The Nexstar-Tegna merger that sought to bring together two of the largest media companies managing over-the-air local network affiliates has been brought to a screeching halt.
In August of last year, Nexstar announced a $6.2 billion acquisition of Tegna that would bring together a total of 265 local stations across the country. In spite of regulatory concerns due to the rapidly increased consolidation of local television, the move was blessed by the Trump administration. The federal government agreed to waive a provision that blocked one company from owning broadcast stations that reached more than 39% of households.
Predicatably, the merger was challenged by multiple attorneys general from eight states and also DirecTV, arguing that it would increase costs.
In a hearing at a federal court in Sacramento, judge Troy L. Nunley sided with the plaintiffs.
Nunley issued a preliminary injunction blocking the acquisition and directing Nexstar and Tegna to continue operations as two distinct companies as the legal fight begins in earnest.
“Defendants and all of their respective agents, employees, or attorneys, shall be and hereby are restrained and enjoined from all actions relating to integration and consolidation of Nexstar and TEGNA until final judgment is entered in this matter. Defendants are prohibited from all actions to integrate and consolidate Nexstar and TEGNA; 2. Nexstar must permit TEGNA to continue operating as a separate and distinct, independently managed business unit from Nexstar, and Nexstar must put measures in place to maintain TEGNA as an ongoing, economically viable, and active competitor,” Nunley wrote in his conclusion.
Nunley’s ruling details several reasons for the decision including a troubling lack of competition and the potential for rising retransmission fees. However, the sports world impact was also at the center of his opinion. The judge stated that a Nexstar-Tegna merger could increase the probability of blackouts and leave fans hoping to watch games on over-the-air broadcast networks at the mercy of the new company’s demands.
“The merger would make Nexstar’s Big Four blackout threats even more coercive. Once Nexstar owns not just one but two or even three Big Four affiliates in a local market — the situation this merger will create in 31 local markets nationwide — any MVPD that refuses Nexstar’s demands will risk leaving its subscribers in that area without multiple sources of live sports and local news, and potentially unable to watch any NFL games on Sunday afternoons, for example. That will make subscribers even more likely to switch to another distributor that is still paying for Nexstar’s stations. In short, by making blackouts even more painful for distributors like DIRECTV, the merger will make it even harder for them to resist Nexstar’s demands for higher prices,’ the judge wrote.
If Nexstar holds all the cards for broadcast networks in a certain local market, it could theoretically charge MVPDs whatever they wanted because of the insane amount of leverage it would have. We all know how consequential live sports are to carriage disputes, especially NFL games. (See: YouTube TV vs ESPN.) It’s a compelling argument in favor of DirecTV and others who oppose the merger. And it will be fascinating to see how this subject in particular casts a shadow over future proceedings, especially when the same administration that blessed the acquisition has been trying to stand up for the availability of football on broadcast television.
