WGN America's 'Outsiders'

With Deal to Sell to Sinclair, Tribune Reports Q1 TV Rev Down 4%

If all goes as planned, Sinclair Broadcast Group will own Tribune's 42 stations by the end of the year

Tribune Media, which could belong to Sinclair Broadcast Group by the end of the year, Wednesday reported that TV and entertainment revenues during the first quarter of 2017 dropped $19.8 million, or 4%, year-over-year.

In its earnings report, Tribune said TV division Q1 revenues hit $436 million, versus the $455.9 million hit in the first quarter of 2016. The drop was driven by a $17.7 million decrease in net core advertising revenue and a $13.7 million decrease in net political advertising revenue.

The loss was partially offset by an increase in retransmission revenues of $10.7 million, or 13%, and an increase in carriage fee revenues of $2.6 million, or 8%, Tribune said.

Related: Tribune's WPIX, CBS Radio Partner on Chopper Reports

Television and entertainment operating profit during Q1 was $20 million compared to $58.6 million the year before—a decrease of $38.6 million or 66%. The decrease was driven by lower revenues of $19.8 million, increased programming expenses of $17.1 million—primarily due to an increase in the number of original hours aired on WGN America—and higher network affiliate fees, according to the report.

Television and entertainment adjusted EBITDA was $75.2 million for Q1 2017 compared to $116 million in the first quarter of 2016, a decrease of $40.8 million, or 35%, primarily due to lower advertising revenues as well as increased programming expenses, Tribune said.

The report comes two days after Tribune and Sinclair announced a $3.9 billion deal under which Sinclair would purchase Tribune Media, which owns 42 TV stations. Under the deal, which is subject to FCC approval, Sinclair stations would reach 72% of U.S. households.

In Wednesday morning’s earnings call, interim CEO Peter Kern called the deal – the result of the company’s extensive strategic review – “a big win for our shareholders”

“We have a strong belief in the potential to combine companies,” he said.

In the near-term, however, Tribune will operate as it would if there were no deal in sight “to deliver the strongest company possible,” Kern said.

Revamping Tribune’s cable network, WGN America, is a major component of doing that, he said.

After a costly foray into high-priced originals, such as the recently cancelled Outsiders, Kern said Tribune will be “putting our capital into more and more efficient shows” that will not only hook viewers, but keep them tuned into the network.

“We are trying to put an original slate together that is somewhat more efficient and carries our audience through other dayparts,” he said.  

Sinclair currently owns or runs 173 TV stations, as well as the cable network Tennis Channel and multicast networks including TBD, Comet TV and This TV.  In addition to its 42 television stations in 33 markets, Tribune owns cable network WGN America, digital multicast network Antenna TV, minority stakes in the Food Network and CareerBuilder, and a variety of real estate assets.

The Tribune deal comes after the broadcast group announced in 2016 that it would be undergoing a strategic review. Last year, Tribune Media sold its data company Gracenote to Nielsen; It also sold real estate assets including its iconic Tribune Tower in Chicago.

Tribune Media was created in 2014 when the broadcast group spun off from Tribune's publishing arm. The company restructured after a wrenching four-year bankruptcy.

In March, CEO Peter Liguori stepped down from the position, which he held since 2013. He has not been replaced.