EXECUTIVE SESSION WITH MIKE YANUZZI

THE SECRET OF NEW AGE BROADCASTING

The operator of 11 stations in five medium and small markets believes he has discovered the formula for growth: shared news services plus duopolies plus locally produced sponsored programming.

The crisis for the Pegasus Communications TV station group began in 2004. Trouble in the satellite TV division had forced the entire company into Chapter 11 bankruptcy and by the summer of 2005 the group was in the hands of a trustee who had orders to sell.

It fell to Mike Yanuzzi as the group’s senior broadcast executive to work with the trustee to interest others in a planned auction. It turned into a grim job.

“As we went through the sales process, I became more and more aware that the group was probably going to go into the hands of a private equity group that I thought would just cut and slash us to the bone,” Yanuzzi says.

But other broadcasters told Yanuzzi that he should try to find investors who would back current management and keep its team intact.

He took the advice and in a matter of 10 days pulled together an investment group that included two local Wilkes-Barre, Pa., businessmen—Frank Henry, owner of a regional bus company, and Charles Parente, an investor with a stake in Bicoastal Media, a radio group with stations on the West Coast.

Yanuzzi also acquired a small piece of the buying consortium.

BRAND CONNECTIONS

“The broadcast division was always cash flow positive and actually had some great margins and, going forward it was a great, great opportunity for any investor,” Yanuzzi says.

In August 2006, Yanuzzi’s group won the auction with a $55.5 million bid, trumping Silver Point Capital, a private equity firm based in Greenwich, Conn.

The group closed on the deal on April 1, 2007.

(Silver Point has been more successful elsewhere, acquiring control of two other troubled broadcast groups, Communications Corp. of America and Granite Broadcasting over the past year.)

Now known as New Age Media, Yanuzzi’s station group operates 11 full-power stations in five markets. It comprises a Fox-CW-MNT triopoly in Wilkes-Barre-Scranton and duopolies in three other smaller markets. It will add a fourth duopoly market, assuming deals in Chattanooga go down as planned.

The New Age Media group stations, markets (DMA) and affiliations:

WQMY Wilkes Barre-Scranton, Pa. (54)—MNT
WOLF Wilkes Barre-Scranton, Pa. (54)—Fox

WSWB Wilkes Barre-Scranton, Pa. (54)—CW

WPXT Portland-Auburn, Maine (76)—CW

WPME Portland-Auburn, Maine (76)—MNT
WDSI Chattanooga, Tenn. (86)—Fox with MNT on a digital subchannel

WFLI Chattanooga, Tenn. (86)—CW
WTLH Tallahassee, FL-Thomasville, Ga. (108)—Fox

WTLF-DT Tallahassee, FL-Thomasville, Ga. (108)—CW+
WGFL Gainesville, Fla. (162)—CBS

WMYG Gainesville, Fla. (162)—MNT

Note: The stations in red are owned by MPS Media, but managed by New Age. MPS is in the process of buying the station in blue, WFLI Chattanooga, from Meredith Broadcast for $6.8 million. It, too, will be managed by New Age upon consummation of a joint sales agreement.

In this interview with TVNewsCheck, Yanuzzi, now the New Age president, reveals three of the tricks he has learned for prospering in medium to small markets—duopolies, shared news services and locally produced sponsored programming.

An edited transcript:


 

Have you seriously looked at buying stations in other markets?

Yes. We took a look at the Clear Channel properties in New York State. We’ve looked at the Acme properties on an individual basis, but the first priority was to make sure that we could double or triple up in all of our five markets. Then, the next step would be adjacent markets and the possibility of hubbing up the technical facilities to one of our primary stations if we could.

So, should we be surprised if you moved into another market this year?

I don’t think you should be surprised if we move into another market. Right now, geographically, to manage these stations effectively, we’re going to have to stay up and down the East Coast. We are, from tip to tip, from Maine to Florida. So anything in between certainly would fit.

But duopolies and triopolies are keys to your strategy?

When [co-owner] Mr. Parente first sat down with me, he said we’re not looking to buy and flip. We’d like to grow the group. And he asked me what my priorities were going forward. I said, the first thing we need to do is make sure that we fill the duopoly business plan in every single one of our markets. Chattanooga was the only one where we didn’t have a duopoly.

