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Volume 23, Issue 108, Jim Carnegie, Editor & Publisher

Friday Morning June 2nd, 2006

TV News ®

Debt raters turn thumbs down
on Trib stock buyback
Two billion plus in stock buybacks may be good news for Tribune Company shareholders (5/31/06 TVBR #106), but the ratings agencies say that's not the case for its bank lenders and bondholders. Moody's, S&P and Fitch have all cut their ratings on Tribune since the stock buyback announcement. As it stands now, all three have given Tribune their lowest investment grade rating. Moody's Investor Service was especially harsh, however, and threatened to cut Tribune again - into junk bond territory. Here is what Moody's said about its continuing review of Tribune's ratings: "Moody's review will focus on Tribune's ability to complete the full extent of its repurchase plan and to rapidly reduce financial leverage through asset sales and cost savings over the ensuing eighteen month period. Moody's estimates that, if fully executed, the proposed repurchase program would increase adjusted debt to over 4.0x EBITDA, and over 10.0x FCF, as per Moody's standard adjustments. Moody's views these prospective levels to be outside investment grade parameters for the newspaper industry. Should the company fully execute the share repurchase plan, a non-investment grade rating is likely. The review will also focus on management's commitment to reducing leverage in the event that only a portion of the share repurchase program is executed."

TVBR observation: Much could be hinging on CEO Dennis FitzSimons' successful execution of the related plan to sell off a half billion bucks worth of non-core assets, including some smaller market TV stations (yet to be identified). That, along with some 200 million in overhead reductions, will improve the leverage situation and perhaps put Tribune back in the good graces of the ratings companies. But if the asset sales are slow to come together, Tribune could find itself with junk bond ratings - and have to pay more for what it borrows.

FEC opts for status quo on 527s
The Federal Election Commission, faced with a court order to either rewrite its rules governing campaign contributions to 527 groups or better explain them, opted for the latter. This means the groups can still run on unregulated soft contributions and will be handled by the FEC on a case-by-case basis. Both the campaign of George W. Bush and House campaign reform champions Christopher Shays (R-CT) and Marty Meehan (D-MA) had challenged the rules, which left groups like MoveOn.org and Swift Boat Veterans unshackled by funding restrictions which apply to other political organizations. At least one of the judges who heard the Shays-Meehan case seemed to indicate that the FEC needs to do much more than rejustify its old approach. Judge Emmett Sullivan wrote, "...judging from the FEC's track record in the 2004 election, case-by-case adjudication appears to have been a total failure." Noting that some of the challenges to 527 groups brought before the FEC have languished for almost two years, Sullivan wrote, "This merely demonstrates the patent inadequacy of the case-by-case approach. The FEC can take years to complete an administrative action, and penalties, if they come at all, come long after the money has been spent and the election decided."

TVBR observation: The FEC justified not doing anything about 527s back in 2004 because it believed that by the time it got through the standard public hearing process and whatever backroom wrangling might go on within the agency, it would be too late to be effective for that election cycle. It is amazing, with that experience, that it has been allowed to sit basically unattended and bleed into another election cycle. Perhaps the judicial reliance on a remand for new rules or new explanations is not sufficient. We wonder if the courts will be happy with the actions of Kevin Martin over at the FCC when he deals with remanded media ownership rules. In both cases, it seems the most likely outcome will be that the agencies will simply be hauled straight back to court if they simply put the same challenged rules in a better wrapper.

Gray changes auditors
Gray Television has informed the SEC that it has dismissed Pricewaterhouse Coopers LLP (PwC) as its independent auditor and hired McGladrey & Pullen LLP in its place. Gray said there had been no disagreements with PwC on any accounting practices or financial disclosures over the past two and a half years, nor did Gray's financial reports for 2004 or 2005 contain an adverse opinions or disclaimers from the auditor. PwC supplied a letter to the SEC agreeing with those statements.

TVBR observation: This used to be a very rare move, but lately we've noticed a few broadcasting companies, particularly the mid-range and smaller ones, switching auditors to save a few bucks. After all, why pay the freight for a big name accounting firm if Wall Street investors are just going to beat up on your stock price anyway?

