Record Spectrum Donation Points Up Sagging TV Station Market
A record spectrum donation of as many as 155 low-power TV stations from a non-profit religious broadcaster to a group that trains women and minorities to run stations points up the sagging market for TV stations of all types, said brokers and executives we interviewed. That Trinity Broadcasting Network, the world’s largest Christian TV network, is giving up most of its low-power TV (LPTV) stations to the Minority and Media and Telecommunications Council illustrates the recent dearth of deals for LPTV and full-power broadcasters, they said. Trinity will keep about 95 of its LPTV stations and upgrade them to digital, said attorney Colby May, who represents the broadcaster. He estimated it may cost $100,000-plus to upgrade from analog each station being donated by Trinity, which had been assessing its portfolio of 250 LPTV stations.
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The MMTC-Trinity accord and the few deals in the works for both low- and full-power stations illustrate that some see value in the stations as spectrum plays, industry brokers and executives said. “The very smart people who have money now are buying as many as they can because it’s spectrum and at some point the spectrum value and what they can do with it is going to far, far outweigh anything the market conditions are going to allow you to do now,” said President Ron Bruno of Bruno Goodworth Network, owner of 11 LPTV stations. “There never is going to be this low a price again. It’s a very, very low price.” It can cost $150,000 to convert an LPTV station to digital, and when his stations have done so they've seen a jump in viewership, he said. Since many of the Trinity stations can be flash-cut to digital, that may keep a lid on conversion expenses, MMTC Executive Director David Honig said.
MMTC will get as many as 155 of the remaining analog stations, Honig said. The final number depends on how many deals the council can get for others to buy them at a discount or to run them under a local marketing agreement with an option for the operator to buy them, he said. The Trinity stations aren’t full-service Class A low-powers that originate shows similar to full-power TV outlets and are in markets of all sizes across the U.S., said Honig, declining to identify them until the deal is finalized. Honig hopes to have finalized by Monday evening deals for others to run most of the 155 stations, he said.
"Much of the value will turn when the time comes for television stations to have the voluntary option to repatriate some of their spectrum for digital” and other for wireless, Honig said. “We've been thinking of that as an opportunity for full-power stations,” but pending legislation refers to broadcasters generically as TV stations instead of singling out full-power stations for inclusion in the spectrum auction envisioned by the FCC, he said. “We'd like to be very sure that low-power stations, notwithstanding their secondary status, are afforded the same opportunity."
"The MMTC/Trinity deal is actually a perfect illustration of what is happening, at least in the LPTV market,” said Elliot Evers, managing director of broadcast broker Media Venture Partners. “Trinity had those stations listed for sale -- I think they sold one, maybe two of them. But the market was so weak they decided to donate them to the MMTC. That says a lot. For full-powers, there are buyers for well-affiliated, profitable stations, but those are not the assets that are being put on the market today. Until there is more financing available to purchase TV stations, or anything in traditional media, the TV deal market is likely to remain very, very slow."
Other brokers agreed. “It’s just amazing: The amount of activity, the amount of money, the amount of interest and the toughness of getting a deal done,” which is “like pulling teeth,” said President Frank Kalil of Kalil & Co. For lenders, “survival is saying no” to potential deals, he continued. “There are a lot of people with money but they're as timid as people who don’t have money. It’s a challenge. It has to be a very secure situation before people buy anything these days."
Values for TV stations of all sorts have turned up recently as publicly traded broadcasters have said they expect sales to rise this year, partly because of political ads, and the recession ended, brokers and executives said. But they said the M&A market isn’t greatly improved, with few deals being concluded. “The transaction marketplace for not only LPTV but basic television and radio has been very thin” and “prices have been all over the place,” said Richard Foreman Associates President Richard Foreman. “Television is coming back very strongly” financially and for deals, he said, “it’s a little bit better this year” than last.