DOJ, FCC sign off on Nexstar–Tegna deal as legal fights remain

The United States Department of Justice (DOJ) and the Federal Communications Commission (FCC) formally approved the proposed merger of broadcast station groups Nexstar and Tegna on Thursday. And while some legal hurdles still remain, this is the closest the two companies have been to combining.

The deal was approved after the federal government agreed to waive a law that prevents companies from owning broadcast stations that reach more than 39% of U.S. TV households.

The merger will result in the combined company owning 260 local broadcast TV affiliate stations in the U.S. Currently, Nexstar owns over 200 stations while Tegna owns 61.

However, some roadblocks still remain. The attorneys general from eight states, including California and New York, are suing to block the move on antitrust grounds. There is also a similar lawsuit from DirecTV.

Tegna and Nexstar have both invested in local sports rights for their over-the-air stations in recent years. Nexstar has local agreements with the Southern Conference, New York Mets, and Los Angeles Clippers, in addition to major national rights through The CW. Tegna holds the exclusive local broadcast rights to the Dallas Mavericks of the NBA and the Indiana Fever and Dallas Wings of the WNBA, as well as smaller deals like an agreement to simulcast some Altitude Sports events in Colorado.

If the transaction is finalized, there is little reason to believe that this acquisition will benefit sports fans. Fewer bidders for local sports rights result in less competition, and could lead to some complacency for the broadcaster.

In theory, a combined Tegna-Nexstar could be a stronger bidder given the increased scale of the company. But both MLB and the NBA seem set on increasing local media rights revenue through a centralized streaming RSN. The combined broadcast company does not currently own a major streaming service.

For its part, Nexstar CEO Perry Sook said in a statement, “this transaction is essential to sustaining strong local journalism in the communities we serve.” Though Lillian Rizzo of CNBC notes that the individual media “companies remain profitable due to hefty fees they receive from pay-TV distributors.”

This is unlikely to be the end of broadcast consolidation. If these rules are being waived for Tegna and Nexstar, there is no reason to believe they would not be waived again. Recently, Sinclair attempted a takeover bid of Scripps, which could only happen if the FCC and DOJ issue a similar waiver.