Norville set to emcee
Service to America Awards
With former President Bill Clinton set to receive this year's Leadership Award and Miss America Jennifer Berry coming to present the Service to Children Awards, the NAB Education Foundation has now added another big name to the agenda for the Service to America Awards June 12th in Washington, DC. Deborah Norville of "Inside Edition" will emcee the event. During the awards ceremonies, Gulf Coast broadcasters and broadcasters nationwide will be honored for their public service efforts before, during and after Hurricane Katrina with the Samaritan Award.

Will Tate get Frist to go to bat for kids?
FCC Commissioner Deborah Taylor Tate fired off a letter to Senate Majority Leader Bill Frist (T-TN) thanking him for his efforts in getting the Sam Brownback (R-KS) Broadcast Decency Act passed by the full body (it is now headed for conference committee where it is expected to prevail over the more stringent House version). Tate went a good bit further, however, establishing herself as a major children's advocate on the FCC's 8th Floor. Acknowledging the critical role parents play in deciding what broadcast content children are exposed to, she mentioned that it would be nice if they are able to "...someday purchase cable on a per channel basis." If John McCain (R-AZ) has his way, Frist may have a chance to floor manage just such a proposal. She continued, "I hope that you will also consider other, positive measures that will encourage the production and broadcast of quality children's programming as well. Children's programming is among the most expensive types of television to produce, but it can be an invaluable part of a child's education if it is integrated into a child's lifestyle in a healthy way." She concluded, "Indecency legislation is just one step towards making television a positive force in our children's lives, but there's so much more we can do."

TVBR observation: Broadcasters are motivated to provide programs for children. A dollar spent to reach the 6-18 demo buys just as many paper clips as one aimed at 18-49. ABC/Disney remains committed to its Children's radio format, and Children's programming is now on the cable schedule almost all the time, much more than was the case when we were children, and is available 24/7 to houses with VOD. More choice is always nice, but the current problem for parents isn't so much that there isn't enough for the kids to listen to or watch. It is making sure there is also time for reading, physical activity, imaginative play or simply talking with mom, dad and the rest of the family. Sometimes, the best thing you can do in a child's relationship with the media is show the kid where the off switch is. So beware: the words "child" and "Washington" can bubble into a toxic brew leading to rules and regs which may be unnecessary on the one hand but difficult to vote against on the other. Legislators and regulators should proceed with caution; meanwhile, broadcasters should make sure they are complying in good faith with existing regulations if only to head off the addition of new ones.

Wall Street Media Business Report TM

Pension funds sell more DirecTV stock
The pension funds at General Motors are continuing their practice of regularly selling blocks of stock back to DirecTV. This time two GM pension funds are selling a total of 15 million shares at 17.15 per share in a transaction due to close June 7th. DirecTV, which is controlled by News Corporation (which bought its stake from GM) notes that it has bought back approximately 160.1 million of its own shares for a total of 2.56 billion since announcing a three billion bucks share buyback program.

Ad Business Report TM

Upfront update: buyers comment
The upfront marketplace is still stalled, thanks to the Live +7 controversy. We asked PHD CEO Steve Grubbs and two unnamed buyers to comment:

Said one buyer: "When the marketplace gears up, it will likely be flat to down. It's not that the advertisers' budgets are down, it's just that the budgets for TV have been cut back and carved out by brand managers who want to experiment in environments that might be psychographically appropriate for the brands vs. putting all their money to television."

Said Grubbs: "There's not much to say. Maybe other people are out there doing deals, but we're not. We're talking to people, but nothing's been done." Is it true that the Live +7 is stalling things out? "Yes. We need to agree as an industry on the ratings methodology, because we can't negotiate one deal with ABC and then different deals with everybody else. And I don't know that any one network wants to have half of their deals as Live +7 and the other half as Live. We want a common currency that we're all using. And right now, we haven't agreed on that currency." Do you have any suggestions on how to fix this, soon? "I think it will fix itself."

Another buyer off the record said The Live + 7 controversy will be worked out in due time because "there is no urgency to this marketplace from the buy side. And because of that, we can wait as long as required. Inventory is a perishable commodity. And at some point, someone is going to have to sell it. There are many sellers out there that will just agree to sell based upon Live Only ratings. And the more people that adopt that approach, the more pressure that puts on those that decide that they will continue to fight the fight for Live +7 or Live + Same Day or whatever. This will organically sort itself out."

