COMCORP READY FOR ITS NEXT CHAPTER
Communications Corp. of America is back.
After 16 months in Chapter 11 bankruptcy, the Lafayette, La.-based operator of small-market TV stations in Louisiana and Texas emerged last month with a manageable debt load, an intact station portfolio, new ownership, new infrastructure and a new CEO.
The company was forced into Chapter 11 in June 2006 under the burden of $425 million in debt. But with creditors having agreed to convert $265 million of that debt into equity, the debt has been reduced to $160 million, a figure more in line with the company’s earnings. According to bankruptcy filings, the company is now doing about $25 million in cash flow on net revenue of $70 million.
Silver Point Capital, a Greenwich, Conn.-based equity firm, has stepped in and is now the principal shareholder in the company. Another equity firm, Highland Capital Management, holds a minority stake. Silver Point also controls another TV station group, the New York-based Granite Broadcasting Corp.
Thomas Galloway and Wayne Elmore, the founders and former top executives and owners of ComCorp, are sticking around as vice chairmen of the newly reorganized company.
The station group is much as it was prior to bankruptcy. It includes a mix of 17 full-power Big Four network affiliates and low-power MNT and CW affiliates, all but two in either Texas or Louisiana.
With the aid of low-power stations and management contracts, ComCorp operates duopolies in Shreveport, La. (Fox-MNT); Evansville, Ind. (CBS-CW); Tyler-Longview, Texas (NBC-Fox); Lafayette, La. (Fox-MNT) and four stations in Baton Rouge, La. (Fox-NBC-CW-Ind.).
Its “virtual duopoly” partner in Shreveport, Baton Rouge and Tyler-Longview is Malara Enterprises, owned by Tony Malara Jr. During bankruptcy, the stations were sold by Thomas Galloway’s son, Sheldon, to Malara.
The ComCorp lineup (with the Marlara stations in red):
- KMSS Shreveport, La. (Fox, DMA 82)
- KSHV Shreveport, La. (MNT, DMA 82)
- KVEO Harlingen-McAllen-Brownsville, Texas (NBC, DMA 88)
- WGMB Baton Rouge, La. (Fox, DMA 94)
- WBRL-CA Baton Rouge, La. (CW, DMA 94)
- WVLA Baton Rouge, La. (NBC, DMA 94)
- KZUP-CA Baton Rouge, La. (IND, DMA 94)
- KWKT/KYLE Waco-Temple-Bryan (Fox, DMA 95)
- KTSM El Paso, Texas (NBC, DMA 98)
- WEVV Evansville, Ind. (CBS, DMA 101)
- WTSN-LP Evansville, Ind. (CW, DMA 101)
- KETK Tyler-Longview, Texas (NBC, DMA 111)
- KFXK Tyler-Longview, Texas (Fox, DMA 111)
- KADN Lafayette, La. (Fox, DMA 123)
- KLAF-LP Lafayette, La. (MNT, DMA 123)
- KPEJ Odessa, Texas (Fox, DMA 157)
- WNTZ Alexandria, La., (Fox, DMA 180)
The new CEO of the group is the former CFO: Steve Pruett.
In this interview with TVNewsCheck Editor Harry A. Jessell, Pruett says the ComCorp has managed to come out of bankruptcy in much better shape than it when in—and not only financially.
With the creditors at bay, the company was able to reinvest much of its considerable cash flow into rebuilding the infrastructure. One of the results of that investment is new newscasts in five markets and plans for news in two more markets.
“We were well positioned to come out of bankruptcy because of the things that we did in bankruptcy,” he says.
An edited transcript follows:
So you haven’t been sitting around waiting for the closing here.
I would say that we used Chapter 11 to reorganize the company, prepare it for the future and make good investments in being good broadcasters. We were able to attract the interest of a good investor [Silver Point], who has knowledge of the industry and a desire to grow. We’re building up our management team.
The company has been completely rebuilt, is fully digital, is fully HD and now has news where it did not have news before.
During the bankruptcy, the company launched Fox News Louisiana, which is a combination of local and statewide news on all of our Fox stations in Louisiana—Baton Rouge, Lafayette and Shreveport. It airs live at 9 [p.m.] and now for two hours in the morning, from 7 to 9. It’s technologically advanced; it’s completely digital.