The WFLI situation [in Chattanooga] came about and we said, hey, this is a perfect fit. If MPS could get its hands on it, we could negotiate a JSA agreement with MPS and operate that station days and nights at a decent price.

So how is business?

We have had record revenue every year for the last 11 years.

That’s somewhat surprising, given that your largest market, Wilkes-Barre-Scranton, is not exactly a high growth market.

The market’s not setting any record revenue figures. During [nonelection] years it’s a $60 million-$65 million market. In the presidential years, it jumps up to $70 million or $80 million. About $12 million of political business comes into this marketplace.

That’s a big percentage increase in political years.

Yes. It’s just been huge and it’s going to be huge again this year.

I just read that Pennsylvania may be a key state in the Democratic primary in April.

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Plus, there are two congressional races that are just huge here.

Let’s take political out of the equation. How are you managing to grow revenues in these fairly small markets?

We’ve found a way to maximize the program inventory on our duopolies. Instead of selling half-hour paid programs during daytime or putting on half-hours of syndicated product that is not doing any ratings at all and getting $5 and $10 per unit, we have developed in all of our markets locally produced, long-form commercials, long-form programs, that are tied to commercial advertisers. They are generating in excess of six to 10 times what we were getting in those time periods before.

How long have you been doing this?

It started in Portland, Maine, out of necessity. We were the Fox affiliate. But a number of years ago, the prior management got into a heated battle with Fox and decided to flip the station to the WB so we ended up with a WB and a UPN there.

Just out of pure necessity, we hired some key creative personnel up in Portland and said, guys, you know we have to figure out a way to sell the station without any ratings and they came up with some local concepts that are just amazing.

We’ve done destination shows, we’ve done restaurant shows and we’ve done career showcases where we’ve been taking help-wanted money away from the local newspapers. We produce shows where we interview HR executives who say why their companies are great places to work and include testimonials from the employees.

It’s been one type of show after another. We actually did something called the Maine Poker Show where we had a car dealer and a Portland company that makes poker chips for casinos as sponsors. It was similar to the World Poker Tour. You name it, we’ve done it. And everything that we touched has kind of turned to gold up in that market.

These are themed shows with sponsored segments?

Yes. If we do a restaurant show, it will be a half hour and it will be feature five, five-minute segments on local restaurants in Portland.

How much revenue do they generate?

Just in Portland alone, $1 million a year. That’s a lot of money for a CW affiliate in that market.

Do you do this everywhere or just in Portland?

Well, Portland has the majority of them, but now it’s trickled down to all of our markets. In Wilkes-Barre-Scranton, we do a high school sports show and that’s a little bit different. That’s sponsor based. We also do an outdoor show, we do a career showcase and we’ve done restaurant shows here. In Chattanooga, we do the same types of things and we’ve generated a lot of revenue, a lot of revenue.

How many shows do you produce in the course of a year in Portland?

About 50 or so.

And what do we call this model?

Well, it’s local long form or turnkey TV. We have an internal subsidiary called Turnkey TV. Our guys from Portland work with the production and creative services people in our other four markets.

And like infomercials, you can keep running them over and over again.

Absolutely. I would rather run a local program with local advertisers in it than run a Time Life Music, nothing against Time Life Music.

The bottom line is, if we can produce a magazine show that features five different advertisers, I can run it in daytime, in early morning, in late fringe, on the weekend and continue to run it over a period of 13 weeks. Right now, we have an 87 percent renewal rate on our sponsors.

They must be very effective.

They’re very effective. They’re just unbelievably effective.

I understand that you broadcast news, but don’t produce news in any of your markets.

We have shared news agreements in every one of our markets and those agreements are with the No. 1 news station. It’s been a win-win for both parties in the marketplace. WOLF in Wilke-Barre-Scranton was the first Fox affiliate in the United States to enter into a shared news agreement. We’ve been doing that news that way since 1991.

How does that work?

Our 10 o’clock newscast is produced by a competitor and we purchase it just like we purchase a syndicated product. In Wilkes-Barre-Scranton, our deal is with the former New York Times station, WNEP, which is now owned by Local TV.

And you do this everywhere?

We also have a news agreement in Portland with Gannett’s WCSH. They’re the No. 1 station there. We have a deal with Freedom in Chattanooga [WTVC]. They’re the No. 1 news station there. And in Tallahassee [WCTV], we have our agreement with Gray and they’re the No. 1 news provider.

