July 23, 2019

It has been more than a year since Gray Television, the parent company of KSFY-TV, announced a proposed acquisition of Sioux Falls NBC affiliate KDLT-TV from Red River Broadcasting Co. And while that’s still the plan, the deal has been held up by the federal government for what one South Dakota senator calls “an unusually long time.”

The $32.5 million deal needs approval from the Federal Communications Commission and the U.S. Department of Justice.

When the deal was announced in May 2018, Gray said it hoped to close the acquisition before the end of the third quarter that year.

More than a year later, it’s still waiting.

“We are working very hard and are very anxious to close the transaction,” Gray Television said in a statement. “Unfortunately, we cannot close until the federal government grants us permission.”

Getting such deals approved hasn’t been simple. Last year, the Department of Justice’s antitrust division turned down Gray’s proposal to buy an affiliate in Casper, Wyo.

According to Gray’s filing, KELO-TV’s share of market revenue never dropped below 56.6 percent over the past five years, while the combined market share of KSFY and KDLT never exceeded 35.7 percent.

“The proposed transaction, if consummated, clearly would allow Gray to operate KSFY-TV and KDLT-TV together to increase efficiencies, reinvest capital resources to improve the stations’ service to their viewers and improve the stations’ abilities to compete with the dominant in-market station – KELO-TV,” Gray said in its federal filing.

On July 7, Sen. Mike Rounds, R-S.D., sent a letter to the chairman of the FCC and the assistant attorney general in the Justice Department’s antitrust division questioning the length of time it has taken to investigate the acquisition. Rounds called it “an unusually long time, nearly 15 months.”

“The length of this review would be uncommon in many markets, but it is particularly uncommon in a market the size of Sioux Falls.”

Rounds wrote that he agrees with Sen. John Thune, R-S.D., as well as Gov. Kristi Noem and the state attorney general’s office who all have said “this merger is in the public interest of South Dakotans.”

“Gray Television has expressed that the merger will increase local news coverage and programming,” Rounds wrote. “Further, Gray Television has indicated they plan to open a news bureau in Pierre, S.D., our state capital. Opening a news bureau in Pierre will increase public access to government activities.”

The Wall Street Journal touched on the deal in a July 8 editorial questioning whether federal regulators are protecting tech giants and cable and satellite companies by blocking local TV mergers.

“The deal would augment Gray’s share of the local TV advertising market to 35 percent, which is still less than the 50 percent that Nexstar’s CBS station controls,” it said. “Gray has promised to invest more in local news and even an advanced weather radar to warn South Dakota of tornadoes.”

The Justice Department “is stringing out the review, ostensibly because its economic models show too much market concentration,” The Wall Street Journal piece opined.

“Broadcast TV accounts for less than 10 percent of advertising in Sioux Falls, so businesses have plenty of alternatives – radio, online, newspapers – if Gray raises its ad rates.”

KSFY-TV has not shared details of how it would manage both stations, including whether newscasts would be added or dropped or what would happen with KDLT’s offices and studio at 3600 S. Westport Ave. KSFY moved into its new studio and offices at Courthouse Square in downtown Sioux Falls in 2016.

Editor’s note: SiouxFalls.Business provides a weekly business news report on KSFY-TV. It is not compensated for its segment.