We also launched news at our NBCs in Brownsville [Texas, KVEO] and Baton Rouge [La., WVLA]. Baton Rouge was the largest market NBC in the country without news. Both launched news at 5, 6 and 10.
And we’ll be launching news at two of our Texas Foxes—Waco and Tyler-Longview—in January.
What about the other Texas Fox, the one in Odessa?
Odessa will be the only Fox without a news.
Why the move to news at all the Fox stations?
Because you become somewhat constrained by the market. When you’re a Fox without a news, the next thing you have to do is get into the news business in order to grow or to find ways to improve your programming in early fringe. That’s a tall order these days.
What’s the upside for a broadcaster in markets 82, 88, 94, 95, 98, 101, 111, 123, 157 and 180? What’s the potential?
The upside is there for these stations. Because they struggled so long without reinvestment, they’re underperforming in market share.
We have good properties and good networks. All of our markets except for Evansville [Ind.] are growth markets. The Louisiana economy is booming because of oil and is expected to continue to boom because of Katrina rebuilding. And it’s a southern market that’s reached a good phase of development.
Our Texas properties are all in extremely good growth markets. We have the border towns, and then Tyler is adjacent to Dallas and Waco’s between Dallas and Houston. They are very robust economies.
And you say the facilities at the stations have been upgraded.
Yes, fully digital, fully HD, fully HD production. We have Digital Broadcast for news and on-air automation, ENPS for news, Pathfire for receiving and ingesting programs, Panasonic P2 newscams and Sony production cams. We have Apple Final Cut Pro across the platform for news and production editing and Avid Adrenaline in Baton Rouge for long-form production. It’s all managed by a WideOrbit traffic system, which we installed across the entire group.
Lou Stroger and Ernie Hart are the engineers behind this incredible transformation that has been accomplished in less than 15 months. The effort was led by Sheldon Galloway.
When you say full HD production, what do you mean?
We can produce local commercials in full HD in every market.
What about the news?
We have one HD news, in Brownsville. That news just launched in October in HD.
What about DTV-wise in terms of the transition.
We have been full-power digital. We were one of the few that converted on schedule.
Is it going to cost you much to complete the transition?
It’s maybe $1 million or $2 million for ’09. Most of that will be taking down stuff off the towers.
Everybody else in the world is talking new media—mobile, Internet, that kind of stuff. Does it make sense in markets this size?
I do think it makes sense. We’re easing into the water, trying not to make big mistakes or make costly errors. We do have commercial Web sites. We are generating revenue from each and every one of those sites. We’re looking for innovative things to do. Clearly, we have some things going on in terms of high schools and high school sports and we see it as a way to leverage local content and leverage our local news.
Are your Web sites home grown, or are you affiliated with one of the broadcast Web development companies?
We are now using Broadcast Interactive Media, but we’re doing some home-grown stuff. It’s a good company. We use their templates, their strategies, and then we developed some of our own things along the way.
It sounds like you are all set.
There’s some upside in the fact that our physical plant is all digital, all top notch, full automated and that we have good markets with news where we didn’t have the news before. Now, we have to become good revenue producers.
Which means selling.
Our goal is to become the best sellers of local advertising in the business and that’s my focus.
How are you going to make that happen?
Training, for one.
Do you have an executive in charge of that at the corporate level?
I have a woman named Susan Ziller Brazell, who has a long history in training and in development of local sales and national sales as well.
We really have done a lot to focus on where the money comes from and managing it. Account management and inventory management are the keys to growth, pricing, franchise leveraging, all those things.
Do you have some software to help you do that?
Yeah. We’re using ShareBuilders. It’s an automated inventory management system that Belo and some of the groups, big and small, use.
And you see that as vital for squeezing the last drop of revenue out of your inventory?
Absolutely. It’s vital not just for squeezing, but also for avoiding major mistakes and selling yourself into a corner and not leveraging your best inventory, especially at a Fox where such things as NFL, NASCAR, American Idol and four or five other primetime shows are so head and shoulders above everything else. You have to make sure you optimize them. If you don’t, you can really fall short of goals.
I think inventory management is critical to being able to raise revenue and raise share and knowing when you can afford to lower rates for share and knowing when you can’t afford to lower rates for share.
How big a factor is national spot in markets your size?
I’d say it’s somewhere around 30 percent of our business.
That includes political, right?
No, not including political. We count political separately.
