September 27, 2005

**DA 05-2519**

**Released: September 27, 2005**

KSMO Licensee, Inc.

c/o Kathryn R. Schmeltzer, Esq.

Shaw Pittman LLP

2300 N Street, N.W.

Washington, DC 20037-1128

Meredith Corporation

c/o John R. Feore, Jr., Esq.

Dow, Lohnes & Albertson, PLLC

1200 New Hampshire Avenue, N.W.

Washington, DC 20036-6802

> Re: Assignment of License for
>
> KSMO-TV, Kansas City, MO
>
> Facility ID No. 33336
>
> File No. BALCT-20050107ACA

Dear Counsel:

This is in reference to the application for consent to assign the
license for KSMO-TV, Channel 62, Kansas City, Missouri (WB), from KSMO
Licensee, Inc. (\"Sinclair\") to Meredith Corporation (\"Meredith\").
The application is unopposed. The application requests a waiver of
Section 73.3555(b)(2) of the Commission\'s rules, the television duopoly
rule, to permit Meredith, licensee of KCTV(TV), Channel 5, Kansas City,
Missouri (CBS), to acquire KSMO. Both KSMO and KCTV are in the same
Nielsen Designated Market Area (\"DMA\") and their Grade B contours
overlap.

Under Section 73.3555(b)(2) of the Commission's rules in effect, [^1]
two television stations licensed in the same DMA that have Grade B
overlap may be commonly owned if: (i) at least one of the stations is
not ranked among the top four stations in the DMA; and (ii) at least
eight independently owned and operating, full-power commercial and
non-commercial educational television stations would remain in the DMA
after the merger. The Kansas City, Missouri DMA would not have eight
independently owned and operated television stations post-merger. Thus,
the proposed common ownership of KCTV and KSMO would violate Section
73.3555(b)(2). Meredith requested a waiver on the basis that KSMO is a
"failing station", however. [^2] Alternatively, Meredith requests a
\"general\" waiver.

**Duopoly Waiver Request.** The Commission's *Local Ownership Order*
established the criteria for a waiver of the television duopoly rule for
a "failing station" -- one which has been struggling for "an extended
period of time both in terms of its audience share and financial
performance." These criteria are:

> \(a\) One of the merging stations has had a low all-day audience share
> (*i.e.,* 4 percent or lower);
>
> \(b\) The financial condition of one of the merging stations is poor.
> "A waiver is more likely to be granted where one ...of the stations
> has had a negative cash flow for the previous three years;"
>
> \(c\) The merger will produce public interest benefits. "A waiver will
> be granted where the applicant demonstrates that the tangible and
> verifiable public interest benefits of the merger outweigh any harm to
> competition and diversity;" and
>
> \(d\) The in-market buyer is the only reasonably available candidate
> willing and able to acquire and operate the station; selling the
> station to an out-of-market buyer would result in an artificially
> depressed price. [^3]

If the applicant satisfies each criterion, a waiver of the rule will be
presumed to be in the public interest.

As part of its waiver request, Meredith attaches a chart showing Nielsen
reported audience shares for the all-day share. The chart shows that
KSMO averaged a 3.85 household audience share in 2002, a 3.3 household
audience share in 2003, and a 3.15 household audience share in 2004,
based on a Nielsen four-book average. In a September 7, 2005 submission
for which it requests confidential treatment, Meredith discloses that,
based on Nielsen data, 2005 household audience share has further
declined to 2.7.

With respect to KSMO\'s financial condition, Meredith\'s request appends
a cash flow summary intended to show negative cash flow for the three
years preceding the filing of the instant application. Moreover, on
January 10, 2005, Sinclair submitted summary balance sheets and income
statements for KSMO covering 2001 through September 30, 2004, with a
request for confidential treatment. The parties filed additional
financial documentation on May 27, 2005; June 28, 2005; July 1, 2005;
July 26, 2005; and September 7, 2005.[^4]

In the documents filed September 7, 2005, Meredith shows that KSMO
revenue has declined steadily over the past five years. The station\'s
share of advertising revenue in the Kansas City DMA has also fallen
significantly during this period. In addition, Meredith shows a sharp
decline in the asset value of KSMO\'s current program contracts relative
to current contracts payable. The same is true with respect to long term
program contracts.

