Fox’s Abernethy: Plenty To Be Positive About

Despite the Sinclair Broadcast Group’s feverish buying of stations, Fox Television Stations is still the nation’s largest TV station group, at least according to the annual TVNewsCheck-BIA/Kelsey ranking of groups by 2012 revenue. With $1.8 billion on the top line, Fox comprises 28 full-power stations in 18 markets, including duopolies in New York, Los Angeles and Chicago.

Charged with running the No. 1 group as CEO for the past nine years has been Jack Abernethy, whose long TV career includes turns at the NBC O&Os and CNBC in financial management and later at Fox News where his management role broadened to include human resources, legal affairs, affiliates sales, marketing and business development.

In his current post, Abernethy also oversees Twentieth Television’s first-run syndication arm and the quasi-network My Network Television. As he did at Fox news, he reports directly to Roger Ailes, chairman and CEO of Fox News and chairman of the Fox Television Stations.

In Part I of this two-part interview with TVNewsCheck Editor Harry A. Jessell, Abernethy talks business. He says he is looking ahead to double-digit growth in 2014, even if it is just barely double digits, thanks to the return of heavy political spending with a boost from Obamacare advertising.

He also discusses the coming of TV Everywhere, his continued faith in Dyle, Fox’s station acquisition ambitions, the usefulness of Twitter and his personal mission to engender a more robust syndication market.

Tomorrow, in Part II, Abernethy talks about his determination to change the look and substance of local TV news.

An edited transcript:

The question I often like to start out with is a simple one: How’s business?

Business is good. Our ratings through the summer have held up pretty well year-to-year and we’ve had a pretty good start to the network season with Sleepy Hollow doing well and the other shows doing OK.

What about 2014 when the political money comes back?  Are you well positioned for all those gubernatorial and senate races?

I think so. We have never been lined up particularly well for the electoral college being that our big city stations tend to be in states for which the presidential race is not contended, but when it comes to the congressional then we’re okay.

What about this Obamacare money?  TVB is talking about some big numbers — $1 billion over the next two years. Do you think that’s really feasible?

Our best guess — this is a guess based on the money we have on the books for Obamacare and how big we are and what share we usually get — is that about $150 million has already been placed. Now the sense is that the spending will take a break. People have till March to sign up. As we get near the deadline, there will be a much bigger surge of advertising.

Is that $150 million from insurance companies, exchanges, advocacy groups or what?

They’re all in.

I would say that that bodes well for the $1 billion over two years.

It sure as hell does and what I like is that surge is going to be right around the time we have got the Super Bowl, a good time of the year.

We surveyed the industry in August and we came up with spot revenue projections for next year — 11% total, 2.6% core. Are those numbers in the ballpark based on what you know?

Yeah, the low double digits.

But core seems stuck at 2% or 3%. Is there any upside in the core business?

This year we have gotten better.  We’re up a little bit.  The car business is healthy.

But core bumps along at 2% or 3% a year. That doesn’t sound like a very exciting business to me.

It may not be exciting, but it’s sustainable. Remember: We’ve got two revenue sources now. The other one is growing more than 2%.

That’s retrans you’re talking about.

Yeah. That’s it.

Fox has the Super Bowl and it’s being played in New York. How will WNYW capitalize on that?  CBS was touting the $1 million local spot in the Super Bowl last year. Are you going to be able to do that?                                     

I would be shocked if we can’t one up CBS.

How important is it for the Fox stations to stream their linear signals so that they can be received on smartphones and tablets? Is that front and center for you?

Yes, it actually is, especially in breaking news. People have come to expect more and more. It’s as much a business issue as a safety issue and we are on it.

But what about the entire day, sign on to sign off?

Well that’s what TV Everywhere is trying to accomplish in the pay TV world. It’s taking more time probably than we expected. There are rights issues and there are some technological issues, but we are not going to have our signal retransmitted for free.  We’re going to need to be compensated for it.

How would that work?

The best way to do that is by working with our MVPD partners.

So do you have any sense on the timing on TV Everywhere?

Not really.  It’s taking time with the rights, but it’s inevitable — hopefully, in the spring. But, again, we have no interest in having our signals being sent out and not getting paid for them.

What about the Dyle mobile DTV broadcast service? Fox has been leader in that, but it seems to be fizzling.

It’s not fizzling.That’s a great use of broadcast technology. Dyle is a whole separate broadcast platform, which is much more consumer friendly because there’s no usage fees associated with it. It’s taking some time, but the quality is great. We’re going to be announcing a big new push, but I can’t really jump the gun on that.

OK, let’s talk about M&A. You bought the Fox affiliate in Charlotte, N.C., and made it an O&O. You said you wanted to be better able to leverage the NFC football rights in that market.  How exactly do you do that?

The company spends an enormous amount of money on rights with the NFL.  So we need to monetize that.  A TV station in a market with an NFL franchise has tremendous opportunities for shoulder programming, tremendous opportunities to promote when and if the team gets into playoffs. Particularly in a smaller market like Charlotte, it galvanizes the area.

The other thing is when the issue of retransmission consent comes up, football is the single biggest intensely demanded product by the consumers. Therefore, it allows us to get what we deserve in our negotiations.