IPG will bring together FCB, Draft units
Interpublic Group announced it will bring its Draft and FCB units together to create a global integrated marketing organization with a single management team and P&L. Draft FCB Group, the new entity that will emerge, represents a communications model designed to address the needs of clients in today's consumer-driven marketing environment. "Clients are increasingly looking to us to deliver more personalized, creative and accountable communications programs, with best-in-class capabilities across the marketing spectrum," said Michael Roth, Interpublic's Chairman and CEO. "Steve Blamer and Howard Draft each came forward to propose linking these two strong companies with highly complementary capabilities. We carefully considered the potential of a combination and believe that the resulting organization will be highly responsive to the new realities that are transforming the consumer and media landscape." Effective immediately, Howard Draft has been named Chairman and CEO of the joint Draft and FCB operations. After a transitional period, Steve Blamer, 50, will be leaving FCB and Interpublic. FCB's Jonathan Harries has been named Worldwide Chief Creative Officer for the new company. The Integration Committee will report to Draft and meet regularly with a Transition Board made up of Draft and Interpublic's EVP, CFO Frank Mergenthaler and its EVP, Strategy, Philippe Krakowsky. Independent or separately-branded units currently grouped with either FCB or Draft, which include FCBi, Marketing Drive, R/GA and Zipatoni will continue to operate independently, serving their existing client rosters and collaborating across Interpublic.

Media Markets & Money TM

Broker named for Shop at Home sell-off
Scripps announced last month that it would shut down the Shop at Home network and sell off its five O&O stations (5/17/06 TVBR #97). Now it has named CobbCorp as the station broker to handle the sale. The sale list includes WSAH-TV (Ch.43) Bridgeport, CT (New York market), KCNS-TV (Ch. 38) San Francisco, WMFP-TV (Ch. 62) Boston, WOAC-TV (Ch. 67) Cleveland and WRAY-TV (Ch. 30) Raleigh-Durham, NC. CobbCorp notes that combined, the five full-power stations reach more than five million homes via cable.

Washington Media Business Report TM

Non-clairvoyant FCC turns down Beer
The FCC as a matter of policy has determined not to attempt and read the minds of its licensees. As a result, First Broadcasting Capital Partners (FBCP) has had its plan to move WOXY-FM from Oxford OH to Mason OH reaffirmed over the repeated (and apparently somewhat repetitive) objections of Bradley J. Beer. Beer repeated his claim that FBCP was using first-service claims for Mason as a wedge to get out of Oxford, relying on a noncommercial FM there as retained service, as a ruse to actually begin serving Cincinnati. He noted that the transmitter was situated so as to maximize coverage of the city while providing only "...minimum city-grade coverage to Mason." The FCC said first of all that Beer "...improperly seeks to relitigate the Mason reallotment..." But it explained its rationale for granting the reallotment anyway. In a nutshell, if the relocation provides new service to one place without depriving the place it left, the FCC is open to a plan that does not interfere with other existing stations. It long ago abandoned attempts to divine the actual intent of the licensee moving a station, in 1983, in fact, since there is absolutely no way to accomplish such a feat. It relies on rules requiring the licensee to serve its community with a city grade signal, programming of interest and a local studio. If the station fails to do any of these things, the citizens of Mason will be free to challenge its license renewal. Better this than to "...try to determine how the station will be operated in the future."

Entertainment Media Business Report TM

British import for ABC lineup
ABC announced that the British game show, "The Con Test," is coming to American in a production deal with FremantleMedia. Joining the ABC lineup this summer, it is a game show where one person could walk away with over one million dollars without ever having to answer a single question correctly. Rather, it is a game for those who have the wit, nerves and guile to bluff their way to big bucks. "The Con Test" was created by Ant & Decs Gallowgate Productions and is produced in the UK by FremantleMedia's UK production company, talkbackTHAMES in association with Gallowgate Productions.

