Big Footprint Brings Windfall

Sinclair, rich in Fox affiliates, is poised to cash in on political ads

By Michael Malone -- Broadcasting & Cable, 10/25/2010 12:01:00 AM

Sinclair Broadcast Group has 58 stations in 35 markets, including 20 Fox affiliates and seven ABC outlets. The group’s 22% coverage across the U.S. places it in the top 10 of U.S. station groups. Sinclair Chairman/CEO/President David Smith spoke with B&C Deputy Editor Michael Malone about what makes the Maryland-based group unique. An edited transcript appears below.

How is Sinclair’s footprint in terms of where the hot political races will be?
That’s not something that I focus on, but Ohio is a huge race, and we’re a player in Dayton and Cincinnati and Charleston-Huntington (WV), which overlaps into Ohio. So I think we’re advantaged.

What do you think of ABC making network spots available to affiliates in high-demand times?
It’s certainly a reasonable thing to give some thought to. It’s just a balancing act between what they think the spot is worth and what we’re prepared to pay for it and sell it to someone else. If that works and the networks make more money doing that, I’d certainly ask the question of the affiliate body. If you don’t get uniformity across the affiliate body, then I don’t know how you do it.

Sinclair’s affiliate agreement negotiations with ABC went on for a long time. What took so long?
I don’t think there were any material differences between our view and their view; it was just that they’re busy doing 4,000 different things. They’re just a big company that moves at a different rate of speed, that’s all.

Last year, all eyes were on the Cunningham Broadcasting stations, fearing they’d drag the Sinclair group into bankruptcy. [Sinclair has marketing agreements with the six Cunningham stations.] How’s the health of the Cunningham stations today?
I couldn’t tell you because I don’t have anything to do with them. All we have is a specific contractual relationship with them. I don’t see their financial statements or have anything to do with their day-to-day operations.

But you must get a sense of whether they’re doing well or if they’re still wheezing.
Everything I’ve been told is that they’re fine. The question was asked in one of our last conference calls, and everything to our knowledge is fine.

What does a Sinclair station in a given market stand for?
It stands for serving the public interest, number 1, and serving its shareholder base, because it has an obligation to make money and be profitable.

How big a business do you see mobile DTV being, and what are you doing to get Sinclair’s stations on board?
The industry in general is grappling with, how do you get it out there, how fast do you get it out there. A lot of broadcasters are just going to go do it, despite the fact that the receivers are not in the marketplace yet. I applaud [Media General’s] WCMH in Columbus [for launching mobile DTV last month], and I understand [Dispatch Broadcast’s] WBNS has announced it’s going to do, or has gone to, a simulcast of their content to the public, which I think is a wonderful thing.

The real benefit of what we bring to the marketplace is local content, and the public wants local content. So it’s incumbent on the broadcast industry to move as quickly as we can to get our content on devices, and it’s also incumbent on manufacturers to get the devices out there. The fact that stations are already turning it on is certainly a good thing, and we expect to be doing the same thing.

What’s your take on what’s going on in Washington in terms of broadcasters’ spectrum?
I think the industry has it under control. There isn’t a shortage of spectrum space in Columbus or Peoria or Rochester. The shortage…if there is one—I’m not telling you there is or isn’t, my engineers tell me there isn’t. The chairman of Verizon said we don’t have any shortage of spectrum space. I don’t know how you reconcile that with the government’s theory. If there’s a technical shortage, it’s in New York, Chicago, Los Angeles and San Francisco—not Columbus, Ohio.

Sinclair’s stock is a little over $7 per share today. Do you feel it’s undervalued?
It’s dramatically undervalued.

How do you communicate that to those who move stock prices?
The same way every other public company does—you go on the road, meet with people, explain to them what the math is, what the industry is. That’s about all you can do.

Do you feel the local TV business is strong long-term?
If I didn’t, I’d be out of here.

There's huge political spending coming to stations. How is Sinclair poised for the campaign windfall?
I'm sensitive to respond to anything along that line because we're a public company and anything I might say to you might be construed in a different way than we've told the public on a very specific basis. The only thing I would say is that we have the inventory to be able to manage through the political process and take full advantage of everything that's coming.

Any interesting ways the Sinclair stations are covering the elections this year, that maybe you didn't do in the last election cycle?
Nothing off-hand that I'm conscious of. That's a little bit below my grade of pay, but news departments do their own thing and interact with these politicians in a way that they think is newsworthy.

Which new fall shows are you watching?
I haven't seen any of them.

C'mon! Do you plan to, or are you too busy working?
Too busy working.

What do you watch when you do get a little free time?
Probably an old movie.

E-mail comments to mmalone@nbmedia.com and follow him on Twitter: @StationBiz