Three Years of Hell to Become the Devil: Poll Watching, Stock Watching

Both Lawrence Lessig and Heidi Bond seem to think that Sinclair Broadcast Group, Inc. (NASDAQ=SBGI) are going to take a hammering due to consumer boycotts. These boycotts arising, of course, because Sinclair has decided to air a special on Kerry's involvement in Vietnam before the election.

I'm skeptical. Lessig notes that SBGI is down 10% since the announcement. This is true enough, but it's also down 50% in the last six months, and the announcement came shortly after an earnings warning. Short-term "shares fell because" analyses are fun games, but I don't give them much credence. Even Lessig notes that, "This drop is no doubt in part a calculation about how Sinclair will fair if the election goes for Kerry." It'll be interesting to watch Sinclair to see how its shares do in relation to the polls: if Kerry tanks, Sinclair may pick back up a few points.

I'm sure I ought to care one way or the other about this: either Sinclair is wickedly using its rights to the broadcast spectrum to manipulate election, and Bush's cronies at the FEC are letting him (Democratic version), or this is all a bundle of hypocrisy being griped at by folks who have no real problem with Farenheit 911 or rankly partisan newscasting using falsified documents (Republican version). [1]

Fortunately, my television reception is lousy, and trying to watch FOX involves fifteen minutes of jiggling antenae. Frankly, I can't imagine a bigger waste of my time than watching this thing, one way or the other. I somehow doubt an anti-Kerry show is going to get huge market share: imagine an hour-long SwiftBoats ad. Nor do I think the boycott's going to make a huge difference. Tempests and teacups...

[1] And before anyone starts pointing out that SBGI is purposefully broadcasting a show and CBS's memorandums thing was a "mistake," just forget it. Those were forgeries that should have been seen through in under a minute by anyone who wanted to look. Sure, you could probably only prove negligence or recklessness in court, but I'm happy to call the "error" intentional. It was dumb enough.

Comments

I'm inclined to agree. Both with Sinclair's right to show it and with the argument that the boycott won't do much. Of course having the CEO arrested for soliciting might cause more trouble at a family values station... Only interesting form of protest I noticed was a suggestion to petition against each and every Sinclair license renewal with the intention of running up large legal bills. On the whole though I can't see this current storm as anything other than free publicity.

Posted by: Martin | October 18, 2004 03:15 AM

However, I find it odd that Sinclair has the go ahead to broadcast this, when inDemand cancelled Michael Moore's election eve PAY-PER-VIEW showing of Farenheit 9/11 decided not to show it for "legal concerns." While I recognize that this a business making a decision more than a legal decision, I also recognize that businesses are in business to make money. Like it or not a lot of people paid good money to see F9/11 in theaters, so why not put it on PPV? Secondly, it is PPV, it's not broadcast, you actually have to spend money, and you have to have cable, and you have to press the magic buy movie button on your remote control. So, what exactly is this legal concern that inDemand has, when Sinclair doesn't have a legal concern, and even has support from the FCC to use public airwaves to broadcast an anti-Kerry piece?

Posted by: Jonathan Link | October 18, 2004 08:58 AM

I sort of agree. Most of the action has been directed at local affiliates, not Sinclair itself, so I'd suspect that any real changes in their economic well-being would take quite a while to percolate upwards. With that said, I understand there's been a fair amount of success at going after the local advertisers of at least a few affiliates (though I've got no way of gauging the scale of things, since frankly I haven't put that much effort into following up on this), and at least one investment bank, not exactly known as paragons of fuzzy-headed principle-trumps-profit liberalism, has reduced their target price on the stock because they think it was a very dumb move, so who knows? I remember seeing a post on I believe The Decembrist (site appears down at the moment, so I can't double-check), indicating that Sinclair had rather bollixed their last bit of growth, and that absent an increase in the market-share caps, they're basically going bankrupt. Any threat of retaliation by a Democrat-controlled FCC isn't much of a deterrent, since a Democrat-controlled FCC isn't going to raise the caps, and Sinclair's dead if that happens anyway (because of the vagaries of FCC commissioners' terms, Kerry will in fact have the chance to wrest control of the FCC very soon after inaugeration).

Posted by: Mike Russo | October 18, 2004 09:01 AM

Mike: the analyst report you're mentioning seems to be the one I noticed last night at Talking Points Memo, from Lehman Research. The devil, as always, is in the details. I can't find a link to the report itself, unfortunately, but TPM quotes it as stating:

"In our opinion, Sinclair's decision to pre-empt programming to air 'Stolen Honor' is potentially damaging -- both financially and politically. In a best case scenario, we believe that this decision could result in lost ad revenues. In a worst case scenario, we believe the decision may lead to higher political risk. As mgmt has increased the co's political risk, we are reducing our 12-month price target to $9 (from $10)"

The stock is currently trading in the low-to-mid $7 range. But who knows: I really wouldn't want to evaluate the report based upon a few-word excerpt from TPM.

Posted by: A. Rickey | October 18, 2004 01:47 PM

What? You can't get your local Fox affiliate very well? However do you live without being able to tune into the baseball postseason, and endure The Horror that is Joe Buck, Tim McCarver, and Scooter, the Talking Baseball? ;-)

Posted by: Len Cleavelin | October 18, 2004 02:33 PM

Dear Len: The astute--indeed, the merely conscious--reader will note the almost complete lack of baseball commentary in this blog. You may choose to blame this on my lack of FOX as a news source. You might also decide that baseball is simply too divine, too heavenly a game for one of my disposition. ;)

Posted by: A. Rickey | October 18, 2004 02:37 PM

Yes, that indeed is the report; certainly without actually reading it, it's hard to know exactly what's going on (and I'm hugely unqualified to evaluate what a 12-month target price reduction from $10 to $9 means vis a vis where the stock is right now). There appear to be seven other firms doing analysis on Sinclair, so a one-firm sample is hardly a conclusive indication of anything. Still, I think the point stands that at least a few people who have some expertise in such things think that Sinclair's decision will adversely affect their stock price, and in matters like these, where my own expertise is quite limited, I generally find recourse to authority to be reasonable. As an additional data point, Sinclair stock appears to be nose-diving today -- it's down over 8% as I write this.

Posted by: Mike Russo | October 18, 2004 02:59 PM

And from the Dow Jones newswire:

The price for Sinclair's stock has declined from $15.17 a share Jan. 1, to $ 7.11 at the 4 p.m. closing Thursday on the Nasdaq Stock Market. The most recent dip, from $7.82 a share on Oct. 6, doesn't appear related to the controversy, but rather to lower-than-expected broadcast revenues. Sinclair still expects its third-quarter broadcast revenue to increase from a year ago, but at a lower rate than previously anticipated.

Though agreed, I couldn't tell you whether it was or wasn't the boycott, I'm still sticking with the "it ain't."

Posted by: A. Rickey | October 18, 2004 03:21 PM

Just to let you know, all my friends up here in Canada are also waiting anxiously for the election. Last year my fiancee and I lived in Manhattan (Gramercy - cheap apt with shower in kitchen) and we got hooked on American politics and Air America radio. Now I'm just glad I can stream it!

Posted by: Queenslaw | October 18, 2004 10:13 PM