So, you have Charlotte and you have indicated that you would like to acquire stations in other markets and the ones everybody talks about are Seattle and San Francisco where you have affiliates owned by Tribune and Cox.  Are you talking to those people? I get the sense from talking to them that you’re trying to work something out with them. Are you?

Well, I’m not going to talk about any specific discussions or specific negotiations. Suffice it to say that we’re not looking to get bigger per se, but if we see a deal that’s compelling financially, like Charlotte was, we will consider it.

But all within the NFC markets, right?

Not necessarily, no.  If we saw a deal that was financially compelling that wasn’t an NFC market, we would consider it.

I’m sort of surprised because the networks over the last several years have been selling stations.  So is this a change in direction over the last few years?

No. I said we are not trying to get bigger per se.  We’re not looking to get bigger, but if we see an opportunity that is overwhelmingly financially compelling, we will consider it.

Now you have the problem with the FCC’s 39% ownership cap. The FCC is talking about eliminating the UHF discount and imposing a hard 39% cap. 

I’m under the cap.

You’re under the cap now, but if they get rid of the discount, aren’t you right up against it?

I think I could buy one more market.

If it’s not too big?

That’s right.

You could also sell in order to make room to buy.

I’m not looking to get any bigger.  I’m not necessarily looking to buy or I’m not looking to buck up against the cap.  I’m looking at compelling financial opportunities.  So if there was one like that, we would consider it.

Are you going to try to do something about that cap in Washington — try to block the elimination of the discount or raise the cap?

We as a company have said this before: We think the ownership rules are outdated, they should be eliminated and a bit of consolidation is good for this industry.

I’m told you are a big believer is social media. How come?

I can think of at least three ways social media and Twitter have really had an impact. When you have a station that’s very aggressive with using that kind of stuff, it changes the way they do news.

The late news is going to come on and cover fires, car accidents and the traditional police blotter news. As you get into social media, you may find out people aren’t as interested in that as they are in other stories.

So if your anchor is tweeting, if your people are on Facebook, they find out. They say: “You know something? We could do more interesting  stories.” So, the back and forth that you get from social media will change the focus of a news operation.

Second is newsgathering. We had an example in Detroit. There is a standoff. We show up. Somebody is barricaded. We have no information. We sent a tweet to the police chief and he sends back information. So now we have something. Then somebody two rooms down — it was in a hotel — is also following our reporter and sends information to our reporter: “I’m two rooms down; I’m hearing noise.”

Another is research. You put something out on Facebook, that we’re going to be doing such and such. What do you think? Nobody answers. It’s a story no one cares about. Or, you get a million comments, people are really interested in it. That’s research, OK?

I’ve been reading that some broadcasters are working with Twitter to sell advertising on Twitter? Are you aware of that.

We’re going to talk to them soon.  You have an enormous amount of discussion not just on Twitter, but also on Facebook,  about the news and entertainment on TV. It’s an opportunity to enhance those discussions with video and then to generate some revenue from it.

And Twitter is interested in working with Fox and other local broadcasters on that?

I think they’re interested in talking to TV generally.  We will see.

Fox is big on testing syndicated shows before picking them up.  You tested two over the past summer, The Real from Warner-Bros. and Kris Jenner from your own Twentieth Television.  What do you think? Are you going to pick them up?

Both are good shows. The Real’s ratings were better than Kris‘, but I think hers were very promising. So we’re going to decide in the next month or so what we do with both of those.

One of the things that’s on now is Bethenny, which seems to be underperforming her test for some reason.

I don’t know if you would say it’s underperforming the test.  One of the reasons we do the test in the summer is because everybody else is in repeats so you get a big sampling. So maybe it’s a little bit under that because now she is competing with a full lineup. 

The other thing about the test is her show grew as the weeks went on. So we really need to compare six or seven weeks now versus then. We had the same thing with Wendy Williams, where it started off a little slower than the test, but had grown in each and every year that it’s been on the air.  So, yeah, I hope it does better, but I certainly wouldn’t call it underperforming by any stretch.

You joined the board of NATPE.  Why? What do you hope to accomplish there?

I think that we need a more robust first-run syndication market. We need newer ideas and, most important, we need more chances, more bets. So, I hope maybe to inform that a little bit.

What about getting more broadcasters to go to that convention? At one time, every GM in the country went.  Now they don’t. Are you going to work to get more broadcasters down there?

Yeah. Part of my charge will be to do that and I think it’s going to be a lot easier because it’s in Miami, which is a great location compared to Vegas. Look, if there are more first-run shows to look at, there will be more reasons to get GMs there.

What about this business of station groups — Raycom, Scripps, Cox — creating their own shows? Do you think that’s good news for you and the other Hollywood studios?

I think it’s great because, like I said, we need more shows, new ideas. We can’t be an industry that goes to two talent agencies for ideas.

So you don’t care where they come from as long as they come?

It’s the portfolio theory of investing.  The more chips you put on the board, the more chances of success you have. Fox has a lot of duopolies.  We have a lot of time to fill.  So we need a robust and healthy first-run business.  We need experimentation, we need risk taking, we need cost effective models.

We have got some great partners. Debmar-Mercury has been great with that. Our own group has been terrific and so has Warner Bros. So, you know, we just need more of it.

We have got some more ideas about shows that we’re thinking about and models that we’re thinking about.

Want to share any with me today?

No, not right now.