Sometimes Two Ain't Better Than One
Fox's NYC duopoly falls short of expectations
By Steve McClellan -- Broadcasting & Cable, 4/4/2004 8:00:00 PM
When Fox purchased the Chris-Craft station group in August 2000, it got duopolies in three big markets. What clout!
Mitch Stern, then the chairman and CEO of Fox Television Stations, boasted that those station combos would turn into lean, mean profit centers with great programming, soaring revenues, and drastically reduced costs.
"You have to deal with us," he taunted advertisers and syndicators expecting to do business in New York, Los Angeles, and Phoenix, where the Chris-Craft deal gave Fox second TV outlets.
It hasn't worked out like that, at least in New York.
In the February sweeps, WWOR, formerly the Chris-Craft station, posted near-record low ratings. According to a station executive who has seen the numbers, the UPN outlet had about $125 million in revenues in 2003, down from about $185 million before its acquisition by Fox.
Fox O&O WNYW's revenues aren't as bad but are still down, to about $220 million in 2003 from a previous high of about $280 million. Fox would not talk about the stations' financials.
Jamie Korsen, chief marketing officer at New York ad agency Avrett Free Ginsberg, says, "WWOR has lost a lot of its cachet and is no longer a must buy."
Trying to fix that, Fox combined the sales operations of its two New York stations and packaged their ad time. It swapped shows from station to station.
But some buyers simply won't do business that way.
Says Janice Finkel Greene, director of local broadcast strategy for ad-buying giant Initiative, "We take great care in projecting ratings, and, when they change programming and move it from one slot on one station to another slot on another station, we have to reevaluate the whole market."
Peter Mirsky, a media analyst who covers Fox for Fahnestock & Co., says the company overestimated the value of running two stations in a market. "You won't get them to say that, but that's what it sounds like from the buyers." He estimates that WWOR has an operating-profit margin in the high- 20% range, which is no better than when Fox took over the station. WNYW is doing better, with a 50% profit margin.
Going into the Chris-Craft purchase, Stern told analysts that Fox's duopolies would deliver margins of 55% to 65% on average.
Fox scheduled WWOR with marginal shows that weren't working on WNYW. Drew Carey, 3rd Rock From the Sun, Spin City, and The Nanny are four of the clunkers that migrated from WNYW's channel 5 to WWOR's channel 9.
And, if the ratings aren't good now, the local people meter set for launch in New York next week (see story, page 20) won't help. Early returns from the new service suggest both stations are headed for even bigger declines.
Jim Clayton, vice president and general manager of the New York duopoly, is quick to answer his critics: "To say WWOR is a dumping ground is a bunch of crap." The one program the two stations bought this year was King of Queens, he says, and it ended up on WWOR. Fox-produced On Air With Ryan Seacrest also aired on WWOR. Expectations were high, but the show is tanking and was moved to WNYW. It's still a work in progress.
So what to do? Cut more costs. In fact, Fox will do that and plans to relocate most of the WWOR operations, now housed in Secaucus, N.J., to WNYW's New York City facilities.
But there's a potential roadblock to those plans: By law, WWOR, licensed in New Jersey, is required to serve the public-interest needs of New Jersey ahead of those of New York. Both Rep. Steve Rothman and Sen. Frank Lautenberg have asked the FCC to investigate. A spokesman for New Jersey Gov. James McGreevey complains, too, that Fox has made "the wrong decision" to move the station.
Clayton assures all that the station can cover New Jersey just fine.
And he argues that WWOR still has plenty of upside. Next year, two new off-net shows, Girlfriends and Malcolm in the Middle, are being considered for WWOR rather than WNYW.
"Is channel 9 where we'd like it to be? Absolutely not," he says. "Do we think we're headed in the right direction? Yes."
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