May buy WB, start Chicago sports channel

Jan 27, 2003  •  Post A Comment

Dennis FitzSimons, Tribune Co.’s veteran “television guy” and newly elected CEO, is on track to make some bold program moves and acquire more big-market TV stations to become a top-tier media player.
Mr. FitzSimons, 52, has demonstrated a keen appreciation for both the distribution and content sides of the ledger in his 23 years at the company and says a financially fortified Tribune has unique opportunities to grow.
“Tribune will be bigger and in the top tier of its core broadcasting and newspaper businesses 24 months from now, as scale will be increasingly important in a fragmented marketplace,” he said in a recent interview at Tribune’s Chicago headquarters.
Industry experts said that could eventually mean Tribune will buy the 77 percent of The WB network it doesn’t already own from AOL Time Warner. While Mr. FitzSimons does not dismiss the possibility, he diplomatically maintains, “We see staying at the partnership percentages that we both have, at least right now.”
Valued at about $1 billion by analysts, The WB will produce its first modest full-year profits in 2003. They will be shared by Tribune and AOL Time Warner, which have jointly invested $500 million in the network over the past nine years. Eighteen of Tribune’s 26 TV stations are WB affiliates, making it the largest of the network’s TV groups.
The younger demographics of many of The WB’s TV stations and newspapers closely align with its core viewers. Tribune’s 22.5 percent stake, which analysts said is worth more than $250 million, addresses one of Mr. FitzSimons’ more urgent concerns: having “ready access to unique, affordable programming.”
Analysts said the acquisition of Warner Bros.-studio-supported WB would be a good fit for Tribune and more likely than an outright grand alliance with AOL Time Warner, which, despite constant industry buzz to the contrary, is not in the immediate cards, Mr. FitzSimons said. “We feel very strongly about our independence.”
But Tribune clearly is moving aggressively on all fronts to achieve more programming and distribution clout.
For instance, talks reportedly are under way to mine the Cubs baseball team and dominant local sports rights it already owns to create a new Chicago Regional Sports digital channel with Comcast Corp., the Windy City’s dominant cable operator. The companies declined to comment.
Mr. FitzSimons is clear about his intentions to seek extended distribution of WGN-TV Superstition in the next round of retransmission negotiations. Increasing coverage from a current 57 million homes to 70 million homes will substantially increase the estimated $100 million in annual revenues the station generates, more than half of which falls to the bottom line, sources said.
Pay model
“Whether General Motors or Rupert Murdoch owns DirecTV, they need local television stations to compete with cable. That’s what we have,” Mr. FitzSimons said.
And that speaks to another of Mr. FitzSimons’ concerns: creating a pay model for as much of Tribune’s core businesses as possible to increase revenues and decrease dependence on cyclical advertising, which will continue to be its primary source of income.
The company’s station and super-station platforms are major outlets for its own and others’ first-run syndicated fare. Wielding that kind of clout, it is likely that Tribune will eventually secure a grand alliance with a leading independent producer such as Studio USA, Carsey-Werner-Mandabach or Sony, sources said.
But perhaps Tribune’s most aggressive play this year will be spurred by anticipated deregulation and will come in the form of widespread cherry-picking of TV stations in more than 20 of the top 30 markets where the company still wants and needs to be with duopoly and single stations. It will need to acquire and convert some Fox and Big 3 network affiliates to accomplish that mission, Mr. FitzSimons conceded.
Sinclair Broadcasting and E.W. Scripps are among two of the broadcast groups analysts and brokers said Tribune is likely to embrace to grow its group of 26 stations, which generally operate at a healthy 40 percent margin. In late December Tribune said it was buying WB affiliates KPLR-TV in St Louis and KWBP-TV in Portland, Ore., from Acme Communications for $275 million.
But with newspaper-television cross-ownership rules expected to be repealed, Mr. FitzSimons is as enthusiastic about buying more newspapers at the right price.