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Volume 22, Issue 119, Jim Carnegie, Editor & Publisher

Friday Morning June 17th, 2005

TV News®

Viacom pays price for splitting
Sumner Redstone's plan to divide Viacom into two companies is not without consequences. Citing the decision to split, Standard & Poor's has lowered Viacom's corporate credit and senior unsecured ratings from A-minus to BBB-plus - - that's still investment grade, but only three notches above junk bond status. Not only that, but S&P left Viacom on its CreditWatch list with "negative implications," which means there could be another cut coming. "How the current debt burden will be allocated between the two companies to be formed is still unclear, and we do not know the priority that will be given to share repurchases, dividends, and acquisitions," said S&P credit analyst Heather Goodchild. S&P said it plans to have talks with the financial and operational management of the two new companies to be formed - - CBS Corp. and Viacom Inc. - - to discuss "their long-term credit quality commitments and how they will be accommodated within their broader strategic agendas." As its credit ratings go down, Viacom can expect to pay more to borrow money - - and borrowing costs of the two new companies will be dependent on their credit ratings as well.

TVBR observation: You can argue that big isn't always better, but big almost always is better when it comes to borrowing money. Lenders like assurances that they'll be paid back and big companies with multiple revenue flows generally offer less risk than a smaller company with the same leverage multiple. By breaking Viacom in half, Redstone is increasing the risk for lenders, while trying to enhance shareholder value. But having to pay more to borrow will reduce shareholder value, so it's tricky to try to balance the pros and cons of the split. Redstone has obviously decided that the pros outweigh the cons. Meanwhile, we note that both the New York Post and Bloomberg have reported that Viacom is interested in offers for its Simon & Schuster publishing house and the Paramount theme parks - - what we called "stray assets" that don't really belong in either new company, but are being assigned to CBS (6/15/05 TVBR #117). We doubt that Les Moonves would mind seeing them go away.

Gray Lady warns The Street
The New York Times Company has warned investors that Q2 earnings will be below previous expectations. "While advertising revenues in the second quarter have exhibited modest year-over-year improvement, the ad market remains uneven across categories and markets. We now expect the company's ad revenue growth rate to be in the low- to mid-single digits. So far in June we have not seen a continuation of May's strength, and June ad revenues are currently trending lower than anticipated, although still above the same period last year," said CFO Leonard Forman, pictured. Rather than revenue growth in the mid single digits, the company is telling Wall Street to expect low to mid single digit growth in Q2. It says earnings per share should be 38-42 cents for the quarter. The Thompson/First Call analysts' consensus had been 46 cents. For May, ad revenues for the company's newspapers were up 2.2% to 161.3 million, while TV revenues fell 1.2% to 11.9 million. Also this week, Media General reported that May revenues were up 3% to 72.6 million. Despite the lack of political advertising, broadcast revenues were up 0.5% to 26.4 million. Newspaper advertising rose 5.1% to 37.5 million, with retail up 5.7%, classified up 5.2% and national down 0.3%. "In broadcast, new business development initiatives continued to drive strong local revenue growth and helped to overcome the absence of political revenues and lower automotive advertising," said CEO J. Stewart Bryan III. Media General said Q2 earnings should be within the current range of analysts' estimates - - 77-84 cents per share. At Tribune Company, TV revenues fell 7.5% in May to 106.4 million, with the company saying the ad environment is weak in most markets. Radio/Entertainment revenues rose 8.1% to 28.4 million, with the improvement credited to the performance of the Chicago Cubs. Newspaper ad revenues crept up 0.3% to 255.6 million, with retail down 0.9%, national down 5% and classified up 5.5%.

