The CEO says the flurry of buying and selling has strengthened the station group, yielding well-run stations in targeted regions.
Over the weekend, the general managers of Raycom stations gathered at the swanky, new Renaissance Ross Bridge Golf Resort & Spa, just outside of Birmingham, Ala. In addition to the usual discussions about how to boost revenue and margins, the GMs spent time just getting to know each other. It was the first such meeting since the flurry of station buying and selling that has significantly reshaped the group—without adding much bulk to it. When all is said and done, the group will have 42 stations and reach about 11% of the country, about a half of a percentage point higher than a year ago. But President and CEO Paul McTear believes he has strengthened the group by bringing in stations that fit geographically and jettisoning those that either don’t fit or are in declining markets. He also had to let go of some stations that he would have preferred not to, to satisfy the federal overseers.
It started last summer when the employee-owned Raycom agreed to acquire the publicly traded Liberty Corp. and its 15 stations for $987 million. The deal brought Raycom a major opportunity (WAVE Louisville, Ky., market No. 50), another state capital (WLBT Jackson, Miss.) and a station in its hometown of Montgomery, Ala. (WSFA). Since then, Raycom has sold 12 full-power and two low-power stations, most going to Barrington Broadcasting in a $262 million deal announced just two weeks ago.
In this interview with TVNewsCheck, McTear explains the rationale behind the dealing and describes the current strategy for bringing the group into the digital age.
So why all the buying and selling?
What we decided to do was expand the company with the purchase of Liberty. That was was step one. We acquired 15 markets in the Southeast for the most part and a few in Texas. They fit hand in glove with our current television stations. But we had four conflicted markets—overlaps. They were Toledo, Ohio; Wilmington, N.C., Columbia, S.C., and Albany, Ga. We had to commit to both the Justice Department and the FCC that we would sell one of the stations in those markets within six months.
But what about all those other stations that you’re selling to Barrington?
Traditionally, you know, Raycom is not a seller. We’re a kind of a patchwork quilt of transactions that go back to 1996. We have assembled a fairly large group of middle market television stations. But since the regulations were forcing us to become a seller and we were going to be in the marketplace anyway, we decided to take a look at our entire portfolio of televisions stations see which really don’t fit the large-term strategic plans for Raycom. We went through this awful process of debate internally and came up with a bunch of TV stations that were outside of the area that we wanted to concentrate on—the Southeast, the Midwest and this small position we have in Texas.
So we have bought TV stations and we are selling TV stations that we have to or that don’t fit strategically. I think we will end up with around 42 TV stations—slightly above where we were when we went into the Liberty transaction. The total number of stations may be about the same, but we are a much stronger company.
Last week you announced the sale of KWWL to Quincy Newspapers. Is that the last of the selling?
There is one more TV station that we announced is for sale and that is in the final stages. That is KASA in Albuquerque, N.M.
That’s a good-sized market. Is that too far west for you?
It’s a standalone Fox [affiliate]. We think it will eventually be a duopoly market, and probably one of those other stations in the markets would be better off with that station long-term.
In one of your press releases, you said that you are still interested in buying stations and that you would look for them in state capitals and university towns. That’s exactly what Gray’s Bob Prather told us last week.
We have a bunch of state capitals and university towns. I read Bob’s interview and he sounds like my brother. A lot of the things that make Gray a terrific broadcaster are things that we like too. We like middle- and small-sized markets where there is not a lot of competition. We do like state capitals and large university towns. They tend to be recession proof. Or, if there is some downturn, it is not as sharp. We like the Southeast. We like the growth characteristics there. And we like the markets on both sides of the Mississippi and in the Ohio Valley.
You’ve indicated that you like the way the Liberty stations are run. How is the marriage of Raycom and Liberty going so far?
I am pleased with the cultural similarity between the way [former Liberty President] Jim Keelor ran those TV stations and with the way our folks run Raycom. We have very similar cultures and very similar goals. One of the more pleasant surprises was the attitude of the people I encountered at Liberty—very confident, bright and alert. A lot of times when you visit TV stations that you are in the process of acquiring you find anxiety and handwringing and defensiveness. I didn’t find any of that at the Liberty TV stations. It has been a terrific operational transition so far.
How is Raycom putting its digital stations to work?
All of our NBC stations offer NBC Weather Plus. All our CBS stations either have or will have in a short period of time a 24-by-seven weather channel as will our ABC stations. We have also launched in all our Raycom stations and very soon in our Liberty stations a 24-hour-a-day music video channel called The Tube. We were the first company to launch it. Tribune and Sinclair have also agreed to carry it. If you take the Raycom/Liberty and Tribune footprints and add the Sinclair footprint, you now have a very legitimate business.
It’s a very clean and simple solution. One of the things that we did in negotiating our little affiliation agreement was to carve out an hour each week to do local. So how do you do that? You just put a sign out and say, “Hey, you guys want to submit video of your garage band or your kid’s band, bring it on in.” You could end up doing a local band contest in order to get on TV. That creates a buzz in the marketplace. It may be a may to attract younger folks to the suite of products that we will be offering.
How are the cable operators treating you?
Pretty good. We negotiated full multicast rights in our retransmission about a year ago. We have the right to fill our entire 19.4 mbps digital signal. In Syracuse N.Y., for instance, we have four channels. We have NBC HD, we digicast a UPN low power, we run NBC Weather Plus and we run The Tube.
So you are not looking for cash from operators. You are content to get multicast carriage for retrans.
Our contacts are not long term. What we meant to do was hedge our bets and get some businesses out there, utilize the space that we created and reserve the right to talk about fees on a going-forward basis.
So the next time around, you might be going for cash?
That’s a possibility.
Are you interested in using your local Web sites to sell downloads of network and local programs as Jack Perry of Decisionmark is suggesting?
That’s a technology looking for a marketplace. I’m not sure the affiliates have the leverage to accomplish that. Do you think the people will actually pay two or three dollars to see Desperate Housewives? I have a DVR at home so I can record what I want. I point and click and I’m done.