Television Stations Are Increasingly Sharing Services through a Variety of Broadcaster Agreements, but Data on the Prevalence of These Agreements Are Limited

		Television Stations Can Share a Variety of Services through Broadcaster Agreements

Television stations can enter into agreements with other stations to share  or provide a variety of services. Common services that can be  shared or provided between stations include:
News resources. In some cases, FCC has  established regulatory definitions for these agreements; in other cases, it  is a common industry term that may be used to characterize an  agreement, but there is no regulatory definition. While Data Are Limited on the Number and Nature of Broadcaster Agreements, Stakeholders Report That Agreements Are Becoming More Prevalent

			Data Limitations

Broadcast stations are required to maintain a “public file” that contains information about  each station’s operations and service. Broadcasters and financial analysts told us that one factor contributing to  the greater use of agreements in small to medium markets is that stations  in these markets receive less advertising revenue than stations in large  markets. Thus, broadcasters in small- and medium-sized  markets are more likely to enter into agreements to share or reduce  costs. own or control locally and nationwide. Station owners counter that these agreements do not necessarily lead to  duplicative local news programming and can, in fact, better serve  residents by providing news at different times. They added that the agreements have also provided  localism and diversity benefits by allowing some stations that previously  did not provide news to begin doing so, or to add additional local  programming. However, comprehensive data on the extent  to which these agreements affect retransmission consent fees are not  available, because retransmission consent fee negotiations are subject to  non-disclosure agreements. FCC Has Not Completed a Review of the Use and Impacts of Broadcaster Agreements

		FCC Evaluates Individual Broadcaster Agreements as Part of Its Review of Mergers and Acquisitions

FCC’s Media Bureau will also review agreements if they are challenged by an outside  party. Station owners told us that by limiting the number of stations  an entity can own in a local market, the media ownership rules have led  companies to enter into broadcaster agreements as a means of realizing  economic efficiencies that they are unable to achieve through  acquisitions. FCC has stated that it is unable to determine the extent to which  broadcaster agreements affect its media ownership rules and policy goals  of competition, localism, and diversity. Yet federal standards for internal control, which provide  the overall framework for identifying and addressing major performance  and management challenges, note the importance of obtaining  information from external stakeholders that may have a significant impact  on an agency achieving its goals. To some extent, this uncertainty exists because FCC has not collected  data or completed a review to understand how broadcaster agreements  are being used and the potential impacts with respect to its media  ownership rules and the corresponding policy goals of competition,  localism, and diversity. Specifically, FCC has not collected  comprehensive data to determine the number of agreements, the  services provided through the agreements, and other relevant data to  provide useful context, such as the market and station characteristics  associated with the use of agreements. Broadcasters, station owners, and consumer groups have provided  counterarguments about the effect of broadcaster agreements on FCC’s  media ownership rules and its policy goals of competition, localism, and  diversity. However,  without conducting a fact-based analysis of how agreements are being  used, FCC cannot ensure its current and future policies on broadcaster  agreements serve the public interest. Recommendation for Executive Action

FCC should determine whether it needs to collect additional data to  understand the prevalence and context of broadcaster agreements. FCC  should also evaluate whether broadcaster agreements affect its media  policy goals of competition, localism, and diversity. FCC also noted that it has taken initial steps to address  the recommendation. Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to examine (1) the uses and prevalence  of broadcaster agreements in the television industry; (2) stakeholders’  views on the effects of broadcaster agreements on programming and the  subscription video industry; and (3) the extent, if at all, that the Federal  Communications Commission (FCC) has regulated these agreements. We defined a broadcaster  agreement as any instance where two or more independently owned  stations within the same DMA have entered into any of the following  agreements:  time brokerage agreement/local marketing agreement,  shared service agreement, joint sales agreement, and local news service  agreement. To determine stakeholders’ views on the effects of broadcaster  agreements on programming and the subscription video industry, we  reviewed FCC dockets and interviewed representatives of broadcast  networks; local television station owners; cable, satellite, and other  subscription video service providers; trade associations; labor groups;  consumer groups; financial analysts; and other individuals with  knowledge of the broadcast industry to obtain their views and identify any  supporting studies and data on the effects of broadcaster agreements.
Why GAO Did This Study

