BOSS OF NEW BELO CHARTS STEADY COURSE

What’s the largest pure-play publicly traded TV station company in the land?

You’re to be forgiven if you said Hearst-Argyle Television. That New York-based company has long reigned atop the pure-play list.

But it was surpassed in February when the Belo Corp. completed the spinoff of its newspapers into a separate corporation (A.H. Belo). That left Belo as a pure play with 2007 revenue of $776.9 million, $21 million more than Hearst-Argyle’s 2007 take of $755.7 million.

But, then again, it all depends on what measuring stick you use to determine “largest.”

Hearst-Argyle has more stations (27 to 21) and reaches more the U.S. TV homes (15.85 percent to 14.24 percent) than the new Belo.

In any event, like Hearst-Argyle, Belo bears watching as a bellwether for the entire TV broadcasting. Every three months, its public earnings will serve as a report card of the entire industry.

Belo’s president and CEO bears watching, too. Having come up through the ranks as a controller and CFO, Dunia Shive assumed an operational role in 2004 and was the natural choice to lead the broadcast-only Belo when the decision to split the company was made last year.

In this interview with TVNEWSDAY Editor Harry A. Jessell, her first in her new role, Shive gives no hint that she is out to shake things up. On the contrary, she says she likes to course the company is on, building online and retrans revenue, while waiting for just the right digital spectrum play, be it mobile or multicast or both. Sure, the top line is now soft, she says, but when the economy comes back, so will Belo.

An edited transcript:

You just reported your first quarter numbers. Let me run them down for you. Total revenue is down 2 percent, spot revenue is down 5 percent, local revenue is down 6.4 percent, national revenue is down 10 percent. What’s the good news?

Consider the economical circumstances we’re operating in. We did have strong political revenues and we had strong Internet revenues, but we had $2 million less in Super Bowl advertising this year because it aired on our one Fox affiliate versus our five CBS affiliates. So your economic conditions are soft right now, but it is a cycle. We have very strong assets, very powerful franchises. When the recovery comes, we will do well.

As the analysts say, can you give me a little color on the categories, which were strong and which were weak? Auto seemed to be a killer for everybody. 

I think that automotive for us was down about 10 percent in the first quarter. If you look at categories that did well for us, I would put pharmaceutical, insurance and travel/tourism there. In addition to auto, the weak categories were telecom, health and beauty, groceries. I’d put financial services in there as well.

Are there any particular regional weaknesses in your group?

No, not particularly. Phoenix has been hit pretty hard with a housing crisis and that has had a spillover effect.

What’s the second quarter looking like?

We didn’t give any second quarter guidance and I have to stay away from any specific numbers. All we’ve said is that local and national spot are pacing better, but that, given the soft economic environment, it’s hard to predict where we would finish the second quarter.

What’s your strategy for growing revenue in the years ahead?

Let’s talk about that for a little bit. Our company had a record year for revenue in 2007 and, if you go back and look at the last five to six years, you’re looking at a 3 percent to 3.5 percent compound annual growth rate.

We are talking about just the TV business, right?

Yes. When you look at growing the company going forward, we’re obviously focused on expanding our Internet business and expanding local programming offerings in time periods where it might make sense to do that.

When you say local programming, do you mean more news or do you mean other things?

Both. In Dallas [WFAA], we’ve launched a new format show a year or so ago, Good Morning Texas, which is more of an information and talk show. We’ve done the same thing in Houston [KHOU] with Great Day Houston. Both of those have done well. We’ll look to see if it makes sense to do so in some of our other markets as well.

We have the digital transition right around the corner with multicast and other spectrum opportunities. I can’t tell you specifically what they are today, but what I do know is that you can put them in the plus column. For example, I think using spectrum to deliver over-the-air television to mobile devices will be a reality.

Continued growth in retransmission [consent payments] will offset losses in network compensation.

How much revenue are you getting now from retrans and how much lays ahead?

I can’t really speak to what lays ahead because that would be contingent upon the deals we have going forward, but what I will tell you is what we’ve said publicly. In 2007, we generated about $23 million in retrans revenue. In 2008, we believe that number will be in the $28 million-$29 million dollar range.

