Profit Squeeze May Pull The Plug On Independent Tv Stations

Posted: November 24, 1986

Just months ago, investors were climbing over each other to spend millions for independent television stations and fighting for licenses to put new stations on the air.

On the local level, a growing number of competitors had seemingly bottomless pockets and endless optimism as stations bid against each other for syndicated programming.

Then reality signed on in the television industry.

That frenzy has fizzled.

Independent television stations in Philadelphia and across the country are facing a serious profit squeeze that could force owners in some markets to sell at a loss or even file for bankruptcy.

"There's at least one station in every market that has the potential for not making it," said Elisabeth J. Swanson, a senior financial analyst with Frazier, Gross & Kadlec Inc., a Washington communications-consulting group.

Hitting the independent stations - they include WPHL-TV (Channel 17), WTAF- TV (Channel 29) and WGBS-TV (Channel 57) in Philadelphia - the hardest are programming costs, which can absorb 50 cents or more of every revenue dollar. Network affiliates don't face as serious a problem because they get much of their programming free from the networks.

As the independent stations try to pay millions in high programming costs, their advertising revenues have not grown as fast as had been forecast.

Three years ago, when Channel 17 contracted for some of its programming, station executives expected the Philadelphia television market's total advertising revenue to increase 10 percent to 12 percent a year, said Eugene McCurdy, the station's general manager.

At Channel 29, station managers had predicted a 10 percent increase in advertising dollars for this year, said Randall E. Smith, that station's general manager.

The increase this year actually will amount to about 4 percent, McCurdy said. Smith expects it to be about 7 percent.

And the advertising outlook for next year looks even worse, said Carol C. Healey, station manager of Channel 57.

For some stations, orders from national advertisers are plunging, she said. ''Not only are they not getting orders, they're getting cancellations," Healey said.

This unexpected turmoil in the broadcasting industry can result in behind- the-scenes business dealings. Or it can touch the television viewer. Consider:

* WTGI-TV (Channel 61), an independent station that went on the air in Wilmington less than six months ago, this morning was scheduled to pull the plug on its regular programming and instead broadcast home-shopping programming 24 hours a day. "We were not making any money," said station president Daniel G. Slape.

* Taft Broadcasting Co., the owner of Channel 29, wanted to sell the station and four other UHF stations for as much as $300 million to $500 million. It settled for $240 million last week from TVX Broadcast Group Inc., a Virginia Beach, Va., company with a reputation for running stations on ''bare-bones" budgets.

* Channel 17's owner, Providence Journal Co., earlier this year put the station on the market but pulled it off recently when it couldn't find the right buyer for the right price.

* WSJT-TV (Channel 65) of Vineland, N.J., which runs programming similar to Channel 61's, is being sold to Home Shopping Network Inc., which will run a 24-hour shopping program. The station's owner, Asbury Park Press Inc., said it couldn't compete. It got out in time: Asbury Park Press paid $3 million for the station in December 1984 and is selling it for $23 million.

* Channels 17, 29 and 57 - as well as many independents across the country - are either asking or considering asking syndication companies to lighten their stations' programming expenses by extending the number of years that they have to pay for the shows.

A station might, for example, be paying a syndication company $12 million a year for three years for a package of programming, explained WPHL's McCurdy. It might instead ask the syndicator to allow it to pay $9 million a year over four years.

At Channel 57, Healey, whose station is owned by veteran owner Milton Grant and his Grant Broadcasting System, said her station needs more time to pay for the television shows.

"We've talked to most every syndicator that we do business with," she said.

While they're most apparent at independent stations, the financial problems in the television industry also extend to the networks. In fact, all three networks - ABC, CBS and NBC - are laying off employees to cut costs.

Part of the problem is on the revenue side, where local television stations are sharing their advertising dollars with other outlets for advertising, said WPHL's McCurdy, who is a board member and former chairman of the Association of Independent Television Stations.

Ad dollars have moved into couponing and direct mail and away from the broadcast media, McCurdy said.

Cable television networks also have begun to take an increasingly large bite out of the audiences that local stations and national networks for years have had to themselves.

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