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Pittman Seeking Stations

Jul 7, 2003  •  Post A Comment

Gannett, Sinclair and the other major TV groups may soon have some competition from an unlikely source: former AOL Time Warner exec and MTV co-founder Bob Pittman.
Mr. Pittman’s recently formed investment company, The Pilot Group, wants to become a player in the ownership of TV and radio staions, according to Bob Sherman, one of the principals in Mr. Pittman’s new company.
The group is starting out with access to at least $400 million in capital to invest.
Besides Mr. Pittman and Mr. Sherman-the former president of interactive marketing at America Online-other principals of The Pilot Group include Mayo Stuntz, a former marketing executive at AOL, who also served as head of AOL’s CompuServe, and Paul McNichol, another veteran media executive.
“We are a group of friends who have been in the media business professionally and want to look at TV and radio properties,” said Mr. Sherman, reached by phone in Cape Cod, Mass., where he was on vacation. “We’re looking for opportunities in both big and small properties.” He added, “We’re all too young to just retire. We want to go in and take on a business and apply our organizational skills. This is at its nascent stage.”
Mr. Pittman, who is 49, was said to be vacationing in Russia and was not available for comment.
The Pilot Group has huge clout behind it. While some executives familiar with Mr. Pittman’s plans referred to an initial capitalization of about $400 million, Mr. Sherman dismissed that number as much too small. “Any number you cite would be baseless,” he said, indicating that Pilot had already lined up enough financing for large investments. “We are in a position where we can evaluate any opportunity that could be available,” he noted, leaving the door open for major television industry acquisitions.
Mr. Sherman said that the Pilot Group had already looked seriously at some TV properties, “Which we are thinking about.”
The entrance of such major players into the TV marketplace comes at a time when there is a revaluation of just how valuable TV stations and networks are in the current environment. With the new Federal Communications Commission regulations, regardless of how they are ultimately adjudicated, there is a strong expectation that TV stations values will rise, which would make them excellent investments.
Mr. Sherman acknowledged that TV stations aren’t cheap as it is. “Broadcast properties have always been priced high, because there is a finite number of them,” he observed.
Sources familiar with Mr. Pittman’s plans said he is investing some of his own money in the Pilot Group. “He’s got lots of money; the man is not hurting,” said Christa Sober, an analyst with Thomas Weisel Partners in San Francisco.
“They want to buy something with a brand name and fix it up,” said Jarl Mohn (who was formerly known as Lee Masters and reverted to using his real name). He is the former CEO of Liberty Digital and E! Entertainment Television). Mr. Mohn worked with Pittman at WNBC Radio and at MTV. “Some people just like to be in the game.”
Speed Bump
Mr. Pittman’s career has been one of the most meteoric in media, right up until it abruptly hit a speed bump a year ago, when he suddenly resigned from AOL Time Warner.
Born in 1953 in Jackson, Miss., the son of a Methodist Minister, Mr. Pittman was drawn early to radio, landing his first professional job at age 15. He worked as a DJ on local stations, hopping to various cities, eventually becoming program director of WNBC-AM in New York, a highly influential station that redefined pop radio in the latter half of the 1970s. His tenure there coincided with the rise of cable, and when Warner Amex decided to start a music-oriented cable channel in 1981, Mr. Pittman was one of the founders of what became MTV (although not the founding CEO, as some later asserted). He departed in 1986 after an aborted attempt at a leveraged buyout of the channel from then-owner Viacom and went out on his own. In doing so, he dismissed much of what he had done up to that point, saying he didn’t want to be the 1980s version of Dick Clark.
Although this part of his resume is largely forgotten today, Mr. Pittman’s career path after MTV included his putting in time as a television producer. Before joining Time Warner and running the Six Flags amusement parks, Mr. Pittman created a company called Quantum Media, which among other things produced a pioneering reality cop show and a controversial talk show starring the late Morton Downey Jr.
Mr. Pittman returned to the corporate world in 1990 when he joined Time Warner, where he was named CEO of Time Warner Enterprises and eventually put in charge of the Six Flags amusement parks unit. In 1995, Mr. Pittman was named CEO of the Century 21 real estate empire. He left to become CEO of America Online in 1996. He was a key player in forging the alliance with Time Warner, since he knew the principals well, including current chairman Richard Parsons.
Mr. Pittman’s tenure at AOL was characterized by extremely good press, at least at first. Business Week, which called him the best-known COO in America, all but anointed him the next chairman and CEO of AOL Time Warner, with a laudatory 2001 cover story that virtually ignored the CEO, Richard Parsons. But Mr. Pittman resigned in July 2002, shortly after allegations surfaced in the Washington Post that AOL ad deals had been manipulated to make them appear to be much more valuable than they were. This revelation and an ongoing SEC investigation that has dragged down AOL stock to under $20 has added to the extreme animosity between the Time Warner and AOL units. Much of that anger has been directed at Mr. Pittman and AOL chairman Steve Case.
