Drake plans to move business locally
NEW YORK — Sinclair Broadcast Group put Wall Street on notice Tuesday that a soft TV market means its cash flow and revenue for the second half of the year will be lower than anticipated.In a conference call with analysts, the station group’s execs discussed plans to shift the bulk of its ad sales to local from national and invest heavily in “strong programming, aggressive promotion and better trained and more disciplined sales departments.” Barry Drake, CEO of Sinclair’s TV division, said the company’s “ultimate goal is to move the mix of our business to 75% local in seven years.” But meanwhile, the increased spending will squeeze Sinclair’s margins, which are among the industry’s highest. For the third quarter ending in September, the company sees revenue up 3% and after-tax cash flow of 29¢ a share — 10¢ below analysts’ expectations. Fourth-quarter revenue will be up marginally by 1%-2% with cash flow of 46¢ a share, also lower than expected. Revenue for the full year is seen about flat from the year earlier, the company said. “Conditions for television advertising in our markets have simply not been as strong as we expected,” said chief financial officer Patrick Talmantes. Sinclair CEO David Smith said it’s highly unlikely that he will sell his company despite FCC rule changes in August. The commission now permits ownership of two stations in the same market, which has made Sinclair and other broadcast groups prime takeover targets. Speculation has linked Sinclair with Barry Diller’s USA Networks, which has snapped up several Sinclair execs in past months. Smith said Sinclair isn’t likely to make a big purchase, either. The company recently agreed to sell most of its 52 radio stations to Entercom Communications for about $825 million; its focus is now squarely on TV. That sale, plus the new initiatives discussed Tuesday, “mark the beginning of a leaner and more aggressive Sinclair,” Talmantes said. Sinclair stock closed down 2% at $14.69.