News planting crops up at USDA
The Bush administration is pushing for adoption of the Central American Free Trade Agreement (CAFTA), a controversial measure which has sparked opposition from Democrats and Republicans alike. But back in the mix are video news releases from the United States Department of Agriculture (USDA), going out to television and radio stations without attribution. According to the Chicago Tribune, USDA has been cranking the ads out since the beginning of the year, totaling over 30 separate releases so far. At least two Senators, Daniel Akaka (D-HI) and Mary Landrieu (D-LA) have sent letters of objection to Agriculture Secretary Mike Johanns. Both senators represent state which produce sugar, and the sugar industry is a major opponent of CAFTA. The Senators have a problem with, among other things, a Johanns quote from on of the ads. He said, "I can't imagine how any senator or House member from ag country could stand up and vote against CAFTA." Another administration member suggested that CAFTA opponents were Chicken Littles. The continued release comes despite the fact that the Senate has passed legislation requiring that the source of such releases be clearly identified, and the FCC has highlighted its own rules requiring proper sourcing. The administration claims that in this case the source is identified, but critics say the ads function more as propaganda for the administration position rather than news or information, and that such argumentative material should not be going out on the taxpayer's dime.

Watchdog calls for FCC payola probe
Free Press notes that former FCC Chairman Michael Powell opened an investigation into pay-for-say and other forms of payola following revelation of the arrangement with Armstrong Williams. It wants to now see some results of that investigation, and would like to see the investigation expanded. It has also put out a report, authored by Timothy Karr, called "Fake News, Payola Pundits and the Public Trust," available at the organization's website. Karr said, "The preponderance of pay-to-sway pundits on television further erodes the public trust in the news media. The spurious activities by these so-called experts should be treated as illegal payola. The FCC should investigate immediately and enforce the law to end this practice once and for all." In particular, Free Press wants an expanded investigation to look into the practice of paying individuals to tout products on news programs under the guise of presenting consumer reports.

Click To Enlarge

Spanish TV on a roll
BIA Financial Network calculates that there are now 151 US television stations offering programming aimed at Hispanics, up from only 97 in 2000. "The dramatic increase in the number of television stations now offering Hispanic network programming is only part of the story. For stations with Hispanic programs, the revenue growth has been remarkable. Established stations affiliated with the Hispanic networks in 2000 garnered 7.7% of their local market revenues. This figure, on average, has climbed to 9.5% in 2004," said Mark Fratrik, Vice President, BIAfn. Even with full-power stations hard to come by, a good bit of that growth has come via low-power TV stations. Nearly half of those 151 stations are either a Class A or LPTV station. BIAfn calculates that the Hispanic stations have far outpaced the general market in revenue growth over the past five years.

Nielsen claims lower LPM fault rates
Nielsen Media Research claims fault rates have declined sharply in the four Local People Meter (LPM) markets that it launched last year. From November 2004 to May 2005, it says fault rates are down 10.4% in New York, 24.7% in Chicago and 22.4% in San Francisco, although they increased 1.6% in San Francisco. Fault rates for African-American households in the four markets were down across the board: down 22% in New York, 14.4% in LA, 18.1% in Chicago and 22.9% in San Francisco. Fault rates for Hispanic households were down in three of the four markets: down 14.8% in LA, 14.3% in Chicago and 33.7% in San Francisco, but up 1.7% in New York. According to Nielsen, "continued improvements in fault rates would be difficult over the next several months because they usually increase during the summer, when children are home from school, viewing patterns are different, power outages are more common, families go on vacation or otherwise spend time away from home and Nielsen has difficulty gaining access to sample homes."

Adbiz©

Outback puts creative in review
Outback Steakhouse has put its advertising creative account into review and is working on menu changes to boost sales. Outback's current agency is David and Goliath, LA, with national planning and buying done by MPG out of New York (they also buy some spot). Then Doner Advertising out of Tampa does the rest of Outback's spot planning and buying. New CEO Bill Allen and President/COO Paul Avery made the statements to analysts on Wednesday. In March, co-founders Chris Sullivan and Bob Basham stepped down as CEO and COO, opting for co-chairmanship. The statement followed a two-day marketing review. Avery said he also plans to change 10-15% of the menu annually going forward. The chain blamed the economy for its struggles in the Midwest and North Central regions and is testing a value menu there with smaller portions and smaller prices. "I think it's time for us to evolve the marketing," said Avery, who added a new campaign starts in September. Outback's measured media was 60 million last year, according to TNS Media Intelligence. However, ad spend is more than 100 million this year for the first time as the company shifted spending to national media. Said Avery: "We're putting spot TV back in several markets...that will take effect in July. We need to get back into marketing on a regional, local, individual unit basis." Regarding the use of television, Fulton Smith-Sykes, Outback Steakhouse VP Marketing, tells RBR/TVBR, "What is happening within any medium, whether it's digital convergence in the wireless world, or how you use your television to interact, becomes more important on your creative strategy and your creative communication than ever. Not that that hasn't always been important, because it has. And for us as a brand we've been very successful with that, ensuring that we use every medium in the way it should be for advertising because our strategy for radio is totally different than our strategy in television and what happens with some brands is they use every medium the same. We have found by doing things differently and in approaching whatever its strengths are, we've been very successful in our branding evolution through different mediums." Editor's note: Read our OneOnOne interview with Fulton, and Director of Media Cherie Shive in our upcoming July print issue.

