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TV sales surge limited

TV station sales may be on the rise, but broadcasters warn that the recent surge in station trading does not mean a return to the days when properties sold at 10 to 13 times cash flow. That’s the word from broadcasters at the National Assn. of Broadcasters confab.

“The business will not support sales of such magnitude,” said Barry Baker, chief executive of River City Broadcasting, which owns five TV stations and is out looking to buy network affiliates. Baker, along with other broadcasters, was part of a seminar here sponsored by media brokerage firm and investment bank Communications Equity Associates.

That the banks have opened their doors to broadcasters is a story in itself. In the mid-’80s, station sales surged and banks were out lending to broadcasters at high multiples that would, it turned out, never be met. Having been burned, banks turned to cable, whose vision of a 500-channel universe included a dual revenue stream of subscribers and advertisers, making them perfect loan risks.

Then the government stepped in and told the cablers to slash their rates. With the future uncertain, banks are returning to broadcasters, whose fortunes have risen.

But Baker warned that it’s a much tougher business now than seven years ago.

“Look at the TV landscape,” he said. “If Paramount or Time Warner’s fifth network efforts are successful, another station in the market will be able to command more advertising dollars.”

When Fox launched, Baker said, their affiliates took a 10% share of local ad dollars. That figure, according to Baker, is up to 25%.

Lowry Mays, topper of Clear Channel Communications — which has among the highest performing communications stocks in the market — echoed Baker’s words and added that if history repeats itself with multiples, the industry will suffer within four years, which is probably when the information superhighway will start rolling.

The banks are not the only ones receptive to broadcasting. Last year, according to CEA, there were 12 successful initial public offerings for radio companies and one for TV owner Renaissance Communications. On the television side, there were also several successful public debt offerings.

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