Gray’s Howell: ‘It Is Past Time For Us To Get Back To Business’

Hilton Howell is unapologetic about being one of the first broadcasters to institute a mandate for COVID-19 vaccinations.

“This is a private business, and it is past time for us to get back to business,” says the chairman and CEO of Gray Television. “My TV stations cannot perform at the level that we all expect them to do if we have folks out sick.”

In an exclusive and wide-ranging interview with TVNewsCheck Editor Michael Depp, Howell considers Gray’s acquisitive prospects, his hopes for the FCC’s reconsideration of the ownership cap and his thoughts on the impact of the “great resignation” on the industry.

Howell also discusses the prospect of Gray expanding its production of original national programming, the potential of networks diverting their better programming to their nascent streaming services and his outlook for retransmission in this part one of a two-part interview.

An edited transcript.

Gray has been assimilating the former Quincy stations and now the Meredith stations into its fold. Are you in the hunt for more stations now?

I would never say that we are out of the hunt for more stations. We have closed on Quincy and they are fully assimilated within Gray, probably the easiest assimilation that we have ever done over the dozens of acquisitions that we have done over the last eight to 10 years. When we close on the Meredith local media group, we would be at 36%, give or take a tenth of a point here or there, so we want to fill it up with the right stations.

The Biden Administration has finally nominated Jessica Rosenworcel as the FCC’s permanent chair and Gigi Sohn to fill its vacant commissioner seat. Assuming they are confirmed — obviously not a safe assumption — what is your hope for what they may do around the ownership cap? What do you see as the best-case scenario with the FCC in this permutation?

When the Nexstar-Tribune acquisition was completed, Commissioner Rosenworcel wrote a dissent to that that said that the UHF discount should be gotten rid of and that we should have a permanent 39% cap. I read her dissent and take her at her word. I personally differ with her in the sense that I think that the television station business today needs to continue to consolidate.

I got in this business essentially from birth. My grandfather put our first TV station on the air in 1952, and it was a great business back then as a mom-and-pop company, but in today’s world it is not. Neither the Department of Justice nor the FCC realizes that for ad dollars we are competing with all of the FANG companies now. They still treat us as if we are only competing with one another, and that is just a fundamental misreading of the world right now.

To think that Google, which is taking 80% of the local ad market, is not a competitor for our little TV stations is nuts. I would like for the government to recognize the much broader competitive field that all TV broadcasters have. The only way we are going to keep solid and legitimate local journalism is through consolidation of local TV stations. The government needs to realize the world is changing faster than their rules can ever change.

If the FCC permits station groups to own more than one major network affiliate in a large market, will Gray acquire more stations?

If they allow us to do so, absolutely.

Gray was among the first broadcasters to have a mandatory vaccine policy for COVID, and it has resulted in some dramatic departures from the company. Why was this still the right decision to make for you?

Let me give you the history of that before we jump to the decision. Gray was unique about the way we looked after our employees during COVID. We had no furloughs. We added benefits. We didn’t fire anyone. We took care of our folks. I communicated via video at least monthly. We did everything to keep our people safe and secure during COVID.

But COVID also shut down something that is integral to our corporate culture, which is having our general managers, general sales managers, news directors, digital sales managers together in national meetings throughout the course of the year. We have gone for a year and a half without anything. So, we put together all [groups in an in-person meeting]. On the subject of vaccinations, we had a two-plus hour open conversation about what we should do.

One hundred percent of our general managers said we need to put in a mandate. It was a very pluralistically decided issue, and now the entire company is vaccinated. I am actually extremely proud of that. We made that decision completely non-politically. This is about public health and the health of our company and our businesses. On a personal basis, I did a video for 10 people who died of COVID in my company in one year. I don’t want to do that again. The best way I know to prevent that hurt is to put in a vaccine [mandate].

We had just a handful of people who didn’t get vaccinated. We had some people because they were on our airwaves make a point. I understand their political point, but I am not the government. This is a private business, and it is past time for us to get back to business. My TV stations cannot perform at the level that we all expect them to do if we have folks out sick. We stick by it.

The Great Resignation among American workers right now has had an impact on the local TV industry. Many stations are facing growing challenges in hiring and retaining reporters and producers. From the chief executive’s chair, how does the industry need to respond to this?

We haven’t had any Great Resignations in Gray Television. Now in complete candor, that is from Gray as a broader company. As you look at it from market to market, there are unique aspects of that, and we handle it locally. We run lean, so we are hiring people and expanding news, coverage and photog jobs, reporter jobs, anchor jobs, management jobs because we were attempting to go more and more focused on local news. We have a lot of jobs that we need to fill. That is not because of a resignation.