TWC unveils Hurricane Season programming
With Hurricane Katrina and the rest of the record-setting 2005 tropical season still in mind, anticipation is high for the 2006 hurricane season. Stressing the critical message of early preparation, The Weather Channel kicked off its coverage yesterday with live reports from the Gulf Coast. Then, "Hurricane Week" arrives on June 4 -highlighted by the premiere of the "Lost" New Orleans episode of the series "It Could Happen Tomorrow."
| See some of the details here |

Ratings & Research

A newbie makes the syndie list
The weekly list of the top 10 syndicated TV shows from the Syndicated Network Television Association (SNTA), based on data from Nielsen Media Research, is generally so stable - with only some jockeying for position - that it is worth noting when a new show cracks the list. Coming in at #10 for the latest week is "That 70s Show," distributed by Twentieth Television. Sony's "Seinfield" weekend edition moved up a spot to #9 and KingWorld's "CSI" dropped off the list - at least for a week.
| View the Chart |

Stock Talk

Retailers give stocks a boost
Good sales reports from major retailers had more impact on Wall Street traders than bad sales reports from automakers. The Dow Industrials rose 91 points, or 0.8%, to 11,260.

TV stocks also got a little boost. LIN led the way, up 4.6%. CBS gained 3.5%.

Stocks

**Here's how stocks fared on Thursday**
Company	Symbol	Close		Change	Company	Symbol	Close		Change
Acme	ACME		4.99	+0.03	LIN TV	TVL		9.20	+0.40
Belo	BLC		17.29	+0.01	McGraw-Hill	MHP		51.72	+0.12
CBS CI. B	CBS		26.64	+0.91	Media General	MEG		38.21	+0.58
CBS CI. A	CBSa		26.62	+0.90	Meredith	MDP		50.81	+0.76
Clear Channel	CCU		31.37	+0.57	News Corp.	NWS		20.47	+0.50
Disney	DIS		30.62	+0.12	Nexstar	NXST		5.28	-0.05
Emmis	EMMS		16.35	+0.29	NY Times	NYT		24.51	+0.35
Entravision	EVC		8.09	+0.23	Ion Media	ION		0.84	unch
Fisher	FSCI		44.00	+0.23	Saga Commun.	SGA		10.33	+0.24
Gannett	GCI		54.68	+0.67	SBS	SBSA		5.55	+0.09
Gen. Electric	GE		34.55	+0.29	Scripps	SSP		46.68	+0.40
Granite	GBTVK		0.22	+0.05	Sinclair	SBGI		8.74	+0.23
Gray	GTN		6.67	-0.04	Time Warner	TWX		17.40	+0.19
Gray, C1. A	GTNa		6.66	-0.09	Tribune	TRB		29.82	-0.02
Hearst-Argyle	HTV		22.38	+0.22	Univision	UVN		36.45	+0.50
Journal Comm.	JRN		11.59	+0.07	Wash. Post	WPO		809.75	-1.15
Lincoln Natl.	LNC		56.74	+0.58	Young	YBTVA		3.31	+0.07

Bounceback

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TV Media Moves

GM stripes for Brickey
Sinclair Broadcast Group has promoted Michael Brickey to General Manager at WDKY-TV (Ch. 56, Fox) Louisville, KY. Brickey has been with the station for 11 years, most recently as General Sales Manager.

Below the Fold

Ad Business Report
Upfront update
Stalled, thanks to the Live +7 Controversy...

Media Markets & Money
Shop at Home sell-off
Scripps names the deal maker also for the stations...

Entertainment Media
Business Report
British import for ABC lineup
Game show, "The Con Test," is coming...

Ratings & Research
Newbie makes the syndie list
Coming in at #10 "That 70s Show"...

More News Headlines

Three killed in fall
from television tower
Three people are dead in western Iowa after falling 11 hundred feet from a television tower Wednesday. Officials with the Pottawattamie County sheriff's office say they received a call that three people had fallen from an Iowa Public Television tower, five miles east of Oakland, reported The AP. The three men - ages 57, 27 and 19 - were from the Des Moines area and were employees of Deter Tower Service, of Grimes. Their names have not been released. Bill Hayes is director for engineering at I-P-T-V. He says the crew was on the tower, replacing strobe lights when the accident happened. He does not know what caused them to fall, said The AP story. He says a fourth member of the crew was working on the ground, operating a winch, hoisting parts to the crew.

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TVBR Radar 2006

Television News you won't read any where else. TVBR--First, Accurate, and Independently Owned.

