Remember when?Broadcast TV economics were something to be envied, at least in terms of profit margins, not to mention incredible valuations based primarily on the value of an FCC license...
At the peak of the market in 1999, KRON was sold to Young Broadcasting for $820 million. Then NBC pulled the plug on Young, purchasing KNTV for a mere $230 million.
Here's the history of the KRON/NBC discord - (according to Wikipedia) http://en.wikipedia.org/wiki/KRONIn 1999, the deYoung family, owners of the parent corporation Chronicle Publishing, decided to liquidate their assets. KRON's longtime newspaper partner, the San Francisco Chronicle would be sold to its current owner, Hearst Corporation.
NBC had made many offers for channel 4 over the years, but the deYoungs had rebuffed them each time. It finally saw a chance to get an O&O ("owned and operated") in the Bay Area, and quickly jumped into the bidding war for channel 4. It was seen as the frontrunner until it was outbid at the last second by New York City-based Young Broadcasting (then-owner of KCAL-TV in Los Angeles and several medium-small market stations). Young's purchase price for the station ($750 million (U.S.) at the outset rose to $820 million by closing) was a record price for a single station that stands to this day. For the down payment, Young was forced to sell WKBT in La Crosse, Wisconsin to Morgan Murphy Stations.
NBC responded with a list of demands that would have required Young to run the station under the conventions of an NBC O&O. For example, NBC wanted Young to rebrand KRON as "NBC 4," and run the entire NBC schedule in pattern with no pre-emptions except for local news emergencies. Rather than give in to NBC's demands, Young decided not to renew Channel 4's affiliation contract with NBC when it ran out in 2002. Granite Broadcasting's KNTV in San Jose later approached NBC with a proposal to pay $37 million annually for the rights to broadcast NBC programming, and NBC accepted the deal. In December of 2001, however, NBC purchased KNTV for a fraction of KRON's sale price - $230 million in cash. That makes NBC the only network in the Bay Area to switch from one local station to another.
------Young Broadcasting's stock was selling at about $60 per share in 1999. The stock has been delisted from the NASDAQ and is currently trading at 7.6 CENTS.
The following TV Technology story looks at the entire sector and the financial wows for the local TV broadcast business.
Now imagine a world where the networks pull their content from Broadcast DTV... http://www.tvtechnology.com/article/68090 There's Still Hope in the Broadcast Economy 10.09.2008 (From TV Technology NewsBytes.)Don't turn off the lights quite yet-broadcasters could emerge from the economic crisis alive, and they'll have many new opportunities to create revenue.
But first, they have to survive the current downturn and credit crunch.Among broadcasters, the four weeks since the crisis began in mid-September have further hammered stock prices that already seemed about as low as they could go-especially among smaller station groups.
Young Broadcasting flew at about $60 per share in 1999 before plunging to Earth. It's now been delisted from the main NASDAQ board and sat at 7.6 cents before the economic disaster began Sept. 15. It's lost nearly half its remaining value since. And it still can't find a buyer for KRON in San Francisco.
Acme Broadcasting once soared at about $30 per share and still topped $3 in January. Since Sept. 12-the Friday before the economic bombs exploded-what's left has shriveled from $1.11 to 71 cents as of Oct. 9.
Equity Media Holdings traded above $5 as late as March 2007. It's been shedding stations and is worth around 50 cents now.
Gray Television traded above $11 in August 2007. It stood at $1.85 Sept. 12 and has dropped another two-thirds of its value and traded at 61 cents Oct. 9.
Nexstar shares were worth nearly $15 in mid-2007. On Sept. 12, it closed at $3.20. Now, it's at $1.73.
Lin Television nearly hit $20 per share last year. On Sept. 12, it stood at $5.67. It's since dropped to $3.31.
Larger station groups have also suffered.Sinclair Broadcast Group already fell a long way from its 2007 peak above $17 per share. In the current crisis, it's slid from $6.46 to $2.92. Belo Corp. sold for more than $20 per share in 2007. Since Sept. 12, it's dropped from $7 to $3.65.
"One thing to remember about television is we had estimated 10 to 11 percent revenue growth in 2008, and it's going to be barely breaking even," said Mark Fratrik, vice president at BIA Financial Network, a Chantilly, Va.-based research firm. "And that's truly remarkable, given the [ad spending by] candidates."
Revenue related to the elections has come through as promised, but the regular ad base tanked. The question broadcasters may be afraid to ask is whether car dealers and local restaurants will return to the ad market next year when the election ads are gone.
The situation could come to a head for stations without deep pockets, should they run out of credit to meet the bills, and that could lead to fire-sale prices on station properties. But BIA President Mark Fratrik said the current credit crunch may be so severe that cash may be hard to come by, even fire-sale prices. Buyers might be limited to those who already have cash on hand. Come six or nine months from now, if credit markets have improved, the healthy may have more opportunities to buy stations cheaply.
The bright spots? The BIA guys and others say that mobile DTV, for example, could provide billions of dollars in revenue in the next several years with relatively little capital expenditure by stations. And then there are the growing revenue areas of retransmission consent fees and station Web sites-an area where broadcasters have also seen major gains in activity and where they should have built-in advantages over local competitors.
Most station groups have seen massive upticks in page views and Internet revenues even as traditional revenues have flattened.
The Web brings minimal increased costs, gives them a dumping ground for stations' video footage, and it leverages station's existing sales staffs and relationships.
"Technology on the Web is getting really powerful and it's really cheap," said Rick Ducey of BIA.
Broadcasters and other companies will offer another series of benchmarks when they begin releasing third-quarter results later this month.
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