With the upcoming loss of its CBS affiliation because it wouldn’t meet the network’s reverse comp demands, LIN’s WISH Indianapolis has to find new programming starting next year. LIN has put together a team with experience at indie operations. Whatever they come up with, a big factor needs to be more and better local news, a tall order in a market that already produces a lot of newscasts, but one that the Peabody-winning WISH should be able to handle.
When CBS told the world earlier this month that it would switch its affiliation in Indianapolis from LIN Media’s WISH to Tribune’s WTTV on Jan. 1 because WISH wasn’t meeting its reverse comp demands, everybody in broadcasting immediately recognized that it was a big blow to LIN and its prospective new owners at Media General.
Now we know how big.
On Wednesday, Media General announced that had dropped the per-share price it is paying for LIN from $27.82 to $25.97. According to an SEC filing, the $1.85 discount works out to $110 million.
The new sale price reflects in part the reduced value of WISH. With the NFL, Big Bang and the rest of CBS prime, the experts say, WISH is worth $96 million to $120 million, depending on what multiple you want to use.
Without the CBS programming, it’s worth … well, who knows at this point? Something way less than $120 million, that’s for sure. Using different multiples and different estimates of cash flow, the experts we spoke to put the post-CBS value at anywhere between $40 million and $70 million.
In any case, the write-down of WISH — let’s be conservative and call it $50 million — doesn’t account for the entire $110 million discount Media General is now getting. Something else must be at play.
I’m guessing that Media General figured that LIN’s 10 other CBS affiliates will be paying more in reverse comp to hang on to their affiliations than it had originally thought. And every additional dollar paid in tribute to CBS is one less dollar of cash flow and $8 or $9 less of station value.
CBS didn’t go about the business of switching the affiliation quietly. It wanted its entire affiliate body to understand that any group or station not meeting its reverse comp demands was subject to abrupt dismissal from the CBS Circle of Trust.
In February, CBS CEO Les Moonves told Wall Street to forget about CBS’s old goal of generating $1 billion in retrans and reverse comp in 2017.
“Our new target is $2 billion in 2020,” he told analysts. “Clearly, that’s quite a jump, but we’ve exceeded our target every time we’ve given you one. And we have tremendous confidence in our ability to realize the full value of CBS going forward.”
Moonves likes to keep his promises to Wall Street. Other than his salary, which, incidentally, is now around twice the annual revenue of WISH, the number Moonves likes to see grow most is the CBS stock price.
So what’s next for WISH, a venerable station that has been on the air for 60 years, the last 58 as a CBS affiliate. It now faces an uncertain future as an independent.
On a conference call with analysts yesterday, Vince Sadusky, CEO of LIN and CEO-designate of the combined Media General-LIN, pledged that WISH would carry on when asked about its fate. “It is a little early right now…. We have assembled a strategic team that has experience in running unaffiliated television stations and we’re currently putting our heads together.”
WISH really only has one way to go — more and better news. But it won’t be easy.
Sadusky sheepishly acknowledged in the conference call that WISH had slipped to No. 3 in news in the market behind Dispatch’s dominant NBC affiliate WTHR and Scripps’ second-place ABC affiliate WRTV. (Correction: After posting this column, I looked at some 25-54 ratings for the news at 6 p.m. and 11 p.m. in May and July, and found that WISH is doing better than Sadusky believes. Among the Big Three affliates, WRTV seems to have the better grasp on third place….or fourth place. Tribune’s Fox affliate WXIN is a player. It was No. 2 at 6 in May and No. 3 at 6 in July.)
Even with network programming to lead viewers into news, it is difficult for a station to move up in the ratings. And in WTHR, WISH faces stiff competition. It wins viewers as well as the big journalism prizes, including Peabodys in 2006, 2010 and 2012.
Making matters worse, Tribune, which pumps out a ton of news on WXIN, says it will produce even more news for WTTV once it joins the CBS family. That’s an awful lot of news for DMA 26.
But WISH has a lot going for it. Its 24-Hour News 8 team currently produces five-and-a-half hours of news each weekend, starting at 4:30 a.m. In addition, it produces 7 a.m. and 10 p.m. newscasts for its duopoly station, MNT affiliate WNDY. That 24-Hour News 8 moniker is ancient, but it’s perfect for the digital age.
WISH enjoys a strong reputation for investigative reporting. Along with WTHR, it won a Peabody in 2006.
Of course, for the news to work, Media General-LIN will have to find some good programming to replace the CBS fare and keep viewers tuned in. It could move the MNT programming over from WDNY. The mini-net has got The Walking Dead this year.
I’m sure the Hollywood syndicators have a few ideas, too.
Media General knows something about operating a news-driven independent. Or, at least it should. Last year, it absorbed Young Broadcasting, the station group that was driven into bankruptcy by its decision in 1999 to buy KRON San Francisco from Chronicle Publishing for a whopping $820 million even though NBC had warned Young that it wanted the station for itself.
When NBC inevitably pulled its affiliation, KRON doubled down on news. Although KRON has lost much of its value, it has managed to carve out a place for itself in the difficult San Francisco market by focusing on news. Today, it airs 10.5 hours each weekday.
There are other examples of station that have made their way as news-centric operations after losing Big Four affiliations, notably Meredith’s (formerly Belo’s) KTVK Phoenix and Graham Media’s WJXT Jacksonville, Fla.
The former lost its ABC papers during the cut-throat game of affiliate musical chairs that swept the industry in 1994. WJXT and CBS parted ways in 2002 reportedly because the network refused to continue paying comp to the station. My, how times have changed.
(Update: After this column was posted, I was reminded that McKinnon’s KUSI San Diego is also thriving as a news-laden independent.)
If Sadusky’s strategic team decides to go all-in on news, I would only advise it to make that investment now. I mean right now.
For the next four months, WISH will broadcast the NFL football on CBS and not just any old NFL. It will broadcast Indianapolis Colts NFL football. WISH will have no greater opportunity to reintroduce itself to the good citizen of Indianapolis and promote its expanded and enhanced news or at least its plans for such.
And if, while using the games to introduce the new WISH, the station managers quietly root for the Colts not to make the playoffs that begin right after the affiliate switch, who could blame them?
P.S. In connection with this deal, the question has arisen: How the heck does Tribune get off owning two top-four stations in the same market — Fox affiliate WXIN and CBS affiliate WTTV? Isn’t that a violation of the FCC local ownership rules? The simple answer is no. However, it may eventually be one.
In its quadrennial review of its ownership rules released last April, the FCC tentatively determined that acquiring a second top four station through an affiliation switch was an evasion of its rules. And it proposed that any broadcaster engaging in such evasion be “subject to the enforcement action.”
The proposal is only that. It has a way to go before Tribune would have to worry. The FCC has been moving painfully slowly on ownership reform measures. And even if a majority of the commissioners adopts the proposal, it would likely also have to survive a court challenge.