NEW STATION SUPER GROUP REACHES HALF OF U.S.

It’s a monster.

Out of a flurry of dealmaking in the waning days of 2007 has emerged a TV station group with coverage of nearly half the country and as much programming and technology buying power as any in the nation.

The yet-unnamed super group of 40 full-power, network affiliated stations in 33 markets (see chart below) is the product of an unusual, if not unique, combination of Tribune Co. and Local TV LLC.

It’s two major groups with common management, says BIAfn analyst Mark Fratrik, who is unaware of anything similar. “It’s a very different animal.”

Following its takeover by financier Sam Zell in December, Tribune created a yet-unnamed company that would manage not only its own 23 stations (including seven in the top 10 markets), but also the nine small-market stations of Local TV, owned by Oak Hill Capital Partners, a private equity firm.

And Tribune hired Local TV CEO Randy Michaels to run the new company as CEO of interactive and broadcasting. (In the 1990s, Zell was a backer of Michaels’ radio station group, Jacor Communications.)

The Tribune-Local TV group got bigger just days later when Local TV announced that it had agreed to purchase another eight stations in midsize markets—including Cleveland, Denver and St. Louis—from Fox for $1.1 billion.

By one key measure—TV household coverage calculated for purposes of the FCC ownership cap—the super group is the largest in the nation, reaching 36.3 percent of the national TV households. That puts the group just three percentage points under the cap.

Its total TV coverage is 46.3 percent of all TV households, second only to Ion Media.

According to BIAfn, the group ranks fourth in annual revenue with around $1.6 billion in 2006. Only the Fox, CBS and NBC groups with their collection of prime major-market stations generate more top-line cash.

Most of revenue ($1.1 billion) comes from the Tribune stations, but it was the $326 million from the eight Fox stations that pushed the super group past ABC in the rankings.

The super group has seven duopolies, all involving a Big Four network affiliate paired with either a CW or MNT affiliate.

Tribune is contributing four of the duopolies—in Seattle, Indianapolis, Hartford and New Orleans, while Local TV brings one, in Oklahoma City.

And then the Tribune-Local partnership creates two new duopolies in Denver and St. Louis. In both markets, Tribune CW affiliates are doubling up with Fox affiliates that Local TV is buying from Fox.

The super group will have the marketplace clout that comes with size.

“They have more negotiating power now with the equipment manufacturers and program syndicators,” says Fratrik.

In a prepared statement at the time the combination was announced, Michaels indicates his intention to use whatever leverage he has.

“Tribune and Local TV expect to realize significant savings in management, technology, and other overhead costs," he says.

"Things like research and development and automation technology are more efficient on a large platform,” he says. “All of the stations get to share the benefits. We are going to find new ways to operate smarter, cheaper, and more efficiently."

Michaels could not be reached for comment on this story.

It’s not clear how much bigger the group can get.

Tribune will undoubtedly maintain that the household coverage of the Tribune-owed stations and the Local TV-owed stations should be treated separately in determining compliance with the FCC’s national ownership limit.

Indeed, in its press release, Tribune went out of its way to emphasize the distinct ownership of the stations.

 â€œTribune Company and Local TV will maintain their own board of directors, senior management, financial structure, shareholders, station management, programming, and network affiliations,” the company says. “The functions that are common across corporate headquarters will be combined in a transparent manner to both companies.”

Tribune also hints that the company may seek to manage other stations or station groups. “The management company will also look towards serving potential third-party-owned stations in the future,” it says.

If the FCC sees the arrangement the same way that Tribune does, there will be virtually no limit on how many stations and TV households can come under the management wing of Tribune and Randy Michaels.

THE TRIBUNE/LOCAL SUPER GROUP

DMA	STATION	MARKET	CH.	NET.	OWNER
1	WPIX	New York	11	CW	Tribune
2	KTLA	Los Angeles	5	CW	Tribune
3	WGN	Chicago	9	CW	Tribune
4	WPHL	Philadelphia	17	MNT	Tribune
5	KDAF	Dallas	33	CW	Tribune
9	WDCW	Washington	50	CW	Tribune
10	KHCW	Houston	39	CW	Tribune
14	KCPQ	Seattle	13	Fox	Tribune
	KMYQ	Seattle	22	MNT	Tribune
16	WSFL	Miami	2	CW	Tribune
17	WJW	Cleveland	8	Fox	Local TV
18	KWGN	Denver	2	CW	Tribune
	KDVR	Denver	31	Fox	Local TV
20	KTXL	Sacramento	40	Fox	Tribune
21	KTVI	St. Louis	2	Fox	Local TV
	KPLR	St. Louis	11	CW	Tribune
23	KRCW	Portland, Ore	32	CW	Tribune
26	WTTV	Indianapolis	4	CW	Tribune
	WXIN	Indianapolis	59	Fox	Tribune
27	KSWB	San Diego	69	CW	Tribune
29	WTIC	Hartford	61	Fox	Tribune
	WTXX	Hartford	20	CW	Tribune
31	WDAF	Kansas City	4	Fox	Local TV
34	WITI	Milwaukee	6	Fox	Local TV
35	KSTU	Salt Lake City	13	Fox	Local TV
39	WXMI	Grand Rapids	17	Fox	Tribune
40	WBRC	Birmingham, Ala	6	Fox	Local TV
41	WPMT	Harrisburg, Pa.	43	Fox	Tribune
42	WTKR	Norfolk, Va.	3	CBS	Local TV
46	KFOR	Oklahoma City	4	NBC	Local TV
	KAUT	Oklahoma City	43	MNT	Local TV
46	WGHP	Greensboro, N.C	8	Fox	Local TV
47	WREG	Memphis, Tenn.	3	CBS	Local TV
53	WGNO	New Orleans	26	ABC	Tribune
	WNOL	New Orleans	38	CW	Tribune
54	WNEP	Wilkes Barre, Pa.	16	ABC	Local TV
71	WHO	Des Moines, Iowa	13	NBC	Local TV
83	WHNT	Huntsville, Ala.	19	CBS	Local TV
96	WQAD	Davenport, Iowa	8	ABC	Local TV
102	KFSM	Fort Smith, Ark.	5	CBS	Local TV