UPN expecting 375 million in upfront spend
UPN expects to secure about 375 million in ad commitments for its primetime season and 350 million in the upfront, according to CBS, which oversees ad sales for its sister net. UPN isn't completely done with its upfront sales, but is close, reported the Wall Street Journal. UPN was able to secure increases of between 4% and 6% in CPM increases. The hot show is the new comedy, "Everybody Hates Chris," which was created and will be narrated by comedian Chris Rock.

True.com to host "True Acquisition Event"
Online dating service True.com announced plans to host the "True Acquisition Event" from 6/20 through 7/1, offering media sales and marketing pros the opportunity to secure contracts against an estimated multi-million dollar ad budget it now manages in-house. The move is part of a broader marketing initiative to best support its media tracking and acquisition systems. "True.com arguably has the most sophisticated media acquisition tracking system in the industry, so moving the buying decision in-house at our fingertips was a natural shift," said Cornell McGee, SVP/Acquisition Marketing. "We move fast and need media partners who can do the same, and the True Acquisition Event is an efficient and effective way for media sellers and marketers to take their best shot." As part of the True Acquisition Event, the company will also entertain proposals from marketing pros who would like to seek strategic partnerships with True.com. To submit a proposal: true.promo@true.com or call 972.402.4816.

Washington Beat

Broadcasting an afterthought in Telecom 2005?
A report in National Journal says that Senate Commerce Committee Chair Ted Stevens (R-AK) has largely turned over drafting duties for an update of Telecom 1996 to John Ensign (R-NV). Ensign is taking point so Stevens can concentrate on the DTV transition and other matters. The new draft is expected to be deregulatory in nature, and its major focus will have strong bearing on the telecommunications and cable industries - - particularly in regards to voice over Internet, telco entry into video distribution and replacing local franchising with a national regime.

TVBR observation: Controversial stuff to be sure - - consumers groups, small telecom companies and local governments will be tripping over one another to get their howls of outrage into the public record. But it looks like whatever broadcast issues do come up on the Hill, like DTV, will be handled by Congress separately. Most of the real action will be taking place across the Mall at the FCC. However, most of us were caught a bit by surprise at the breadth of radio deregulation presented in Telecom 1996, so we'll keep our eyes on this proceeding on the chance that more surprises are in store.

Programming

Lauren Sanchez will host Fox's
"So You Think You Can Dance"
Emmy winner Lauren Sanchez, who reports on entertainment for FOX's KTTV in Los Angeles and anchors KCOP-TV (UPN) News, has been tapped to host Fox's summer's dance series, "So You Think You Can Dance," premiering 6/20 (8:00-10:00 PM ET/PT). FOX teams up with the creators of American Idol and the producers of The American Music Awards and American Bandstand for the search for the nation's best dancer. From 19 TV Ltd. and dick clark productions. Executively produced by Simon Fuller, Nigel Lythgoe and Allen Shapiro.