However, Mr. Pittman departed AOL Time Warner with stock holdings and options worth hundreds of millions of dollars and has not been implicated in the scandal. A recent book by Washington Post reporter Alec Klein places much of the blame for the accounting mess on two subordinate AOL executives.
Mr. Sherman also has an extensive background in broadcasting. He was executive VP of NBC’s owned-and-operated radio stations and CEO of the advertising agency Della, Femina, Sherman, which represented, among others, USA Network, Fox Television, MSG Network, and other broadcasters. Mr. Sherman created and sold several radio station holding companies, as well as serving as general manager of WNBC-AM New York and WCAU-AM Philadelphia.
The WNBC connection is interesting, because Mr. Pittman was program director of that station during a seminal period in the 1970s. Mayo Stuntz performed a variety of tasks at Time Warner and at AOL Time Warner during the Pittman period, including overseeing cross-marketing initiatives for AOL.
Despite their shared background in new media, those familiar with their plans said they are unlikely to invest in technology companies.
Jeff Dearth, a former technology executive who is now a senior partner at DeSilva & Phillips, a media mergers-and-acquisition firm based in New York and Washington, said, “There is a lot of money going into private equity that needs to be put to work, and there is a lot of interest in [traditional] media from private equity.” More recent darlings of private equity, such as telecom and technology companies, “have gone downhill, and many of these guys are looking at media now.”
Several friends of Mr. Pittman’s were willing to talk about the venture, but most requested anonymity. When speculating on motives for starting up the Pilot Group, one former technology company CEO, who competed with Mr. Pittman’s AOL, saw a combination of “ego” and “intellectual stimulation” as fueling the investment group’s rise. “He’s too young to pack it in,” this executive said. “Bob is an enormously talented, respected guy. In the last chapter of his career, he did very well for AOL shareholders.”
Fiduciary Responsibility
Time Warner shareholders are, of course, a different matter, but one can argue, as this executive does, that Mr. Pittman’s main fiduciary responsibility was to AOL shareholders, as that company’s C
EO.
Now, Mr. Pittman and company could certainly get by with never working again. But one observer said that top executives of this stripe are like squirrels “who can never get enough nuts.” This same executive noted that truly arriving as a mogul, with at least $100 million of your own money, means you can afford a private airplane. Mr. Pittman has one, most recently a Falcon 20 jet.
Robert Pittman’s Pilot Group plans to invest in major TV and radio properties, but what’s available that might interest them? Most major cable channels are priced out of reach of even the most well-heeled entrepreneur, and many marginal digital channels might not be worth the effort. But there are some station groups with possibilities available.
Among the largest station groups currently being shopped is West Palm Beach, Fla.-based Paxson Communications Corp., which bills itself as the “largest broadcast television station group in the U.S.” The company has 60 TV stations, all full power, and reaches 86 percent of the country through cable. Paxson’s unwieldy equity relationship with NBC has become dysfunctional, and the company is being actively shopped by Bear Stearns’ media unit. Last month, the company announced it had sold its Shreveport, La., station, KPXJ-TV, for $10 million, and founder Bud Paxson observed, “This transaction demonstrates the keen interest in our broadcast stations, heightened by the FCC’s new rules.”
Nancy Udell, a spokesperson for Paxson Communications, had no comment on specific possible investors in the company, but confirmed that there was a lot of current interest. According to Cheryl Scully, VP and treasurer at Paxson, NBC has the right of first refusal on the sale of any stations in the top 50 markets and absolute right of first refusal in markets 20 or above. NBC owns approximately 32 percent of Paxson, through the 1999 purchase of $450 million worth of convertible preferred securities convertible to common stock, but Paxson has the right to buy out NBC as of September 2004, Ms. Scully said. Paxson’s current market cap is about $400 million, making a buyout of NBC’s interests difficult.
Mr. Sherman would not comment on any specific interests of the Pilot Group, but he did say that the group had sufficient financial backing for almost any size media investment. Still, one top media CEO cautioned, “No one can figure out how to unleash the value” of the Pax TV opportunity. “That is too knotty a mess.”
Another TV station group actively being shopped now, according to an executive who has looked at the portfolio, is Oregon-based Fisher Broadcasting Co., which owns 11 network affiliates, including four in Oregon, two in Washington state and two in Georgia. Ben Tucker, the head of Fisher’s broadcast unit, was not available for comment. Those familiar with the Pilot Group principals speculate that the investors might be more interested in a property that offers more outlets for creativity than do standard network affiliates.
That could leave various cable channels, lots of radio groups, and plenty of other opportunities for the nascent Pilot Group.