That Paramount Global is reportedly considering selling up to a dozen of its independent local television stations in major markets is a curious turn of events that has prompted both practical speculation about potential buyers and strategic considerations about the broader impact on the local television industry at large. The potential divestiture, which could net the struggling media conglomerate between $500 million and $1 billion, raises increasingly pressing questions about the economic viability and long-term value of local broadcasting.

Who could be logical buyers?

The usual suspects are likely to be interested buyers: Nexstar Media Group, Gray TVAnd Sinclair Broadcast Group — all have aggressively expanded their reach in recent years. But their potential involvement raises significant questions. These companies have already reached or are close to exceeding the Federal Communications Commission (FCC) ownership cap — which limits the number of TV stations a company can own to 39% of U.S. household reach — and they have aggressively challenged legal definitions (Nexstar, for example, has an outdated 1970s-era loophole known as the “UHF discount” and already reaches 68% of national reach), while petitioning regulators to loosen or even eliminate those limits.

This regulatory hurdle not only complicates potential takeovers by most large, pure-play broadcasters, but also highlights the dangers of further media consolidation. As these increasingly centralized entities grow, the diversity and quality of local news content will be threatened, potentially leading to a standardization of programming that does not meet the unique needs of individual communities.

Private equity firms active in the media industry such as Cox Media owner Apollo Global Management and owned by Standard General (and thwarted Tegna acquirer) Standard media (current portfolio: four small channels) are also logical candidates for the discarded Paramount channels, but bring with them their own questions. Right to exist of PE is about Extract Value creation through acquired companies, not the creation of value; concerns about whether these companies with high return expectations are genuinely interested in improving the current (not to mention future) offering of local broadcasters are not only legitimate, but also expected. Spreadsheet risk management (in this case, the current regulatory constraints and the relatively high cost of financing) is rarely compatible with the qualitative vagaries of content creation and quality journalism.

A harbinger of things to come?

The potential sale of these stations is not just a sign of industry volatility or corporate restructuring; it also reflects a troubling and now more pressing shift in the local television market. Paramount’s consideration of divesting these assets suggests that traditional local broadcasting is being strategically sidelined in favor of potentially more profitable digital and streaming platforms. The mere possibility of such a deal is likely to trigger similar divestment considerations among other television networks and media conglomerates – regardless of the consequences.

• Concerns about consolidation: Most potential corporate buyers are already bumping up against or even circumventing FCC ownership limits, and any further consolidation is likely to bring new regulatory scrutiny and legal challenges. This trend toward consolidation not only risks restricting competition, but also exacerbates already deep public concern about the concentration of media power in the hands of a few large corporations.

• Less importance for local broadcasts: Paramount’s potential station divestiture indicates a strategic shift away from local television as a core part of its business, not unlike what other similar companies are considering/experiencing. As more and more “television” companies move to digital and streaming platforms, the role of local television as a viable source of programming and a vital service to the community is already being eroded and increasingly under further threat. Reduced coverage of local news and a loss of the unique perspectives that only locally focused stations can provide are very real concerns.

• Financial intentions: While the estimated sale price of the entire station portfolio is in the $500 million to $1 billion range, that value is significantly lower than what the collection could have fetched even a decade ago — and certainly below the aggregate internal values ​​and/or original acquisition costs of the properties involved. The fact that the private equity sector is seen as the (most likely?) suitor for this potential spinoff of the station group is a clear sign that the real value opportunity here lies in the near-term exploitation of local broadcasting’s famous (but stagnant to declining) free cash flows, rather than anything resembling long-term or strategic value creation.

Redefining “local” as “non-core”

In summary, Paramount Global’s potential sale of its independent local television stations could be the proverbial “canary in the coal mine” for the broadcast industry. If major network/studio owners like Paramount are willing to offload their new “non-core” local assets, it indicates a growing struggle (or disinterest) to retain traditional broadcasting as a key part of the business model.

The potential long-term impacts on the quality of local news, media diversity and public access to diverse viewpoints are unclear, but the risks of further consolidation and a move away from community-focused content could not be more obvious.