Ratings & Research

What US Hispanics are watching
American Hispanics may watch a fair amount of network TV programming in English, but they still watch a lot more Spanish television. According to the latest weekly ratings from the Nielsen Hispanic Television Index, the #1 English show with US Hispanic viewers, ABC's "Dancing with the Stars," ranked behind 16 Spanish primetime programs in viewing by Hispanic Persons 2+. Popular novelas on Univision claimed the top three spots in Nielsen's Hispanic ratings. | View the Charts |

Ratings company wants to take Nielsen to court
A company which want to break into the TV ratings businesses with a set-top box system of measurement is taking Nielsen Media Research to court in a antitrust lawsuit which it hopes will break up Nielsen's monopoly grip of the television ratings business. The complainant is erinMedia, owned by Frank Maggio, who said his own system is better than Nielsen's antiquated methodology. He argued that Nielsen undercounts minorities, and results in 10%-30% advertising waste due to poorly targeted ad buys, and also causes new shows to be killed off prematurely by undercounting their audience. Maggio said that set-tops already number 25M, and may make it to 85M before too long, resulting in much more accurate ratings numbers. He also had words for Arbitron's "Orwellian Personal People Meters," saying such an invasive technique is inappropriate for American culture.

Stock Talk

Another day of modest gains
Stock prices were mostly slightly higher on Thursday, despite only modest gains in housing starts. The Dow Industrials rose a dozen points, or 0.1%, to 10,579.

TV stocks were mixed. The best performer was Young, up 8.8%. The New York Times Company gained 4.6%, despite warning that it would fall short of Q2 expectations.

Stocks

**Here's how stocks fared on Thursday**
Company	Symbol	Close		Change	Company	Symbol	Close		Change
Acme	ACME		4.07	+0.04	McGraw-Hill	MHP		42.60	+0.02
Belo	BLC		24.69	+0.05	Media General	MEG		63.32	-1.14
Clear Channel	CCU		30.15	-0.45	Meredith	MDP		48.84	-0.15
Disney	DIS		26.78	-0.26	News Corp.	NWS		17.54	+0.05
Emmis	EMMS		18.16	-0.19	Nexstar	NXST		5.77	+0.15
Entravision	EVC		7.70	-0.05	NY Times	NYT		32.15	+1.41
Fisher	FSCI		50.00	+0.14	Paxson	PAX		0.68	unch
Gannett	GCI		74.46	+0.55	Saga Commun.	SGA		14.67	+0.33
Gen. Electric	GE		36.11	-0.21	Scripps	SSP		49.51	+0.23
Granite	GBTVK		0.19	+0.01	Sinclair	SBGI		8.93	+0.08
Gray	GTN		11.59	+0.11	Time Warner	TWX		16.75	-0.04
Gray, C1. A	GTNa		11.28	+0.31	Tribune	TRB		36.05	+0.80
Hearst-Argyle	HTV		24.86	-0.01	Univision	UVN		26.87	-0.11
Jeff-Pilot	JP		49.76	-0.14	Viacom, Cl. A	VIA		34.04	unch
Journal Comm.	JRN		16.60	-0.19	Viacom, Cl. B	VIAb		33.70	-0.07
Liberty Corp	LC		36.13	-0.16	Wash. Post	WPO		871.50	-22.50
LIN TV	TVL		14.62	+0.13	Young	YBTVA		5.57	+0.45

Bounceback

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Upped & Tapped

Wertlieb
moves up
Jordan Wertlieb has been named President and General Manager of Hearst-Argyle's WBAL-TV (Ch. 11, NBC) Baltimore, succeeding Bill Fine, who's moved to WCVB-TV Boston (6/16/05 TVBR #118). Filling Wertlieb's former post as General Sales Manager is Barbara Anderson, up from Local Sales Manager.

Sales is a Stretch in SF
Univision has promoted Sandi Stretch to Vice President of National Sales in San Francisco, serving both the Univision and TeleFutura networks. She had been VP of Marketing & Business Development for the company's Western Division.

NBC Uni ups Boner
Kevan Boner has been named Senior Vice President and CFO for NBC Universal Television Distribution. He has been with Universal Studios since 1994 and moved to Universal Pictures in 2000.

