IN 2010, TV station groups such as Tribune and Young are due to restructure their finances, eliminate debt and exit Chapter 11 bankruptcy, giving syndicators hope that cleaned-up balance sheets will augur a livelier programming market. Other groups, including Ion and Pappas, already have gone through this process and emerged on the other side.
“This is a good thing for the industry,” says Justin Nielson, analyst at SNL Kagan. “Now stations can start trading at the right multiples, and they won’t have that overhanging debt that’s been in the picture over the past three years.”
This debt-for-equity swap scenario, which leaves broadcast groups under bank ownership, is now common. Broadcasters expanded ownership over the past decade by acquiring highly leveraged assets under the assumption that the advertising market would remain healthy. Instead, many TV station businesses have crumbled in the past two years due to the advertising recession, which saw revenues drop as much as 25%. As a result, stations have not had money to invest in new programming or even, in some cases, to continue to pay existing license fees for previously acquired shows.
New reasons to play
Tribune’s reemergence is particularly good news for syndicators, but other groups—including Ion, Young, Pappas, New Vision and Freedom—also may be more willing to play in the syndication market now that their finances are looking healthier. Ion, in particular, with 58 TV stations in markets across the country, may become a more active buyer of syndicated programming, says a company source. Two years ago, Ion bought CBS Television Distribution’s Criminal Minds and Ghost Whisperer for primetime runs. With plenty of time to fill, Ion may want to acquire more first-run and off-net programming in the coming months.
Tribune has remained an active buyer of syndicated programming since it first entered Chapter 11 bankruptcy in December 2008. It has acquired Warner Bros.’ Entourage and Curb Your Enthusiasm for late-night time slots, and renewed Twentieth’s Family Guy and NBC Universal’s Maury, Jerry Springer and Steve Wilkos for cash license fees and barter.
Still, Tribune’s purchases have been cash-light compared to previous acquisitions; the broadcaster paid top dollar for Warner Bros.’ Two and a Half Men back in 2006, prior to being acquired by investor Sam Zell. With strong stations in New York, Los Angeles and Chicago, Tribune often sets the pace when it comes to syndication sales.
That Tribune is preparing to exit bankruptcy just as Warner Bros. is bringing out The Big Bang Theory for sale is not a coincidence. Warner Bros. sits on Tribune’s creditor committee and knows exactly where Tribune stands. And Warner Bros. has made it clear that it expects to get big bucks for Big Bang.
“Tribune’s bankruptcy shouldn’t be an issue,” says one syndicator. In fact, “it’s more likely that their finances will be on track,” says Bill Carroll, VP of programming at Katz Media Group. “It should have a positive effect, not a negative one.”