Sadusky: All Eyes On Freedom TV Group

What’s a TV station group worth these days?

LIN Media CEO Vince Sadusky says that he and other broadcasters expect to find out soon when the winning bid for Freedom Communications’ eight TV stations emerges.

“It sounds like it is a pretty robust process,” Sadusky told securities analysts this morning after reporting LIN’s fourth quarter 2010 earnings. “Money is available again at reasonable rates so that would be an important benchmark for the TV broadcasting industry.”

The Freedom stations went on the block last fall after the company emerged from Chapter 11 bankruptcy with private equity/hedge fund Angelo, Gordon & Co. as the controlling owner.

In addition to flagship CBS affiliate WPEC West Palm Beach, Fla., the Freedom group comprises WWMT (CBS) Kalamazoo, Mich., (DMA 39); WRGB (CBS) Albany-Schenectady, N.Y., (DMA 56) in a duopoly with WCWN (CW); WTVC (ABC) Chattanooga, Tenn. (DMA 86); WLAJ (ABC) Lansing, Mich. (DMA 112); KTVL (CBS) Medford, Ore. (DMA 140); and KFDM (CBS) Beaumont, Texas (DMA 141).

Last fall, industry experts were saying the group could go for between $400 million and $500 million.

Sadusky said that he was also encouraged by the news of a big radio merger last week, in which Cumulus Media agreed to buy Citadel Broadcasting Corp. in a deal that values Citadel at $2.5 billion. “We believe that TV’s growth prospects are greater than radio…,” Sadusky said.

Sadusky reiterated that LIN Media could be a buyer or seller in a revived station market. “We are opportunistic. If there is an opportunity to buy something that’s accretive — terrific multiple, great cost synergies, interactive synergies, retransmission consent synergies, all those great things — we will take a look at it.”

On the other hand, if the market is “very robust,” he said, LIN would also consider selling.

While discussing the LIN-NBCU joint venture that owns KNSD San Diego and KXAS Dallas, Sadusky also indicated that he expects retransmission consent fees to ramp up to at least $1 per month, per cable/satellite subscriber.

Because of the lingering effects of the recession, the joint venture did not have enough money to make full interest payments on the $815.5 million loan that the JV is carrying. In 2010, the shortfall was $4.5 million and in 2011, without heavy political advertising, it is expected to grow to $10 million.

In line with its 20% interest in the JV, LIN is on the hook for 20% of the shortfalls.

But not to worry, said Sadusky. NBC, which operates the stations, says that the stations will soon begin receiving retransmission consent revenue that will more than cover any shortfalls, he said.

“We are going to get retransmission consent fees for the JV up to 50 cents [per sub, per month] and eventually $1 and then hopefully greater than that,” he said, noting that there are 3.2 million pay subs in the two markets.

Given 3.2 million subs and a 50-cent fee, the two stations would generate nearly $20 million a year in retrans revenue.

Sadusky also noted that the JV’s affiliation agreement with NBC runs through 2023. That means, he said, the JV won’t have to share any of its retrans revenue with the network until that year.