Broadcasters Push to Merge but Deals Stall amid Governance, Regulatory and Market Roadblocks

The broadcast-television sector agrees on one thing: consolidation is necessary. Executing those combinations, however, has proven far more difficult than many executives anticipated.

In August, Nexstar Media Group, the nation’s largest local-station owner, unveiled a proposed $6.2 billion agreement to acquire Tegna, a move that would combine more than 260 stations across the United States. Last week, Sinclair, which operates 179 local affiliates, publicly launched a hostile bid for E.W. Scripps after acquiring nearly 10% of the company on the open market.

Both potential transactions are unresolved, and industry leaders say the delay is increasing pressure to reach workable outcomes. Station groups that operate network affiliates for local news, sports and other programming confront the same structural headwinds hitting cable and studio businesses: subscriber declines driven by streaming and tech alternatives.

Broadcasters remain profitable today largely because of hefty carriage payments from pay-TV distributors. Roughly 65 million U.S. households still subscribe to bundled linear television packages, and retransmission fees — the payments broadcasters receive for inclusion in pay-TV lineups — account for an estimated 33% to 50% of a station group’s annual revenue, with advertising comprising most of the remainder.

That revenue model is under strain as the pool of traditional bundle subscribers shrinks. Local streaming strategies have not yet filled the gap, newsroom resources are thinning, and the economic case for scale has become more urgent. Consolidation promises cost reductions and increased negotiating leverage for carriage renewals with major distributors such as Comcast, Charter, YouTube TV and DirecTV.

For some buyers, regulatory constraints are the primary impediment. For others, internal governance dynamics and cultural friction have complicated dealmaking. Sinclair’s push for expansion, for example, has been hampered not by regulatory limits alone but by questions around family control and organizational fit.

Sinclair has been pursuing an acquisition target for nearly a year. In August the company announced a strategic review to explore merging its broadcast business with a peer, and it held early discussions with several potential partners. Gray Television was among the companies reportedly approached, but talks did not advance because Gray is awaiting government approval on a separate, smaller transaction.

Sinclair focused its attention on Scripps, owner of more than 60 stations and a portfolio of entertainment channels, with talks beginning over the past year. Early discussions examined a structure in which the Scripps family and the Smith family — Sinclair’s controlling shareholders — would cede majority control of a combined entity while retaining roles in the company. Proposals included establishing an independent board to oversee critical editorial and programming decisions, a governance safeguard that became a focal point of negotiations after both Sinclair and Nexstar preempted episodes of “Jimmy Kimmel Live!” in September.

Across the discussions, Sinclair presented multiple transaction variants addressing leadership and whether the deal would constitute a merger or an acquisition. Sources close to the talks said the proposals stalled in part because of cultural and governance concerns tied to Sinclair’s ownership and its history of politically charged programming mandates. The company’s 2018 effort to force “must-run” commentary across its stations and its failed bid for Tribune that same year remain touchpoints in opponents’ critiques.

“I think there’s a lot of complexity to any transaction, especially transactions that involve family-controlled public companies with highly levered balance sheets,” Scripps Chief Financial Officer Jason Combs said at Wells Fargo’s TMT Summit in November. “I think they’d add some complexity around a variety of issues, whether it’s economic splits, whether it is impacts to the capital structure and potential there, whether it’s governance issues. There’s a whole range of issues.”

When talks with Scripps paused in September, Sinclair began purchasing shares incrementally until its stake reached roughly 8%, a level that required public disclosure under SEC rules. Sinclair now holds a 9.9% position in Scripps and has announced a hostile proposal to buy the company. In response to Sinclair’s $7-per-share offer — valuing the proposal at more than $580 million — Scripps adopted a shareholder rights plan, commonly called a “poison pill,” intended to allow time for deliberation and to protect against coercive tactics. The plan is set to expire after one year.

Legal questions have also surfaced. After Sinclair disclosed its Scripps stake, Scripps lawyers reportedly sent a letter raising concerns about the timing and nature of Sinclair’s stock purchases. Because the parties exchanged nonpublic information under a nondisclosure agreement during early talks, the letter suggested there may be open questions about whether any confidential material was used in the subsequent purchases — a scenario that, if proven and material, could raise securities-law issues, according to an outside attorney familiar with the matter.

Regulatory constraints remain the most consequential barrier across the sector. Federal Communications Commission rules prevent any single company from owning broadcast stations that reach more than 39% of U.S. television households. That cap does not immediately imperil a potential Sinclair-Scripps tie-up, Sinclair has argued, but Nexstar’s proposed Tegna acquisition would likely require the FCC to lift or significantly waive the long-standing ownership limit.

“We are focused on achieving deregulation, and we continue to advocate for the elimination of the antiquated constraints on local television ownership as the best solution to level the competitive playing field for all media,” Nexstar CEO Perry Sook said in a November statement when seeking approval for the Tegna deal. Broadcasters also seek relief from a separate rule that bars ownership of three or more ABC, CBS, Fox or NBC affiliates in a single market.

FCC Chairman Brendan Carr has publicly expressed support for modernizing ownership rules, calling the cap “arcane” and contrasting it with the regulatory posture toward Big Tech. The commission opened a review of those rules in late September, but any formal changes have not yet been finalized. The Department of Justice has also been slow to advance approvals, adding another layer of uncertainty for deals of all sizes.

The consolidation debate has political and industry opponents. Former President Donald Trump criticized consolidation on his social platform, while Newsmax CEO Chris Ruddy, a Trump ally, has argued that allowing larger station groups would reduce the number of independent voices and empower affiliates to demand higher carriage fees. Pay-TV distributors likewise oppose consolidation, warning that higher retransmission fees would be passed through to consumers who already face pressure from cord-cutting.

“Sinclair is brazenly seeking a mega-footprint nationwide and in local markets across the country, which will allow them to impose even more exorbitant retransmission consent fees,” said Grant Spellmeyer, president and CEO of America’s Communications Association, a trade group representing distributors. “These higher prices will leave consumers with a painful choice—pay up or lose your programming.”

Industry trade groups counter that ownership restrictions disadvantage broadcasters as they attempt to compete with global streaming platforms. “Lifting the arbitrary 39% limit, which applies only to broadcast stations, will allow station groups to invest in local journalism, sports rights and the technology that keeps communities informed during emergencies, especially in smaller markets,” Curtis LeGeyt, president and CEO of the National Association of Broadcasters, said in a statement. He added that the national cap was imposed in a different media era and that reform is needed so local stations can sustain news coverage and emergency reporting.

For now, station owners must navigate a complex mix of commercial incentives, family-led governance structures and a regulatory framework that is being debated but has not changed. That combination makes the path to consolidation uncertain, even as the economics that drive consolidation grow more compelling.