LIN TV Corp.’s launch of a Spanish-language network is more than an attempt to capture a piece of the fastest-growing television audience in the United States. It also represents an opportunity to open up a new revenue stream at a time when station groups in general are having a tough time growing their traditional broadcast businesses.
Although the heated battle for the White House, a series of tight local political races and a rebound in local advertising in several parts of the country are helping many station groups post significant revenue gains in 2004, investors have cooled to the TV station sector amid the expected revenue declines that will come next year. The culprits: the traditionally sharp decline in political advertising revenue in odd-numbered years and persistent uncertainty surrounding station-ownership rules.
That lack of clarity in the ownership rules has idled a major engine for station-group growth, since it has left many would-be buyers, sellers and swappers stuck on the sidelines until the federal courts sort out how the rules should work.
Further, even though the overall economy is showing signs of improvement, the annual fluctuations in station revenue from year to year has hurt many station groups.
At the same time, many station groups are nearing the end of the huge capital outlay they made in preparation of their meeting the 2006 digital broadcast deadline set forth by the Federal Communications Commission, and are keen on finding sure-fire ways to recoup those investments.
“The guys running these companies are faced with the fact that the old way of doing business is no longer available,” said one executive who works closely with station group executives. “The networks have emasculated them by taking away their ability to make a lot of money off the network. They are somewhat being sandwiched now by not having a lot of avenues to grow revenue and expand their business, and selling a station has not been the thing to do because people are not willing to pay the multiples [that owners] need.”
Enter an initiative such as LIN’s WAPA America channel. Based on programming from its San Juan, Puerto Rico, station WAPA-TV, WAPA America will feature original content produced by the station, including comedies and news programming. While the target audience is Puerto Ricans living in the United States, LIN expects it to appeal to a broader audience, including viewers who originally hailed from the Dominican Republic.
Operating costs will be kept low by programming from LIN’s broadcast hub in Springfield, Mass.
DirecTV Group has agreed to carry the channel beginning Sept. 1 as part of a package of programming aimed at Hispanics and will serve as the exclusive satellite carrier through Jan. 31, 2006. LIN is also holding talks with several cable operators that have expressed interest in the channel.
On one level, the launch of WAPA America reflects a realization at LIN that “we had a tremendous amount of product [at WAPA] that we produce every day that could be repackaged for a U.S. audience,” said Paul Karpowicz, LIN’s VP of television. “No one has geared a channel specifically for Puerto Ricans in the U.S., so they can keep up with news at home and get the entertainment programming that they know very well. It just seemed like such a natural.”
But because the venture will be profitable from the start, it will also provide LIN a source of growth at a time when “the amount of buying and selling of traditional assets is somewhat limited,” Mr. Karpowicz said.
WAPA America is one of a number of strategies being tested against the backdrop of a changing marketplace. Some are proving more successful than others. Sinclair Broadcast Group, for example, has launched a successful direct-mail business that has proved to be a revenue generator. However, Belo Corp. earlier this summer decided to shutter its 4-year-old 24-hour cable news venture with Time Warner Cable, citing the channels’ inability to gel with audiences.
But Belo’s failure in this space isn’t likely to sway station group executives from trying new things, particularly as they find ways to use up portions of their digital broadcast spectrum. Among them: new attempts at the 24-hour local news channel, weather channels and kids programming. Some sources believe there could also be opportunities for station groups to band together to help launch and distribute new upstart networks.
“This is a logical extension of what large media conglomerates do,” said Stephen Benedek, managing director of Benedek Investment Group and a former station group executive. “Smart station operators are leveraging existing content to go into other businesses that are ancillary.”