Sinclair getting $84 mil to switch from UPN
In the biggest TV affiliate switch since Fox snagged the New World stations in 1994, the WB TV Network has agreed to pay the Sinclair Broadcast Group $84 million over 10 years for converting five of its stations from UPN to WB affiliates.
WB CEO Jamie Kellner called the deal a “cataclysmic blow” to UPN and “the most important thing that has happened to this network in distribution.”
The stations owned or programmed by Sinclair that are switching from UPN to the WB on Jan. 16 are: WPTT Pittsburgh, WNUV Baltimore, WSTR Cincinnati, KRRT San Antonio and KOCB Oklahoma City.
The WB previously had weak, low-power affiliates in Pittsburgh, Baltimore and Cincinnati, and no station coverage in San Antonio and Oklahoma City. Those five markets range in rank from 19 to 43.
Sinclair-managed indie WFBC in Greenville, S.C., also will become a WB affiliate in November 1999 as part of the deal, and three Sinclair stations now affiliated with the WB in Milwaukee, and in Birmingham and Tuscaloosa, Ala., have reupped for another 10 years.
The total nine-station agreement makes the strong and successful Sinclair stations the WB netlets’s largest non-equity affiliate station group. The deal also increases the WB’s primary station coverage and lowers UPN’s primary coverage by 3%, making the two netlets equal for the first time, with primary affiliates covering 72% of the country.
The WB’s total coverage, with cabler WGN included, is now at 87%, compared to UPN’s 88%, which includes secondary affiliates. Secondary affiliates run network programming out of pattern.
“The one thing that’s been an issue for us has been distribution,” Kellner said. “The distribution is now here.”
More than money
Sinclair Communications CEO-designate Barry Baker said his company decided to go with the WB in a 10-year deal for more reasons than money alone. “They’re branded. Their target is right, the studio’s heritage with kids is great,” he said.
Sinclair, which controls more than one station in several markets through local marketing agreements, is keeping UPN affiliates in Milwaukee, Birmingham, Las Vegas, Indianapolis, Ind., Kansas City, Mo., and Raleigh, N.C. — where the WB already has other affiliates in place.
But the Sinclair-WB deal is a huge loss for UPN because in the markets where Sinclair is switching affiliates, there are no other full-power stations with which UPN can replace the lost affils. Baker said that when he broke the news to Paramount executives Kerry McCluggage and Steve Goldman on Monday morning, their response was, “You pick up breakfast.”
UPN CEO Lucie Salhany was away on vacation Monday, and the netlet issued only a short statement saying it “looks forward to continuing that relationship in the markets in which we have ongoing affiliation agreements. During our renewal discussions with Sinclair, we have been evaluating and continuing to assess our options in these markets and are confident UPN will be well-represented there.”
Payment too high?
UPN sources privately contended that the WB payment to Sinclair was too high, and in fact, the WB has never paid for affiliates in the past. Paramount is no stranger to giving affiliates sweet deals, though. When UPNsigned its original affiliation agreement with Sinclair three years ago, Paramount sold its station in Raleigh to Sinclair in exchange for the deal.
The $84 million ($64 million of which is guaranteed to Sinclair even if the WB folds) will be paid over the course of the next decade. The WB will pay $6 million a year for the first three years, and will increase the payments to $10 million a year in the final two years. Sinclair, like all WB affiliates, though, will also pay the netlet reverse compensation — a percentage of any increased revenue it gets from switching to the WB.
WB execs contend that the payment to Sinclair is a one-time move based on the value of Sinclair to the network as a whole, although the move could certainly open up a can of worms with other affiliates.
“It certainly opens up the door for negotiations, but it depends on how strong the station is and whether you need the WB worse than they need you,” said Jack Paris, general manager of the WB affiliate KFBT Las Vegas. “I’m sure somewhere down the line, it’s going to cause a lot of conversations with a lot of affiliates.”
Time Warner vice chairman Ted Turner has made noises in the past, complaining about losses at the WB that equal about $100 million a year. But execs at Warner Bros. contend the Sinclair deal will add more to the bottom line than it takes away, an assessment echoed by Jon Mandel, senior VP and director of national broadcast at Grey Advertising.
“This puts aside any doubt about the WB. We think on the low end in national buying, it means $300 million to $500 million to them over the 10 years,” Mandel said. “If UPN hasn’t been so vocal about the WB’s supposed problems in these markets, it wouldn’t be so bad. I don’t think it means the end of UPN, but the see-saw has changed. They’re now playing see-saw with someone 300 pounds.”
The $84 million the WB is paying is small compared to the $500 million Fox paid New World to switch its 12 stations, which News Corp. later purchased. Mandel also said UPN most likely will pick up the three low-power affiliates dropped by the WB, but it’s not clear what UPN will do in the remaining markets.