CW Stations Opt for the Familiar

Mar 13, 2006  •  Post A Comment

When it comes to the strategy of signing on with The CW, for two station groups it seems to be a matter of go with what you know.

Tribune Broadcasting’s decision to align 16 of its WB affiliates with The CW finally came down to sticking with a familiar business model that was beneficial for the station group as a stake-holder in The WB for 11 years.

The CW is a 50-50 joint venture between Warner Bros. Entertainment and CBS Corp.

The added bonus of the new network’s model is that it doesn’t include the shared responsibility for WB debt that for Tribune added up to some $140 million over those 11 years.

“The old model worked great for us and the new model is going to work very well for us. We’re happy in the position we’re in,” Tribune Broadcast President John Reardon said.

Hearst-Argyle Television’s reasoning behind signing Kansas City, Mo., UPN affiliate KCWE-TV with The CW boiled down to the new network’s ability to cherry-pick known programming and executive talent from both sides. Another factor was the companies’ depth and breadth of experience with programming and running broadcast networks.

Of course, it didn’t hurt that the Hearst-Argyle station has “CW” in its call letters.

“Any of us who’ve been around the business any length of time understand that in most cases a station with an affiliation has higher asset value than a nonaffiliated station. That’s pretty much a given going in,” said Wayne Godsey, president and general manager of the Kansas City duopoly that consists of ABC affiliate KMBC-TV and KCWE.

“What we looked at and what I think in large part drove the decision, even though we looked at other options, was the fact that first of all, The CW is like the best of both worlds. Quite literally,” Mr. Godsey said.

In addition, with The CW, “You’ve got programming out of the box that you think is going to put you at an advantage and you’ve got a pipeline that’s already established.”

Mr. Godsey crunched numbers more than once before deciding on affiliation. “The initial analysis compared our projected revenue, expense, cash flow under the current situation with UPN with what it might be with The CW as soon as we got that information. Later, when MyNetworkTV emerged, we did an analysis on that, and we did another analysis on what we might be able to do if we went with it. I think it’s fair to say every single option had pluses and minuses,” he said.

“There’s no prescription for success, but [The CW’s] experience counts for something with us,” said Terry Mackin, the Hearst-Argyle executive VP who also oversees the group’s duopoly in Sacramento, Calif. CW affiliation was a nonstarter for the group’s WB-affiliated KQCA-TV because CBS-owned KMAX-TV was preordained to be the new network’s affiliate in the California capital, Mr. Mackin said.

“I can go independent when The WB shuts down or I can do the MyNetworkTelevision with Fox. Or probably the most radical thinking would be a Telemundo affiliation,” Mr. Mackin said with almost dramatic nonchalance given that Sacramento already has a Telemundo affiliate, KCSO-TV.

Tribune Broadcasting has to decide what to do with three stations, in Philadelphia, Atlanta and Seattle that have been WB affiliates but lost The CW as an option.

“We are looking at all the options available to us to program those three stations and we’re looking at them from both the long-time strategic programming standpoint and certainly an economic standpoint: How are we going to make the most money?,” said Marc Schacher, VP of programming and development for Tribune.

“We’re certainly looking at MyNetworkTV as an option. We’re also looking at what we could do in programming those stations ourselves-how we could use our group-buying mechanism to help them get programming for prime time. As of right now we have not made any decision,” Mr. Schacher said.

In a conference call with analysts Jan. 24, after the announcement of The CW, Tribune Chairman, President and CEO Dennis FitzSimons said that not having equity in The CW would “insulate” the group from sharing network losses and noting that “We will not have to absorb any of the shutdown costs that will be created by the ending of WB.”

He said Tribune Broadcasting also paid reverse compensation to The WB for 11 years and will be paying “slightly less” reverse comp with The CW. To Tribune, its executives said, it’s just part of the cost of doing business.

And while it may not, with The CW, buy them the favored-nation status Tribune had with The WB as a stakeholder, “We definitely have squeaky wheel privileges,” Mr. Schacher said.

Reverse comp has been a sensitive subject with station groups in recent years as the Big 3 broadcast networks work to wean stations off the compensation they have traditional been paid to carry network programming. Powerful station groups such as Hearst-Argyle have tried, with mixed results, to hold the comp line.

“I wouldn’t want to be so bold as to say that maybe comp will come back-and comp hasn’t gone away completely for Hearst-Argyle Television or a lot of companies around the country,” Mr. Mackin said. “There is a longstanding relationship with powerful affiliates, but the business model is different. I think that’s where I would probably draw the line.

With The CW, reverse comp is part of the recognition that both sides “need this to work. It’s a risk profile that says that both parties are going to have to try to help this work,” Mr. Mackin said.