Stations For Sale

LPTV Available in Sacramento, CA. Class A/LPTV Available in Fresno, CA. LPTV Available in Vail, Aspen & Glenwood Springs, CO.
Contact Chuck Lontine at Marconi Media Ventures (303) 382-1000. E-mail us at: www.marconi.cc

International

CRTC approves
subscription radio
in Canada
The Canadian Radio-television and Telecommunications Commission (CRTC) approved all three license applications for subscription-based digital radio services yesterday. Both XM and Sirius have entered into partnerships with Canadian enterprises to apply. Canadian Satellite Radio is a consortium involving former Toronto Raptors owner John Bitove Jr. and XM Satellite Radio. The CBC and Standard Radio partnered with Sirius Satellite Radio for Sirius Canada. And CHUM Ltd. and Montreal-based Astral Media, would forego satellite delivery for the time being and proposed to deliver pay radio to consumers via a series of broadcast towers. | More... |

TVBR Radar 2005

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

Viacom break-up: What's the point?
There's only one issue driving Sumner Redstone to split Viacom into two separate companies - - Wall Street valuation. So, the big question is whether the split will actually accomplish what Redstone wants. Will investors pay more for stock in the two parts than they're currently willing to pay for the whole? If not, then the split will have been for naught. TVBR observation: Investors are fickle folks. Viacom's stock got a brief boost after Redstone announced the break-up plan a few months ago, but lately has been trading at the low end of the 33-46 range from Hodge's analysis. That could mean that there's a lot of upside post-split. That will take place if value investors, with an appreciation for all that free cash flow, buy up the CBS shares and growth investors, who want a fast ride on a hot stock, flock to the Viacom shares. Of course, there could be some unforeseen problems ahead and the Viacom shares could become less attractive if the cable networks business falls out of favor. We recall that just a few years back, radio stocks were a hot commodity. See the data in the chart. 06/16/05 TVBR #118

Arbitron buying back stock
You can add Arbitron to the growing list of broadcasting companies who think their stock is undervalued - - so they'll just buy it back.
RBR observation: Said it before so lets do it again - if Wall Street doesn't love ya then love yourself.
06/16/05 RBR #118

As excepted Viacom board
approves split
CEO Sumner Redstone's plan to split the company in two - Company 1 the broadcast operations will be part of the company to be called CBS Corporation, headed by Les Moonves, consisting of CBS, UPN, the O&O TV stations, the Infinity radio stations, Viacom Outdoor, the Paramount, CBS and KingWorld production operations and a few stray assets - - Showtime, Simon & Schuster and the Paramount theme parks. In legal terms, it will be the continuation of the current Viacom. Company 2 the rest to be spun off into a new company, which will get the Viacom Inc. name, to be headed by Tom Freston. It will have the MTV Networks (MTV, VH1, Nickelodeon, Comedy Central, CMT, Spike, etc.), BET, Paramount Pictures, Paramount Home Entertainment and Famous Music. The new Viacom is being styled as the growth stock, while Redstone called CBS Corp. "a strong generator of free cash flow."
TVBR observation: We still of the recommended and strong observations that MTV/Paramount would be a better name for Freston's company, since the Viacom name really isn't used to Brand anything that's delivered to the public. Bottom line - the average person investing in the second company would identify and have a better understanding when buying MTV and the Paramount Brand - especially boomers. Sumner you picked the wrong Brand Name.
06/15/05 TVBR #117

P&G cuts commitment to TV
Saw this coming a long time ago and sharply cutting how much it commits in advance to buying television commercials next season. In 2004, P&G was the No. 1 U.S. advertiser, spending 2.5 billion on TV -- more than 80% of its estimated 3 billion ad budget. It also is expected to reduce spending on syndicated shows such as "The Oprah Winfrey Show" and "Ellen." While cutting back spending on TV commercials, P&G is looking to shift money into several different forms of TV marketing. Among them is increased activity in product placement. TVBR observation: Hello - we said over and over again since the 2004 4A's conference this was coming and now it is here. National Spot hold on to your socks.
06/14/05 TVBR #116

President/General Manager
Schurz Communications, Inc. is seeking President/General Manager candidates for one of its network affiliated television stations. Demonstrable success required in leading strong news & sales efforts. See TV Careers

Seeking Challenge
Professional communications executive with strong international media background seeking a new challenge. Prior experience includes: CEO& COO. See Positions Wanted

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