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There's Still Hope in the Broadcast Economy

(From TV Technology NewsBytes.)

Don't turn off the lights quite yet—broadcasters could emerge from the economic crisis alive, and they'll have many new opportunities to create revenue.

But first, they have to survive the current downturn and credit crunch.

Among broadcasters, the four weeks since the crisis began in mid-September have further hammered stock prices that already seemed about as low as they could go—especially among smaller station groups.

Young Broadcasting flew at about $60 per share in 1999 before plunging to Earth. It's now been delisted from the main NASDAQ board and sat at 7.6 cents before the economic disaster began Sept. 15. It's lost nearly half its remaining value since. And it still can't find a buyer for KRON in San Francisco.

Acme Broadcasting once soared at about $30 per share and still topped $3 in January. Since Sept. 12—the Friday before the economic bombs exploded—what's left has shriveled from $1.11 to 71 cents as of Oct. 9.

Equity Media Holdings traded above $5 as late as March 2007. It's been shedding stations and is worth around 50 cents now.

Gray Television traded above $11 in August 2007. It stood at $1.85 Sept. 12 and has dropped another two-thirds of its value and traded at 61 cents Oct. 9.

Nexstar shares were worth nearly $15 in mid-2007. On Sept. 12, it closed at $3.20. Now, it's at $1.73.

Lin Television nearly hit $20 per share last year. On Sept. 12, it stood at $5.67. It's since dropped to $3.31.

Larger station groups have also suffered.

Sinclair Broadcast Group already fell a long way from its 2007 peak above $17 per share. In the current crisis, it's slid from $6.46 to $2.92.

Belo Corp. sold for more than $20 per share in 2007. Since Sept. 12, it's dropped from $7 to $3.65.

"One thing to remember about television is we had estimated 10 to 11 percent revenue growth in 2008, and it's going to be barely breaking even," said Mark Fratrik, vice president at BIA Financial Network, a Chantilly, Va.-based research firm. "And that's truly remarkable, given the [ad spending by] candidates."

Revenue related to the elections has come through as promised, but the regular ad base tanked. The question broadcasters may be afraid to ask is whether car dealers and local restaurants will return to the ad market next year when the election ads are gone.

The situation could come to a head for stations without deep pockets, should they run out of credit to meet the bills, and that could lead to fire-sale prices on station properties. But BIA President Mark Fratrik said the current credit crunch may be so severe that cash may be hard to come by, even fire-sale prices. Buyers might be limited to those who already have cash on hand. Come six or nine months from now, if credit markets have improved, the healthy may have more opportunities to buy stations cheaply.

The bright spots? The BIA guys and others say that mobile DTV, for example, could provide billions of dollars in revenue in the next several years with relatively little capital expenditure by stations. And then there are the growing revenue areas of retransmission consent fees and station Web sites—an area where broadcasters have also seen major gains in activity and where they should have built-in advantages over local competitors.

Most station groups have seen massive upticks in page views and Internet revenues even as traditional revenues have flattened.

The Web brings minimal increased costs, gives them a dumping ground for stations' video footage, and it leverages station's existing sales staffs and relationships.

"Technology on the Web is getting really powerful and it's really cheap," said Rick Ducey of BIA.

Broadcasters and other companies will offer another series of benchmarks when they begin releasing third-quarter results later this month.