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Community Leadership Key to Hearst's Barrett - Broadcasting & Cable

Community Leadership Key to Hearst's Barrett

CEO talks retrans, recession and remaining on top
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Hearst Television is considered by many to be the gold standard in local broadcasting. David Barrett joined Hearst in 1984, was named president and CEO of the television group in 2001, and earned induction into the B&C Hall of Fame in 2008. Barrett speaks with Deputy Editor Michael Malone about why Hearst stations are leaders in so many of its markets.

What words come to mind when you think of a Hearst TV station?

It's a civic leader. It informs and serves the community. I hope leadership is always associated with our company and the stations we have. But we can only serve the community to the extent that we're a strong business enterprise. We are a company that wants to win in all ways-leading revenues, leading ratings, leading profitability. We think all of that is derived by how well we serve the community with local news, and how well we are engaged in those communities. That's our formula.

What did you learn from the recession?
We always have to be mindful of our cost structure. But I'm also reminded that the quality of the product we put out there is important. Media assets have to be relevant; there's got to be something on the screen that people care about and want to engage in. You can't dumb down the product in such a way that you lose the popular appeal that exists for the company. I think we've been very disciplined in terms of cost management over the past 36 months, but our priority has been to preserve the content values that make us leading stations.

Groups are sharing more of their retrans cash with the networks. Is that fair?

Everyone is doing individual deals, so I won't suggest that there's a one-size-fits-all approach to what our negotiations are with the networks and the cable operators. But as stations are monetizing the value of their local signal, which includes the network and local news and syndicated programming, the networks not inaccurately make the case that they contribute some of the value that's being derived. That's not an unreasonable case to be made; it's a question of degree, of how much, and those are negotiated matters between companies.
The network-affiliate relationship is a lot broader than just retrans. We've always felt that we need a strong network that has the resources to invest in programming, which helps our local brand. To the extent that their economics have changed and our economics have changed, it's appropriate that there be discussions about new business models.

Hearst TV has three corporate news VPs. Why is that important to Hearst?
Success in local news means success for the company. We determined we weren't going to outsource to consultants to help us on the news front. We wanted people who were more accountable on a day-to-day basis to our stations only, and we created a structure that has worked. I look at the results that we generate, the leadership of the stations and the performance of the company, and I'm satisfied the structure we have adds value.

It's earnings season. Where do Hearst's results line up with the first quarter earnings at the public station groups?
We're having a strong year. I think our numbers rank in the very top tier of what you're seeing at public companies. We've got leading stations and we're seeing pretty broad-based recovery in terms of ad spend across all of our markets. In the first quarter, 18 of the top 25 categories we track were up. Automotive was up significantly, along the same lines of what you're hearing from the public companies.

It's a testament to the underlying strength of the medium. A year ago people were really rattled about the state of the industry, the economic base of the industry, and 2009 was aberrationally bad. I think we're seeing that the fundamentals of the business are stronger than people were prepared to acknowledge last year. As an advertising platform, local television is the best advertising platform. It's superior to the local newspaper proposition, the local radio proposition. When they're allocating their budgets, advertisers are coming back to local television for their advertising and marketing purposes. That's fueling a very broad-based recovery-more so than I would observe is occurring in the newspaper or magazine sector.

Among our stations, KCCI in Des Moines was the No. 1 rated CBS affiliate in 18-49 and 25-54 in all markets. Our ABC station in Kansas City, KMBC, was the top rated ABC station in the top 100 markets for those two demos. WGAL Lancaster was the top rated NBC affiliate in the top 50 markets. Whatever we have, ABC or NBC or CBS, we're overindexing. I'm not sure you could look at any point in recent history where one company has had the leading affiliate in each of those three networks. [Hearst does not own Fox affiliates.] That speaks to the quality of the local operation. Our success is derived from local news, local engagement, and excellence in operations, and that manifested itself in some good results.

We've stayed the course with the commitment to the product and stayed relevant in these local marketplaces. I think we've probably edged further ahead than our competitors in some markets because we stayed the course in the downturn.

