Broadcast TV’s Regulatory House Of Mirrors

A $3.25 million station deal announced last week offers a surprisingly useful illustration of the peculiar state of broadcast television regulation.

Sinclair has agreed to acquire four stations from Howard Stirk Holdings that it already operates under a shared services agreement (SSA). If the FCC approves the deal, WGWG-TV Charleston, KHSV-TV Las Vegas, WGWW-TV Anniston and WSES-TV Tuscaloosa will go from separately owned stations Sinclair already helps operate to stations Sinclair simply owns outright.

Four modestly valued stations changing hands would ordinarily barely register against the industry's multibillion-dollar consolidation story. But this transaction points toward something larger. After decades in which broadcasters developed increasingly elaborate arrangements to capture some of the operational and economic benefits of stations they could not directly own, the FCC is dismantling some of the ownership restrictions that helped make those arrangements useful in the first place. The next consolidation wave may therefore look considerably different from traditional M&A: before broadcast groups buy one another, many may simply start buying more of the stations they already run.

How (Not To) Own A TV Station

Broadcast ownership has accumulated a uniquely dense collection of acronyms, each describing a slightly different way for separately licensed stations to share programming, sales or operations.

A local marketing agreement (LMA), often called a time-brokerage agreement, lets one broadcaster program portions of another station's schedule and sell the related advertising. A joint sales agreement (JSA) covers advertising sales. A shared services agreement (SSA) is broader, encompassing services such as news production, engineering, facilities, technical support and administration. The FCC defines SSAs broadly to include arrangements through which separately controlled stations provide or collaborate on station-related services.

Then there are the so-called sidecars — not an official FCC classification so much as industry shorthand for separately owned companies that hold station licenses while maintaining extensive contractual relationships with larger groups. Sinclair has long had such relationships with companies including Howard Stirk and Cunningham Broadcasting; Nexstar has similar arrangements with firms like Mission Broadcasting, White Knight and Vaughan Media.

There is even another acronym: variable interest entity (VIE). It is a financial-accounting concept rather than an FCC one, but it neatly captures the unusual economics at play. Nexstar says 35 full-power stations are owned by VIEs it consolidates in its financial statements. The licensees retain formal control over programming, finances, personnel and station operations, while Nexstar provides sales, programming and other services and is deemed under generally accepted accounting principles (GAAP) to hold controlling financial interests in the entities. Nexstar also holds options to purchase their station assets, subject to FCC approval.

The license holder still matters: FCC rules require it to retain ultimate control. Economically, though, the line between an “owned station” and a “partner station” can become remarkably thin.

These structures developed for understandable reasons. When direct ownership would run afoul of local or national ownership limits, contractual arrangements could preserve many of the same operational or economic benefits without transferring the license. Not every deal was designed as a regulatory workaround, and FCC attribution rules have changed over time. But ownership limits clearly encouraged the industry’s creativity. As those limits are loosened or rewritten, much of that complexity now looks ripe for simplification.

The UHF Discount That Wouldn’t Die

Nothing illustrates the accumulated strangeness quite like the “UHF discount.” The FCC created it in 1985, when UHF television really was technologically disadvantaged relative to VHF. For purposes of calculating a station group’s national reach, a UHF station therefore counted as reaching only half the television households in its market.

By the time the nationwide full-power digital transition was completed in 2009, however, that technical rationale had largely disappeared — and in some respects reversed. The FCC itself later concluded that digital UHF channels were “equal, if not superior” to VHF for television transmission.

The FCC finally abolished the discount in 2016, concluding that it had become technically obsolete. A year later, the Chairman Pai regime restored it, not because UHF broadcasting had mysteriously become inferior again, but because eliminating the discount without simultaneously reconsidering the national ownership cap effectively tightened that cap. Pai memorably called the two rules “inextricably linked.”