The September 7, 2005 submission appends an analysis of KSMO\'s
financial condition by Michael G. Baumann, Ph.D., and Stephen E. Siwek,
M.B.A., of the firm Economists Incorporated. Therein, the authors find,
*inter alia*, that KSMO has shown steep declines in traditional measures
of liquidity both over time and in comparison to other Sinclair
television group stations.

Meredith maintains that consolidated operations of the two stations will
result in tangible and verifiable public interest benefits that far
outweigh any conceivable harm to competition and diversity.
Specifically, Meredith pledges to invest over \$1 million to restore and
upgrade KSMO\'s physical plant and equipment. In addition, pointing out
that, due to its financial situation, KSMO currently cannot offer
locally originated programming, Meredith claims that a number of
broadcast and non-broadcast public interest benefits will flow as a
direct result of the joint operation of KSMO and KCTV. Meredith would
maintain separate network affiliations for the two stations and would
continue to provide separate non-network programming on KSMO targeted to
its viewers. Meredith also promises certain programming initiatives.
Within six months, it represents that it would launch a new 30-minute
prime-time local newscast, Monday through Friday, and a new, weekly,
30-minute public affairs program focusing on issues of concern to the
community. Within one year, Meredith pledges to begin a new, weekly,
30-minute public affairs show hosted by local high school students and
addressing issues of importance to teens and young adults. Pointing out
that, through KCTV, Meredith has extensive local programming and access
to local program content, Meredith indicates that it would repurpose
appropriate local programming and program content for broadcast on KSMO.
It also would make available to KSMO local programming and program
content that it cannot include in the existing KCTV schedule. Meredith
states that, during the four quarters beginning with the fourth quarter
of 2003 and ending with the third quarter of 2004, KSMO aired an average
of 3 ½ hours of \"core\" children\'s programming per week. Meredith
pledges to increase that amount to four hours per week of \"core\"
children\'s programming. Moreover, Meredith will increase the number of
KSMO public service announcements by at least ten percent initially. In
addition, Meredith would regularly attend the Kansas City area
broadcasters\' quarterly ascertainment event to meet with community
leaders and assess their concerns and the needs and interests of the
public.

Meredith goes on to pledge that it would attempt to secure rights to
broadcast Kansas City Chiefs football games on KSMO and commits to air
weekly post-game reports on KSMO. Meredith states that it intends to
work with owners of certain popular informational and other programming
currently airing on KCTV and either obtain the right to air a second run
on KSMO or move the primary run to KSMO. According to Meredith, with no
local news staff at KSMO, the station\'s ability to cover severe weather
and public emergencies is limited, whereas Meredith is widely recognized
as having the best severe weather team in Kansas City and a full local
news staff. With the merged operation of KCTV and KSMO, Meredith
maintains, Meredith would immediately be able to improve the depth of
emergency and severe weather coverage on KSMO.

In addition to its programming commitments, Meredith commits to
continue - and increase - KSMO\'s non-programming service to the Kansas
City community. It will continue KSMO\'s participation at events such as
SIDS Stroll, Abby\'s Run, a Gilmore Girls \"She\'s My Best Friend\"
contest promoting mother-daughter relationships, and donation of holiday
toys to Excelsior Springs Good Samaritan Center. Meredith states that it
will use KSMO to provide coverage of community events, particularly when
KCTV would otherwise be constrained by existing network and programming
commitments. Meredith claims that the two stations, together, can
provide fuller coverage of community events than they could
independently. Moreover, Meredith indicates that, under its ownership,
KSMO will serve the community through additional activities such as
blood drives, food drives, contributions to local school fundraisers,
volunteering and youth mentoring efforts. Meredith would extend its
established internship program for young adults to KSMO.

