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Granite Expects Approval for Duluth Station Deal

Aug 6, 2004  •  Post A Comment

Granite Broadcasting executives on Friday expressed confidence that they would be permitted by the Federal Communications Commission to complete a station sale with Malara Broadcast Group that would create a “virtual” duopoly in Duluth, Minn.

W. Don Cornwell, Granite’s CEO, said the proposed transaction in which Granite would guarantee Malara’s purchase of CBS affiliate KDLH-TV avoids the issues that the FCC has raised in the past about joint sales agreements. Some competitors have raised questions about the sale because Granite already owns the NBC affiliate KBJR-TV in Duluth and suggest that the Granite is violating duopoly rules with the sale.

Malara and Granite earlier this year announced plans to enter into a strategic arrangement under which Granite would provide sales, administrative and promotion functions to Malara-owned stations in Duluth and Fort Wayne, Ind.

Mr. Cornwell said the Malara station in Duluth would be programmed by Malara employees and would be separate from the operations at KBJR. However, he did say that the plan is to share as many other services as permitted by the FCC. The two stations would have separate sales forces, though Mr. Cornwell said it is unclear whether KDLH’s sales team would be employed by Granite or Malara.

His comments came as the New York-based owner of eight network-affiliated televisions reported a widened second-quarter loss of $15.7 million, or 81 cents a share, vs. red ink of $13.8 million a year ago. Revenue advanced 2 percent to $29.2 million. The results were the first since Granite was delisted earlier this week from the NASDAQ SmallCap Market and moved to the Over the Counter Bulletin Board.

By affiliate group, Granite said its stations affiliated with ABC, CBS and NBC reported a 4 percent revenue increase, mainly driven by political advertising revenue. The company’s WB-affilated stations posted a 1.5 percent decline in revenue, as a result of difficult-to-match year-ago results and a 19 percent drop in national advertising revenue.

Meanwhile, the company said its Buffalo, N.Y., station, ABC affiliate WKBW-TV is undergoing a major cost-saving initiative to help improve its weak margins and lackluster revenues. Already, the company’s work force has been reduced by 10 percent at a savings of around $600,000, and Mr. Cornwell said more cuts are expected.