TV Stations Are About To Make Michael Dell Even Richer

The Texas tycoon could make billions off of little-watched channels. Here’s how.

By Mark DeweyJanuary 21, 2016 10:07 am| ,

The federal government is turning off of some broadcast TV stations forever to free up space for the broadcast signals needed by smartphone users to play videos, run apps, and make calls.

One of the big beneficiaries of this re-allocation of the airwaves will be Texas billionaire Michael Dell.

Broadcast industry trade publications have wondered for years why Dell’s OTA Broadcasting company was buying a grab bag of the cheapest TV stations available, and in the opinion of many, paying too much for those stations. It comes to a total of around $80 million. At least two other big investment funds have been doing the same thing.

The Federal Communication Commission posted prices online that it’s offering to every TV station in the country, if they’re willing to surrender their spectrum.

“Everyone knew this was going to happen, the FCC has done almost 100 auctions in its history,” says Mark Dewey, a business and technology reporter. “But no one really had a sense of the scale of this one. No one but Michael Dell and two other big investment firms that were buying these stations.”

For the big stations with network affiliations and lots of viewers and advertisers, the FCC isn’t offering enough to get them to give up their rights to the airwaves, but for smaller stations – the “ugly ducklings” that Dell was buying – it’s a potential bonanza.

One of those stations runs a daily Catholic Mass and re-runs of the comedy show, “Roseanne.”

“People thought they were crazy and they were coming in and paying too much,” Dewey says. “But they obviously had a good view of what the endgame was going to be.”

Dell likely won’t earn the $4 billion the Wall Street Journal says he might make, but he will probably sell his stations to the FCC for close to a billion dollars. The extremely complex auction will last for months, with at least 52 rounds of bidding. The spectrum buys from TV stations will be resold to wireless companies like AT&T, Verizon, and T-Mobile.

It’s a market-based approach that the FCC has used for many spectrum auctions in the past, but for most people the big numbers this time were a surprise.

Not for everyone, though. Big investors can afford to build or access auction simulations that combine the work of economists, engineers, auction experts, and computer programmers to estimate the value of each station. It was likely the approach used by Dell and the other investment funds before they went shopping for TV stations.

Dell’s family investment fund, MSD Capital, declined to comment.