In addressing the fourth criterion, Meredith states that, beginning in
November 2001, Sinclair\'s parent, Sinclair Broadcast Group (\"SBG\")
made an extensive effort to find buyers for KSMO. SBG retained the
services of Bear Stearns, a nationally recognized independent broker
with substantial experience in TV ownership, consulting, and station
brokerage, to market certain assets, including KSMO. From late 2001
through early 2002, Bear Stearns contacted approximately forty parties,
including major broadcasters throughout the country. Only five,
including Meredith, requested further information on KSMO and other
stations licensed to SBG. Only two potential purchasers - Meredith and
one other party - continued to pursue a possible purchase of KSMO. The
other party was interested in KSMO only as part of a package deal
including other SBG stations. SBG found the various purchase prices
offered by this party to be inadequate, and the party eventually
withdrew.[^5] In addition, another party contacted SBG directly, asking
for information about KSMO. This party and SBG entered into talks, but
SBG has not heard from the party since July 2004.

Alternatively, Meredith argues that, if the Commission is disinclined to
grant the failing station waiver it should nevertheless grant a
\"general waiver\" of what Meredith terms \"the 8 TV voices test of the
Duopoly Rule\" in order to permit the proposed combination.[^6]
According to Meredith, rigid application of the \"8 TV voices\" test
would be inappropriate because a permanent waiver to permit a duopoly of
KSMO and KCTV would serve, not undermine, the Commission\'s policy goals
of competition and diversity. Meredith references the above-stated
public interest benefits that it maintains will accrue as a result of
the consolidated operation of the two stations. In addition, Meredith
argues that, even with the consolidated operation, data regarding the
Kansas City DMA demonstrate that it must contend with robust media
competition. Specifically, Meredith indicates that there are now ten
full-power television stations in the DMA, representing at least eight
independent voices, and there are also eight LPTV stations representing
an additional six television owners. Meredith states that the market has
45 radio stations representing at least 20 separate radio voices; 106
cable systems that provide service to DMA households, representing
approximately 63 percent of the total DMA TV households; 18 daily
newspapers representing 12 different owners, and 91 weekly newspapers,
which, combined with daily newspapers, represent 70 different owners.

**Discussion.** We will grant the parties\' request for a waiver of the
television duopoly rule and we will grant the above-captioned
application. On balance, based upon the showings submitted under the
waiver criteria established by the Commission in the *Local Ownership
Order*, we are persuaded that grant of a waiver is warranted on grounds
that KSMO is a failing station.

Specifically, the parties have demonstrated that KSMO has a low audience
share. Significantly, not only is the audience share below 4 percent for
every year since at least 2002, ratings have decreased steadily since
then. Furthermore, the financial documentation submitted by the parties
shows that KSMO\'s financial condition is poor. In reviewing the
extensive financial information submitted by the parties, especially the
information presented regarding the distribution of revenues in the
market, we are persuaded that station KSMO is failing to such an extent
that its ability to be a viable voice in the Kansas City market is
severely hampered. Specifically, the parties have shown not only that
station KSMO's revenues have declined steadily over the past five years,
but that the station's share of advertising revenue in the DMA has
fallen significantly.[^7] Additionally, there appears to be a sharp
decline in the asset value of KSMO's program contracts relative to
contracts payable. Finally, we note that two independent economists have
opined that KSMO has shown steep declines in the traditional measures of
liquidity both over time and in comparison to other Sinclair television
group stations. Given these very negative operational circumstances, it
is not surprising that little news, public affairs or other public
interest programming is currently being provided by station KSMO.[^8]
The proposed merger would address these shortcomings, and numerous
public interest benefits will accrue from the combined operation of KSMO
and KCTV. For example, Meredith's pledge of a new 30-minute prime-time
local newscast, Monday through Friday; a new, weekly, 30-minute public
affairs program focusing on issues of concern to the Kansas City
community; and an increase to four hours per week of "core" children's
programming, are the kinds of public interest benefits the Commission
envisioned in adopting the failing station waiver exception. We note
that Meredith also pledges to invest more than one million dollars to
restore and upgrade the KSMO facilities and to include new weather
forecasting capabilities in a part of our country where severe weather
is not an unusual occurrence. Finally, the parties have established that
Meredith is the only reasonably available buyer for station KSMO.

