Gray Television may be still be popping leftover New Year’s Eve bottles of champagne in celebration of its merger with Raycom Media, but one former Raycom partner certainly won’t be.
Gray, in an announcement distributed late Friday afternoon to perhaps soften the blow, revealed that it has signed an agreement “to terminate” the national ad sales rep deals that cover every Raycom station it now owns.
It’s a loss for CoxReps.
Gray noted that for the past few years, “Gray’s legacy television stations have successfully managed national advertising sales directly with national buyers, just as these stations have always dealt directly with their local and
As such, the former Raycom stations will follow suit, beginning on Feb. 25, in joining the legacy Gray stations in handling all local, regional and national business directly with their buyers.
Gray owns and/or operates television stations in 91 markets.
The loss of the Raycom stations could put added pressure on a CoxReps leadership team that includes four co-SVP/Director of Sales: Ray Karczewski, Mark Marino, John Dewan and Gib Gibson.
CoxReps is built on the premise of connecting agencies with local broadcast TV stations. Minus Raycom, CoxReps works with its own Cox Media Group TV stations, which are actively seeking an equity/leadership partner but not an outright sale; Tribune Broadcasting, which intends to merge with Nexstar, leaving CoxReps perhaps in a deeper hole; and two relatively small players — Lilly Broadcasting, presently in a retransmission fee dispute with a main MVPD in St. Croix, USVI; and Capitol Broadcasting Company of Raleigh.
Interestingly, the individual at Gray offering a comment was not Executive Chairman/co-CEO Hilton Howell but its other President/co-CEO — former Raycom President/CEO Pat LaPlatney.
LaPlatney explained, “Raycom Media has had a long and mutually beneficial relationship with CoxReps. We nevertheless believe that Gray has the systems and experience that will allow the former Raycom stations to take national sales in-house in a manner that will make those transactions more efficient for all parties. We are deeply grateful for CoxReps’ service and many contributions over the years.”
There’s also the cost of working with CoxReps, which was likely a key consideration for the termination.
Gray anticipates that its average annual expense savings to be realized due to the
termination of the CoxReps national advertising sales representation agreements, net of increased personnel expense, will be approximately $11 million.
In addition to this cost savings, Gray expects that the expansion of its strategy to the newly acquired Raycom stations “may have positive impact on national advertising revenue.”
Yet, Gray has incurred termination fees valued at $27.6 million, which will be tacked on to its Q1 2019 broadcast expenses.
Even so, this should not come as a surprise to Gray shareholders: The anticipated commission reductions and termination fees are included in the company’s previous guidance for cost synergies and transaction expenses related to the Raycom deal.