That being said, I have done a lot of reporting showing that across the whole industry this is going on as a national trend. If this is a question of pay — and that is at least part of the dynamic here — does this mean that station groups are going to need to cut a little bit into their profits to increase compensation to get people to stay in the industry?

I think that Gray pays well. We pay well for people that do well. Other companies have chosen to go the other route. They have slashed their budgets at stations. I slashed them in corporate. I still have the same number of people at this company at the top of it that I had when we were in 30 markets and now, we are 113 markets. It is just a different way of doing business.

At the same time as staffing challenges are growing in the industry, many stations are increasing their volume of daily local programming and they are pulling some of that inventory back from syndicated shows. Do you expect to see your stations further expanding their local content?

Oh, absolutely. Right now, WBTV in Charlotte — a very important market in the United States — our station has zero syndicated programming and what CBS does not put on the air, we handle it with our local news and local coverage.

As you are doing that, are they getting the resources to do it? Or are they having to do more with the same resources?

No, of course we are adding resources to do that. The thing I am proudest about Gray is the corporate culture that we have created here. Our people work hard there is no question about it, but the people at the top of the company work harder than anybody else. They love this job, they love this company, and we are just going to keep growing.

We moved to a much higher level of local news and local production at WAVE in Louisville, and then we moved it to WBTV. There have all been sorts of pilot tests and our ratings have gone through the ceiling, doing better than they ever had before. You have to look at that holistically and by market because those markets just also happen to have a lot of news, which is critical. We shouldn’t be doing stuff off the police blotter. In some of our smaller markets, there is just not enough daily news every day to have a full gamut, but in cities of the size of Louisville and Charlotte, and certainly markets larger than that, the news happens every minute. Here in Atlanta, which we will soon be in with two television stations, CBS 46 [WGCL] and Peachtree TV [WPCH], the news is just all the time.

Gray recently bought and then expanded some production studio space outside of Atlanta. The company stated this is a real estate play, but there are obvious possibilities for creating non-news programming for Gray’s stations. Is that part of your long-range plan for the studio space?

That actually is the plan. We are doing, or will be when it is built out, local production both [for] television and in other areas when it is ready to go.

Is Gray looking to develop more of its own programming to fill those dayparts that used to feature syndicated shows or given the possibility that the networks will eventually reduce the amount of programming that they are providing the affiliates?

I can’t really speak to what the networks are doing, but Gray has a lot of production companies within its total portfolio. Raycom Sports is one, Swirl Films here in Atlanta is another. We have a joint venture with the Grand Old Opera companies in Nashville. We have RTM studios, which stands for Road and Truck Magazine studios, where we do programming. We have Tupelo Honey, which does live production around the country.

We also made a small investment in World Chase Tag, and during COVID we filmed it here in Atlanta at the Battery. We found a lot of need for production space, and through Swirl I was looking at property and helped them to find 10, 20 acres that we could expand. We just happened to luck onto this property, we bought it and we are building a studio complex there.

The networks are investing heavily in original programming for their streaming platforms. How concerned are you that they will reserve their best programming for direct-to-consumer and then leave affiliates increasingly with lower tier offerings?

That is a real and legitimate worry, and I hope that they choose not to do that. The networks are going to fight it out for streaming. To my knowledge, most of them are probably losing money right now. Like with any new technology, there will be consolidation. There will be the ones that make money and win and those that aren’t doing as well and maybe [will] merge or close down.

I look at streaming across the board as a positive for us. I think it would be profoundly unwise if [the networks] killed the goose that laid the golden egg. Candidly, it is all of the station groups that are paying for the streaming investments that they are making right now through our reverse retransmission numbers. We are paying for it. I would rather we not pay for our own execution, but I don’t think that they are unwise enough to abandon something that has worked so well for so many years.

At the same time that the networks are reducing exclusivity for programming that they run on their affiliates, they are suddenly boosting reverse comp fees. At what point do those fees exert a negative pressure on valuations?

I don’t think that any of that is going to affect the TV station valuations. What is going to affect TV station valuations is there’s not many of them left. That makes TV stations, particularly good ones with a solid franchise in their markets, those are always going to be able to demand a high price.

With regard to retransmission affecting things, we have had very successful negotiations with the networks, and they are getting what they view as their fair share, and we are getting our fair share. Ten years ago we kept a 100% and it was $20 million. We are keeping somewhere in the 50/50 range now, and it is a billion dollars. I would much rather have 50% of a couple of billion than 100% of $20 million. The pie has continued to get larger. It has lifted everybody’s boats. I don’t think the growth of retransmission has yet met its end.

In part two tomorrow, Howell discusses Gray’s aggressive streaming strategy and the company’s prescient adoption of local “OTT desks.” Read it here.