• by David Goetzl  @dgoetzl, Erik Sass  @eriksass1, October 3, 2007

Belo Corp., with assets including the Dallas Morning News and the CBS affiliate in Houston, announced plans Monday to split into two publicly traded companies, separating its newspaper business from its TV operations.

When the split is executed early next year, each company will have revenues of about $750 million, but both will face uncertain futures. Their respective sectors are experiencing drops in ad sales amid fierce Internet competition.

Key to the prospects of both, of course, is building their digital assets--driving traffic to existing Web sites and creating profitable new ones. On the broadcast side, capitalizing on new revenue streams, such as retransmission consent dollars and the potential to create a slew of new channels in the era of digital multicasting, is paramount.

A sense of what each company faces: For the first half of this year industrywide, ad dollars for local newspapers dropped 5.7% to $11.1 billion, and spot TV declined a similar 5.4% to $7.3 billion, according to TNS Media Intelligence.

Belo has had mixed success vis-à-vis those results, with its second-quarter newspaper revenues down 8.5%, but TV operations increasing 2.5%. (Online revenues for both were up by significant margins, but still represent a small slice of the pie.)

As with other newspaper companies, Belo has blamed declining classified advertising for its struggles, as well as drops in both local and national advertising.

One motivation behind the split is to remove any lag the newspaper business may be having on the broadcast side.

The new newspaper company will be known as A.H. Belo Corp.--a return to the original name of the company when it was founded in 1865--and focus on the Dallas paper, the Providence Journal and the Press-Enterprise in Riverside, Calif. It will also continue operating the direct mail and commercial printing businesses associated with the newspaper division.

Robert Decherd, currently chairman and CEO of Belo Corp., will become the president and CEO of A.H. Belo.

The broadcast business--with 20 stations, six in top-15 markets--will continue to carry the Belo Corp. moniker with Decherd as non-executive chairman. Current company president-COO Dunia Shive will become CEO there.

Belo's split-business tactic comes at a time when media companies with holdings in both newspapers and TV are pursuing various options. Hearst Corp. is seeking to buy out shareholders and take the Hearst-Argyle station group private. Scripps has indicated it would like to shed its TV operations from its newspaper holdings in some fashion, but appears to be constrained by provisions in a trust.

"Clearly, the most advantageous route would be separating the newspaper business from the rest of the business," said Joe NeCastro, E.W. Scripps' executive vice president-finance and administration, at an investor conference in January. The company then backtracked, however.

Belo's newspaper business has about 3,800 employees, while the television business has 3,200. On the TV side, Belo has interests in six cable news channels, and its stations are in 15 markets and affiliated with all of the Big 4 networks.