QUARTERLY REPORTS MAKE SOBERING READING

The returns for the first quarter from most of the publicly traded TV groups are in, and they are not what anybody had expected they would be last year at this time. Even-numbered 2008, buoyed by heavy political spending and the summer Olympics, was supposed to deliver big revenue gains and commensurate profits.

But somehow the national economy failed to play along. The housing bubble burst, oil and gas prices rose and SUVs became as popular as Katie Couric in a Nielsen home. If we are not in a recession, it sure feels like it.

According to the 1Qs, the top lines of the companies were up or down in the low single digits, with the exception of Sinclair which somehow managed to drive revenue up 8.5 percent. Overall, the word to describe the TV station business in the quarter is flat.

The second quarter outlooks are not good either. Auto is showing no real signs of revving up and political looks as if it is on a three-month hiatus, except in the heated Democratic primary states like Pennsylvania, North Carolina and Indiana where Hillary and Barack have been cutting each other up.

"There is nothing dramatically improving nor is there anything dramatically worsening,” Hearst-Argyle CEO David Barrett told analysts. “We are kind of in the same zone with automotive and most of our other large categories.”

The bottom line numbers vary from company to company as each maneuvers to maintain cash flow and margins. That usually means a tight grip on capital expenses (bad news for vendors) and job cuts (bad news for people).

In its conference call, Barrington acknowledged what anybody at its stations already knew: it was cutting back its workforce by 8 percent in the second quarter. Gray and Young also said they were making significant layoffs—not exactly the stuff of a dynamic, growing business.

Certainly, there was nothing in the earnings to revive the stock prices of the companies that began sinking last summer after the credit markets tightened and the private equity players lost their interest in TV stations’ high and steady cash flows.

As of this morning, all the stocks were way off their 52-week highs: Gray, down 63 percent to $4.06; LIN, down 47 percent to $10.66; Sinclair, down 39 percent to $9.90; Nexstar, down 61 percent to $6; Fisher, down 39 percent to $31.79; Hearst-Argyle, down 24 percent to $20.53; and Young, down, down, down to 50 cents.

Poor LIN. It thought that it had one of the best quarterly report cards in the industry. Yet, as one analyst reported on the conference call, the stock dropped 6 percent as soon as the report hit the street.

Bears Stearns analyst Victor Miller called Sinclair’s first quarter results—net revenue growth of 8.5 percent and cash flow growth of 13 percent—“other-worldly.” Yet, Miller’s enthusiasm did little for the stock. It continued to languish at week’s end.

Sinclair CEO David Smith is so frustrated by his stock price that he told analysts that he had considered taking his company private, although he conceded that financing such a move in the current debt market would be difficult.

“[A]nybody that’s looking at the Sinclair stock today would have to say there's a tremendous amount of value,” he said, according to MediaPost. Yet, “for whatever reason, the valuations just don't show up from a market standpoint in our equity.”

Gray’s stock price has sunk so low that COO Bob Prather has taken to "stealing."

Prather told analysts he is snapping up Gray shares for his personal portfolio. “And every time I buy them, I think I am stealing at the price I am paying. So, I guess I’ll just keep stealing.

”Prather says he now has 90 percent of his net worth tied up in Gray stock. “So, I haven’t been faring too well lately, but I have 100 percent faith in the strength of our company.”

Everyone believes that the political revenue will start pouring in his summer and fall and the companies will finally be able to report those double-digit revenue jumps in the third and fourth quarters.

But then what?

It’s 2009. No political money. No Olympics for NBC affiliates.

Without those drivers, the station groups will have to rely on their core local and national advertising business along with whatever they can squeeze out of retrans deals and the Web. In all likelihood, it will be a flat-to-down year.

Broadcasters are hoping that the economy will be coming out of recession just as the 2008 political dries up after Nov. 4 to keep revenue from falling off a cliff in 2009.

Of course, it would also help if the credit market strengthens itself out. Then, the private equity firms may return to bid up the prices of TV stations and put all the station groups in play. That would show investors that there is value in the stations and an opportunity to make a fast buck by buying the right stock at the right time. Stocks would rise.

On the conference calls and in conversations with me, station executives make a strong case for why broadcasting is a growth industry. They talk about opportunities in local advertising and the fact that they have just begun the tap of the potential of the Web and their digital channels.

They now have to deliver on the talk.

“Our entire industry has been unfairly painted by the old media brush,” Prather said during his call. “We just all have to get out there and show the world that we are going to be in business, and profitable and growing for a long time into the future.”