Sinclair, Fox Strike Affil Deal with Optional Station Swap

BALTIMORE: Sinclair Broadcast Group said today that reached an affiliate agreement with Fox Broadcasting that included an option to buy Fox’s Baltimore station for $52.7 million, or less if Fox buys stations from Sinclair.

The deal covers 19 stations owned or operated by Sinclair, and go into effect when the existing agreement expires, Jan. 1, 2013, running through Dec. 31, 2017. It also covers Cedar Rapids, Iowa Fox affiliate KFXA-TV, which Sinclair provides with non-programming related services.

The station swap portion of the deal gives Sinclair the option to buy Fox’s owned-and-operated MyNetworkTV station in Baltimore, WUTB, between July 1, 2012 and March 31, 2013, for $52.7 million. That sum would be reduced by $25 million if Fox exercises a likewise option to buy three of four CW and MNT affiliates owned by Sinclair within the same period of time—WRDC (MNT) and WLFL (CW) in Raleigh, N.C.; KVMY (MNT) and KVCW (CW) in Las Vegas; WSTR (MNT) in Cincinnati; and WTVZ (MNT) in Norfolk, Va.

Sinclair will pay “monthly programming fee payments at rates and increases consistent with the marketplace for Fox stations,” the company said.

David Smith, president and CEO of Sinclair, said securing the Fox affiliation for WBFF-TV, its flagship station in Baltimore, was pivotal to the deal.

“Our Fox affiliate in Baltimore is one of our most important television assets, and over the years the station has built a strong local brand,” Smith said. “We believe that this affiliation was at risk, and negotiated with Fox to acquire the option to purchase [Fox O&O] WUTB, in Baltimore in hopes that acquiring this station would solidify WBFF’s position as a Fox affiliate in Baltimore in the long term.

“In addition to securing the Baltimore affiliation, the terms of the agreement include the granting of options to [Fox] to purchase our CW and MNT affiliates in three of four markets at current valuation multiples. Any sales under the option agreement would be in line with our current focus to lessen our exposure to MNT and CW stations, particularly in markets where we do not have a duopoly structure with a ‘big four’ network. As expected, we agreed to continue to pay Fox annual program license fees, which increase annually. 

“We believe that the current retransmission rates that are being paid to us by the multichannel video program distributor providers such as cable, telecom and satellite are significantly below market value based on the fees paid to cable channels and, as these contracts renew, we expect these revenues to provide us with the resources to pay those programming license fees. Our goal is to grow our share of MVPD programming payments to reflect more closely the audience share and appointment programming we bring to the MVPDs. We believe the best and quickest strategy to achieving that goal is by having our broadcast network partners' and our interests aligned.”

Sinclair now owns and operates 74 TV stations in 45 markets.