THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, January 22, 1995 TAG: 9501210191
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Long : 147 lines
To understand what's going on in the Hampton Roads commercial-TV market, try thinking in seismic terms.
Picture each station as a tectonic plate that's constantly jostling to get an edge up over another.
The sixth station down - in ratings and ad revenues - wants to overtake No. 5. Meanwhile, No. 5 craves No. 4's position. And so on.
Now imagine most of those ``plates'' thrusting forward all of a sudden. Shocks and aftershocks are what you'd expect. And they are just what's being felt in the local TV business right now.
``This market has to be going through the most changes ever in so short a time,'' says Lyle Banks, president and general manager of WAVY, the local NBC affiliate.
Here's a quick rundown:
WTVZ, the Fox Broadcasting affiliate, was sold earlier this month for $48 million.
WTKR, the CBS affiliate, is up for sale in a bidding war that could top $100 million.
WGNT, formerly Hampton Roads' top independent station, affiliated with the new United Paramount network, which last week won the prime-time ratings race its premiere night.
WVBT, once a barely watched home-shopping station, just switched to another new network, Warner Brothers.
WAVY signed a deal to help program the new Warner Brothers station. It's also expanding a local weather network on cable systems in the region.
While all those local heavyweights and middleweights were scrambling, a low-power station in Hampton called WPEN quietly convinced most cable systems in Hampton Roads to carry its inventive programming mix.
The reason for all this moving and shaking is simple, Banks says: ``optimism.''
All over the country in the past year, TV station owners and investors have gotten a lot more bullish about the business.
``When you feel confident about the future,'' Banks says, ``you can make moves optimistically.''
What's driving this renewed optimism?
For starters, TV broadcasters have curbed viewership losses to cable networks. ESPN, Nickelodeon and and other cable-exclusive networks had cut broadcast's audience share from 95 percent to 75 percent between 1982 and '92. But over the past year, they've managed to chip away only a few tenths of a percent from broadcast's audience share.
Then there's ad sales. They boomed to more than $18 billion nationwide last year for TV stations, up about 13 percent. Stations in Hampton Roads, the nation's 39th-largest TV market, grabbed about $75 million of that.
``I think we're in the beginning of a major swing,'' says media consultant Arthur Gruen, president of New York-based Wilkofsky Gruen Associates Inc. He predicts better-than-average ad sales growth for TV stations the rest of the '90s.
Harold Simpson, a vice president of the New York-based Television Bureau of Advertising, goes even further. TV ad sales will go ``gangbusters'' over the next few years, Simpson says. With the Summer Olympics in Atlanta and a likely hotly contested presidential race in 1996, he says, ``it would take World War III to keep that from being a great year.''
There's also the Rupert Murdoch factor.
Over the past year, the crusty Australian-born media magnate has lured to his Fox network dozens of longtime ABC, CBS and NBC affiliates, partly by dangling rich compensation packages while the other networks were slashing payouts.
Faced with even more affiliate losses, the bigger networks' cash coffers burst open. Analysts say local affiliates stand to gain a combined hundreds of millions of dollars in extra network payouts over the next few years - a dramatic shift of economic power to local stations.
All of these things, plus proposed federal rules that would let broadcast groups own more stations and permit TV broadcasters to enter potentially lucrative new businesses like data services, have driven sale prices way up.
When prices are compared to operating profits, stations are now selling at near-record levels - 11, even 12 times operating cash flow. That's up from seven or eight times cash flow only a few years ago.
Local station owners and managers say the lofty prices - nearly $50 million for WTVZ, perhaps double that for WTKR - are an encouraging thumbs-up for their business.
But there's a potential down side to this gold rush, too.
The new owners of the stations will likely push harder to grab audience and ad shares. How else, except through cost-cutting, will they generate the extra cash flow they'll need to make their investments pay off?
Clearly, the local competition for ad dollars - which was already bound to intensify with WGNT, WVBT and WPEN all upgrading their programming - will get even more spirited.
``Every time you cut the pie, it means less revenue for somebody,'' says Ernie Harris, senior vice president at WGNT.
Maybe.
Other broadcasters say the ad pie may grow fast enough for the next several years to make everybody's slice bigger.
Lee R. Salzberger, president and general manager of WVEC, has weathered several market realignments during his 29 years in the business with the station's owner, A.H. Belo Corp. He's optimisticabout TV stations' prospects, but says there's no room anymore for complacency or sloppy thinking in the business, even in good times like these.
``The days of the golden gut are gone, when TV stations were operated by people who made decisions based on feelings about this or that,'' Salzberger says. Now, decisions are driven by such data as ratings, demographics, return-on-investment statistics.
The numbers have driven Salzberger to one conclusion: ``People watch programs. . . . There is less and less loyalty to stations.''
That's why WVEC locked up long-term local broadcast rights for all three of the country's top-rated first-run syndicated shows, ``Jeopardy!'', ``Wheel of Fortune'' and ``The Oprah Winfrey Show.'' Those shows' success are a big part of the station's overall market-leading ratings.
On the opposite side of Salzberger in the market is WAVY's Banks.
Banks is similarly optimistic about broadcast TV's future, but less risk-averse.
WAVY's parent, LIN Broadcasting Co., has spent ``millions'' - exactly how much, he says he doesn't even know - on its various new ventures, based on what largely amounts to hunches that they'll pay off.
``If you're prepared and lucky and have a little bit of vision,'' Banks says, ``you'll have a good chance of coming up with something that will work.''
A decade from now, this bright new polish on broadcast TV may fade. Cable networks, though their gains have slowed, are wildly multiplying with audiences ever more narrowly defined. Golf Channel. TV Food Network. Idea Channel. The list goes on.
Meanwhile, telephone companies like Bell Atlantic Corp. are planning vast networks of computer jukeboxes that promise to turn every movie and TV show ever made into bits of data that will zip instantly over phone lines into customers' homes.
But all that's too futuristic and technically mind-boggling to figure out. For now, broadcasters like the feeling of being rediscovered.
Says TV ad man Simpson: ``The dinosaur egg has hatched.'' ILLUSTRATION: Color photo
FILE
Graphic
JANET SHAUGHNESSY/Staff
COMMERCIAL TV IN HAMPTON ROADS
SOURCES: Nielsen Media Research, the stations
A DINOSAUR SPRINGS BACK TO LIFE
SOURCES: Vernois, Suhler & Associates, McCann-Erickson, Television
Bureau of Advertising, Wilkofsky Gruen Associates, Broadcasting &
Cable magazine
[For complete graphics, please see microfilm]
by CNB