT and KKCO, the duplication is the result of a business strategy adopted to sidestep federal laws, free speech advocates say.
Broadcast industry professionals say it reduces costs and preserves local access to the broadcast spectrum.
But some recent changes in local news programming highlight some of the strategy’s potential problems.
A call Thursday to the general manager at KJCT was referred to Stacey Smith, general manager of KKCO.
The telephone operator at KJCT said the station no longer has its own general manager. KKCO’s Smith now manages the KJCT station, she said.
Smith did not return a telephone message requesting comment.
A side-by-side comparison of the websites for KJCT and KKCO reflect several duplications. Both sites state they are “Designed by Gray Digital Media,” for example.
On Thursday, both sites featured the same photo of a snow-covered evergreen branch with the identical headline: “National Weather Service breaks down temperature inversion.”
Numerous other duplicate photos, videos, headlines and stories are evidence of an obvious sharing of content.
The duplication is not limited to stories, videos and photos. The stations are also sharing on-air talent.
Suzi Evans, a subscriber to The Daily Sentinel, reported KKCO weather forecaster Joseph Dames presented weather news at 6:50 a.m. Nov. 23 on KJCT and again at 5:30 p.m. Nov. 24 on KKCO.
“So what’s going on with the interchangeable staff?” Evans asked in an email.
This is what is going on.
Atlanta-based Gray Television, the sixth-largest broadcast company in the nation, owns and operates KKCO.
In July, Gray’s lawyers formed a West Virginia-based limited liability company known as Excalibur Broadcasting, Gray Senior Vice President Kevin P. Latek said.
Don Ray, a Gray regional vice president before retiring mid-year, acts as Excalibur’s president.
“Gray has decided to be more aggressive acquiring stations and so they’ve helped me set up Excalibur,” Ray said.
In the TV business, Ray’s company is known as a “sidecar.”
Excalibur is Gray’s sidecar.
In a deal that closed in October, Excalibur purchased KJCT’s broadcast license from Pikes Peak Television for $3 million.
At the same time, Gray bought KJCT’s building and equipment from Pikes Peak for $9 million.
Excalibur now does what sidecars do. It owns the broadcast license but does nothing to operate the station.
“Excalibur is not set up to run the stations or to have a back office to handle everything that has to be done with the broadcast group,” Ray said.
Instead, it acts as a holding company for the license, he said.
A shared services agreement signed by Excalibur July 31 hires Gray to run KJCT.
In other words, Gray, owner of KKCO, operates KJCT.
Under the terms of the agreement, Excalibur pays Gray $75,000 a month plus performance bonuses to operate KJCT.
KJCT leases office space, equipment, studio furnishings and business facilities from Gray for an additional $25,000 a month.
Under the agreement, Excalibur is allowed to keep whatever revenue KJCT earns minus costs.
If Excalibur doesn’t have enough money to pay KJCT’s salaries, utilities, or property taxes each month, Gray pays the difference.
Gray could also be obligated to pay the Wells Fargo loan Excalibur took out to buy KJCT should Excalibur fall behind, according to the agreement.
In other words, for $100,000 a month, Gray assumes most of the risk that Excalibur will lose money on the KJCT station.
On paper, Excalibur retains ultimate control over the management of KJCT. Gray is not allowed to hire or fire certain Excalibur managers, set advertising rates or make final programming decisions.
Gray Senior VP Latek denied the company has any ownership interest in Excalibur, though Ray confirmed that Gray was a member of the Excalibur limited liability company.
Latek also denied Gray is a creditor of Excalibur.
Gray does not control Excalibur in any way, Latek contended.
The agreement extends to 2021 but can be terminated sooner under certain conditions and renewed on 180 days notice.
Two for one
Under federal law, the broadcast spectrum belongs to the public and must be managed in the public interest.
By law, the Federal Communications Commission decides who receives a broadcast license. The broadcast license is what gives TV stations permission to broadcast.
As a general rule, the FCC forbids a single company from owning more than one license in a single television market.
Sidecar arrangements allow broadcast companies to sidestep the rule because they permit the company to own one license while its sidecar, legally a separate entity, owns another.
“It’s what you might think of as a shell game to exploit loopholes in the rule,” said Todd O’Boyle, program director for media and democracy at Common Cause, a national nonpartisan, nonprofit advocacy organization.
Sidecar arrangements are profitable because they allow a broadcast company to operate two stations for the price of one. Essentially the same back office operates both stations, he said.
“When they combine newsrooms and you have one camera crew and one set of reporters and they’re reporting the same news every night, you’ve effectively controlled two stations in violation of the rules,” O’Boyle alleged.
FCC regulations do not prohibit the practice, which is both legal and widespread, according to an Oct. 20 story in the Wall Street Journal.
In Grand Junction, a review of staff members listed on the KJCT website reflects fewer people work there since Excalibur bought the station, though Gray’s Latek declined to comment about staffing at either station.
“We don’t talk a lot about that because it’s pretty proprietary,” Latek said. “It’s kind of right at the guts of how we operate our business.”
Meanwhile, KJCT appears to be using much of the same material KKCO uses to program local news, though not in every case.
“We are looking at trying to rationalize the cost of running a news operation and that’s pretty expensive as you guys know,” Latek said.
“There’s not as much revenue in Grand Junction to ... afford all of the same types of stuff that we really think we need to have,” he said.
News production costs are the same in larger, more profitable markets as they are in small markets, Latek said.
In terms of media market size, the Grand Junction-Montrose television area is ranked number 184, of a possible 210 markets listed at the industry website http://www.stationindex.com.
“All of us are trying to rationalize how we can continue to do news in a world where news does not make, frankly, a lot of money,” Latek said. “But it’s important. It’s part of our mission and this deal with Excalibur and the ABC affiliate there ... we thought would be a way to keep that station viable and ... share the back office.”
Where possible, KKCO and KJCT share the same engineering, promotions, sales, and IT staff and also the same email system, he said.
“Wherever we can pull costs together and run things out of one operation — it’s just more efficient,” Latek said.
“We know this is just about the bottom line,” Common Cause’s O’Boyle said. “They often make nice pronouncements about how we’re going to have new resources to invest in local reporting and investigative coverage, but we really know this is about mining broadcast properties for all they’re worth.”
The strategy is new to Gray, but not to the television industry, Excalibur’s Ray said.
“These things have been going on since the 1980s. Sinclair (Broadcasting) does them ... just about everybody who is trying to grow in the business and stay in broadcasting and invest in broadcasting is setting up these arrangements so they can operate more stations,” Ray said.
The problem is, shared news programming overall reduces governmental accountability, O’Boyle said.
“We know that consolidation results in fewer reporters on the beat, which means we’ve got fewer eyes holding the power accountable,” he said.