Tribune Media Emphasizes Diversification Efforts in Warmup for NYSE Listing

Don’t call Tribune Media a pure-play TV station group. That was the message from Tribune CEO Peter Liguori on the company’s third-quarter earnings call, the first for the newly formed entity that is warming up for a return to a listing on the New York Stock Exchange by next year.

Liguori and Tribune CFO Steven Berns took investors through the company’s strategy and recent financials. Liguori emphasized the group’s multi-pronged approach to growth through beefing up its 42 local TV stations, turning WGN America from a cable superstation to a general entertainment network offering original programming year-round, and expanding its metadata business in the U.S. and overseas markets.

“We are not just a local broadcaster,” Liguori said. “We are a diversified media company.”

The emphasis on Tribune’s diversification efforts comes amid weakness in the local and national advertising market that has investors jittery about businesses that are too dependent on advertising. Liguori said 62% of Tribune’s revenue stems from advertising. Tribune doubled its local broadcast footprint last year with its $2.7 billion acquisition of 19 stations from Local TV LLC.

In all, Tribune’s third-quarter revenue grew 69% over the year-ago quarter to $474.9 million, reflecting the gains of the Local TV acquisition. Operating profit increased 21% to $55.3 million. On a pro forma basis, the station group saw a 6%, or $17.7 million, decline in core TV advertising revenue that was almost evenly offset by a $17.1 million increase in political ad revenue. Overall, ad revenues for the quarter grew 0.9% to $321.1 million.

Liguori emphasized the growth of Tribune’s retransmission consent revenue, from less than $2 million a few years ago to $58.1 million in the third quarter. Liguori also noted the upside to come, as Tribune had done its retrans deals with about 50% of the MVPDs in its markets, although the deals done have been in the largest and most lucrative markets.

Tribune has strong stations in 11 key political swing states, which positions the group well to take advantage of the periodic gusher of political advertising. Sales came in strong at the end of the third quarter, which helped offset weakness in core TV advertising categories including automotive, Berns said.

Liguori spoke briefly about Tribune’s recent showdown in the Seattle market with Fox, which tried to pressure the group into selling its Fox affil KCPQ-TV. Fox wanted the station as part of its campaign to have O&Os in NFC markets to make the most of its NFL rights package. Tribune resisted, even amid threats of losing its Fox affiliation. In the end, the sides realized that an affiliation disruption in Seattle would be bad for both of them, so they reached a “middle ground” deal, Liguori said. He stressed that with growing retrans revenue, Tribune would see net profits from MVPD retrans fees even with the group’s obligations to pay program fees to Fox and other networks.

As for WGN America, Liguori said the focus was on a three- to five-year transformation of the channel into a general entertainment network — a distinction that means generating subscriber fees from MVPDs. He said about 50% of WGN America’s 70 million subscribers would convert in January, with the rest to following in the next two years.

The plan with original programming, which began this year with the rollout of dramas “Salem” and “Manhattan,” is to build up in the coming years to at least four original series per year, in the hopes of having “success build on success.” The Tribune Studios arm is focused on producing or co-producing most of that programming in order to benefit on the backend from SVOD and international sales. He pointed to “Salem’s” recent bow on Netflix as a sign of the riches to be mined from original series, although he also stressed that Tribune would be “measured” in its overall investment in original series.

Liguori also briefly referenced the station group’s efforts to expand in first-run syndication with a nighttime show hosted by Craig Ferguson. That’s the first official reference to the talk-variety project that is targeting access time periods for fall 2015, with key Tribune stations as its launch group.

Tribune at present is flush with cash, with a little more than $1 billion on its books. The company plans to spend about $400 million on stock buybacks. But beyond that, Liguori downplayed the idea of a major acquisition such as a cable network. Liguori emphasized that the company generates a healthy amount of free cash flow — $239 million through the first nine months of 2014 — which gives it great flexibility in investments and R&D. It will generate some $50 million a year just on rental income from real estate, much of that coming from fees paid by Tribune Publishing newspapers — proving that Tribune Media got the better end of the deal in the post-bankruptcy breakup of the TV and newspaper assets.

Tribune Media’s investment in metadata services offers its best chance for international expansion. It acquired from Sony Corp. the Gracenote song listing service and inherited the Tribune Media Service unit that provides TV listings data to a host of MVPDs and others. Those companies are poised to expand overseas in such growth markets as India. Tribune is focused on working on a global basis with big U.S. customers that have relevant overseas operations.

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