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Blog Posts by Phil Verveer

How The Sidecar Business Model Works

by Phil Verveer, Senior Counselor to Chairman Wheeler
March 6, 2014 - 02:25 PM

The sidecar business model involves a dominant and weaker (or, to put it another way, an independent and a dependent) broadcaster in the same market.  The broker exercises operational and financial influence over the brokered station and performs the basic functions of station operation.  The model is used primarily in markets where one entity would not be allowed to hold more than one television license.  Part of the model’s utility thus involves overcoming a rule that is designed to promote competition, diversity, and localism.   The other part of its utility involves increasing the joint profits of the two (or more) broadcasters involved.

The typical sidecar business model has three principal components:  (1) a joint sales agreement (JSA); (2) shared services agreements (SSAs); and (3) special financial arrangements.

The JSA is the element that addresses advertising revenue.  Basically, the independent broadcaster takes over the ad sales for the dependent broadcaster.  In normal economic theory, if two ostensibly independent entities in the same market engage in coordinated selling, the expectation is that they will be able to raise the average per unit price they receive.  If this holds in the sidecar markets, advertisers buying local ads are paying more than they otherwise would.

The SSAs largely address the cost side of the broadcasting business.  The sharing of talent, other human resources, and hard assets presents an opportunity for efficiencies.  Everything else being equal, it is less expensive to hire three news reporters than four, one news director than two, and to maintain one studio rather than two, etc.

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