The result bordered on regulatory performance art. Under the rule, a company nominally limited to stations reaching 39% of U.S. television households could count households reached by its UHF stations at only 50%. An all-UHF portfolio could therefore theoretically reach 78% of U.S. television households while remaining within a rule ostensibly limiting national reach to 39%. That is not merely a critic’s extrapolation; the FCC itself explicitly described the effective cap as 78% in its 2016 order eliminating the discount.

Earlier this month, the FCC voted 2-1 to repeal the 39% bright-line national cap and replace it with transaction-by-transaction public-interest review. The change has not yet taken effect and is almost certain to be litigated. Strangely, however, 39% survives as the threshold for that additional review — still calculated using the 50% UHF discount. The obsolete discount, in other words, may outlive the hard cap it was created to administer.

From Workaround To Acquisition

Sinclair is already moving aggressively in that direction. Its 2025 annual report says it completed three station-partner buy-ins during 2025 and 23 in total as of the report’s publication, with additional transactions pending. Sinclair is unusually explicit about the rationale: the transactions “improve retransmission economics, enhance alignment, and increase long-term EBITDA potential.”

Gray offers another example. In July, it agreed to acquire six American Spirit Media stations for $50 million. Gray — and predecessor Raycom before it — had already provided back-office services to five of those stations and local news to four for more than a decade. The parties immediately completed the first phase of the transaction, with Gray paying $40 million and beginning a limited local management agreement while the remaining regulatory process continued.

Scripps may offer the cleanest illustration of regulatory cause and effect. When it acquired ION Media in 2021, Scripps simultaneously sold 23 ION stations to INYO Broadcast Holdings to comply with FCC ownership rules, receiving options that allowed it to reacquire the stations later. In February of this year, Scripps notified INYO that it was exercising all 23 options; in June, it withdrew six of those option exercises specifically to bring the remaining transaction beneath the national television ownership cap. Two months later, the FCC voted to eliminate the bright-line cap itself — a sequence that could hardly provide a cleaner case study of how quickly the regulatory calculus is changing.

Buying a station you already service is fundamentally different from acquiring an unfamiliar competitor. Depending on the arrangement, the buyer may already supply its news, sell its advertising, operate its technical infrastructure or capture much of its economics. Ownership can simplify the structure, improve retransmission economics, better align spectrum and multicast strategy and eliminate some of the friction associated with a separate licensee. In practical terms, it is regulatory cleanup with an EBITDA multiple attached.

The Workaround Era Starts To Unwind

Meaningful constraints remain. In 2025, the Eighth Circuit vacated the FCC’s Top-Four Prohibition, which had generally prevented one owner from controlling two of a market’s four highest-rated stations, but upheld the basic local rule preventing common ownership of more than two full-power stations in a market.

Even that constraint has become more flexible in practice. In approving Nexstar’s acquisition of Tegna in March, the FCC granted waivers permitting Nexstar to own more than two full-power stations in 23 DMAs, subject to committed divestitures in six markets.

The national-cap repeal is also far from legally settled. Congress directed the FCC in 2004 to set the national audience-reach limit at 39%, and opponents argue that only Congress can now change it. Todays’ Carr-driven FCC takes the opposite position, contending that Congress removed the national rule from mandatory quadrennial review without stripping the Commission of its broader authority to modify or repeal it. Free Press and allied groups, which also challenged the Nexstar-Tegna waiver earlier this year, announced immediately after the August 6 vote that they intend to challenge the repeal as well.

So the current moment is not quite regulatory anarchy. It is something stranger: a regulatory inversion in which structures built to live within the old ownership regime remain in place just as that regime begins to recede. The next consolidation wave may therefore arrive less through another $6 billion merger than through dozens of smaller purchases of stations that groups already operate — using ownership structures largely invisible to the viewing public.

There is something wonderfully absurd about that endpoint. The FCC spent years giving broadcasters reasons to invent complicated ways not to own stations, and is now giving them reasons to own those stations after all. The ultimate regulatory workaround may turn out to be eliminating the regulation that required the workaround in the first place.

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