Consistent with the *Local Ownership Order*, we find that the combined
operation of KCTV and KSMO will pose minimal harm to our diversity and
competition goals because KSMO\'s financial situation hampers its
ability to be a viable voice in its market. Under these circumstances,
allowing KSMO to be operated by a stronger station in the market will
result in a definite improvement in facilities and programming, an
outcome which clearly benefits the public interest.[^9]

In view of this result, we need not address the parties\' request for a
\"general waiver\". Having found the applicants qualified to be
Commission licensees, we find that grant of the KSMO-TV assignment
application would serve the public interest.

Accordingly, IT IS ORDERED, That the request for a "failing station"
waiver of the television duopoly rule, Section 73.3555(b)(2), to permit
Meredith to own and operate both KSMO-TV and KCTV(TV), IS GRANTED. IT IS
FURTHER ORDERED, That the application (File No. BALCT-20050107ACA) for
consent to the assignment of the license for KSMO-TV, Kansas City,
Missouri, from KSMO Licensee, Inc. to Meredith Corporation, IS GRANTED.

Sincerely,

Donna C. Gregg

> Acting Chief, Media Bureau

[^1]: 47 C.F.R. § 73.3555(b)(2). On June 2, 2003, the Commission adopted
    revised media ownership rules. *In re 2002 Biennial Regulatory
    Review -- Review of the Commission's Broadcast Ownership Rules and
    Other Rules Adopted Pursuant to Section 202 of the
    Telecommunications Act of 1996*, 18 FCC Rcd 13620, 13691-92 (2003)
    (\"*2002 Biennial Regulatory Review\"*). The effective date of those
    rule changes, however, was subsequently stayed by order of the 3rd
    Circuit Court of Appeals on September 3, 2003. *Prometheus Radio
    Project v. FCC,* No. 03-3388 (3rd Cir. Sept. 3, 2003) (per curiam)
    (*\"Prometheus\"*). With respect to Section 73.3555(b)(2), the court
    continued the stay in *Prometheus Radio Project v. FCC,* 373 F.3d
    372 (3rd Cir. 2004) (*\"Prometheus Stay Order\"*). On June 13, 2005,
    the Supreme Court of the United States denied a petition for writ of
    certiorari. 125 S.Ct. 2904.

[^2]: *See* 47 C.F.R. § 73.3555, Note 7. *See also Review of the
    Commission's Regulations Governing Television Broadcasting*, 14 FCC
    Rcd 12903, 12935-40 (1999) (*"Local Ownership Order"*), *recon.
    granted in part,* 16 FCC Rcd 1067 (2001).

[^3]: 14 FCC Rcd at 12939.

[^4]: Each filing requested confidential treatment. In a letter filed
    July 26, 2005, however, the parties clarified that they were seeking
    confidential treatment only for financial data.

[^5]: *See* declaration of Michael E. Anderson, Senior Managing Director
    for Bear Stearns, Attachment C of waiver request.

[^6]: *See* 47 C.F.R. § 73.3555(b)(2).

[^7]: In this regard, we note that the *Local Ownership Order* suggests
    that the Commission would look favorably upon the grant of relief to
    stations unable to compete effectively. 14 FCC Rcd at 12935.

[^8]: As the *Local Ownership Order* indicated, failing stations
    \"rarely have the resources to provide local news programming, and
    often struggle to provide significant local programming at all.\" 14
    FCC Rcd at 12939.

[^9]: 14 FCC Rcd at 12939.