As campaign ads saturated the airwaves during the 2012 campaign, and piles of campaign cash buoyed stations’ balance sheets, media watchers wondered: how would the windfall revenues affect the local TV industry, and the news coverage it produces?

We now have a partial answer: the ad-buying binge has accelerated the ongoing trend toward ownership consolidation in the industry.

According to a a report last week by Moody’s Investor Service, large broadcast television companies have launched a new wave of acquisitions. Industry heavyweights such as Sinclair Broadcast Group, LIN Television, and Nexstar Broadcasting are looking to expand their reach by buying up local stations, the report found.

The value of merger and acquisition deals among pure-play broadcasters—companies devoted entirely to television and not owned by major networks—will likely range from $3.5 billion to more than $6 billion in 2013-2014.

The buying spree is fueled in part by the record advertising revenues that local broadcasters reaped in the run-up to the 2012 elections.

Smaller companies “primarily used the political windfall to clean themselves up to be acquired,” said Carl Salas, a senior analyst at Moody’s and the lead author of the report. “The revenues from political advertising really improved companies’ balance sheets, and they’re using that to dress them up to be sold.”

The question of how the unprecedented flood of political dollars unleashed in the 2012 campaign is affecting local television news is one that I examined in CJR’s January issue. Local broadcasters took in the majority of that windfall, gathering nearly $3 billion in political advertising last year, according to the trade association TVB.

But we found that although many stations were producing valuable factcheck segments that scrutinized the ads themselves, there was scant evidence that they were using any of the ad revenues to pay for additional political or investigative reporting.

The Moody’s report, which reflects final 2012 financial data from broadcast companies, offers one of the first big-picture examinations of how the campaign bonanza is in fact being spent. To be sure, consolidation has been an ongoing trend in the broadcast industry, and the report notes that improved balance sheets also reflect a growth in revenues from traditional advertising. But Moody’s found that “the 2012 political-ad cash windfall gave potential acquirers cash for spending or repaying debt balances, while making targets more attractive”—thus driving the current wave.

These findings in turn raise a crucial question: how does consolidation affect the quality of local news?

Broadcast trade groups and media activists hold sharply divergent views on this question.

Dennis Wharton, a spokesman for the National Association of Broadcasters, said that consolidation generally benefits smaller stations by providing them with more resources.

“We think the record shows that when there are opportunities for stations to partner or consolidate, particularly with struggling stations, the more well-financed station will typically add local news, do more public service programming” on the airwaves of its counterpart, Wharton said.

He cited a 2012 survey of local TV news content and jobs, conducted by Hofstra University, which showed an increase in local news programming to an average of five and a half hours per day and a record number of jobs in the local TV industry. That came on the heels of what was at the time a record year for consolidation; 2011 saw the breaking of the billion-dollar mark in station sales.

Media policy advocates such as Tim Karr of the nonprofit organization Free Press disagree—and say that what Hofstra University recorded as an increase in local news was mostly an illusion.

Karr said consolidation leads companies to focus on content that can be syndicated or shared between stations, and to cut back on stations’ capacity at the local level. He noted that in 2009, also a year of broadcast industry consolidation, the annual Hofstra survey found cuts in reporting budgets and staffing at local stations. (Of course, both the job losses in 2009 and the subsequent gains may have had as much to do with the broader economy as industry-specific developments.)

“With the consolidation of ownership there’s generally a decline in the quality in local news,” Karr said. “It is directly related to the staffing of local newsrooms.”

One key to the discrepancy between Karr and Wharton’s claims—and for Karr’s skepticism that local news programming has increased—is the rapid spread in the industry of shared service agreements, according to Danilo Yanich, a professor of public policy at the University of Delaware and the director of its Local Television News Media Project.

Under shared service agreements and other similar partnerships, different stations in the same market agree to share content. The terms of the deals vary, from sharing of scripts or full segments to one partner shutting its newsroom entirely and simply broadcasting the work of its counterpart. An October 2011 analysis by Yanich of the programming broadcast by eight stations working under these agreements found that much of their news content was literally the same, with the only difference being the station logos and commercials.

Yanich’s study identified 83 such agreements among more than 200 markets nationwide, and he said the number has since grown substantially. Although each station may schedule more hours of local news, “the argument that that’s an increase in news in the marketplace is absurd to me” because so much of the content is duplicative, Yanich said.

However, while Yanich’s concerns about shared service agreements raise questions about the quantity of local news being produced, the number of jobs in local television have increased during this period of increased consolidation and sharing agreements, according to Hofstra’s surveys. Yanich said this may reflect growth in the industry overall, but that shared service agreements consistently lead to job reductions.

For better or worse, the effects of consolidation on the quality of local news are likely to become increasingly apparent in the next few years.

Salas of Moody’s expects that the record political ad windfall that helped fuel the current consolidation spree is likely to become a new normal in a world of super PACs, nonprofit political advocacy groups, and the permanent campaign.

An executive of Nexstar, one of the biggest broadcast companies, has predicted a near future in which a small number of station “super-groups” corner the local television market and push out smaller media companies.

“I would think within two to five years, you’ll see the emergence of what I call three or four super-groups, and I think you’ll see a couple emerge sooner rather than later,” Perry Sook, the president and chairman of Nexstar, told investors last November, according to a report by Broadcasting & Cable.

“Those companies will continue to drive the business, while the companies that are sub-scale will look in the mirror and choose not to be a house by the side of the road, as the parade passes by.”

 

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Sasha Chavkin covers political money and influence for CJR's United States Project, our politics and policy desk. He has written for ProPublica, the Center for Public Integrity, and The New York World. Follow him on Twitter @sashachavkin.