Wells Fargo analyst Marci Ryvicker says that the decision of CBS to get a second broadcast television station makes good sense, and Hoffman Schutz analyst David Schutz thinks it makes fabulous sense and could also carry a very high sticker price.
Ryvicker said, “In our opinion, pursuing a duopoly in NYC makes sense, and we view today’s news as a positive for several reasons:
1) A duopoly market tends to have higher margins than a single station market (10bps or more, according to general conversations we have had with other broadcasters).
2) There could be a lot of upside at this station, despite the fact that it is independent both in terms of more news product (NYC is a very unique market where the value of local news is significant) as well as incremental retransmission consent.
3) This is a tuck-in acquisition? therefore we do not read today’s news as a change in strategy at CBS.”
Schutz was very enthusiastic about the deal for a number of reasons, the main one perhaps being that the station projects far far beyond its over-air contour. Located about 55 miles due east from the Empire State Building, it nevertheless enjoys cable carriage all the way out to western New Jersey, in many locations where its carriage is not enforceable by the licensee.
Schutz said that about 97% of the station’s viewers get it off an MVPD, compared to only 3% off the air. “This is final confirmation that the over-the-air transmission model for TV is truly dead,” he said.
Schutz noted that the most comparable recent TV sale was that of WTVE Reading, serving Philadelphia, which went for $30.4M in a deal fined with the FCC 9/28/11.
That works out to about $10/TV household, and in New York, with serious MVPD penetration, that would generate a value of $73M, and he expects that with horse-trading thrown in the price could be anywhere from $60M-$75M.
The station’s lineup of quality syndicated fare, and the addition of CBS news-gathering ability, should make this a great combination, and perhaps will get WABC out on the hunt for an over-air partner of its own.