But that 30 percent is not growing, is it?
It hasn’t grown since I’ve been here. It’s been pretty flat. I think we could do better. It’s usually made up of about 25 accounts that really are consistently in spot and it’s obviously driven by automotive and wireless and some other major players that drive the spot business.
How much of your revenue comes out of primetime?
Historically, in this company, it’s been about 45 percent. We hope that that will go lower as our newscasts develop. It should be lower than that. With the new newses, it should be about a third.
Is 2008 going to be a big year for Louisiana politically?
It’s always hard to tell. We think it will be. We have [Democratic Senator] Mary Landrieu up for reelection next year. That’s going to be a big fight.
And you just elected a new governor, Bobby Jindal, right?
Yes. Unfortunately, he won on the first go around. We were kind of hoping for a bit of a runoff.
I hate when that happens.
Yeah, well, Bobby Jindal is a professional politician here in Louisiana. He’s been in politics for a long time. He’s very well regarded.
You’ll just have to see how tight the races get on the presidential side.
Yes. And we’re all hoping for a bunch of issue money. And keep in mind that about 55-60 percent of our revenue comes out of Texas.
I understand. But in Louisiana now, because you have these new newscasts, you’re going to be getting political money for the first time.
It’s the same in Texas. We’re going to have more news in Texas, too. We’re going to have the NBC in Brownsville and we will have news at the two Foxes.
So it should be a good year.
It should be good. I mean it will just depend on the gods of political allocation.
Is there anything you want or need out of Washington?
Well, I have been so focused on just the fundamentals of the business and rebuilding the company that my political agenda is probably pretty short. I would just like to not have anything harmful done.
What about the small-market duopoly ban? Like of lot of other small-market broadcasters, you’ve manage to create so-called virtual duopolies in a number of market despite the ban.
It’s no secret. There are rules that you follow that will allow you to do it. You just follow those rules.
If you can run two stations under these various arrangements, why do you care if the duopoly ban stays in place or not?
It’s just an administrative headache. It’s less cumbersome to just own them straight out.
Are you factoring retrans revenue into your growth strategy?
Retrans, obviously, we’re all anticipating. Over time, the free market is taking care of retrans because people are beginning to get paid retrans dollars. Those are obviously critical to the future of any company.
When do you expect to get some retrans dollars?
Ours don’t come in until ’09 or ’10. I think the landscape will tell us what’s possible then.
Media General has put five of its smaller stations on the block. Any interest?
There are a couple of those I would like to have.
So, you do have an appetite for more stations.
I believe we do, absolutely. We are looking to acquire in our footprint—Texas, Louisiana, surrounding states, Gulf states.
One of the Media General stations is KALB, the CBS affiliate in Alexandria, La.
Yeah. That would really make a lot of sense for us.
You’ve got a lot of your assets in one area.
We’re definitely committed to Louisiana. We like the economy. We like the prospects of the economy in Louisiana and Texas. There’s a lot of development in the Gulf for oil and I don’t think that the next decade is going to be unkind to oil-driven economies.
But you never do know.
Well, you never do know, but we have a lot of leeway between what I would call an oil boom to an oil bust. Don’t forget: Louisiana is an energy and chemical driven economy. We have a lot of alternative energy projects going on here. And, unfortunately, as a result of Katrina, we have a shift in population, we have an influx of dollars to rebuild and just a lot of positive things happening to this state. The new governor now understands the game.
Would you like a station in New Orleans?
Oh, I’d love to have a station in New Orleans.
Doesn’t Emmis have one down there [WVUE] that it’s looking to sell?
There are stations for sale. But right now it’s hard for people to buy or sell there because the sellers don’t know what’s going to happen—nor do buyers.
People generally believe that New Orleans is coming back. New Orleans is a huge economic engine for the state of Louisiana because of the port, but what is the configuration going to be when it comes back? How do discern that? It’s just too hard to tell right now what the economic future is exactly. So, sellers are saying we don’t want to sell too cheap and buyers are saying we don’t want to buy too high.
In New Orleans, the ideal situation would be to buy the Fox [WVUE], the ABC [WGNO] and the CW [WNOL], which are the Emmis stations and the Tribune stations. Of course, you’d need a third party to hold the third station.
Good luck to you.
I appreciate it. I think that we’re really very well prepared to grow and take on the future. That’s my mantra.