Local television stations play an important role in educating, entertaining, and informing the citizens they serve. FCC limits the number of television stations an entity can own or control to advance its media policy goals of competition, localism, and diversity. Competing television stations are entering into agreements to share or outsource services, and some policymakers are concerned about the effects of these agreements on competition and programming.
GAO was asked to review issues related to broadcaster agreements. This report examines (1) the uses and prevalence of broadcaster agreements; (2) stakeholders' views on the effects of broadcaster agreements; and (3) the extent, if at all, that FCC has regulated these agreements.
To address these objectives, GAO reviewed relevant FCC proceedings; conducted a literature review; interviewed officials from FCC, industry, and consumer associations; and conducted nongeneralizable case studies in 6 markets (3 with agreements and 3 without) selected from small and medium-sized markets.

What GAO Found

Local television stations use broadcaster agreements to share services with one another, but data are limited on the prevalence of these agreements. Stations use agreements to share or outsource a range of services, such as selling advertising time and producing local news. Agreements are referred to by a variety of names and two—joint sales agreements and local marketing agreements—have regulatory definitions; other types of agreements have commonly been referred to as shared service agreements or local news service agreements. Stations may participate in more than one type of agreement. Federal Communications Commission (FCC) officials and industry representatives could not identify a central data source that tracks all broadcaster agreements. Station owners and financial analysts said that agreements are more prevalent in small markets because they have lower advertising revenues than large markets. Further, FCC officials and stakeholders said that agreements are becoming more prevalent, and stakeholders stated that economic factors, including declining advertising revenues, drive the use of agreements.
Stakeholders expressed mixed views on the effects of broadcaster agreements. Consumer groups raised concerns that agreements in which stations share news resources can lead to duplicative content in local newscasts. Station owners counter that the agreements are needed to allow some stations to continue providing news and allow other stations that previously did not provide news to begin doing so. In addition, some agreements include provisions that allow stations to jointly negotiate for their signals to be carried by cable and satellite providers. Cable and satellite providers argue that these agreements increase stations' negotiating leverage and thereby contribute to higher prices for cable and satellite service. In contrast, station owners counter that these concerns are overstated. Comprehensive data are not available to evaluate this issue, because the negotiations are subject to nondisclosure agreements, and there is no data source identifying which stations participate in agreements.
FCC evaluates broadcaster agreements that occur in the context of a merger or acquisition, but it has not collected data or completed a review to understand the use and effects of broadcaster agreements. FCC's recent regulatory approach has been to evaluate broadcaster agreements that occur as part of a merger or acquisition and to propose specific remedies as needed. To promote its media policy goals of competition, localism, and diversity, FCC established media ownership rules that limit the number of stations an entity can own or control in a local market. Station owners and consumer groups said that broadcaster agreements are used in situations where common ownership of stations is prohibited by FCC's media ownership rules. FCC has stated that it is unable to determine the extent to which broadcaster agreements affect its policy goals and media ownership rules. Specifically, FCC does not collect data and has not completed a review on the prevalence of agreements, how they are used, or their effects on its policy goals and media ownership rules. Yet federal standards for internal control note the importance of agencies' having information that may affect their goals. Without data and a fact-based analysis of how agreements are used, FCC cannot ensure that its current and future policies on broadcaster agreements serve the public interest.

What GAO Recommends

FCC should determine whether it needs to collect additional data to understand the prevalence and context of broadcast agreements and whether broadcaster agreements affect its media policy goals of competition, localism, and diversity. FCC agreed with the recommendation and noted that it has taken initial steps to address the recommendation, including proposing disclosure of sharing agreements.