In Gainesville, we also have news, but it’s a national newscast produced by Independent Network News in Davenport, Iowa, with some local content in it.

The relationships have been unbelievable. We get news for a fraction of what it would cost us to produce ourselves. The fact that we have Fox affiliates makes it very difficult to maximize news expenditures across a lot of different day parts.

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So you simply write a check for your news and sell the time?

Right. We purchase it. We purchase all the time. They control the content. In some instances, it’s heavily branded as Fox or, up in Portland, it’s CW news. In some of our markets like Wilkes-Barre-Scranton, it’s still has some of the WNEP brand, too, which I don’t think is the worst thing in the world because they are such a strong newscast.

You have just one Big Three affiliate—CBS in Gainesville, Fla.  How is that going?

Gainesville is our smallest market, but the market with highest growth. It’s been a hot little market for us and a lot of that is because we have the CBS affiliate and for years there was no CBS affiliate in the market.

It took us a few years to get the CBS-type syndicated product—you know, the King World product—over to our station. Now that we’ve been able to secure Wheel and Jeopardy!, the station has really grown tremendously for us.

Also, Florida University has had some record success with basketball and football and CBS is the SEC outlet. That certainly doesn’t hurt.

What about your digital channels? Have you considered any of the diginets that have popped up lately?

Yes, we have. We are considering them. With the duopolies and triopolies in our markets, it’s something we have to take a look at. We’re cautious. I saw [Nexstar CEO] Perry Sook’s comments where he said he’s not really sure because he doesn’t know how much bandwidth is going to be needed for mobile television.

Are you going after retransmission consent dollars? What’s your relationship with the cable operators these days?

The last go-around went fairly smoothly. Almost every one of our cable TV deals and satellite deals are up at the end of the year so we’re going into them positively and we feel that our relationship with the cable operators to this point has been excellent.

I keep my fingers crossed that it continues to goes very smoothly. I agree 100 percent with what Perry [Sook] has done in the past. Cable operators should be paying something for our stations. We give them a lot of value.

In Wilkes-Barre-Scranton, for instance, we’ve turned our My Network TV affiliate into really more of a local-regional sports channel of sorts where we carry the New York Yankees, the Philadelphia Phillies, the Philadelphia Fliers, the Sixers, the AHL hockey team. I mean, we’re wall-to-wall sports in Wilkes-Barre-Scranton.

Is there anything else you want to talk about?

The only thing that I kind of preach every time I go to one of these conferences is that after being involved in TV for 23 years, I just don’t understand why there are not better relationships between all of our partners

There always seems to be friction between broadcasters and syndicators and networks and their affiliate partners. We’re all in business to make money for our individual companies, but when I attend NATPE meetings and affiliate meetings everybody’s arguing with their partners. I just get frustrated by it.

We’ve worked very well with anybody that has partnered with us—the networks, Fox, the WB people and now the CW people and certainly the Twentieth people with My Net and the syndicators.

In the long run, we both need each other to survive. I just sit through meetings and shake my head when I hear stories about how difficult the relationships have grown between people. It doesn’t make any sense.

Well, there are reasons for some of that friction. Broadcasters are slowly losing exclusivity to syndicated and network programming because their longtime partners are seeking more lucrative outlets.

Let me give you an example. The Office is going into syndication and they [NBC Universal] have not cleared Wilkes-Barre-Scranton. The show takes place in Scranton and they cannot get this market cleared.

Why not?

We don’t want to pay the market rate for that show because they have already done a TBS cable run on it. That’s been our concern for years. Raymond, Sex and the City, King of Queens, Seinfeld: they’re all over cable and we’re not exclusive with them.

I would like to see the large broadcasters—Hearst-Argyle, Sinclair, LIN, you name it—say, hey, we’re not going to pay for these [non-exclusive] show. You’re a syndicator. Where else are you going to go? New Age Media can’t do that because we represent only 1.5 percent of the country.

Years ago, if the broadcast community would have ponied up, and I’m not saying overpaid, but if they would have paid a little bit more and demanded exclusivity, the broadcast industry would be in better shape now than it is.

But I guess the broadcasters in their collective wisdom decided that exclusivity wasn’t worth it.

That’s true. But our bread and butter is in early fringe access and I mean I need some real good first-run products or some great exclusive off-net if I’m going to make money in those dayparts.


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