A battle is brewing between an over-the-air antenna retailer and a broadcast station owner, with a pending multibillion-dollar merger hanging in the balance.
Mr. Antenna, a vendor of outdoor television antennas, recently filed an informal objection against Gray Television Inc.'s proposed $2.83 billion acquisition of Meredith Corp.'s 17 local TV stations. The retailer argues that Meredith refused to run advertisements promoting Mr. Antenna's equipment on Meredith's Las Vegas network and that this refusal is a violation of the Communications Act's "core public interest values," which include free over-the-air broadcasting and robust competition.
According to the complaint, from April 2019 until this year, Mr. Antenna advertised its outdoor antenna products and services on KVVU-TV, Meredith's FOX (US)-affiliated Las Vegas station. Mr. Antenna was notified in June 2021, however, that Meredith would no longer run paid advertisements for any "cord cutting" replacements to cable service, effective July 1, 2021.
Mr. Antenna was told that the decision did not originate locally but came from the senior level at Meredith and would apply to all of Meredith's television properties. Such antennas posed a competitive threat to Meredith's retransmission consent revenue, according to the complaint. Under retransmission-consent agreements, pay TV providers pay fees to broadcasters to transmit their stations' signals. Thus, any household that cancels their cable or satellite video package results in lower retrans revenue for broadcasters.
"The competitive harm ... is starkly obvious in the current environment," Mr. Antenna said, noting that the Las Vegas market has been hard hit by job losses during the pandemic. "When families lose income, they often are no longer able to pay monthly cable or satellite subscriptions fees. Free, over-the-air broadcast service allows them to continue to enjoy television."
Meredith filed a response rejecting Mr. Antenna's claims. According to Meredith, there is no corporate policy against accepting advertisements for over-the-air antennas or their installation. Karlo Maalouf, the owner of Mr. Antenna in Las Vegas, made claims based on miscommunication that was later addressed, Meredith wrote. Meredith also stated that it offered to restore Mr. Antenna's advertisements.
"Indeed, Mr. Antenna advertised with KVVU-TV from 2017-2021 and was only briefly told the station could not take his advertisements due to an internal miscommunication ... Contrary to Mr. Antenna's unsupported speculation, Gray has had no input into and has not sought to exert any influence over Meredith's advertising decisions or policies," Meredith's response stated.
The FCC has already proposed fining Gray Television $518,283 this year for previous violations. In July 2021, the FCC concluded that Gray Television's ownership and operation of Alaska's KTUU-TV NBC (US)-affiliated station and the KYES-TV CBS (US)-affiliated station from July 31, 2020, until March 3, 2021, violated the FCC's Local Television Ownership Rule. Under the rule, an entity may not own two full-power television stations in the same designated market area if both commonly owned stations are ranked among the top four rated stations in the market.
Gray Television filed a request for cancellation in response to the fine, saying it should be "lauded not punished" for improving television service in Anchorage, Alaska.
Frank Montero, an attorney at Fletcher Heald and Hildreth, said Mr. Antenna's allegations may not be a reason for the FCC to fine Meredith or Gray, but he expects the FCC to continue closely monitoring the merger.
"[Meredith and Gray Television] may have to submit a compliance report," he said. "If that compliance report is in order, the FCC could lift the requirements of the consent decree. But if not, the FCC is going to extend the consent decree. And if they're still not in order, eventually they could get fined."
Gray's purchase of Meredith is expected to close in the fourth quarter. Executives have said the combined entity will benefit from greater scale that will bolster its position in the political advertising arena while opening up new national ad sales opportunities.