That $29 million is not all an incremental number, meaning it’s not something that came about only with retrans. We have cable news channels that we’ve been paid for since they’ve launched, the Texas Cable News and the Northwest Cable News.

What about acquisitions?

I would say that’s probably not in the cards for us in the short to intermediate term. We do have five duopolies and we manage second stations in Dallas and San Antonio. There may be an opportunity or two to add a second television station in other markets where we already operate.

You talked about expanding your Internet business. How do you plan to do that?

If you read our first quarter earnings release, you saw that we have had strong online growth over the last few years. We bring large audiences to our sites with our breaking news and weather and we’ve been successful in monetizing those audiences. I expect that to continue.

Automotive is a big category on air; it’s a big category online as well. We are affiliated with cars.com in five of our markets and we’ve seen very good growth in that category. I also think video will be an increasingly important category for us. Right now, it’s a very small category, but the percentage growth has been big and I would expect that to continue.

We also have a relationship with Yahoo where we’re an exclusive provider of local news video in 13 of our 15 markets. Yahoo hosts clips and local news pages so we have the benefit of that relationship. And we have an investment in a company called Mochila where we can offer content for syndication and distribution.

You also mentioned multicast as having some potential. Could you elaborate?

Obviously, we look at a lot of things to see if there’s one thing out there that would make sense at all of our television stations to use on our multicast channels. Having said that, we’re not committing any significant amounts of spectrum to anything other than some of the local things we’re doing right now until we find out exactly how much spectrum we will need for mobile digital opportunities.

Have you looked at this Sezmi project?

Is that the one that is similar to what USDTV was doing?

Exactly, except there’s an Internet piece to it. The box plugs into the Internet so that you can download or stream videos to your big screen.

I’m vaguely familiar with it, but I will tell you that that would be one of the ideas. There are many others that we would look at as well in terms of what we might do with that spectrum.

Again, we’re trying to look at everything corporately and see if there are things that make sense for our entire organization and also recognize that there may be specific local opportunities. In Boise, Idaho [KTVB], for example, we’re using our spectrum to multicast 24/7 local news.

What are the Olympics going to do for you in August?

Well, we have four NBC affiliates. The Olympics in the past has been a great platform for us. Three of our four NBC stations—that would be Seattle [KING], Portland [KGW] and Boise—have delivered in the past some of the highest audiences in the country for the Olympics. I think NBC has done a great job in scheduling some of the major events live for U.S. primetime audiences, so I think that will be a plus for the Olympics this year. We start selling the Olympics early so a lot of the leg work has already been done. If you go back and look at past years, we’ve traditionally done about $8 million-$10 million in Olympics revenue.

So that’s 8 to 10 in incremental revenue.

That’s a number that we have done with the Olympics in the past, although I do want to say that I don’t think you can count all of it as incremental. I think some of it is replacement. I think it has been in the past as well.

Ever since Disney announced in October 2005 that it was offering ABC shows via iTunes, TV affiliates have been steadily losing exclusivity to their programming to the Web. How do you feel about that?

Sure, they’re increasing content on the Internet and local affiliates don’t have the type of exclusivity that we’ve had before, but they’re not moving everything there today. The networks will tell you that it’s providing incremental viewing, which is good for them and that’s not where all the money is being made. So, the hope is, what they do online will be measured so that it benefits their business model and doesn’t hurt ours in the long run.

Should we expect any big changes in the operational style of Belo stations in either the sales area or in the local news area?

I would say there will be no big changes in the way we do business. I think there are things that have worked very well for us that will continue. We have invested heavily in sales. Our most important daypart is news and will remain news. I think maintaining quality there is much more important when there are so many choices available to people.

You know, when I asked that question, I had in mind an interview I did with David Lougee at Gannett who said that he plans to put more sales people and journalists on the street.

Back in my finance days at Belo, before I was on the operating side, Jack [Sander, then head of broadcasting] came in and looked at how our sales forces were structured and determined that we needed to have more feet on the street and we made significant changes in the number of sales people we have selling in our local markets. So we have already done that. With respect to more photo journalists, we’re doing that, too. We have more people out there producing more content that we can use either on air or online.

You have to look at opportunities for more content creation and you can’t assume that you can do it in the traditional broadcast way of sending out crews of people. So we’re going to try to be creative, but also maintain the quality in what we do.