Paxson Braces for Challenge

Mar 6, 2006  •  Post A Comment

Paxson CEO Brandon Burgess, the former NBC Universal executive who assumed the top job at Paxson last November, is analyzing as keenly as any television executive the arrival of new network The CW and the attendant shutdown of The WB and UPN networks.

The merger of The WB and UPN into The CW is likely to trigger a chain of events that could make life difficult for Paxson, which is in the throes of a makeover designed to help the broadcaster find either a strategic partner or a buyer, according to some observers.

As a result of the formation of The CW, some insiders expect a proliferation of “orphaned” local TV stations will be put up for sale by owners unable to secure an affiliation with The CW or MyNetworkTV. With many stations currently involved in talks with both The CW and MyTV, the exact number of stations that would end up orphaned isn’t known.

But most industry players expect a number of stations to be without affiliation once the dust settles. This could cause some owners to unload their stations rather than try to run them as independents.

A sudden infusion of stations up for sale could adversely affect the price Paxson gets for any stations it might consider selling and could even affect the company’s overall value, said one former station executive. For Mr. Burgess, the pending closures of The WB and UPN mark yet another round of change in the 100 or so days since he became Paxson’s chief executive.

He insisted, however, that The CW can create opportunity for Paxson too.

Mr. Burgess will be “keeping an eye on how The CW and MyNetworkTV [News Corp.’s competing programming offering] shake out. There may be something that shakes out for us,” he said in an interview with TelevisionWeek last week.

Mr. Burgess said that Paxson’s 60 television stations tell a compelling story about the company’s ability to be a distributor of content, one of several angles he plans to exploit over the next year as he readies a company plagued by programming missteps and a heavy debt load for its close-up.

Mr. Burgess got his current job after Paxson and NBCU reached a settlement on their years-long legal battle over whether NBCU was able to monetize its 32 percent stake in Paxson. Before the truce, Paxson founder Lowell “Bud” Paxson argued that it wasn’t obligated to pay NBCU for the stake, a position NBCU challenged.

However, after several rounds in court and with arbitrators, the two sides were able to bury the hatchet in November, agreeing to give Paxson 18 months to either find a partner or a buyer for the company. Mr. Paxson also agreed to step down as chairman and CEO.

Since then, Mr. Burgess, who was born in the United States but raised in Germany, has moved to refinance Paxson’s entire debt structure to the tune of $1.1 billion, including extending the maturities of its senior debt and swapping into fixed-rate securities that offer protection against rising interest rates. He has also enlisted the help of several well-known industry figures, including former Bernstein Research analyst Tom Wolzien, as senior advisors.

And just last week, Paxson announced plans to change the name of the company to Ion Media Networks, a plan pending shareholder approval at the company’s annual meeting in June.

“This is our way of saying this thing is going to be transformed,” Mr. Burgess said of the name change. “This is a new day, a new business team, new standards, a new mind-set. We are going to be open to trying different things.”

To that end, Mr. Burgess said, it is not his intention to sell any of the company’s television stations but instead use them to demonstrate Paxson’s position as a distributor of content.

“We think the one thing we have as a differentiator is that no one else covers the country,” he said. “If we keep it together, we can use that platform to launch multinetwork feeds.”

Indeed, as Paxson moves forward, Mr. Burgess said, the company’s focus will be on three business areas: the flagship network the company now calls “i” and which now reaches 91 million households; developing digital networks for underserved audiences; and using the company’s digital spectrum to deliver content to various platforms and devices.

Some have criticized Paxson for failing to capitalize on its local presence by offering more in the way of community-specific content. Mr. Burgess agreed that the old Paxson missed the boat on that score, and noted that deploying a hyper-local broadcasting model is something that takes both time and money-and could be in the offing down the road.

“Turnarounds take time and thought. It’s not a quick flip,” he said.