It's coming up on a year since Hearst bought up the outstanding shares in Hearst-Argyle and turned it into privately held Hearst TV. How has going private affected your management?
We always said we try to run the company the same way, whether it's public or private, making the right kinds of business decisions. Our management team has been less preoccupied by the responsibilities of public reporting, which is expensive and time consuming and we recaptured some of that time and focused on operations, and that's been beneficial for the company.

Hearst [Corp.], the parent of Hearst Television, is as rigorous as any analyst in terms of what their expectations are for our performance, so there's no free pass for sure. But we can have internal discussions and come to some internal conclusions without the bright lights of Wall Street overshadowing us.

Are you looking at acquisitions this year?
This year we're not. We're really trying to optimize the performance of the stations that we have. We've long believed that the scale that we have, with 18 or so percent of coverage of TV households is a good model; we're right sized with respect to that. It helps us in terms of buying programming, buying capital hardware at our stations. We've got scale with two principal networks, so I don't think we need scale for the sake of scale. We've never been encumbered by the kind of debt levels that others have been, but we did bring some debt back into the Hearst Corporation, and our objective this year is to operated very efficiently, restore the higher level of profitability we've previously enjoyed and continue to pay down debt that does reside in Hearst Television.

Might you sell stations?
This is not a time to even think about that. If a buyer were looking at stations, included in that analysis would be the poor results of 2009. We're not in a position where we've got to sell at distressed prices. We don't need to sell any assets, and certainly wouldn't sell at distressed prices.

Everyone in local TV is excited about the midterm election windfall. Is Hearst better positioned than other groups to grab political advertising?
Going back to 1996 and 2000, we tend to take a higher share of political than the share we typically take of business that's spent in the marketplace. It's a function of, money gravitates in the political arena a little bit more to the news leaders in the marketplace, and I think that trend will continue for us this year.

Are there any special features the stations will debut for election coverage?
We've been very aggressive on that front-a signature part of our local news coverage is politics and local elections, and we devote a substantial amount of time, from candidate discourse slots to features around the elections. Candidate ad truth checks, debates--there are number of those things occurring around the country at our stations. News stations are an important part of the democratic process.

Hearst is one of several large broadcast groups working together on a mobile DTV initiative. Do you see the big broadcasters working together more to address common issues and enemies?
I think it's a sign of the times. People recognize they have to work more collaboratively on things of this kind and policy matters, and that our common good is best protected if we're working together in areas where we're like minded, when it's legally appropriate to do that.

It's interesting to see the announcement that Fox and CBS have come back in the NAB. There is recognition there that we've got a lot more in common than we have not in common, and working together on policy matters in Washington and on business opportunities with respect to the mobile handheld is the right way to proceed in this day and age.

Are you encouraged by what you're hearing from the FCC regarding broadcast spectrum?
[Commissioner Julius Genachowski] has been very direct that it's a voluntary plan. If you read the plan, that wasn't as evident in the first reading. I want to take him at his word that this will be a voluntary plan. I'm most encouraged that there's going to be what I think they described as technical workshops and the opportunity to bring engineering minds to the table to look at the data, because the data we've seen from NAB and MSTV suggest a lot more technical issues and complications than some at the FCC believe is the case.

Physics will dictate what the interference implications are on this, and I think we're going to feel a lot better as a company and an industry to have engineers in the room coming to grips with what the data says is going to happen based on a number of different scenarios. I'm encouraged that the chairman said he will facilitate that.

Hearst stations have not taken part in the various content pools and shares in several markets. Do you see your stations getting involved in them in the future?
I don't rule it out, but we haven't yet embarked on that course. We think part of our unique competitive advantage is that our brand, our people, our content is special to us. We've had some reluctance to bootstrap some of the weaker players onto our brands.

In a practical sense, we have a few weaker stations, so it may be advantageous for us to do that in reverse way. But if I'm consistent in my thought that there are going to be fewer stations out there, leadership defines success, and we'll capture a premium for leadership. Diluting what our coverage strengths are as a news operation is not what we think is the best strategy.

What's your favorite new show of 2010?
I think The Good Wife is a terrific television show. I think it's well written and well produced. In our house, that's a show that gets viewed every week. Modern Family too.

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

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