Martin to change
channels on multicast?
It looks like FCC Chairman Kevin Martin will make multicast must-carry one of the first issues to tackle once he has a third Republican vote in place in the form of Robert McDowell. The Michael Powell FCC already called this broadcast v. cable bout in favor of cable, so the fact that it appears to be up for reconsideration can only be good news for broadcasters. According to reports, the matter could hit the FCC agenda by mid-July or earlier.

TVBR observation: If you side with cable, you believe that they are required by law to carry only the primary signal from a broadcast television station in the same media market. Broadcasters argue that cable is required to carry the entire broadcast stream within a station's allotted bandwidth, which in a digital world could be one high-definition stream or six or more split, or multicast streams. Cable doesn't want the multicast stations, if for no other reason, because they would offer more competition for its own channel offerings. Free marketeer Powell sided with cable on the initial FCC consideration, believing that mandating multicast carriage was an abridgement of cable First Amendment rights and would not stand up in court. Martin dissented at the time. The two Democrats, Michael Copps and Jonathan Adelstein, also voted against broadcasters back then, not because they disagre! ed with the multicast concept, but because they wanted public interest obligations tied in along with assurances that it wouldn't turn a given station into a network affiliate with five home-shopping side channels. The FCC has already grafted children's programming responsibilities onto multicast. We'd guess that if Martin pays some attention to their concerns, he could well get this through unanimously.
06/01/06 TVBR #107

FCC upholds CBS Super Bowl fine
Saying that the half time show staged at Super Bowl XXXVIII by CBS was indeed indecent, the FCC has denied the group's plea for rescission of the 550K fine it was charged for the Janet Jackson wardrobe malfunction. Wrote the FCC, "The Order rejects CBS' claim that the halftime show was not indecent.."

TVBR observation: The lines are drawn. Will CBS pay up or try to book a judge and courtroom? Stay tuned. By the way anyone remember who played in Super Bowl XXXVIII?
06/01/06 TVBR #107

Tribune may sell some TV stations; buying back its own stock
announced a Dutch auction to buy back up to 53 million shares in a range of 28.00-32.50 (above Friday's close of 27.89) from the public and 10 million from the foundations that are its largest shareholders. CEO Dennis FitzSimons says Tribune will also cut expenses some 200 million (including some staff cuts) and sell up to 500 million in non-core assets, possibly including some non-core TV stations. For complete details review of the TV's that could be up on the block see
05/31/06 TVBR #106

VNU buyer wants bonds too
Now that Valcon, created by a consortium of equity funds, has won the right to buy out shareholders of VNU for 9.7 billion bucks it is offering to buy out most bondholders as well. The soon-to-be owner of Nielsen Media Research, Billboard magazine and other VNU properties is making a tender offer for nearly 1.3 billion bucks of VNU's public debt. To facilitate the bond buyback, VNU has called a series of meetings for June 19th and 20th for holders to vote on approving the redemption of some or all of the bonds at 100% of their face value, plus accrued and unpaid interest.

TVBR observation: We wait now for the bigger moves. Who will be the new CEO, as VNU gets a new name and moves its incorporation from The Netherlands to the US? What role will Nielsen Media Research President and CEO Susan Whiting play? TVBR hears that Whiting's star is on the rise as she was the guiding light through this storm. Bottom line: When the CEO is appointed that will give some idea on the focus of the company.
05/30/06 TVBR #105

The top 25 TV groups
It only takes 135.7M in 2005 annual income to make the BIA Financial Network list of Top 25 Television Station groups, but it takes almost 17 times that amount to get to the top of the list. The top guns are see
05/30/06 TVBR #105

Too much leverage?
Bear Stearns analyst Victor Miller is concerned that most publicly traded TV companies are over leveraged. Thus, he likes LIN's plan to sell off its Puerto Rico properties and pay down debt. In an extensive analysis piece sent out Friday, Miller noted that Wall Street appears to be punishing the stock prices of the pure-play TV companies with the highest debt-to-EBITDA ratios - Young at 19.3 times and Nexstar at 7.6 times, while awarding the highest value to Hearst-Argyle, the least leveraged at 3.2 times. For more details on Too Much Leverage see
05/30/06 TVBR #105

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